Pier 1 2012 Annual Report Download

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2012 Annual Report
Annual Meeting of Shareholders
June 26, 2012

Table of contents

  • Page 1
    2012 Annual Report Annual Meeting of Shareholders June 26, 2012

  • Page 2
    ... to create an eclectic environment. Our image is quirky, and our logo is iconic. We offer a special shopping experience, whether in store or online. We display our wares so that each visit is a treasure hunt where customers can find long-time favorites as well as something new. It's the thrill of...

  • Page 3
    ... first year of our three-year plan. Strategic and operating highlights during the year also included the initial phase of improving our store merchandise fixtures and lighting, the opening of 15 new Pier 1 Imports stores, upgrading our technology and systems to support long-term growth opportunities...

  • Page 4
    ... our associates who work hard and smart to make Pier 1 Imports a better place for our customers to shop. We are grateful for the sustained support of our shareholders, and we value the contributions of and relationships with our business partners, vendors and agents. 2012 is truly an eventful year...

  • Page 5
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  • Page 6

  • Page 7
    ... No. 001-07832 PIER 1 IMPORTS, INC. (Exact name of registrant as specified in its charter) DELAWARE (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...

  • Page 8
    ... 14. Directors, Executive Officers and Corporate Governance. Executive Compensation. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Certain Relationships and Related Transactions, and Director Independence. Principal Accounting Fees and Services. PART...

  • Page 9
    ...relate to the Company's retail locations operating under the name Pier 1 Imports®. As of February 25, 2012, the Company had 1,052 stores in the United States and Canada. In fiscal 2012, the Company opened 15 new Pier 1 Imports stores and closed 9 stores. Subject to changes in the retail environment...

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

  • Page 11
    ... (e) Available Information. The Company makes available free of charge through its Internet website address (www.pier1.com) its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed with the Securities and Exchange Commission...

  • Page 12
    ... of Home Goods, Marshalls, TJ Maxx, and a number of corporate functions. He was instrumental in the development of the TK Maxx stores in Great Britain and also ran their international operations. CHARLES H. TURNER, age 55, was named Senior Executive Vice President of the Company in April 2012 and...

  • Page 13
    ... 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 14
    ... 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 15
    ... manage and execute the Company's marketing initiatives could have a negative impact on the business. The success and growth of the Company is partially dependent on generating customer traffic in order to gain sales momentum in its stores and drive traffic to the Company's website. Successful...

  • Page 16
    ... stores, small specialty stores and mass merchandising discounters. Management believes that as it is competing for sales, it does so on the basis of pricing and quality of products, constantly changing merchandise assortment, visual presentation of its merchandise and customer service. The Company...

  • 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
    ... penalties or business interruptions. Risks Associated with International Trade As a retailer of imported merchandise, the Company is subject to certain risks that typically do not affect retailers of domestically produced merchandise. The Company may order merchandise well in advance of delivery...

  • Page 19
    ... 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 other countries. Risks Relating to Liquidity A disruption in the global credit and equity markets could negatively...

  • Page 20
    ... of office space located in Fort Worth, Texas. As of February 25, 2012, the present value of the Company's minimum future operating lease commitments discounted at 10% totaled approximately $638.6 million. The following table sets forth the distribution of Pier 1 Imports' U.S. and Canadian stores by...

  • Page 21
    .... As of February 25, 2012, the Company owned or leased under operating leases the following warehouse properties in or near the following cities: Location Baltimore, Maryland Columbus, Ohio Fort Worth, Texas Ontario, California Savannah, Georgia Tacoma, Washington Item 3. Legal Proceedings. Approx...

  • Page 22
    ... 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 2012 and 2011. Market Price Fiscal 2012 First quarter Second quarter Third quarter Fourth quarter Fiscal 2011 First...

  • Page 23
    ..., 2011, the Board of Directors authorized a new $100.0 million share repurchase program and $100.0 million remained available for repurchase at the end of fiscal 2012. There were no purchases of common stock of the Company made during the three months ended February 25, 2012, by Pier 1 Imports, Inc...

  • Page 24
    ... allowance. In fiscal 2010, the Company recorded and received a $55.9 million tax benefit as a result of a tax law change allowing additional carryback of the Company's net operating losses. In fiscal years 2011, 2010, 2009 and 2008, the Company recorded minimal state and foreign tax provisions...

  • Page 25
    ... sells a wide variety of decorative accessories, furniture, candles, housewares, gifts and seasonal products in its stores. The Company conducts business as one operating segment and operates stores in the United States and Canada under the name Pier 1 Imports. As of February 25, 2012, the Company...

  • Page 26
    ... late July 2012. Pier 1 To-You is the Company's site-to-customer initiative which will allow customers to purchase merchandise online and choose from multiple delivery options. The Company is also implementing a new point-of-sale ("POS") system and plans for an initial rollout in fall 2012, followed...

  • Page 27
    ... excluded from the calculation until it meets the Company's established definition of a comparable store. FISCAL YEARS ENDED FEBRUARY 25, 2012 AND FEBRUARY 26, 2011 Net Sales Net sales consisted primarily of sales to retail customers, net of discounts and returns, but also included delivery revenues...

  • Page 28
    ... gains related to prior transactions with Chase as appropriate. A summary reconciliation of the Company's stores open at the beginning of fiscal 2012, 2011 and 2010 to the number open at the end of each period is as follows (openings and closings include relocated stores): United States Open at...

  • Page 29
    ... of the home office building, and $1.6 million gain in the prior year related to the sale of a distribution center near Chicago, with no similar gain in the current year. These increases were partially offset by a decrease in general insurance. Depreciation and amortization for fiscal 2012 was $21...

  • Page 30
    ... the change in the Company's tax valuation allowance, earnings per share were $0.48 for the fourth quarter of fiscal 2012. Net income for the fourth quarter of fiscal 2011 was $57.1 million, or $0.48 per share. FISCAL YEARS ENDED FEBRUARY 26, 2011 AND FEBRUARY 27, 2010 Net Sales Net sales consisted...

  • Page 31
    ... 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 32
    ... agreements along with the closing of fewer stores in fiscal 2011 compared to fiscal 2010. 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 amortization for fiscal 2011 was $19.7 million...

  • Page 33
    ... million, or 3.4%, from the end of fiscal 2011. Inventory per retail square foot at the end of fiscal 2012 was $39 compared to $38 at fiscal 2011 year end. The Company continues to focus on strategically managing inventory levels and closely monitoring merchandise purchases to keep inventory in line...

  • Page 34
    ... new program and $100 million remained available for share repurchase. The timing of the repurchases will depend on several factors including, among others, prevailing market conditions and prices. On April 5, 2012, subsequent to year end, the Company's Board of Directors declared a $0.04 per share...

  • Page 35
    .... The interest rates on the Company's industrial revenue bonds are variable and reset weekly. The estimated interest payments included in the table were calculated based upon the rate in effect at fiscal 2012 year end and exclude fees for the related standby letter of credit which are included...

  • Page 36
    ... capital expenditure requirements, cash dividends and share repurchases through fiscal 2013. OFF-BALANCE SHEET ARRANGEMENTS Other than the operating leases, letters of credit and purchase obligations discussed above, the Company has no off-balance sheet arrangements. CRITICAL ACCOUNTING POLICIES AND...

  • 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
    ...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 the time of grant or estimates of future anticipated dividend rates. If the Company had...

  • Page 39
    ... cost of sales. At February 25, 2012, there were no material outstanding contracts to hedge exposure associated with the Company's merchandise purchases denominated in foreign currencies or the repatriation of Canadian funds. Interest Rate Risk The Company manages its exposure to changes in interest...

  • Page 40
    ... of the three years in the period ended February 25, 2012, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Pier 1 Imports, Inc.'s internal control over financial...

  • Page 41
    ...1 Imports, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) Year Ended 2011 $ 1,396,470 841,083 555,387 431,900 19,739 103,748 (5,164) 5,368 204 103,544 3,419 $ $ $ 100,125 0.86 0.85 116,466 117,484 $ $ $ $ 2012 Net sales Cost of sales Gross profit Selling, general...

  • Page 42
    Pier 1 Imports, Inc. CONSOLIDATED BALANCE SHEETS (in thousands except share amounts) February 25, 2012 ASSETS Current assets: Cash and cash equivalents, including temporary investments of $248,624 and $261,274, respectively Accounts receivable, net of allowance for doubtful accounts of $502 and $688...

  • Page 43
    ... $ 20,557 1,962 Interest paid in fiscal 2010 includes $13,782 in make-whole interest related to the conversion of the Company's convertible debt. See Note 5 of the Notes to Consolidated Financial Statements for further information regarding this payment. (1) The accompanying notes are an integral...

  • Page 44
    ... (loss), net of tax as applicable: Pension adjustments Currency translation adjustments Comprehensive income Stock-based compensation expense Exercise of stock options, directors deferred, stock purchase plan and other Balance February 26, 2011 Comprehensive income: Net income Other comprehensive...

  • Page 45
    ... ACCOUNTING POLICIES Organization - Pier 1 Imports, Inc. (together with its consolidated subsidiaries, the "Company") is a global importer and is one of North America's largest specialty retailers of imported decorative home furnishings and gifts, with retail stores located in the United States...

  • Page 46
    ... from the recorded value as of February 25, 2012 or February 26, 2011. Risk management instruments: The Company may utilize various financial instruments to manage interest rate and market risk associated with its on- and off-balance sheet commitments. From time to time, the Company hedges certain...

  • Page 47
    ...Cost of sales includes the cost of the merchandise, buying expenses, costs related to the Company's distribution network, and store occupancy expenses. 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 48
    ... fiscal 2012, 2011 and 2010, respectively. Prepaid advertising at the end of fiscal years 2012 and 2011 was $2,008,000 and $2,077,000, respectively. Defined benefit plans - The Company maintains supplemental retirement plans (the "Plans") for certain of its current and former executive officers. The...

  • Page 49
    ... the fiscal 2012, 2011 and 2010, respectively, earnings per share as the effect would be antidilutive. Stock-based compensation - The Company's stock-based compensation relates to stock options, restricted stock awards and director deferred stock units. Accounting guidance requires all companies to...

  • Page 50
    ... Deferred gains Retirement benefits Other Other noncurrent liabilities NOTE 4 - COSTS ASSOCIATED WITH EXIT ACTIVITIES As part of the ordinary course of business, the Company terminates leases prior to their expiration when certain stores or distribution center facilities are closed or relocated as...

  • Page 51
    ...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 2.7%, 3.8% and 3.2% for fiscal 2012, 2011 and 2010, respectively. In February...

  • Page 52
    ...acceptances for merchandise purchases, $25,475,000 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 bonds, and $7,788,000 related to other...

  • Page 53
    ... retirement age or 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 $2,759,000, $2,458,000 and $2,484,000 in fiscal 2012, 2011 and 2010, respectively...

  • Page 54
    ... of February 25, 2012 and February 26, 2011 (in thousands): 2012 Change in projected benefit obligation: Projected benefit obligation, beginning of year Service cost Interest cost Actuarial loss Benefits paid (including settlements) Projected benefit obligation, end of year Reconciliation of funded...

  • Page 55
    ... 25, 2012, and February 26, 2011, outstanding options covering 932,275 and 1,181,325 shares were exercisable under the 2006 Plan, respectively. Options were granted at exercise prices equal to the fair market value of the Company's common stock at the date of grant. Employee options issued under the...

  • Page 56
    ... weighted average assumptions: 2012 Weighted average fair value of options granted Risk-free interest rates Expected stock price volatility Expected dividend yields Weighted average expected lives 48 $9.43 2.31% 117.52% 0.00% 5 years 2011 $7.16 2.65% 118.88% 0.00% 5 years 2010 $0.33 1.70% 112...

  • Page 57
    ...first day of the 2011, 2012 and 2013 fiscal years the Company granted the CEO 187,500 service-based awards that vest equally over a three-year period on the last day of each respective fiscal year. In accordance with the accounting guidance on equity compensation, all 937,500 shares of the timebased...

  • Page 58
    ... 2012, 2011 and 2010, respectively. Stock purchase plan - Substantially all Company employees and all non-employee directors are eligible to participate in the Pier 1 Imports, Inc. Stock Purchase Plan under which the Company's common stock is purchased on behalf of participants at market prices...

  • Page 59
    ... 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 $1,574,000, $4,489,000 and $8,738,000 related to these program agreements during fiscal 2012, 2011 and 2010, respectively. 51

  • Page 60
    ...of Alliance Data Systems Corporation ("ADS"). The transfer of ownership to ADS of the private-label credit accounts issued under the Company's existing private-label credit card program agreement was completed in the first quarter of fiscal 2013. The Agreement has an initial term of seven years that...

  • Page 61
    ...allowance against all deferred tax assets. Taxes arising from the earnings in fiscal 2011 and 2010 were offset by utilization of the Company's federal net operating loss carryforwards. During the fourth quarter of fiscal 2012, the Company was able to conclude that given its improved performance, the...

  • Page 62
    ... 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 2012 and 2011 are presented...

  • Page 63
    ...) and expenses. Penalties associated with unrecognized tax benefits are recorded in selling, general and administrative expenses. The Company recorded expenses of $711,000, $424,000 and $1,245,000 related to penalties and interest in fiscal 2012, 2011 and 2010, respectively. The Company had accrued...

  • Page 64
    ... the Exchange Act is (a) recorded, processed, 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...

  • Page 65
    ... registered public accounting firm, has audited the Company's internal control over financial reporting as of February 25, 2012, 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 66
    ... Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Pier 1 Imports, Inc. as of February 25, 2012 and February 26, 2011 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended...

  • Page 67
    ... information required by this Item is incorporated by reference to the section entitled "Executive Compensation," the section entitled "Matters Relating to Corporate Governance, Board Structure, Director Compensation and Stock Ownership - Non-Employee Director Compensation for the Fiscal Year Ended...

  • Page 68
    ... Registered Public Accounting Firm Consolidated Statements of Operations for the Years Ended February 25, 2012, February 26, 2011 and February 27, 2010 Consolidated Balance Sheets at February 25, 2012 and February 26, 2011 Consolidated Statements of Cash Flows for the Years Ended February 25, 2012...

  • Page 69
    ... authorized. PIER 1 IMPORTS, INC. Date: April 25, 2012 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 70
    ...001-07832). Forms of Director and Employee Stock Option Agreements, incorporated herein by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarter ended August 28, 1999 (File No. 001-07832). Pier 1 Imports, Inc. Stock Purchase Plan, restated as amended June 20, 2008, incorporated herein...

  • Page 71
    ... the Company's Form 10-Q for the quarter ended May 29, 2010 (File No. 001-07832). Amended and Restated Credit Agreement, dated April 4, 2011, among Pier 1 Imports (U.S.), Inc., Bank of America, N.A., as administrative and collateral agent, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells...

  • Page 72
    ... the Company's Form 10-Q for the quarter ended November 29, 2008 (File No. 001-07832). Pier 1 Imports Non-Employee Director Compensation Plan, as amended through October 9, 2009, incorporated herein by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarter ended November 28, 2009 (File...

  • Page 73
    ...2008 (File No. 001-07832). Pier 1 Imports, Inc. Deferred Compensation Plan, effective January 1, 2011, incorporated herein by reference to Exhibit 10.2 to the Company's Form 10-Q for the quarter ended November 27, 2010 (File No. 001-07832). Credit Card Program Agreement by and between Pier 1 Imports...

  • Page 74
    10.21 Private Label Credit Card Plan Agreement by and between World Financial Network Bank and Pier 1 Imports (U.S.), Inc., dated October 5, 2011, incorporated herein by reference to Exhibit 10.1 to the Company's Form 8-K filed on October 7, 2011 (File No. 001-07832). Some of the schedules and an ...

  • Page 75
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  • Page 76

  • Page 77
    ... 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 26, 2012, at Pier 1 Imports' corporate headquarters, Mezzanine Level, Conference Center Room C, 100 Pier 1 Place, Fort Worth, Texas...

  • Page 78

  • Page 79
    ... the annual meeting of shareholders of Pier 1 Imports, Inc., a Delaware corporation ("Pier 1 Imports"), will be held on Tuesday, June 26, 2012, 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...

  • Page 80

  • Page 81
    ...100 Pier 1 Place Fort Worth, Texas 76102 PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS To Be Held June 26, 2012 Table of Contents QUESTIONS AND ANSWERS REGARDING THE PROXY STATEMENT AND ANNUAL MEETING ...MATTERS RELATING TO CORPORATE GOVERNANCE, BOARD STRUCTURE, DIRECTOR COMPENSATION AND STOCK...

  • Page 82
    ... Fiscal Year Ended February 25, 2012 ...Potential Payments upon Termination or Change in Control ...EQUITY COMPENSATION PLAN INFORMATION ...OTHER BUSINESS ...SHAREHOLDER PROPOSALS FOR 2013 ANNUAL MEETING ...YOUR VOTE IS IMPORTANT ...Driving Directions for the Pier 1 Imports, Inc. Annual Meeting of...

  • Page 83
    ...to the proxy voting web site. Your election to receive proxy materials by email will remain in effect until you terminate it. Shareholders of Record: You may enroll in MLinkSM offered by Pier 1 Imports' transfer agent, Computershare Shareowner Services LLC, formerly Mellon Investor Services LLC, for...

  • Page 84
    ... before the annual meeting. What is the difference between holding shares as a shareholder of record and as a beneficial owner? If your shares are registered directly in your name with Pier 1 Imports' transfer agent, Computershare Shareowner Services LLC, formerly Mellon Investor Services LLC, you...

  • Page 85
    ... can I do if I change my mind after I vote my shares? If you are a shareholder of record, you can revoke your proxy prior to the completion of voting at the annual meeting by sending written notice to our corporate secretary at 100 Pier 1 Place, Fort Worth, Texas 76102; timely delivering of a valid...

  • Page 86
    ... be available at the annual meeting and for ten days prior to the meeting for any purpose germane to the meeting, between the hours of 8:30 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...

  • Page 87
    ...outstanding shares of common stock entitled to vote at the annual meeting, present...owner, your broker, bank or other holder of record is not entitled to vote on the election of directors or on the non-binding, advisory resolution to approve the compensation of Pier 1 Imports' named executive officers...

  • Page 88
    ... request. To request either of these accommodations, please contact our Investor Relations Department on or before June 12, 2012. 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...

  • Page 89
    ...Code of Business Conduct and Ethics 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 Leadership Structure Pier 1 Imports' bylaws require...

  • Page 90
    ... relevant to Pier 1 Imports' business, such as accounting and financial literacy; general knowledge of the retail industry; information technology experience; international business experience; and chief executive officer, chief financial officer or other senior management experience. Although...

  • Page 91
    ... March 28, 2013. You may contact Pier 1 Imports' corporate secretary to obtain the specific information that must be provided with the advance notice. No shareholder recommended an individual for nomination for election to the board of directors at Pier 1 Imports' 2012 annual meeting of shareholders...

  • Page 92
    ... board of directors or compensation committee) the board of directors' responsibilities relating to compensation of Pier 1 Imports' non-employee directors, chief executive officer, executive officers, and other senior officers who report directly to Pier 1 Imports' chief executive officer; establish...

  • Page 93
    ... year were less than $120,000. Pay Governance did not provide any other services to Pier 1 Imports during fiscal 2012, other than non-customized survey data information. In addition to the compensation committee consultant described above, Pier 1 Imports' management may, from time to time, retain...

  • Page 94
    ...Member Member Chairman Chairman Non-Employee Director Compensation for the Fiscal Year Ended February 25, 2012 Fees Paid to Directors Directors who are Pier 1 Imports employees do not receive any compensation for their board activities. Non-employee directors receive an annual cash retainer of $150...

  • Page 95
    ... board of directors and the shares will be transferred to the person within five business days of such date, except that DSU's will be settled in cash to the extent applicable plan limitations at such time preclude issuing Pier 1 Imports' common stock. During fiscal 2012, each non-employee director...

  • Page 96
    ... January 1, 2012, Mr. London elected to defer 10% of his cash fees. The following table shows the Pier 1 Imports' common stock closing price by month used to calculate the number of DSU's to be received for deferred director fees plus any Pier 1 Imports match. This closing price also represents...

  • Page 97
    ... 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 25, 2012, February 26, 2011 and February 27, 2010," and all directors and executive officers...

  • Page 98
    ... April 27, 2012, to beneficially own more than 5% of Pier 1 Imports' common stock: Name and Address of Beneficial Owner Common Shares Beneficially Owned Percent of Class Greek Investments, Inc. Harbour House Queen Street Grand Turk Turks and Caicos Islands Systematic Financial Management, L.P. 300...

  • Page 99
    ... at Board and Committee Meetings and at the Annual Meeting of Shareholders." During fiscal 2012, 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 100
    ...Matters Relating to Corporate Governance, Board Structure, Director Compensation and Stock Ownership," the primary qualities and characteristics nominees to the board of directors should possess are management and leadership experience; knowledge relevant to the business of Pier 1 Imports; diversity...

  • Page 101
    ... on a local, state and national level. He also serves as the Guiyang, China Chair on the executive committee of Fort Worth Sister Cities International. HAMISH A. DODDS Mr. Dodds, age 55, is being nominated for his second consecutive term on the board of directors. During fiscal 2012, Mr. Dodds...

  • Page 102
    ...'s International, Inc., including service as chairman of its compensation committee and as a member of its audit committee. Mr. Smith's employment agreement provides that, at all times during the employment period, Pier 1 Imports will use its reasonable efforts to cause the board of directors, or...

  • Page 103
    ... officers is designed to enable us to attract and retain talented and experienced senior executives to lead Pier 1 Imports successfully in a competitive environment. Your vote on this resolution is advisory, and therefore not binding on Pier 1 Imports, the compensation committee, or the board...

  • Page 104
    ...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 under...

  • Page 105
    ... 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 ended February 25, 2012, for filing with the SEC. AUDIT COMMITTEE Terry E. London, Chairman Hamish A. Dodds Cece Smith 23

  • Page 106
    ... a 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 many countries, and sells a wide variety of decorative accessories, furniture, and seasonal assortments in its stores. Pier...

  • Page 107
    ...fiscal 2012, Pier 1 Imports used a group of peer companies to benchmark base pay, shortterm incentive and long-term incentive elements of total executive compensation. The peer group included the following companies which at that time were publicly traded and were direct competitors, retail industry...

  • Page 108
    ... 2012. For executive officers and senior management that shift will be to 60% performance-based shares and 40% time-based shares in fiscal 2013. Advisory Vote on Executive Compensation Pier 1 Imports conducted its first advisory vote on executive compensation last year at its 2011 annual meeting...

  • Page 109
    ... group compensation information, individual job responsibilities and other relevant information as appropriate given the needs of the business. Designed to focus management on increasing operating profitability on a year-over-year basis, with no payouts in fiscal 2012 unless Pier 1 Imports achieved...

  • Page 110
    ...). Additional information regarding Pier 1 Imports' considerations relating to base salary is detailed in Table 1 above. In fiscal 2012, Pier 1 Imports management, through its human resources compensation group and Pier 1 Imports' chief executive officer, recommended to the compensation committee...

  • Page 111
    ...time. Additional information and factors relating to Pier 1 Imports' fiscal 2012 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 112
    ... Goal established by the compensation committee for those respective fiscal years. Vesting for each fiscal year is also conditioned upon the named executive officer being employed on the date of filing of Pier 1 Imports' annual report on Form 10-K with the SEC for the applicable fiscal year. 30

  • Page 113
    ...-based shares vested upon the date of filing of Pier 1 Imports' annual report on Form 10-K. Pier 1 Imports' chief executive officer, Mr. Smith, did not participate in the fiscal 2012 long-term incentive equity award given his grants of restricted stock pursuant to his renewed and extended employment...

  • Page 114
    ...key members of management. The plan is described and discussed below under the caption "Non-Qualified Deferred Compensation Table for the Fiscal Year Ended February 25, 2012." Chief Executive Officer Employment Agreement - Mr. Smith and Pier 1 Imports have entered into an employment agreement for Mr...

  • Page 115
    ... the compensation committee at their meetings in January, February and March of 2011. The presentations 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...

  • Page 116
    ... compensation for the year occurs after compensation committee and board approval. Pier 1 Imports' Policy on Share Ownership The Pier 1 Imports' board of directors has adopted voluntary stock ownership guidelines for its non-employee directors. These guidelines state that the board of directors...

  • Page 117
    ... time-based restricted stock granted to Mr. Smith on December 15, 2009, which is the date on which the renewed and extended employment agreement was entered and also the service inception date. On December 15, 2009, each of the 937,500 shares was valued at $4.65 (the closing price of Pier 1 Imports...

  • Page 118
    ... applicable federal rate at the time the rate for the plan was selected and the annual interest credited in calendar years 2012, 2011, 2010 and 2009 of 5.81% 5.99%, 7.47% and 7.39%, respectively, by Pier 1 Imports on salary deferred by the named executive officers plus Pier 1 Imports match amounts...

  • Page 119
    ... and Fort Worth, Texas during her period of relocation. (b) This column reports Pier 1 Imports' aggregate matching contributions to the named executive officer's 401(k) savings account, Benefit Restoration Plan II account, Deferred Compensation Plan account and Stock Purchase Plan account. Those...

  • Page 120
    ... Year Ended February 25, 2012 As set forth in the Compensation Discussion and Analysis above, during fiscal 2012 Pier 1 Imports granted short-term incentive cash awards pursuant to the Pier 1 Imports, Inc. 2006 Stock Incentive Plan to the named executive officers. Quarterly and annual incentive...

  • Page 121
    ... 1 Imports' common stock. Pier 1 Imports did not pay cash dividends in fiscal 2012. The following table sets forth information relating to grants of plan-based awards during the fiscal year ended February 25, 2012 to the executive officers named above in the table included under the caption "Summary...

  • Page 122
    ...during the fiscal year, computed in accordance with FASB ASC Topic 718. The amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. For restricted stock awards, fair value is calculated using the closing price of Pier 1 Imports' common stock on the date...

  • Page 123
    ... Year Ended February 25, 2012 The following table provides information on the current outstanding stock option and unvested restricted stock awards held by each named executive officer as of the end of fiscal 2012. Market value was determined using the closing price of Pier 1 Imports' common stock...

  • Page 124
    ... compensation committee for fiscal 2011, 2012 and 2013, achievement of which is determined upon the filing of Pier 1 Imports' annual report on Form 10-K for the applicable fiscal year and provided that Mr. Smith is employed on the last day of each such fiscal year. 62,500 shares each year upon Pier...

  • Page 125
    ... Pier 1 Imports' annual report on Form 10-K for the applicable fiscal year, and provided that for each fiscal year Mr. Smith is employed on the last day of each such fiscal year. On April 25, 2011, the forfeiture restrictions lapsed on 62,500 shares of the February 28, 2010 grant with a market price...

  • Page 126
    ... pay the total premium associated with the coverage. 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 February 25, 2012. Number of Years Credited Service(1) (#) 12...

  • Page 127
    ... members of management and highly compensated employees of Pier 1 Imports to defer compensation. Additionally, Pier 1 Imports recognized the value of the past and present services of employees participating in the BRP II by making matching contributions to employee deferrals plus paying interest on...

  • Page 128
    ...in Pier 1 Imports' matching contributions plus earnings at 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 a daily average Moody's Corporate Bond Index plus...

  • Page 129
    ... in each named executive officer's salary amount in the table included under the caption "Summary Compensation Table for the Fiscal Years Ended February 25, 2012, February 26, 2011 and February 27, 2010" above. (2) Reflects Pier 1 Imports' matching contribution credited to the account of each named...

  • Page 130
    ... 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 25, 2012, and that such date is within 24 months of a change...

  • Page 131
    ... executive officers' time-based restricted stock grants and Mr. Turner's performance-based restricted stock grants under the 2006 plan, then that amount is shown. Value shown is the NYSE closing price on February 24, 2012, of $16.44 per share times the number of shares. (7) Grants of stock options...

  • Page 132
    .... The dollar value shown is the NYSE closing price on February 24, 2012, of $16.44 less the exercise price times the number of shares that could be acquired upon exercise of the options. (13) If Mr. Smith's employment ended as of the end of fiscal 2012 due to a voluntary good reason termination or...

  • Page 133
    ...before the annual meeting. Pier 1 Imports' bylaws require that it receive written notice of the matter in proper form with the requisite materials and information no earlier than February 26, 2013, and no later than March 28, 2013. You may contact Pier 1 Imports' corporate secretary to find out what...

  • Page 134
    ... 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 135
    ... Imports, Inc. SHAREHOLDER INFORMATION Pier 1 Imports, Inc. DIRECTORS AND EXECUTIVE OFFICERS Corporate Headquarters 100 Pier 1 Place Fort Worth, Texas 76102 817-252-8000 www.pier1.com Board of Directors Chairman of the Board Michael R. Ferrari President Ferrari & Associates LLC Alexander W. Smith...

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    www.pier1.com