Pier 1 2016 Annual Report Download - page 30

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Income Taxes
The income tax provision for fiscal 2016 was $23.5 million, compared to $45.2 million in fiscal 2015. The decrease in the income
tax provision from fiscal 2015 is primarily the result of the Company’s lower income before taxes in fiscal 2016. The effective tax
rate for fiscal 2016 was 37.3% compared to an effective tax rate of 37.6% for fiscal 2015. The decrease in the effective tax rate
was primarily related to certain favorable discrete items that occurred in fiscal 2016, partially offset by certain non-recurring
favorable permanent differences and other discrete items that occurred in fiscal 2015.
Net Income and EBITDA
Net income in fiscal 2016 was $39.6 million, or $0.46 per diluted share, compared to $75.2 million, or $0.82 per diluted share,
for fiscal 2015. In fiscal 2015, non-GAAP adjusted net income excluding the after-tax effect of retirement related expenses for the
Company’s former chief financial officer was $77.2 million, or $0.84 per diluted share. EBITDA for fiscal 2016 was $125.2 million
compared to $176.3 million in fiscal 2015. See “Reconciliation of Non-GAAP Financial Measures.”
FISCAL YEARS ENDED FEBRUARY 28, 2015 AND MARCH 1, 2014
Net Sales
Net sales consisted almost entirely of sales to retail customers, net of discounts and returns, but also included delivery revenues
and wholesale sales and royalties. Net sales during fiscal years 2015 and 2014 were as follows (in thousands):
2015 2014
Retail sales $1,868,895 $1,774,778
Other (1) 15,662 16,665
Net sales $1,884,557 $1,791,443
(1) The Company supplies merchandise and licenses the Pier 1 Imports name to Grupo Sanborns, which sells Pier 1 Imports merchandise primarily in a “store within a store” format. Other sales
consisted primarily of these wholesale sales and royalties received from Grupo Sanborns and gift card breakage.
Net sales during fiscal 2015 were $1.885 billion, an increase of 5.2%, from $1.791 billion for fiscal 2014. Company comparable
sales increased 4.7% for fiscal 2015 which was the result of an increase in total brand traffic, store and online conversion, and
average ticket compared to fiscal 2014. The Company’s e-Commerce sales accounted for 11.1% of net sales for fiscal 2015
compared to 4.0% for fiscal 2014. E-Commerce sales are comprised of both customer orders placed online which were shipped
directly to the customer and those picked up by the customer at a store location.
The Company’s sales from Canadian stores are subject to fluctuations in currency conversion rates. These fluctuations offset the
increase in company comparable sales by approximately 50 basis points in fiscal 2015. Sales on the Pier 1 rewards credit card
comprised 32.4% of U.S. sales for fiscal 2015 compared to 30.4% in fiscal 2014.
The increase in net sales for fiscal 2015 was comprised of the following components (in thousands):
Net Sales
Net sales for fiscal 2014 $1,791,443
Incremental sales growth (decline) from:
Company comparable sales 81,513
New stores opened during fiscal 2015 26,158
Stores opened during fiscal 2014 18,343
Closed stores and other (32,900)
Net sales for fiscal 2015 $1,884,557
24 PIER 1 IMPORTS, INC. 2016 Form 10-K