Pier 1 2009 Annual Report Download - page 50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1—DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT 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, the Company has merchandise
in ‘‘store within a store’’ locations in Mexico and Puerto Rico that are primarily operated by Sears
Roebuck de Mexico, S.A. de C.V. and Sears Roebuck de Puerto Rico, Inc., respectively. On March 20,
2006, the Company sold its subsidiary based in the United Kingdom, The Pier Retail Group Limited
(‘‘The Pier’’). The Pier has been included in discontinued operations in the Company’s financial
statements for fiscal year 2007.
Basis of consolidation—The consolidated financial statements of the Company include the
accounts of all subsidiary companies except, in fiscal 2007, Pier 1 Funding, LLC (‘‘Funding’’), a
non-consolidated, bankruptcy remote, securitization subsidiary. See Note 9 of the Notes to Consolidated
Financial Statements for further discussion. All intercompany transactions and balances have been
eliminated.
Segment information—The Company is a specialty retailer that offers a broad range of products in
its stores and conducts business as one operating segment. The Company’s domestic operations
provided 90.9%, 90.9% and 92.3% of its net sales, with 8.5%, 8.7% and 7.3% provided by stores in
Canada, and the remainder from royalties received from Sears Roebuck de Mexico S.A. de C.V. during
fiscal 2009, 2008 and 2007, respectively. As of February 28, 2009, March 1, 2008 and March 3, 2007,
$2,308,000, $4,572,000 and $5,510,000, respectively, of the Company’s long-lived assets were located in
Canada. There were no long-lived assets in Mexico during any period.
Use of estimates—Preparation of the financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results could differ from
those estimates.
Reclassifications—Certain reclassifications have been made in the prior years’ consolidated
financial statements to conform to the fiscal 2009 presentation. These reclassifications had no effect on
net income, shareholders’ equity, total assets and total liabilities and the major categories of the cash
flow. In addition to insignificant reclassifications on the statement of cash flows, the Company’s home
office building and related assets were reclassified during the first quarter of fiscal 2009 to noncurrent
assets from assets held for sale which were included in current assets at March 1, 2008. This
reclassification on the balance sheet was made in all prior periods presented to reflect the fact that the
Company entered into a lease for a portion of the building when the sale transaction was completed,
and therefore the building did not meet the definition of assets held for sale at the balance sheet dates.
Depreciation was recorded on the assets through the date of sale and the reclassification had no impact
on the results of operations or statement of cash flows in any period presented. As stated in Note 2 of
the Notes to Consolidated Financial Statements above, the office building and related assets were sold on
June 9, 2008.
Fiscal periods—The Company utilizes 5-4-4 (week) quarterly accounting periods with the fiscal
year ending on the Saturday nearest the last day of February. Both fiscal 2009 and 2008 consisted of
52-week years and fiscal 2007 consisted of a 53-week year. Fiscal 2009 ended February 28, 2009, fiscal
2008 ended March 1, 2008 and fiscal 2007 ended March 3, 2007.
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