Pier 1 2016 Annual Report Download - page 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 the original global importer of
home décor and furniture. The Company directly imports merchandise from many countries, and sells a wide variety of
decorative accessories, furniture, candles, housewares, gifts and seasonal products in its stores and through the Company’s
website, Pier1.com. Additionally, the Company sells 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.
Basis of consolidation — The consolidated financial statements of the Company include the accounts of all subsidiaries, and
all intercompany transactions and balances have been eliminated upon consolidation.
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. During fiscal 2016, 2015 and 2014, respectively, the Company’s
domestic operations provided 93.1%, 92.4% and 92.0% of its net sales, with 6.3%, 6.9% and 7.3% provided by stores in
Canada, and the remainder from royalties received primarily from Sears Operadora de Mexico S.A. de C.V. As of February 27,
2016, February 28, 2015 and March 1, 2014, $3,837,000, $4,707,000 and $5,578,000, 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 items in these consolidated financial statements have been reclassified to conform to the current
period presentation.
Revised presentation of credit card fees — The Company has revised the presentation of the reporting of credit and debit
card fees (“Credit Card Fees”) for all periods presented. The Company previously reported Credit Card Fees as a reduction to net
sales and has revised its presentation to report Credit Card Fees as a component of selling, general and administrative (“SG&A”)
expenses. This revised presentation results in an immaterial increase to both net sales and SG&A expenses. There is no impact
to operating income, net income, the balance sheet or statement of cash flows.
The following table shows the revised presentation of net sales and SG&A expenses for the years ended February 27,
2016, February 28, 2015 and March 1, 2014, to illustrate the effect of the revised presentation of Credit Card Fees, net, on the
Company’s financial statements (in thousands):
Year Ended
February 27, 2016 February 28, 2015 March 1, 2014
$ Amount % of Sales $ Amount % of Sales $ Amount % of Sales
Net sales (Historical Presentation) $1,870,252 100.0% $1,865,782 100.0% $1,771,743 100.0%
Add back: Credit Card Fees, net (1) 21,978 18,775 19,700
Net sales (Revised Presentation) $1,892,230 100.0% $1,884,557 100.0% $1,791,443 100.0%
SG&A (Historical Presentation) $ 556,850 29.8% $ 576,131 30.9% $ 531,190 30.0%
Add back: Credit Card Fees, net (1) 21,978 18,775 19,700
SG&A (Revised Presentation) $ 578,828 30.6% $ 594,906 31.6% $ 550,890 30.8%
(1) Fiscal 2015 included a reduction of Credit Card Fees based upon a settlement agreement.
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 2016 ended February 27, 2016, fiscal 2015 ended February 28, 2015 and fiscal 2014 ended
March 1, 2014. Fiscal 2016, 2015 and 2014 consisted of 52-week years.
40 PIER 1 IMPORTS, INC. 2016 Form 10-K