Pier 1 2015 Annual Report Download - page 27

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
infrastructure initiatives, including the completion of the Company’s fulfillment center in Columbus, Ohio and enhancements to the
Company’s e-Commerce platform. Capital expenditures in fiscal 2016 are expected to be $60 million, lower by approximately
27% compared to fiscal 2015.
The Company entered into a $200 million Term Loan Facility in April 2014, which matures in 2021. Borrowings under this facility
strengthen the Company’s capital structure and provide added flexibility to invest for future profitable growth and continue the
return of excess capital to shareholders. As of February 28, 2015, the Company had $199.0 million outstanding under this
facility. See “Liquidity and Capital Resources — Revolving Credit Facility and Term Loan Facility” below for more information.
The Company’s share repurchase program announced on October 18, 2013, was completed on April 10, 2014, with total
repurchases during fiscal 2015 of 5,071,812 shares of the Company’s common stock at a weighted average cost of $18.95 per
share for a total cost of $96.1 million. On April 10, 2014, the Company announced a $200 million common stock share
repurchase program. As of February 28, 2015, the Company had repurchased 5,208,500 shares of its common stock under the
April 2014 program at a weighted average cost of $14.94 per share for a total cost of $77.8 million, and $122.2 million remained
available for further repurchases. Subsequent to year end, through April 24, 2015, under the April 2014 $200 million program,
the Company utilized a total of $5.1 million to repurchase 383,000 shares of the Company’s common stock at a weighted
average price per share of $13.26 and $117.1 million remained available for further repurchases under that program. On April 8,
2015, subsequent to year end, the Company announced a $0.07 per share quarterly cash dividend on the Company’s
outstanding shares of common stock to shareholders of record on April 22, 2015, which is payable on May 6, 2015. The $0.07
per share quarterly cash dividend represented a 17% increase from the quarterly cash dividend paid in the prior quarter.
Overview of Business
The Company’s key financial and operational indicators used by management to evaluate the performance of the business
include the following (trends for these indicators are explained in the comparative discussions below):
Key Performance Indicators 2015 2014 2013
Total sales growth 5.3% 3.9% 11.2%
Company comparable sales growth 4.7% 2.4% 7.5%
Gross profit as a % of sales 40.2% 42.1% 43.6%
Selling, general and administrative expenses as a % of sales 30.9% 30.0% 30.1%
EBITDA (in millions) (1) $176.3 $215.4 $232.0
EBITDA as a % of sales 9.5% 12.2% 13.6%
Operating income as a % of sales 6.8% 9.9% 11.7%
Net income as a % of sales 4.0% 6.1% 7.6%
Total retail square footage (in thousands) 8,405 8,451 8,358
(1) See reconciliation of Net Income to Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) in Reconciliation of Non-GAAP Financial Measures.
Company Comparable Sales Calculation — For the fiscal 2015 over fiscal 2014 comparison, the company comparable
sales calculation included sales that were fulfilled, ordered or sold in a store, provided that the store was open prior to the
beginning of the preceding fiscal year and was still open at period end. In addition, orders placed online as direct-to-customer
sales (as defined below) were included in the calculation, as a result of direct-to-customer sales being active prior to the
beginning of the preceding fiscal year. Remodeled or relocated stores are included if they meet specific criteria. Those criteria
include the following: the new store is within a specified distance serving the same market, no significant change in store size,
and no significant overlap or gap between the store closing and reopening. Such stores are included in the company
comparable sales calculation in the first full month after the reopening. If a relocated or remodeled store does not meet the above
criteria, it is excluded from the calculation until it meets the Company’s established definition as described above.
For the fiscal 2014 over fiscal 2013 comparison, the sales included in the company comparable sales calculation were
determined in the same manner as above, except that direct-to-customer sales were excluded because those sales did not
meet the criteria for inclusion at that time.
PIER 1 IMPORTS, INC. 2015 Form 10-K 21