Pier 1 2013 Annual Report Download - page 44

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 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 and Canada. Additionally, the Company has merchandise
primarily in “store within a store” locations in Mexico and El Salvador that are operated by Sears Operadora de
Mexico, S.A. de C.V. and Corporacion de Tiendas Internationales, S.A. de C.V., respectively. During fiscal
2013, the Company executed the launch of its new e-Commerce enabled website, Pier1.com.
Basis of consolidation – The consolidated financial statements of the Company include the accounts of
all subsidiary companies, and 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 on its website and conducts business as one operating segment. The Company’s domestic operations
provided 91.4%, 91.1% and 90.5% of its net sales, with 7.9%, 8.2% and 8.8% provided by stores in Canada, and
the remainder from royalties primarily received from Sears Operadora de Mexico S.A. de C.V. during fiscal
2013, 2012 and 2011, respectively. As of March 2, 2013, February 25, 2012 and February 26, 2011, $5,344,000,
$5,061,000 and $1,709,000, respectively, of the Company’s long-lived assets were located in Canada. There were
no long-lived assets in Mexico or El Salvador 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 statements
of cash flows to conform to the fiscal 2013 presentation. These reclassifications had no effect on the major
categories within the cash flow statement.
Fiscal periods – The Company utilizes 5-4-4 (week) quarterly accounting periods with the fiscal year
ending on the Saturday closest to February 28th. Fiscal 2013 ended March 2, 2013, fiscal 2012 ended
February 25, 2012 and fiscal 2011 ended February 26, 2011. Fiscal 2013 consisted of a 53-week year and fiscal
2012 and 2011 were 52-week years.
Cash and cash equivalents, including temporary investments – The Company considers all highly
liquid investments with an original maturity date of three months or less to be cash equivalents, except for those
investments that are restricted and have been set aside in a trust to satisfy retirement obligations and are
classified as non-current assets. As of March 2, 2013 and February 25, 2012, the Company’s short-term
investments classified as cash equivalents included investments in money market mutual funds totaling
$191,568,000 and $248,624,000, respectively. The effect of foreign currency exchange rate fluctuations on cash
was not material.
Translation of foreign currencies – Assets and liabilities of foreign operations are translated into U.S.
dollars at fiscal year-end exchange rates. Income and expense items are translated at average exchange rates
prevailing during the year. Translation adjustments arising from differences in exchange rates from period to
period are included as a separate component of shareholders’ equity and are included in other comprehensive
income (loss). As of March 2, 2013, February 25, 2012 and February 26, 2011, the Company had cumulative
other comprehensive income (loss) balances of ($1,304,000), ($386,000) and $1,664,000, respectively, related to
cumulative translation adjustments. The adjustments for currency translation during fiscal 2013, 2012 and 2011
38