Pier 1 2011 Annual Report Download

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2011 Annual Report
Annual Meeting of Shareholders
June 28, 2011

Table of contents

  • Page 1
    2011 Annual Report Annual Meeting of Shareholders June 28, 2011

  • Page 2
    ... and distinctive merchandise reflects the diverse cultures of the many countries we explore. We offer a broad assortment of items and styles, with something for everyone - useful, decorative and the purely whimsical. We help our customers reflect their personal style. Pier 1 Imports Our stores are...

  • Page 3
    ... which will bring new customers to the Pier 1 Imports experience and give existing customers more reasons to shop with us. With an outstanding management team, the strength of the Pier 1 Imports brand and rigorous capital discipline, we are working towards developing our Company into a best-in-class...

  • Page 4

  • Page 5
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  • Page 6

  • Page 7
    ... (State or other jurisdiction of incorporation or organization) 100 Pier 1 Place Fort Worth, Texas (Address of principal executive offices) Company's telephone number, including area code: (817) 252-8000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Common Stock...

  • Page 8
    ... and Supplementary Data. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Controls and Procedures. Other Information. PART III Item 10. Item 11. Item 12. Item 13. Item 14. Directors, Executive Officers and Corporate Governance. Executive Compensation. Security...

  • Page 9
    ... sites, and lease renewal negotiations, the Company plans to open 12 new Pier 1 Imports stores and close 7 stores during fiscal 2012. As of the end of fiscal 2011, the Company operates regional distribution center facilities in or near Baltimore, Maryland; Columbus, Ohio; Fort Worth, Texas; Ontario...

  • Page 10
    ... accents, lamps, vases, dried and artificial flowers, baskets, ceramics, dinnerware, bath and fragrance products, candles, bedding, seasonal and gift items. FURNITURE - This merchandise group consists of furniture and furniture cushions to be used in living, dining, office, kitchen and bedroom...

  • Page 11
    ... 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 without limitation as to reason...

  • Page 12
    ... suitable store sites and distribution center locations, the availability of a qualified labor force and management, the availability and proper functioning of technology and communications systems supporting the Company's key business processes, the ability of the Company to import merchandise from...

  • Page 13
    ...is a licensed attorney in the State of Texas. Prior to joining the Company, Mr. Carter practiced law with the Fort Worth, Texas law firm of Brackett and Ellis, LLP. LAURA A. COFFEY, age 44, was named Senior Vice President of Business Development and Strategic Planning in January 2011. Ms. Coffey has...

  • Page 14
    ...reasonably predicted. A majority of the Company's merchandise is manufactured, purchased and imported from countries around the world and may be ordered well in advance of the applicable selling season. Extended lead times may make it difficult to respond rapidly to changes in consumer demand and as...

  • Page 15
    ... its stores and customers, which could impact its sales and results of operations. The Company maintains regional distribution centers in Maryland, Ohio, Texas, California, Georgia and Washington. At these distribution centers, merchandise is received, allocated, and shipped to the Company's stores...

  • Page 16
    ...profitable state. Current locations may not continue to be desirable as demographics change, and the Company may choose to close an underperforming store before its lease expires and incur lease termination costs associated with that closing. The Company cannot give assurance that opening new stores...

  • Page 17
    ... manage the merchandise supply chain, sell merchandise, accomplish payment functions, report financial data or manage labor and staffing. Although the Company maintains off-site data backups, a concentration of technology-related risk exists in the Company's headquarters located in Fort Worth, Texas...

  • Page 18
    ..., because the Company imports merchandise from countries around the 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...

  • Page 19
    ... barriers in international trade to be beneficial to its business. Any type of sanction on imports is likely to increase the Company's import costs or limit the availability of merchandise purchased from sanctioned countries. In that case, the Company may be required to seek similar merchandise from...

  • Page 20
    ... leases the following warehouse properties in or near the following cities: Owned/Leased Facility Leased Leased Owned Leased Leased Leased 14 Location Baltimore, Maryland Columbus, Ohio Fort Worth, Texas Ontario, California Savannah, Georgia Tacoma, Washington Approx. Sq. Ft. 634,000 sq. ft...

  • Page 21
    Item 3. Legal Proceedings. The Company is a party to various legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations or ...

  • Page 22
    ... and Issuer Purchases of Equity Securities. Market Prices of Common Stock The following table shows the high and low 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...

  • Page 23
    ... February 26, 2011. The information used in the graph below was obtained from Bloomberg. PIER 1 IMPORTS, INC. STOCK PERFORMANCE GRAPH 300 250 200 150 100 50 0 2/25/2006 3/3/2007 3/1/2008 2/28/2009 2/27/2010 2/26/2011 Pier 1 Imports, Inc. S&P 500 Stock Index S&P Retail Stores Composite Index...

  • Page 24
    ... prior years. All financial information in this report relates to continuing operations, unless stated otherwise. The decrease in selling, general and administrative expenses for fiscal years 2010, 2009 and 2008 relate primarily to initiatives to reduce costs Company-wide. See detailed description...

  • Page 25
    ... "Company") is a global importer and is one of North America's largest specialty retailers of imported decorative home furnishings and gifts. The Company directly imports merchandise from many countries, and sells a wide variety of decorative accessories, furniture collections, bed and bath products...

  • Page 26
    ... 1,046 Pier 1 Imports stores today throughout the United States and Canada to approximately 1,100 Pier 1 Imports stores in the United States and Canada within five years. The Company currently plans to open approximately 80 stores and close approximately 30 stores as part of its net new store growth...

  • Page 27
    ... until it meets the Company's established definition of a comparable store. FISCAL YEARS ENDED FEBRUARY 26, 2011 AND FEBRUARY 27, 2010 Net Sales Net sales consisted primarily of sales to retail customers, net of discounts and returns, but also included delivery revenues and wholesale sales and...

  • Page 28
    ... summary reconciliation of the Company's stores open at the beginning of fiscal 2011, 2010 and 2009 to the number open at the end of each period follows (openings and closings include relocated stores): United States Open at March 1, 2008 Openings Closings Open at February 28, 2009 Openings Closings...

  • Page 29
    ... with lease terminations and buyout agreements along with the closing of fewer stores this year compared to the same period last year. In addition, the Company had a gain of $1.6 million on the sale of its distribution center near Chicago during the first quarter of fiscal 2011. Depreciation and...

  • Page 30
    ... 28, 2009 Net Sales Net sales consisted primarily 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 2010, 2009 and 2008 were as follows (in thousands): 2010 Stores Direct to...

  • Page 31
    ...de C.V. which sells Pier 1 Imports merchandise primarily in a "store within a store" format. At the end of fiscal 2010, there were 35 of these locations in Mexico. During the third quarter of fiscal 2010, the company ended its relationship with Sears Roebuck de Puerto Rico, Inc. and closed all seven...

  • Page 32
    ... year related to a reduction in the Company's work force. Acquisition costs decreased $1.7 million as a result of expenses related to the Company's withdrawn proposal to acquire all of the outstanding common stock shares of Cost Plus, Inc. in fiscal 2009, with no similar expenditure in fiscal 2010...

  • Page 33
    ... in cash. The Company recognized a net gain of $1.8 million related to these transactions in the second quarter of fiscal 2010. During the third quarter of fiscal 2010, all $61.3 million of the Company's 9% Notes voluntarily converted into shares of the Company's common stock. In connection with...

  • Page 34
    ... investing activities used $13.7 million. Capital expenditures were $31.0 million in fiscal 2011, consisting primarily of $14.2 million for new and existing stores, $14.7 million for information systems enhancements, and $2.1 million related to the home office and distribution centers. Proceeds from...

  • Page 35
    ... order has been shipped. The table above excludes certain executory contracts for goods and services that tend to be recurring in nature and similar in amount year over year. The Company also has outstanding standby letters of credit totaling $9.7 million related to the Company's industrial revenue...

  • Page 36
    ...sources of working capital for fiscal 2011 were primarily from operations and the sale of its distribution center near Chicago. The Company has a variety of sources for liquidity, which include available cash balances and available lines of credit. The Company's current plans for fiscal 2012 include...

  • Page 37
    ... differ from the Company's estimates and current provision for merchandise returns, revisions to the estimated merchandise returns may be required. Gift cards - Revenue associated with gift cards is recognized when merchandise is sold and a gift card is redeemed as payment. Gift card breakage is...

  • Page 38
    ...economic data related to each location. Additional lease termination expense may be incurred as a result of changes to the Company's current assumptions. Defined benefit plans - The Company maintains supplemental retirement plans (the "Plans") for certain of its current and former executive officers...

  • Page 39
    ...contracts. The Company uses such contracts to hedge exposures to changes in foreign currency exchange rates associated with purchases denominated in foreign currencies, primarily euros. The Company operates stores in Canada and is subject to fluctuations in currency conversion rates related to those...

  • Page 40
    ... outstanding related to its industrial revenue bonds and no cash borrowings outstanding on its secured credit facility. A hypothetical 10% adverse change in the interest rates applicable to either or both of these variable rate instruments would have a negligible impact on the Company's earnings and...

  • Page 41
    ... with the standards of the Public Company Accounting Oversight Board (United States), Pier 1 Imports, Inc.'s internal control over financial reporting as of February 26, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 42
    Pier 1 Imports, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) Year Ended 2010 $ 1,290,852 $ 2011 Net sales Operating costs and expenses: Cost of sales (including buying and store occupancy costs) Selling, general and administrative expenses Depreciation and ...

  • Page 43
    ...-term debt Gift cards and other deferred revenue 71,963 Accrued income taxes payable 232 Other accrued liabilities 106,739 Total current liabilities Long-term debt Other noncurrent liabilities Shareholders' equity: Common stock, $0.001 par, 500,000,000 shares authorized 125,232,000 issued Paid-in...

  • Page 44
    ... Change in cash from: Inventories Accounts receivable, prepaid expenses and other current assets Income tax receivable Accounts payable and accrued expenses Income taxes payable Defined benefit plan liabilities Make whole interest provision Proceeds from an adjustment to the proprietary credit card...

  • Page 45
    ... (loss), net of tax as applicable: Pension adjustments Currency translation adjustments Comprehensive income Restricted stock compensation Stock option compensation expense Exercise of stock options, directors deferred, stock purchase plan and other Balance February 26, 2011 979 918 117,484 125 (11...

  • Page 46
    ... 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...

  • Page 47
    ... to hedge exposure associated with the Company's merchandise purchases denominated in foreign currencies or the repatriation of Canadian funds. For financial accounting purposes, the Company does not designate such contracts as hedges. Thus, changes in the fair value of both types of forward...

  • Page 48
    ... billed to customers for shipping and handling are included in net sales and the costs incurred by the Company for these items are recorded in cost of sales. Gift cards - Revenue associated with gift cards is recognized when merchandise is sold and a gift card is redeemed as payment. Gift card...

  • Page 49
    ... discount rate, compensation increase rates, or retirement dates used to determine the projected benefit obligation. Additionally, changes made to the provisions of the Plans may impact current and future benefit costs. In accordance with accounting rules, changes in benefit obligations associated...

  • Page 50
    ... the Company's diluted earnings per share calculations for those periods as the average common stock price did not exceed the initial conversion price of $15.19 per share. Stock-based compensation - The Company's stock-based compensation relates to stock options, restricted stock awards and director...

  • Page 51
    ... 27, 2010 (in thousands): 2011 Accrued payroll and other employee-related liabilities Accrued taxes, other than income Rent-related liabilities Other Other accrued liabilities Rent-related liabilities Deferred gains Retirement benefits Other Other noncurrent liabilities $ 55,540 20,414 11,100 19,685...

  • Page 52
    ...in selling, general and administrative expenses in the Company's consolidated statements of operations. The write-off of fixed assets and associated intangible assets related to Pier 1 Imports store closures was approximately $111,000, $177,000 and $56,000 in fiscal 2011, 2010 and 2009, respectively...

  • Page 53
    ... of industrial revenue bonds related to the distribution center near Chicago, Illinois with proceeds received from the sale of that facility earlier in the year. The Company's interest rates on the loans are based on the bond interest rates, which are market driven, reset weekly and are similar to...

  • Page 54
    ...During the third quarter of fiscal 2010, all $61,255,000 of the Company's 9% Notes voluntarily converted into shares of the Company's common stock at a conversion rate of 399.2016 shares for each $1,000 principal amount, representing a conversion price of $2.5050 per share. The Company issued 24,453...

  • Page 55
    ...to trade letters of credit and bankers acceptances for merchandise purchases, $36,950,000 related to standby letters of credit for the Company's workers' compensation and general liability insurance policies, $9,715,000 related to standby letters of credit related to the Company's industrial revenue...

  • Page 56
    ... 2011, 2010 and 2009, respectively. In addition, the Company offers non-qualified deferred compensation plans for the purpose of providing deferred compensation for certain employees whose benefits under the qualified plan may be limited under Section 401(k) of the Internal Revenue Code. The Company...

  • Page 57
    ... 2011 and 2010 Weighted average assumptions used to determine: Benefit obligation, end of year: Discount rate Lump-sum conversion discount rate Rate of compensation increase (1) Net periodic benefit cost for years ended: Discount rate Lump-sum conversion discount rate Rate of compensation increase...

  • Page 58
    .... As of February 26, 2011, there were a total of 4,395,127 shares available for grant under the 2006 Plan. Stock option grants - On January 27, 2007, the Board of Directors approved an employment agreement effective February 19, 2007 for the Company's President and Chief Executive Officer (the "CEO...

  • Page 59
    ... of an employee, or under certain conditions, such as a change in control of the Company, unless the Board of Directors determines otherwise prior to a change of control event. As of February 26, 2011, there were no shares available for grant under the 1999 Stock Plan. All future stock option grants...

  • Page 60
    ... $2,020,000, or $0.02 per share, and $3,528,000, or $0.04 per share, in fiscal 2011, 2010 and 2009, respectively. The Company recognized no net tax benefit related to stock based compensation during fiscal 2011, 2010 or fiscal 2009 as a result of the Company's valuation allowance on all deferred tax...

  • Page 61
    ...respective fiscal year in order for both the time-based and performance-based shares to vest. These shares could also vest under certain termination events. During fiscal 2011, the Company granted long-term incentive awards under the 2006 Plan to employees. The fiscal 2011 long-term incentive awards...

  • Page 62
    .... Compensation expense for the director deferred stock awards was $579,000, $149,000 and $1,015,000 in fiscal 2011, 2010 and 2009, respectively. Stock purchase plan - Substantially all Company employees and all non-employee directors are eligible to participate in the Pier 1 Imports, Inc. Stock...

  • Page 63
    ... of the new program agreement based on revolving credit card sales, and certain other credit and account related matters. In addition, the Company received total payments of $4,489,000, $8,738,000 and $7,500,000 related to these program agreements during fiscal 2011, 2010 and 2009, respectively. The...

  • Page 64
    ... (in thousands): 2011 Deferred tax assets: Deferred compensation Net operating loss carryforward Accrued average rent Properties, net Self insurance reserves Deferred gain on sale of credit card operations Cumulative foreign currency translation Deferred revenue and revenue reserves Other Total...

  • Page 65
    ... and penalties, accounting in interim periods, disclosure and transition. 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 2011 and 2010 are presented...

  • Page 66
    ...$281,000 in fiscal 2011, 2010 and 2009, respectively. During fiscal 2009, the Company sold its corporate headquarters building and accompanying land to Chesapeake Plaza, L.L.C., an affiliate of Chesapeake Energy Corporation. The Company also entered into a lease agreement to rent office space in the...

  • Page 67
    ..., summarized, and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is (b) accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to...

  • Page 68
    ... registered public accounting firm, has audited the Company's internal control over financial reporting as of February 26, 2011, 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 69
    ...accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pier 1 Imports, Inc. as of February 26, 2011 and February 27, 2010 and the related consolidated statements of operations, shareholders' equity and cash flows for each of...

  • Page 70
    ..." and "Matters Relating to Corporate Governance, Board Structure, Director Compensation and Stock Ownership - Director Independence" set forth in the Company's Proxy Statement for its 2011 Annual Meeting of Shareholders. Item 14. Principal Accounting Fees and Services. Information required by this...

  • Page 71
    ...' Equity for the Years Ended February 26, 2011, February 27, 2010 and February 28, 2009 Notes to Consolidated Financial Statements 2. Financial Statement Schedules Schedules have been omitted because they are not required or are not applicable or because the information required to be set forth...

  • Page 72
    ... Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PIER 1 IMPORTS, INC. Date: April 25, 2011 By: /s/ Alexander W. Smith Alexander W. Smith, President and Chief Executive Officer Pursuant to the requirements of the...

  • Page 73
    ... First Amendment to the Pier 1 Imports, Inc. 1999 Stock Plan, as amended and restated December 31, 2004, incorporated herein by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarter ended September 1, 2007. Forms of Director and Employee Stock Option Agreements, incorporated herein by...

  • Page 74
    ... 29, 2010 to Pier 1 Imports, Inc. Stock Purchase Plan, incorporated herein by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended May 29, 2010. Secured Credit Agreement, dated November 22, 2005, among the Company, certain of its subsidiaries, Bank of America, N.A., Wells Fargo...

  • Page 75
    ... 1, 2011, to Pier 1 Benefit Restoration Plan II, as amended and restated effective January 1, 2009, incorporated herein by reference to Exhibit 10.3 to the Company's Form 10-Q for the quarter ended November 27, 2010. Employment Agreement by and between Alexander W. Smith and Pier 1 Imports, Inc...

  • Page 76
    ...Stock Option Agreement between Alexander W. Smith and Pier 1 Imports, Inc. dated October 6, 2008, incorporated herein by reference to Exhibit 10.19.4 to the Company's Form 10-Q for the quarter ended August 30, 2008. Employment Agreement dated as of December 15, 2009 by and between Alexander W. Smith...

  • Page 77
    10.17* Summary Plan Description of Pier 1 Imports Limited Severance Plan, Restated as of January 1, 2009, incorporated herein by reference to Exhibit 10.1 to the Company's Form 10-Q for the quarter ended November 29, 2008. Form of Note Purchase Agreement for 6.375% Convertible Senior Notes due 2036...

  • Page 78

  • Page 79
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  • Page 80

  • Page 81
    ... 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 Tuesday, June 28, 2011, at Pier 1 Imports' corporate headquarters, Mezzanine Level, Conference Center Room C, 100 Pier 1 Place, Fort Worth, Texas...

  • Page 82

  • Page 83
    ..., June 28, 2011, at 10:00 a.m., local time, at Pier 1 Imports' corporate headquarters, Mezzanine Level, Conference Center Room C, 100 Pier 1 Place, Fort Worth, Texas 76102 for the following purposes, as more fully described in the accompanying proxy statement: (1) to elect as directors the eight...

  • Page 84

  • Page 85
    ...and are requested to vote on the proposals described in this proxy statement. The annual meeting will be held on the Mezzanine Level, in Conference Center Room C, of Pier 1 Imports' corporate headquarters located at the address shown above. How can I get electronic access to the proxy materials? The...

  • Page 86
    ... & Young LLP as Pier 1 Imports' independent registered public accounting firm for fiscal 2012 (PROPOSAL NO. 5); and any other business as may properly come before the annual meeting or any adjournment or postponement of the meeting. • • • • • What are the board of directors' voting...

  • Page 87
    ... engage Ernst & Young LLP as Pier 1 Imports' independent registered public accounting firm for fiscal 2012 (PROPOSAL NO. 5). • • • Who is entitled to vote at the annual meeting? Holders of Pier 1 Imports' common stock at the close of business on April 29, 2011, are entitled to receive the...

  • Page 88
    ... shares of Pier 1 Imports' common stock you hold in certificate form in book-entry form in book-entry form purchased through the Pier 1 Imports, Inc. Direct Stock Purchase and Dividend Reinvestment Plan; and if you are a Pier 1 Imports employee: • • in the Pier 1 Imports, Inc. Stock Purchase...

  • Page 89
    ...8:30 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 at (817) 252-8000. What constitutes a quorum? The presence of the holders of a majority of the outstanding shares of common stock entitled to vote at...

  • Page 90
    ... Plan) and PROPOSAL NO. 3 (approval of the compensation of Pier 1 Imports' named executive officers). An abstention will have the same effect as a vote "AGAINST" PROPOSALS NO. 2, NO. 3 and NO. 5 (ratification of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2012...

  • Page 91
    .... To request either of these accommodations, please contact our Investor Relations Department on or before June 14, 2011. You may make your request by mail to Pier 1 Imports, Inc., Attn.: Investor Relations Department, 100 Pier 1 Place, Fort Worth, Texas 76102 or by telephone at (817) 252-7835 or...

  • Page 92
    ..., Code of Business Conduct and Ethics, Ethics Compliance Policies and Procedures and charters for the audit, compensation, and nominating and corporate governance committees are available on Pier 1 Imports' web site at www.pier1.com at the Investor Relations - Corporate Governance link. Board...

  • Page 93
    ... 1 Imports' board of 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...

  • Page 94
    ...'s name, business or residence address, principal occupation or employment and a description of the candidate's qualifications to the Chairman of the Nominating and Corporate Governance Committee, in care of the corporate secretary, Pier 1 Imports, Inc., 100 Pier 1 Place, Fort Worth, Texas 76102. To...

  • Page 95
    ... than March 30, 2012. You may contact Pier 1 Imports' corporate secretary to obtain the specific information that must be provided with the advance notice. No shareholder nominated an individual for election to the board of directors at Pier 1 Imports' 2011 annual meeting of shareholders. Committees...

  • Page 96
    ... committee's meetings in January, February and March of each year. The presentations include recommendations by Pier 1 Imports' chief executive officer, human resources compensation group, or both, on those elements of compensation, plus recommended plan design changes, if any, and a summary of all...

  • Page 97
    ... at the time attended Pier 1 Imports' annual meeting of shareholders. Committee memberships, the number of meetings of the full board and each standing committee, and each director's dates of service for fiscal 2011 are shown in the table below. Board of Directors Member Audit Committee Compensation...

  • Page 98
    ...to the extent applicable plan limitations at such time preclude issuing Pier 1 Imports' common stock. During fiscal 2011, each non-employee director was also eligible to participate in the Pier 1 Imports, Inc. Deferred Compensation Plan and the Pier 1 Imports, Inc. Stock Purchase Plan, although none...

  • Page 99
    ...following table sets forth a summary of the compensation with respect to the fiscal year ended February 26, 2011 for services rendered in all capacities to Pier 1 Imports by its non-employee directors: Fees Earned or Paid in Cash(1) ($) $175,000 $ 17,857 $235,000 $ 17,857 $ 20,604 $ 50,275 Change in...

  • Page 100
    ...to her. The closing price of Pier 1 Imports' common stock on June 29, 2010 was $6.11. (3) Perquisites and personal benefits aggregating less than $10,000 are not shown. Non-employee director stock options outstanding on February 26, 2011 are shown below: Aggregate Number of Outstanding Stock Options...

  • Page 101
    ... of Pier 1 Imports' common stock by each director and nominee, each named executive officer shown below in the table included under the caption "Summary Compensation Table for the Fiscal Years Ended February 26, 2011, February 27, 2010 and February 28, 2009," and all directors and executive officers...

  • Page 102
    ... at Board and Committee Meetings and at the Annual Meeting of Shareholders." During fiscal 2011, there were no compensation committee interlocks or insider participation. Related Person Transaction Policies and Procedures Pier 1 Imports' board of directors has adopted as part of its Code of Business...

  • Page 103
    ...are: (a) employment of executive officers, (b) director compensation, (c) certain transactions with other companies if the aggregate amount involved does not exceed the greater of $1,000,000 or 2% of the other company's total annual revenues, (d) certain charitable contributions by Pier 1 Imports if...

  • Page 104
    ... board of the State Firemen's & Fire Marshals' Association of Texas where in both capacities he has achieved recognized public safety and governmental experience on a local, state and national level. He also serves as the Guiyang, China Chair on the executive committee of Fort Worth Sister Cities...

  • Page 105
    ...President of the TJX Companies, Inc., where he oversaw the operations and development of Home Goods, Marshalls, and TJ Maxx plus a number of corporate functions. He was instrumental in the development of the TK Maxx stores in Great Britain and ran its international operations. Mr. Smith also has 21

  • Page 106
    ... Purposes of Compensation Deductibility Under Section 162(m) of the Internal Revenue Code The board of directors recommends that shareholders approve the material terms of the performance goals under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan, Restated as Amended through March 25, 2011. The...

  • Page 107
    ...of Pier 1 Imports' common stock; Pier 1 Imports' earnings per share; Pier 1 Imports' or an affiliate's market share; the market share of a business unit of Pier 1 Imports designated by the compensation committee; Pier 1 Imports' or an affiliate's sales; the sales of a business unit of Pier 1 Imports...

  • Page 108
    ... at the annual meeting and entitled to vote on this proposal is required to approve the material terms of the performance goals under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan for the purposes of compensation deductibility under Section 162(m) of the Internal Revenue Code. Abstentions will...

  • Page 109
    ...necessary to address those concerns. The affirmative vote of a majority of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote on this proposal is required to approve the compensation of Pier 1 Imports' named executive officers as disclosed...

  • Page 110
    ... of the shares of common stock present in person or represented by proxy at the annual meeting and entitled to vote on this proposal is required to ratify the approval to engage Ernst & Young LLP as Pier 1 Imports' independent registered public accounting firm for fiscal 2012. Abstentions will...

  • Page 111
    ... 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, the registered public accounting firm's report on Pier 1 Imports' internal control over financial reporting, as required...

  • Page 112
    ... global importer and is one of North America's largest specialty retailers of imported decorative home furnishings and gifts. Pier 1 Imports directly imports merchandise from more than 50 countries, and sells a wide variety of decorative accessories, furniture, and seasonal assortments in its stores...

  • Page 113
    ... profitability in order to increase shareholder value. The board of directors approved the three-year growth plan and Pier 1 Imports will implement the following initiatives in fiscal 2012 in connection with the plan: • a clearly defined capital allocation policy in support of business priorities...

  • Page 114
    ... of 2011, Pier 1 Imports used a group of peer companies to benchmark short-term incentive and long-term incentive elements of total compensation and non-employee director compensation. The peer group included the following companies which at that time were publicly traded and were direct competitors...

  • Page 115
    ... In addition to base salary, short-term incentives, and long-term incentives, Pier 1 Imports' compensation program in fiscal 2011 included retirement plans and Mr. Smith's employment agreement, which is discussed separately below under the caption "Chief Executive Officer Employment Agreement." The...

  • Page 116
    ... grants to create value, as well as time-based grants to encourage retention and stability. Pier 1 Imports switched from an all cashbased plan in fiscal 2010 to an all equity plan using 100% restricted shares in fiscal 2011. For fiscal 2011, restricted shares were generally equally divided between...

  • Page 117
    ...time. Additional information and factors relating to Pier 1 Imports' fiscal 2011 annual short-term incentive program are included in Table 1 above. These factors were discussed with the compensation committee and, as a result, the compensation committee approved the plan and set quarterly and annual...

  • Page 118
    ... - Pier 1 Imports designs its long-term incentive awards to support Pier 1 Imports' overall objectives of long-term company profitability, competitiveness in the retail industry, and retention of executives. Pier 1 Imports' long-term incentive plan for fiscal 2011 was comprised of restricted stock...

  • Page 119
    ... the performance-based shares vested upon the date of filing of Pier 1 Imports' annual report on Form 10-K for fiscal 2011. Pier 1 Imports' chief executive officer, Mr. Smith, did not participate in the fiscal 2011 long-term incentive equity award given his grants of restricted stock pursuant to his...

  • Page 120
    ... restricted stock on December 18, 2009, under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan, with one-third of such shares vesting on December 18, 2010 and the remaining shares vesting one-third per year on the second and third anniversary of the grant date, provided Mr. Smith is employed on...

  • Page 121
    ...by Section 4999 of the Internal Revenue Code on payments contingent upon a change in control of Pier 1 Imports. Under Mr. Smith's renewed and extended employment agreement, should Mr. Smith's employment be terminated by Pier 1 Imports without Cause or by Mr. Smith with Good Reason (as such terms are...

  • Page 122
    ... to the compensation committee at their meetings in February and March of 2010. The presentation included recommendations of Pier 1 Imports' chief executive officer and human resources compensation group on those elements of compensation, plus recommended plan design changes, and a summary of all...

  • Page 123
    ... February 26, 2011, February 27, 2010 and February 28, 2009 The following table sets forth a summary of the compensation in the past three fiscal years for services rendered in all capacities to Pier 1 Imports and its subsidiaries by the chief executive officer, chief financial officer and the three...

  • Page 124
    ... earnings on non-qualified deferred compensation earnings for each of the named executive officers. Neither Ms. Leite nor Ms. David is a participant in a Pier 1 Imports defined benefit plan. The change in pension values were: Name Alexander W. Smith Charles H. Turner Gregory S. Humenesky Fiscal 2011...

  • Page 125
    ...long-term applicable federal rate at the time the rate for the plan was selected and the annual interest credited in calendar years 2011, 2010, 2009 and 2008 of 5.99%, 7.47%, 7.39% and 7.03%, respectively, by Pier 1 Imports on salary deferred by the named executive officers plus Pier 1 Imports match...

  • Page 126
    ... annual base salary. Also, and as set forth in the Compensation Discussion and Analysis above, during fiscal 2011 Pier 1 Imports granted under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan long-term incentive awards to the named executive officers, other than Mr. Smith. The fiscal 2011...

  • Page 127
    ... Smith received a grant of 187,500 shares of performance-based restricted stock under the Pier 1 Imports, Inc. 2006 Stock Incentive Plan on February 28, 2010, which vest 62,500 shares upon Pier 1 Imports satisfying the Profit Goal target established by the compensation committee for fiscal year 2011...

  • Page 128
    ... following table sets forth information relating to grants of plan-based awards during the fiscal year ended February 26, 2011 to the executive officers named above in the table included under the caption "Summary Compensation Table for the Fiscal Years Ended February 26, 2011, February 27, 2010 and...

  • Page 129
    ... executive officer as of the end of fiscal 2011. Market value was determined using the closing price of Pier 1 Imports' common stock of $9.78 (the NYSE closing price on February 25, 2011, which was the last business day of fiscal 2011). Option Awards Stock Awards Equity Incentive Plan Awards: Number...

  • Page 130
    ... is employed on the date of filing of Pier 1 Imports' annual report on Form 10-K for the applicable fiscal year. (6) Performance-based restricted stock awards granted to Mr. Smith vest according to the following schedule: Grant Date 02/28/2010 Vesting 62,500 shares each year upon Pier 1 Imports...

  • Page 131
    ... three-year average of annual salary and bonus offset by Social Security retirement benefits. Messrs. Smith, Turner and Humenesky are each entitled to a lump-sum payment of the actuarial equivalent of their respective benefit. For the named executive officers that participate in the plan other than...

  • Page 132
    ...fiscal 2008 Mr. Smith was credited with 10 years of plan participation upon enrollment in the plan and 6.67 years of credited service as of his employment date with Pier 1 Imports. The additional 6.67 years of credited service accounts for $3,750,759 of his total present value of accumulated benefit...

  • Page 133
    ... to as 409A. During fiscal 2011, BRP II was closed to further deferral elections by participants. Account balances in BRP II will continue to earn interest at an annual rate as described above. Effective January 1, 2011, the Pier 1 Imports, Inc. Deferred Compensation Plan ("DCP") described below was...

  • Page 134
    ... in each named executive officer's salary amount in the table included under the caption "Summary Compensation Table for the Fiscal Years Ended February 26, 2011, February 27, 2010 and February 28, 2009" above. (2) Reflects Pier 1 Imports' matching contribution credited to the account of each named...

  • Page 135
    ... a party for various scenarios including a change in control or termination of employment, assuming the event occurred on February 26, 2011 and, where applicable, using the closing price of Pier 1 Imports' common stock of $9.78 (the NYSE closing price on February 25, 2011). The table below does not...

  • Page 136
    ... the benefits for each participating named executive officer assuming the executive officer is involuntarily terminated other than for cause, or leaves the employment of Pier 1 Imports for good reason (as defined in the plan), on February 26, 2011, and that such date is within 24 months of a change...

  • Page 137
    ... is shown. Value shown is the NYSE closing price on February 25, 2011 of $9.78 per share times the number of shares. (7) Grants of stock options under the 1999 plan and the 2006 plan allow upon a termination of employment with the consent of Pier 1 Imports for the optionee to have until the earlier...

  • Page 138
    ..., an event which is closely associated with a change in control such that payments made on account of the termination of employment could be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code. The benefits payments to be made to Mr. Smith and the vesting of restricted...

  • Page 139
    ..., 2011, the plan had 3,661,504 shares available for issuance. (2) Equity compensation plans not approved by shareholders represent the employment inducement stock option awards granted to Mr. Smith on February 19, 2007. OTHER BUSINESS Pier 1 Imports does not plan to act on any matters at the meeting...

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  • Page 142
    ... the annual meeting?" at the admissions table in order to attend the Pier 1 Imports, Inc. Annual Meeting of Shareholders. Doors will open at 9:00 a.m., local time. Below are directions to Pier 1 Imports' corporate headquarters located at 100 Pier 1 Place / 100 Energy Way, Fort Worth, Texas from...

  • Page 143
    ...100 Pier 1 Place Fort Worth, Texas 76102 817-252-8000 www.pier1.com SHAREHOLDER INFORMATION Pier 1 Imports, Inc. Board of Directors DIRECTORS AND EXECUTIVE OFFICERS Chairman of the Board Michael R. Ferrari President Ferrari & Associates LLC President and Chief Executive Officer Alexander W. Smith...

  • Page 144
    www.pier1.com