Pier 1 2014 Annual Report Download - page 29

Download and view the complete annual report

Please find page 29 of the 2014 Pier 1 annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 136

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
together with financial measures prepared in accordance with GAAP, to assess the Company’s operating performance, to
enhance its understanding of core operating performance and to compare the Company’s operating performance to other
retailers. This non-GAAP financial measure should not be considered in isolation or used as an alternative to GAAP financial
measures and does not purport to be an alternative to net income as a measure of operating performance. A reconciliation of net
income to EBITDA is shown below for the fiscal years indicated (in millions).
2014 2013 2012
Net income (GAAP) $107.5 $129.4 $168.9
Add back: Income tax provision (benefit) 67.1 71.6 (4.8)
Interest expense, net 1.9 0.0 2.4
Depreciation and amortization 38.9 31.0 21.2
EBITDA (non-GAAP) $215.4 $232.0 $187.7
LIQUIDITY AND CAPITAL RESOURCES
The Company’s cash and cash equivalents totaled $126.7 million at the end of fiscal 2014, a decrease of $104.9 million from
fiscal 2013 year-end balance of $231.6 million. The decrease was primarily the result of the utilization of cash to support the
Company’s three-year growth plan, including capital expenditures of $80.3 million, $192.3 million to repurchase shares of the
Company’s common stock, and cash dividends of $21.7 million. These expenditures were partially offset by cash provided by
operating activities of $159.2 million.
The Company’s cash and cash equivalents totaled $231.6 million at the end of fiscal 2013, a decrease of $56.3 million from
fiscal 2012 year-end balance of $287.9 million. The decrease was primarily the result of the utilization of cash to support the
Company’s three-year growth plan, including capital expenditures of $80.4 million, $100.0 million to repurchase shares of the
Company’s common stock, and cash dividends of $18.0 million. These expenditures were partially offset by cash provided by
operating activities of $124.0 million.
Cash Flows from Operating Activities
Operating activities provided $159.2 million of cash in fiscal 2014, primarily as a result of $107.5 million of net income and a
$14.0 million increase in accounts payable, primarily due to timing of rent payments, partially offset by a $21.6 million increase in
inventory. Inventory increased 6.1%, as anticipated, from the end of fiscal 2013 due to increased purchases in anticipation of
increased sales for the first half of fiscal 2015. The Company continues to focus on strategically managing inventory levels and
closely monitoring merchandise purchases to keep inventory in line with consumer demand.
Operating activities provided $124.0 million of cash in fiscal 2013, primarily as a result of $129.4 million of net income, and a
$5.7 million increase in income taxes payable, partially offset by a $31.6 million increase in prepaid expenses and other assets,
primarily due to timing of rent payments, and a $33.6 million increase in inventory. Inventory increased 10.4% from the end of
fiscal 2012 due to additional inventory to support the new e-Commerce website and slightly larger purchases of select
merchandise to support higher sales in the first half of fiscal 2014.
Cash Flows from Investing Activities
During fiscal 2014, the Company’s investing activities used $70.2 million, compared to $82.4 million during fiscal 2013. Total
capital expenditures were $80.3 million, which included approximately $50.0 million for the opening of 27 new stores, six major
remodels, new merchandise fixtures and lighting, and other leasehold improvements and equipment. The remaining capital
expenditures were for technology and infrastructure initiatives, including e-Commerce and the new point-of-sale system.
Dispositions of properties provided $12.6 million, primarily from the sale of all remaining company-owned store locations. These
locations were subsequently leased back and the majority of the related gains will be recognized over the primary lease terms.
During fiscal 2013, the Company’s investing activities used $82.4 million, compared to $62.1 million during fiscal 2012. Total
capital expenditures were $80.4 million, which included approximately $48.5 million for the opening of 22 new stores, four major
remodels, new merchandise fixtures and lighting, and other leasehold improvements and equipment. The Company also
invested in the build-out of e-Commerce fulfillment space located in one of the Company’s distribution centers. The remaining
capital expenditures were for technology and infrastructure initiatives, including e-Commerce and the new point-of-sale system.
PIER 1 IMPORTS, INC. 2014 Form 10-K 25