Pier 1 2008 Annual Report Download

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Table of contents

  • Page 1
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  • Page 2
    Form 10-K Form 10-K ® 2008 Annual Report

  • Page 3
    ... (I.R.S. Employer Identification No.) 100 Pier 1 Place Fort Worth, Texas (Address of principal executive offices) 76102 (Zip Code) Company's telephone number, including area code: (817) 252-8000 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange...

  • Page 4
    PIER 1 IMPORTS, INC. FORM 10-K ANNUAL REPORT Fiscal Year Ended March 1, 2008 TABLE OF CONTENTS Page Item Item Item Item Item Item 1. 1A. 1B. 2. 3. 4. PART I Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security ...

  • Page 5
    ..., the Company plans to open up to three new Pier 1 Imports stores and close approximately 25 stores during fiscal 2009. Presently, the Company maintains regional distribution center facilities in or near Baltimore, Maryland; Chicago, Illinois; Columbus, Ohio; Fort Worth, Texas; Ontario, California...

  • Page 6
    ... furniture, wicker, decorative home furnishings, dining and kitchen goods, epicurean products, bath and bedding accessories, candles and other specialty items for the home. On March 1, 2008, the Company operated 1,034 Pier 1 Imports stores in the United States and 83 Pier 1 Imports stores in Canada...

  • Page 7
    ... business and competes primarily with specialty sections of large department stores, furniture and decorative home furnishings retailers, small specialty stores, and mass merchandising discounters. The Company allows customers to return merchandise within a reasonable time after the date of purchase...

  • Page 8
    ... changes make it clear that any projected results expressed or implied will not be realized. Executive Officers of the Company ALEXANDER W. SMITH, age 55, has been a director of Pier 1 Imports, has served as President and Chief Executive Officer and has been a member of Pier 1 Imports' Executive...

  • Page 9
    ... supply chain could impact its ability to deliver merchandise to its stores and customers, which could impact its sales and results of operations. The Company maintains regional distribution centers in Maryland, Illinois, Ohio, Texas, California, Georgia and Washington. At these distribution centers...

  • Page 10
    ... in order to gain sales momentum in its stores. Successful marketing efforts require the ability to reach customers through their desired mode of communication utilizing various media outlets. Media placement decisions are generally made months in advance of the scheduled release date. The Company...

  • Page 11
    ... retail environment with companies offering similar merchandise, and if customers are lost to the Company's competitors, sales could decline. The Company's retail locations operate in the highly competitive specialty retail business competing with specialty sections of large department stores, home...

  • Page 12
    ... the merchandise supply chain, sell products, accomplish payment functions or report financial data. Although the Company maintains off-site data backups, a concentration of technology related risk does exist in certain locations. The Company outsources certain business processes to third-party...

  • Page 13
    ... world, the Company may be affected from time to time by antidumping petitions filed with the United States Commerce Department and International Trade Commission by U.S. producers of competing products alleging that foreign manufacturers are selling their own products at prices in the United States...

  • Page 14
    ... center space from time to time through short-term leases. The following table sets forth the distribution of Pier 1 Imports' U.S. and Canadian stores by state and province as of March 1, 2008: United States Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Florida Georgia...

  • Page 15
    ... 1, 2008, the Company owned or leased under operating leases the following warehouse properties in or near the following cities: Location Approx. Sq. Ft. Owned/Leased Facility Baltimore, Maryland ...Chicago, Illinois ...Columbus, Ohio ...Fort Worth, Texas ...Ontario, California ...Savannah, Georgia...

  • Page 16
    ... closing sale prices of the Company's common stock on the New York Stock Exchange (the "NYSE"), as reported in the consolidated transaction reporting system for each quarter of fiscal 2008 and 2007. Fiscal 2008 Market Price High Low First quarter ...Second quarter ...Third quarter ...Fourth quarter...

  • Page 17
    ...at the average of the closing stock prices at the beginning and end of the quarter. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on March 1, 2008. PIER 1 IMPORTS, INC. STOCK PERFORMANCE GRAPH $300 $250 $200 $150 $100 $50 $0 3/1/2003...

  • Page 18
    ... impairment charges on long-lived store level assets. (5) Working capital and current ratio include the effect of the classification of the office building held for sale as a current asset in all periods presented. (6) In fiscal 2008, the Company recorded minimal state and foreign tax provisions and...

  • Page 19
    ... is a global importer and is one of North America's largest specialty retailers of imported decorative home furnishings and gifts. The Company imports merchandise directly from over 50 countries, and sells a wide variety of furniture collections, wicker, decorative accessories, bed and bath products...

  • Page 20
    ...-home mailers and product information available to site visitors. The Company is also continuing to leverage its partnership with Chase Bank USA, N.A. ("Chase") through the Pier 1 Imports preferred credit card to reach existing and identify and target potential new customers. The Company anticipates...

  • Page 21
    ... almost entirely of sales to retail customers, net of discounts and returns, but also included delivery revenues and wholesale sales and royalties. Sales by retail concept during fiscal years 2008, 2007 and 2006 were as follows (in thousands): 2008 2007 2006 Stores ...$1,486,147 Direct to consumer...

  • Page 22
    ... four new stores and closed 83 store locations, including all Pier 1 Kids and clearance stores. In addition, the Company closed its direct to consumer business. As of March 1, 2008, the Company operated 1,117 stores in the United States and Canada. The Company continues to evaluate its real estate...

  • Page 23
    ... in fiscal 2008 compared to last year. Administrative payroll including bonus decreased $14.5 million and 50 basis points as a percentage of sales, resulting primarily from decreases in salaries and wages related to a reduction in the number of home office and field administrative employees in the...

  • Page 24
    ... 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 received from franchise stores and Sears Roebuck de Mexico, S.A. de C.V. Sales by retail concept during fiscal years 2007...

  • Page 25
    ... and closed 64 stores in the United States and Canada, bringing its Pier 1 Imports and Pier 1 Kids store count to 1,196 at year end, compared to 1,226 at the end of fiscal 2006. A summary reconciliation of the Company's stores open at the beginning of fiscal 2007, 2006 and 2005 to the number open at...

  • Page 26
    ...of retirement plan settlement and curtailment charges of $6.8 million related to the retirement of two officers in fiscal 2007, $4.5 million expense for the relocation of Pier 1 Kids' distribution facilities and integration of its headquarters, and compensation expense recognized on stock options of...

  • Page 27
    ...2008, inventory per retail square foot was $46.71 compared to $38.84 in the prior year. Management believes that store-level inventories are currently near optimum levels but plans to reduce distribution center inventories during fiscal 2009 by revising its ordering process and reducing future order...

  • Page 28
    The Company's bank facilities include a $325 million credit facility expiring in May 2012, which was secured by the Company's eligible merchandise inventory, third-party credit card receivables and certain Company-owned real estate at year end. During fiscal 2008, the Company had no cash borrowings ...

  • Page 29
    ... credit. As part of the transaction subsequent to fiscal 2008 year end to sell the Company's corporate headquarters, the Company will also enter into a lease agreement to rent space in the building. The lease has a primary term of seven years from the closing date with one three-year renewal option...

  • Page 30
    ... Company's proprietary credit card receivables. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of the Company's consolidated financial statements in accordance with accounting principles generally accepted in the United States requires the use of estimates that affect the reported value...

  • Page 31
    ... from retail sales, net of sales tax and third-party credit card fees, upon customer receipt or delivery of merchandise, including sales under deferred payment promotions on its proprietary credit card in fiscal 2007 and prior years. The Company records an allowance for estimated merchandise returns...

  • Page 32
    ... rate utilized is the United States Treasury rate that most closely matches the weighted average expected life at the time of the grant. The expected dividend yield is based on the annual dividend rate at the time of grant or estimates of future anticipated dividend rates. If the Company had used...

  • Page 33
    ... dollars in order to limit its exposure to foreign currency fluctuations, the Company, from time to time, enters into forward foreign currency exchange contracts. The Company uses such contracts to hedge exposures to changes in foreign currency exchange rates associated with purchases denominated in...

  • Page 34
    ... with the standards of the Public Company Accounting Oversight Board (United States), Pier 1 Imports, Inc.'s internal control over financial reporting as of March 1, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 35
    Pier 1 Imports, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) 2008 Year Ended 2007 2006 Net sales ...Operating costs and expenses: Cost of sales (including buying and store occupancy costs) . Selling... income taxes ...Provision (benefit) for income taxes ...Net...

  • Page 36
    ...,632 Office building held for sale...80,539 Prepaid expenses and other current assets ...41,445 Total current assets ...Properties, net ...Other noncurrent assets ...663,879 114,952 43,073 $ 821,904 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable...$ 106,084 Gift cards and...

  • Page 37
    ... held for sale ...Stock-based compensation expense ...Deferred compensation ...Lease termination expense ...Deferred income taxes ...Other ...Change in cash from: Sale of receivables in exchange for beneficial interest in securitized receivables ...Purchase of proprietary credit card receivables and...

  • Page 38
    Pier 1 Imports, Inc. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands except per share amounts) Common Stock Outstanding Shares Amount Cumulative Other Comprehensive Income (Loss) Total Unearned Shareholders' Compensation Equity Paid-in Capital Retained Earnings Treasury Stock ...

  • Page 39
    ... ACCOUNTING POLICIES Organization - Pier 1 Imports, Inc. (together with its consolidated subsidiaries, the "Company") is one of North America's largest specialty retailers of imported decorative home furnishings and gifts, with retail stores located in the United States and Canada. Additionally...

  • Page 40
    ... the receivables to the Pier 1 Imports Credit Card Master Trust (the "Master Trust"). Neither Funding nor the Master Trust were consolidated by the Company, as the Master Trust met the requirements of a qualifying special-purpose entity under Statement of Financial Accounting Standards ("SFAS") No...

  • Page 41
    ... average cost or market value. Cost is calculated based upon the actual landed cost of an item at the time it is received in the Company's warehouse using actual vendor invoices, the cost of warehousing and transporting product to the stores and other direct costs associated with purchasing products...

  • Page 42
    ... merchandise returns at the end of fiscal years 2008 and 2007 were $1,559,000 and $3,215,000, respectively. The Company's revenues are reported net of discounts and returns, net of sales tax and third-party credit card fees, and include wholesale sales and royalties received from franchise stores...

  • Page 43
    Pier 1 Imports, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) costs. In accordance with accounting rules, changes in benefit obligations associated with these factors may not be immediately recognized as costs on the income statement, but recognized in future years over the remaining...

  • Page 44
    Pier 1 Imports, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Stock-based compensation - The Company grants stock options and restricted stock for a fixed number of shares to employees with stock option exercise prices equal to the fair market value of the shares on the date of the ...

  • Page 45
    ... classified as held for sale in all periods presented. NOTE 3 - SUBSEQUENT EVENT (UNAUDITED) Subsequent to fiscal 2008 year end, the Company entered into an agreement to sell its corporate headquarters building and accompanying land for $104,000,000 to an unrelated party. As part of the transaction...

  • Page 46
    Pier 1 Imports, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) NOTE 4 - PROPERTIES Properties are summarized as follows at March 1, 2008 and March 3, 2007 (in thousands): 2008 2007 Land ...Buildings ...Equipment, furniture and fixtures ...Leasehold improvements ...Computer software ...

  • Page 47
    ... closure of all of the Company's clearance and Pier 1 Kids stores and the direct to consumer channel. These concepts were closed during fiscal 2008 since their aggregate performance was not in line with the Company's profitability targets. Lease termination costs associated with these closures were...

  • Page 48
    ... loans are based on the bond interest rates, which are market driven, reset weekly and are similar to other tax-exempt municipal debt issues. The Company's weighted average effective interest rate, including standby letter of credit fees, was 5.2% for both fiscal 2008 and 2007. In February 2006, the...

  • Page 49
    ... inventory, thirdparty credit card receivables and certain Company-owned real estate. The amendment also revised certain advance rates and other definitions and terms of the facility, including the allowable use of proceeds and permitted distributions. During 2008, the Company had no cash borrowings...

  • Page 50
    ... information is presented below. CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS Year Ended March 1, 2008 (In thousands) Pier 1 Imports, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Net sales ...Cost of sales (including buying and store occupancy costs) ...Selling...

  • Page 51
    ...Year Ended March 3, 2007 (In thousands) Pier 1 Imports, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Net sales ...Cost of sales (including buying and store occupancy costs) ...Selling...operations: Loss from discontinued operations ...Benefit for income taxes ...Net loss ...

  • Page 52
    ...Year Ended February 25, 2006 (In thousands) Pier 1 Imports, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Net sales ...Cost of sales (including buying and store occupancy costs) ...Selling...: Loss from discontinued operations ...Benefit for income taxes ...Net loss...

  • Page 53
    ... CONDENSED BALANCE SHEET March 1, 2008 (In thousands) Pier 1 Imports, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total ASSETS Current assets: Cash and cash equivalents...Other accounts receivable, net ...Inventories ...Income tax receivable ...Office building held for sale...

  • Page 54
    ... CONDENSED BALANCE SHEET March 3, 2007 (In thousands) Pier 1 Imports, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total ASSETS Current assets: Cash and cash equivalents...Other accounts receivable, net ...Inventories ...Income tax receivable ...Office building held for sale...

  • Page 55
    ...) CONSOLIDATING CONDENSED STATEMENT OF CASH FLOW Year Ended March 1, 2008 (In thousands) Pier 1 Imports, Inc. Guarantor Subsidiaries Non-Guarantor Subsidiaries Eliminations Total Cash flow from operating activities: Net cash provided by (used in) operating activities ...Cash flow from investing...

  • Page 56
    ...: Cash dividends ...Proceeds from stock options exercised, stock purchase plan and other, net ...Notes payable borrowings ...Repayments of notes payable ...Debt issuance costs ...Advances (to) from subsidiaries ...Net cash provided by (used in) financing activities ...Change in cash and cash...

  • Page 57
    ... purchase plan and other, net ...Issuance of long-term debt ...Notes payable borrowings ...Repayments of notes payable ...Debt issuance costs ...Purchase of call option ...Contributions from parent ...Advances from (to) subsidiaries ...Net cash provided by (used in) financing activities ...Change...

  • Page 58
    ...of its executive officers. The Plans provide that upon death, disability, reaching retirement age and certain termination events, a participant will receive benefits based on highest compensation, years of service and years of plan participation. The Company recorded expenses related to the Plans of...

  • Page 59
    ... 2008 includes the impact from the addition of the Company's President and Chief Executive Officer to the Plan during the year. Pursuant to his employment agreement, he was entitled to participate in the Plan with the same level of benefit as his accrued benefit at his former employer. (2) The rate...

  • Page 60
    ... 2006 Plan, which resulted in awards of stock options and restricted stock totaling 986,700 shares. Stock option grants - On January 27, 2007, the Board of Directors approved an employment agreement for the Company's new President and Chief Executive Officer (the "CEO"). The employment agreement set...

  • Page 61
    .... During fiscal 2006, the Company's Board of Directors approved the accelerated vesting of approximately 3,806,375 unvested stock options awarded to employees under the Company's then existing stock option plans that had exercise prices exceeding the closing market price of $11.20 at September...

  • Page 62
    ... SFAS 123R was effective for the Company at the beginning of fiscal 2007. A summary of stock option transactions related to the stock option plans during the three fiscal years ended March 1, 2008 is as follows: Weighted Average Exercise Price Weighted Average Fair Value at Date of Grant Exercisable...

  • Page 63
    ...common stock of the Company for a period approximating the expected life. The risk free interest rate utilized is the United States Treasury rate that most closely matches the weighted average expected life at the time of the grant. The expected dividend yield is based on the annual dividend rate at...

  • Page 64
    ...the Pier 1 Imports, Inc. Stock Purchase Plan under which the Company's common stock is purchased on behalf of employees at market prices through regular payroll deductions. Each participant may contribute up to 10% of the eligible portions of compensation. The Company contributes from 10% to 100% of...

  • Page 65
    ... 1 National Bank, to finance purchases of merchandise and services offered by the Company. These accounts had various billing and payment structures, including varying minimum payment levels. The Company had an agreement with a third party to provide certain credit card processing and related credit...

  • Page 66
    ... ... Total provision (benefit) for income taxes ...$2,594 The Company files a federal income tax return and income tax returns in various states and foreign jurisdictions. The Company has settled and closed all Internal Revenue Service ("IRS") examinations of the Company's tax returns for all years...

  • Page 67
    ... compensation ...Net operating loss ...Accrued average rent ...Fixed assets, net ...Self insurance reserves ...Deferred gain on sale of credit card operations...Cumulative foreign currency translation ...Deferred revenue and revenue reserves ...Purchased call option ...Other ...Total deferred...

  • Page 68
    ... on March 4, 2007, total reserves for uncertain tax positions were $13,908,000. On a quarterly and annual basis, the Company accrues for the effects of open uncertain tax positions. A summary of amounts recorded for unrecognized tax benefits at the beginning and end of fiscal 2008 is presented below...

  • Page 69
    ... During the fourth quarter of fiscal 2006, the Company's Board of Directors authorized management to sell its operations of The Pier with stores located in the United Kingdom and Ireland. The Company met the criteria of SFAS 144 that allowed it to classify The Pier as held for sale and present its...

  • Page 70
    ... first quarter of fiscal 2008. See Note 1 of the Notes to Consolidated Financial Statements for further discussion of this charge. (3) Net loss for the fourth quarter ended March 3, 2007, included the pre-tax effects of a $6.8 million settlement and curtailment charge related to retirement plans and...

  • Page 71
    ...registered public accounting firm, has audited the Company's internal control over financial reporting as of March 1, 2008, as stated in their report which is included in this Annual Report on Form 10-K. /s/ Alexander W. Smith Alexander W. Smith President and Chief Executive Officer /s/ Charles...

  • Page 72
    ... standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pier 1 Imports, Inc. as of March 1, 2008 and March 3, 2007, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the...

  • Page 73
    .... Information regarding the Company's audit committee financial experts and code of ethics and business conduct required by this item is incorporated by reference to the section entitled "Matters Relating to Corporate Governance, Board Structure, Director Compensation and Stock Ownership" set forth...

  • Page 74
    ... Principal Accounting Fees and Services. Information required by this Item is incorporated by reference to the sections entitled "Independent Registered Public Accounting Firm Fees" and "Pre-approval of Nonaudit Fees" set forth in Item 3 of the Company's Proxy Statement for its 2008 Annual Meeting...

  • Page 75
    ... authorized. PIER 1 IMPORTS, INC. Date: May 7, 2008 By: /s/ Alexander W. Smith Alexander W. Smith, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in...

  • Page 76
    ... and JPMorgan Chase Bank, National Association, incorporated herein by reference to Exhibit 4.1 to the Company's Form 8-K filed February 16, 2006. Registration Rights Agreement dated February 14, 2006, among Pier 1 Imports, Inc., the Guarantors parties thereto and the Initial Purchaser named therein...

  • Page 77
    ...year ended February 28, 2004. Amendment to the Pier 1 Imports, Inc. Stock Purchase Plan. Employment Agreement between Pier 1 Imports, Inc. and Gregory S. Humenesky, dated February 28, 2005, incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed March 3, 2005. Secured Credit...

  • Page 78
    ... 2007. Amendment No. 2 to the Credit Card Program Agreement by and among Pier 1 Imports (U.S.), Inc. and Chase Bank USA, N.A., incorporated herein by reference to Exhibit 10.4 to the Company's Form 10-Q for the quarter ended September 1, 2007. Real Estate Purchase Agreement by and between Chesapeake...

  • Page 79
    Notice of Annual Meeting of Shareholders Proxy Statement Proxy ® 2008 Annual Report

  • Page 80
    ..., INC. 100 Pier 1 Place Fort Worth, Texas 76102 May 15, 2008 Dear Shareholder: The board of directors and management cordially invite you to attend Pier 1 Imports' annual meeting of shareholders to be held at 10:00 a.m., local time, on Friday, June 20, 2008, at Pier 1 Imports' corporate headquarters...

  • Page 81
    ...20, 2008 Pier 1 Imports' annual meeting of shareholders will be held on Friday, June 20, 2008, at 10:00 a.m., local time, at Pier 1 Imports' corporate headquarters, Mezzanine Level, Conference Room C, 100 Pier 1 Place, Fort Worth, Texas 76102 for the following purposes: (1) to elect as directors the...

  • Page 82
    ... You are invited to attend our annual meeting of shareholders on June 20, 2008, beginning at 10:00 a.m., local time. The annual meeting will be held at Pier 1 Imports' corporate headquarters, Mezzanine Level, Conference Room C, 100 Pier 1 Place, Fort Worth, Texas 76102. Shareholders will be admitted...

  • Page 83
    ... or postponement of the meeting. Who is entitled to vote at the annual meeting? Holders of Pier 1 Imports' common stock at the close of business on April 21, 2008, are entitled to receive this notice and to vote their shares at the annual meeting. As of that date, there were 89,036,575 shares of...

  • Page 84
    ... 100 Pier 1 Place, Fort Worth, Texas 76102; • timely delivery of a valid, later-dated proxy or a later-dated vote by telephone or on the Internet; or • voting by ballot at the annual meeting. If you are a beneficial owner of shares, you may submit new voting instructions by contacting your bank...

  • Page 85
    ... available at the annual meeting and for ten days prior to the meeting for any purpose germane to the meeting, between the hours of 8:00 a.m. and 5:00 p.m., local time, at our corporate headquarters at 100 Pier 1 Place, Fort Worth, Texas 76102, by contacting our corporate secretary. What constitutes...

  • Page 86
    ... your home or business, and also will give you an electronic link to the proxy voting site. Shareholders of Record: You may enroll in MLinkSM offered by Pier 1 Imports' transfer agent, Mellon Investor Services LLC, for online access to our future proxy statement and annual report materials by going...

  • Page 87
    ...proof of your ownership of Pier 1 Imports' common stock, to: Pier 1 Imports, Inc. Attn.: Investor Relations Department 100 Pier 1 Place Fort Worth, Texas 76102 No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the annual meeting. If you have...

  • Page 88
    ...New York Stock Exchange ("NYSE"). In assessing independence under the subjective test, the board of directors takes into account the standards in the objective tests, and reviews and discusses additional information provided by the directors and Pier 1 Imports with regard to each director's business...

  • Page 89
    ...directors, addressed to: [Name of Board Member], Board of Directors Pier 1 Imports, Inc. c/o Corporate Secretary 100 Pier 1 Place Fort Worth, Texas 76102 In addition, shareholders and other interested parties may communicate with the chairman of the audit committee, compensation committee, executive...

  • Page 90
    ... and systems of internal controls. As part of its duties, the audit committee is directly responsible for the appointment, compensation, retention and oversight of Pier 1 Imports' independent registered public accounting firm. The audit committee also reviews Pier 1 Imports' quarterly and year-end...

  • Page 91
    ... Implementation of any equity grant portion of the compensation for the year occurs after board of directors and compensation committee approval. Pier 1 Imports' management, from time to time, retains outside consultants for assistance and guidance in the formulation of new compensation programs and...

  • Page 92
    ... Pier 1 Imports' annual meeting of shareholders. Committee memberships, the number of meetings of the full board and each committee, and each director's dates of service for fiscal 2008 are shown in the table below. Board of Directors Audit Committee Compensation Committee Executive Committee...

  • Page 93
    ... year ended March 1, 2008 for services rendered in all capacities to Pier 1 Imports by its non-employee directors: Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) Name Fees Earned or Paid in Cash(1) ($) Stock Awards(2) ($) Option Awards ($) Non-Equity Incentive Plan...

  • Page 94
    ..."). The number of DSU's is calculated using the closing price of Pier 1 Imports' common stock on the first business day following the month the fees were earned, which price approximates the fair value of the units. The following table shows fiscal 2008 DSU's for each non-employee director given his...

  • Page 95
    ...III ...Karen W. Katz ... Total ...Terry E. London ... Total ...Cece Smith ...Tom M. Thomas ... Total ... On March 25, 2008, the board of directors, based on a recommendation from the compensation committee, amended and restated Pier 1 Imports' non-employee director compensation plan. Pursuant to the...

  • Page 96
    ...,000; and the non-executive chairman of the board will continue to receive an annual retainer of $75,000. The annual retainers will be payable in advance at the beginning of each fiscal year with Pier 1 Imports having the right to adjust the credited DSU's of a non-employee director who ceases to be...

  • Page 97
    ...of the board of directors. A DSU is the economic equivalent of one share of Pier 1 Imports' common stock. (3) Mr. Schneider's employment ended on August 6, 2007. At that time, Mr. Schneider directly owned 54,036 shares of Pier 1 Imports' common stock, and non-qualified stock options totaling 650,000...

  • Page 98
    ... reports disclosing their ownership and changes in ownership of Pier 1 Imports' common stock or other equity securities. Pier 1 Imports' executive officers, directors and greater than 10% shareholders are required by SEC regulations to furnish Pier 1 Imports with copies of all Section 16(a) forms...

  • Page 99
    ..., III, age 55, has been a director of Pier 1 Imports since June 2007. Effective June 28, 2007, he became a member of the compensation committee. He represented the United States on the board of executive directors of the World Bank in various capacities, including executive director and alternate...

  • Page 100
    ... Smith is not related to Alexander W. Smith. TOM M. THOMAS Tom M. Thomas, age 66, has been a director of Pier 1 Imports since September 1998. During fiscal 2008 he was the non-executive chairman of the board, chairman of the executive committee and a member of the nominating and corporate governance...

  • Page 101
    ...account the deducted funds plus Pier 1 Imports' contribution on the participant's behalf. The plan allows Pier 1 Imports as the plan administrator to use the contributed funds to purchase shares of Pier 1 Imports' common stock either on the open market or directly from Pier 1 Imports. No open market...

  • Page 102
    ... in cash by the employee and Pier 1 Imports, and the number of shares purchased under the plan for their respective accounts during the fiscal year ended March 1, 2008. Pier 1 Imports, Inc. Stock Purchase Plan Name and Position Participant Cash Contributions Pier 1 Imports Cash Contributions Shares...

  • Page 103
    .... (2) Equity compensation plans not approved by security holders represent the employment inducement stock options granted under the president and chief executive officer's employment agreement. See Note 10 of the Notes to Consolidated Financial Statements in Pier 1 Imports' Annual Report on Form 10...

  • Page 104
    ...,100 $ 136,008 $ 1,624 $1,233,732 $1,232,248 $ 228,722 $ 1,624 $1,462,594 (1) Includes fees for services related to the annual audit of the consolidated financial statements, required statutory audits, reviews of Pier 1 Imports' quarterly reports on Form 10-Q and the registered public accounting...

  • Page 105
    ... oversight function, the committee reviewed and discussed Pier 1 Imports' audited consolidated financial statements as of and for the fiscal year ended March 1, 2008 with management and Pier 1 Imports' independent registered public accounting firm, including a discussion of the quality, not just the...

  • Page 106
    ...-mentioned review and discussions with management and the independent registered public accounting firm, the committee recommended to the board of directors that Pier 1 Imports' audited consolidated financial statements be included in Pier 1 Imports' Annual Report on Form 10-K for the fiscal year...

  • Page 107
    ... Pier 1 Imports' current policies and practices. Pier 1 Imports' annual performance-based incentive for executives is administered by the board of directors' compensation committee whose duties include establishing performance goals each year for the payment of cash incentive awards. For fiscal 2008...

  • Page 108
    ... given the size of the home furnishings industry and the fact that no one company competes directly in all aspects of Pier 1 Imports' business. As stated, no senior executive or key management employee earned or received a performance cash incentive award for fiscal years 2004, 2005, 2006 and 2007...

  • Page 109
    ... significantly exceed planned financial goals. In March 2007, Pier 1 Imports used a group of peer companies to benchmark the base salary, short-term incentive and long-term incentive elements of total compensation. That group included Abercrombie & Fitch Co., Ann Taylor Stores Corporation, Bed Bath...

  • Page 110
    ... with market conditions for similar jobs, (iii) reflect an executive's individual performance and contribution, and (iv) aid in the retention of key personnel. In fiscal 2008, Pier 1 Imports management, through its human resources compensation group and Pier 1 Imports' chief executive officer...

  • Page 111
    ...whose bonus for fiscal 2008 was addressed in his employment agreement. In fiscal 2008, the named executive officers (other than the chief executive officer) had a target cash incentive award of 75% of annual base salary. The Plan required participants to be employed with Pier 1 Imports at the end of...

  • Page 112
    ...by the board of directors. For fiscal 2008, the grant date was delayed pending Pier 1 Imports' fourth quarter and year-end earnings release and conference call. Pier 1 Imports does not grant equity compensation awards in anticipation of the release of material non-public information. Similarly, Pier...

  • Page 113
    ... 2008, the board of directors approved $750,000 as the fiscal 2008 bonus for Mr. Smith. He will participate in Pier 1 Imports' annual cash incentive award plan for Pier 1 Imports' 2009 and 2010 fiscal years as determined by Pier 1 Imports' compensation committee and board of directors at those times...

  • Page 114
    ... the equity grant portion of the compensation for the year occurs after compensation committee and board of directors approval. Pier 1 Imports' Policy on Share Ownership During fiscal 2008, Pier 1 Imports' board of directors adopted voluntary stock ownership guidelines for its non-employee directors...

  • Page 115
    ... as a Pier 1 Imports executive officer at the fiscal year-end. Change in Pension Value and Non-Equity Non-Qualified Deferred Incentive Compensation All Other Plan Compensation Earnings(4) Compensation(5 Name & Principal Position Fiscal Year Salary(1) ($) Bonus ($) Stock Awards(2) ($) Option...

  • Page 116
    ... set by the board of directors. (4) This column represents the sum of the change in pension value and above market earnings on nonqualified deferred compensation earnings for each of the named executive officers. During fiscal 2007, Mr. Smith did not participate in a Pier 1 Imports defined benefit...

  • Page 117
    ...vesting requirements as Pier 1 Imports' 401(k) Retirement Plan; and (c) Pier 1 Imports matching contributions to the named executive officer's Stock Purchase Plan account equal to 50% of the named executive officer's compensation deduction, other than Mr. Walker whose matching contributions were 100...

  • Page 118
    ... included in the Summary Compensation Table above under the Bonus column. During fiscal 2008, Pier 1 Imports granted under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan time based restricted stock awards. These time based awards vest 33%, 33% and 34% each year over a three-year period beginning...

  • Page 119
    ... of plan-based awards during the fiscal year ended March 1, 2008 to the executive officers named in the Summary Compensation Table. Pier 1 Imports distributes long-term incentive awards as soon as possible following receipt of all required approvals. Stock options are granted at the closing price of...

  • Page 120
    ... the Fiscal Year Ended March 1, 2008 The following table provides information on the current outstanding stock option and restricted stock awards held by each named executive officer as of the end of fiscal 2008. Market value was determined using the closing price of Pier 1 Imports' common stock of...

  • Page 121
    Option Awards Stock Awards Equity Incentive Plan Awards: Equity Market or Incentive Payout Plan Value of Awards: Market Unearned Number of Value of Shares, Unearned Number of Shares or Units or Shares or Units of Shares, Units Other or Other Stock Units of Rights That Rights That That Stock That ...

  • Page 122
    ...the grant date, or August 6, 2010. Option Exercises and Stock Vested Table for the Fiscal Year Ended March 1, 2008 The following table provides information for each named executive officer on (a) stock option exercises during fiscal 2008, including the number of shares acquired upon exercise and the...

  • Page 123
    ... of a change in control may constitute retirement under the plan. The following table shows the present value of each named executive officer's total accumulated benefit under Pier 1 Imports' Supplemental Retirement Plan as of the fiscal year ended March 1, 2008. Number of Years Credited Service...

  • Page 124
    ... 50% 60% 70% 80% 90% 100% Vesting is accelerated to 100% upon an early retirement, normal retirement, termination of employment in certain circumstances as a result of a change in control of Pier 1 Imports, or death or disability of the participant. The years of plan participation for Mr. Smith are...

  • Page 125
    ... in Pier 1 Imports' matching contributions plus earnings after six years of service with Pier 1 Imports. Each participant's deferral amount plus the Pier 1 Imports match is credited at least quarterly with an amount of interest at an annual rate equal to Moody's Corporate Bond Index plus 1%. Over...

  • Page 126
    ...officers under existing contracts, agreements, plans or arrangements to which they are a party for various scenarios including a change in control or termination of employment, assuming the event occurred on March 1, 2008 and, where applicable, using the closing price of Pier 1 Imports' common stock...

  • Page 127
    ... are discussed in the Non-Qualified Deferred Compensation Table above. This disclosure is based on the terms and provisions of the plans as they existed at the end of Pier 1 Imports' fiscal year 2008, and Pier 1 Imports' interpretation of these terms and provisions at that time. One or more of the...

  • Page 128
    ... For Cause Termination ($) Change in Control ($) Death ($) Disability ($) Alexander W. Smith Employment Agreement Compensation/Benefits ...Supplemental Retirement Plan(1) Benefit Payment ...Insurance Premiums ...Stock Options ...Charles H. Turner Post-Employment Consulting Agreement(14) Salary...

  • Page 129
    ... shown is market price on March 1, 2008 of $5.24 per share times the number of shares. The 1993 Plan includes death and disability as termination of employment events. (7) Grants of stock options under Pier 1 Imports' 1989 Employee Stock Option Plan ("1989 Plan"), 1999 Stock Plan ("1999 Plan") and...

  • Page 130
    ...termination of employment. (11) Upon a change in control event (as defined in the 1999 Plan), options granted under the 1999 Plan would automatically vest unless Pier 1 Imports' board of directors determines otherwise prior to the change in control event. Under the 2006 Plan, upon a corporate change...

  • Page 131
    ... April 21, 2009. You may contact Pier 1 Imports' corporate secretary to find out what specific information regarding the matter must be included with the advance notice. YOUR VOTE IS IMPORTANT You are encouraged to let us know your preference by completing and returning the enclosed proxy card or by...

  • Page 132
    ... of the Plan, including eligibility requirements, applicable to employees of the Company. No amounts from an employee Participant's Account will be used to purchase shares of Common Stock if immediately after such purchase such employee would own 5% or more of the total combined voting power...

  • Page 133
    ...Common Stock from Pier 1 Imports, Inc. will be at an average price per share determined over an allocation period, each as established by the Administrative Committee from time to time. Purchased shares will be allocated to the Accounts of Participants, at the average price per share for open market...

  • Page 134
    ...purchase of Common Stock under the Plan for each Participant. The Company will contribute an amount equal to 25% of the nonemployee Director's deduction from his cash director compensation payments for the purchase of Common Stock under the Plan for such non-employee Director. ARTICLE VI TERMINATION...

  • Page 135
    ... terminated as set forth in Article VI, may submit a Withdrawal Request and close their Account. If a Withdrawal Request is not submitted, then all shares in such Account shall be automatically distributed to such former employee or such former employee's estate, as the case may be, at the same time...

  • Page 136
    ... and consented to the application to him of the provisions of the Plan. Neither Pier 1 Imports, Inc. nor any of its subsidiaries both corporate and non-corporate (including, but not limited to, any statutory trust), nor any Director, officer, employee or agent of Pier 1 Imports, Inc. or any of...

  • Page 137
    ...of its board of directors, or other governing person or entity, if applicable. i. "Compensation" shall mean the total of all amounts paid by an employer to or for the benefit of an employee Participant for services rendered or labor performed for the employer which are required to be reported on the...

  • Page 138
    Driving Directions for the Pier 1 Imports, Inc. Annual Meeting of Shareholders at Pier 1 Imports, Inc.'s Corporate Headquarters 100 Pier 1 Place, Fort Worth, Texas 76102 at 10:00 a.m., local time on June 20, 2008 Reminder: You must present your admission ticket at the admissions table in order to ...

  • Page 139
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  • Page 140