UNITED STATES SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
PROXY STATEMENT
Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
PIER 1 IMPORTS, INC.
(Name of Registrant as Specified In Its Charter)
PIER 1 IMPORTS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PIER 1 IMPORTS, INC.
301 Commerce Street, Suite 600
Fort Worth, Texas 76102
May 20, 1996
Dear Shareholder:
On behalf of the Board of Directors and Management, you are cordially
invited to attend the Annual Meeting of Shareholders to be held at 10:00 a.m.
local time on Thursday, June 27, 1996, at the Radisson Plaza Hotel, Grand
Crystal Ballroom, Section A, 825 Main Street, Fort Worth, Texas. The formal
Notice of the Annual Meeting of Shareholders and Proxy Statement are
attached. Please read them carefully.
It is important that your shares be voted at the meeting in accordance
with your preference. If you do not plan to attend, please complete the
proxy card located in the envelope's address window by indicating your vote
on the issues presented and sign, date and return the proxy in the prepaid
envelope provided. If you are able to attend the meeting and wish to vote in
person, you may withdraw your proxy at that time.
Sincerely,
Clark A. Johnson
Chairman and Chief Executive Officer
<PAGE>
PIER 1 IMPORTS, INC.
301 Commerce Street, Suite 600
Fort Worth, Texas 76102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 27, 1996
The Annual Meeting of Shareholders of Pier 1 Imports, Inc., a Delaware
corporation (the "Company"), will be held on June 27, 1996, at 10:00 a.m.,
local time, at the Radisson Plaza Hotel, Grand Crystal Ballroom, Section A,
815 Main Street, Fort Worth, Texas for the following purposes:
(1) To elect seven Directors to hold office until the next Annual
Meeting of Shareholders.
(2) To approve amendments to the 1989 Employee Stock Option Plan to
increase the number of shares available for issuance and extend the term.
(3) To act upon a stockholder proposal.
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only holders of record of Common Stock at the close of business on May 8,
1996, are entitled to notice of and to vote at the Annual Meeting. A
complete list of shareholders entitled to vote will be available for
examination at the Company's offices at 301 Commerce Street, Suite 600, Fort
Worth, Texas by any Company Shareholder during ordinary business hours for a
period of ten days prior to the date of the Annual Meeting.
To ensure that your vote will be counted, please complete, sign and date
the enclosed proxy card and return it promptly in the enclosed prepaid
envelope, whether or not you plan to attend the Annual Meeting. Your proxy
may be revoked in the manner described in the accompanying Proxy Statement at
any time before it has been voted at the Annual Meeting.
By Order of the Board of Directors,
J. Rodney Lawrence
Senior Vice President and Secretary
May 20, 1996
Fort Worth, Texas
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY,
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING
<PAGE>
PIER 1 IMPORTS, INC.
301 Commerce Street, Suite 600
Fort Worth, Texas 76102
________________________
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 27, 1996
This Proxy Statement is being furnished to the holders of Common Stock,
par value $1.00 per share (the "Common Stock") of Pier 1 Imports, Inc., a
Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual
Meeting of Shareholders to be held on June 27, 1996, and at any adjournments
or postponements thereof. Shareholders representing a majority of the Common
Stock outstanding and entitled to vote must be present in person or
represented by proxy in order to constitute a quorum to conduct business at
the meeting. The Board of Directors has fixed the close of business on May
8, 1996, as the record date for the determination of the Shareholders
entitled to notice of and to vote at the Annual Meeting. On the record date,
39,688,385 shares of Common Stock were outstanding and entitled to be voted
at the meeting. Each share of Common Stock entitles the registered holder
thereof to one vote on each matter submitted to a vote at the meeting.
All shares of Common Stock represented at the Annual Meeting by properly
executed proxies received prior to the meeting, unless the proxies have been
properly revoked prior to voting, will be voted in accordance with the
instructions on such proxies. If no instructions are given, proxies will be
voted in accordance with the recommendations of the Board of Directors, as
noted in this Proxy Statement. Any proxy given pursuant to this solicitation
may be revoked by the person giving it at any time before it is voted.
Proxies may be revoked by delivery to the Corporate Secretary of the Company
at the Company's principal executive offices at 301 Commerce Street, Suite
600, Fort Worth, Texas 76102 of a written notice of revocation bearing a
later date than the proxy, or by duly executing and delivering to the
Corporate Secretary a subsequent proxy relating to the same shares, or by
attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy).
With regard to all items submitted for Shareholder vote, abstentions are not
counted as voting for approval of a matter and, therefore, will have the same
effect as a vote "against" the matter, even though the Shareholder may
interpret such action differently. Votes withheld, including broker non-
votes, are neither counted as voting for nor against a matter and, therefore,
as to that matter will not be treated as shares present and will be
disregarded.
The accompanying proxy also covers shares of Common Stock held for
participants in the Company's Stock Purchase Plan and will serve as voting
instructions for the Plan administrators to vote such shares.
This Proxy Statement and the accompanying proxy are being first sent to
Shareholders on May 20, 1996.
ELECTION OF DIRECTORS
Seven Directors of the Company are to be elected at the Annual Meeting to
serve until the next Annual Meeting of Shareholders of the Company and until
their respective successors shall have been elected and qualified. Unless
authority to vote for one or more Directors is withheld, proxies will be
voted for the election of the persons listed below or, if any such person
shall unexpectedly become unable or unwilling to accept nomination or
election, for the election of such other person as the Board of Directors may
recommend. Directors will be elected by holders of a majority of the shares
of Common Stock present in person or represented by proxy and entitled to
vote. The persons listed below are Directors of the Company now in office
and are nominees for re-election. The Board of Directors recommends a vote
"FOR" the nominees.
Nominees for Directors
CLARK A. JOHNSON
Clark A. Johnson, age 65, has served as Chairman and Chief Executive
Officer of the Company and has been a member of the Executive Committee since
March 1988. He has been a Director of the Company since March 1983. From
May 1985 to March 1988 Mr. Johnson served as President and Chief Executive
Officer of the Company. He is a director of Albertson's Inc., InterTAN,
Inc., Metro Media International Group, Anacomp, Inc. and Heritage Media
Corporation.
CHARLES R. SCOTT
Charles R. Scott, age 68, is a member of the Executive Committee and has
been a Director of the Company since March 1983. He is a principal,
president and chief executive officer of Leadership Centers USA, Inc., which
conducts business under the name TEC-The Executive Committee. Mr. Scott
served as president and chief executive officer of The Actava Group Inc. from
February 1991 until April 1994, and from August 1970 to February 1991 served
as chairman, president and chief executive officer of Intermark, Inc. He is
also a director of The Union Bank of California.
MARVIN J. GIROUARD
Marvin J. Girouard, age 56, has served as President and Chief Operating
Officer of the Company and as a Director since August 1988. From May 1985
until August 1988, he served as Senior Vice President - Merchandising of Pier
1 Imports (U.S.), Inc., a wholly owned subsidiary of the Company. He also is
a director of ENSERCH Corporation.
SALLY F. McKENZIE
Sally F. McKenzie, age 67, has been a Director of the Company since
November 1985 and is a member of the Audit Committee. Mrs. McKenzie has
served as a volunteer leader on a local, regional and national basis for over
five years.
JAMES M. HOAK, JR.
James M. Hoak, Jr., age 52, has been a Director of the Company since
September 1991 and is chairman of the Executive Committee and a member of the
Audit Committee and the Compensation Committee. He has served as chairman of
Heritage Media Corporation since August 1987; chairman of Hoak Capital
Corporation since September 1991; chairman of Hoak Securities Corporation
since April 1995 and chairman and president of James M. Hoak & Company since
April 1995. From 1971 to 1987 he served as president and director of
Heritage Communications, Inc. and as its chairman and director from August
1987 to December 1990. From February 1991 to January 1995 he served as
chairman and director of Crown Media, Inc. He is also a director of Airgas,
Inc., MidAmerican Energy Company and Texas Industries, Inc. Until April
1994, he served as a Governor of the American Stock Exchange.
MARTIN L. BERMAN
Martin L. Berman, age 56, has been a Director of the Company since June
1994 and is chairman of the Audit Committee and a member of the Executive
Committee. Since April 1995 he has been chairman, chief executive officer
and a principal of Palisade Capital Management L.L.C. ("Palisade") and senior
managing director of Palisade Capital Securities, L.L.C., a related company.
From 1990 to April 1995 he served as a managing director at Smith Barney
Inc., prior to which he served as a managing director at Drexel Burnham
Lambert, Incorporated.
CRAIG C. GORDON
Craig C. Gordon, age 41, has been a Director of the Company since March
1995, and is chairman of the Compensation Committee. He has served as
president of Off-The-Record Research since November 1994. From April 1987 to
March 1995, he was a principal of RCM Capital Management.
Board Meetings, Committees and Fees
During the 1996 fiscal year, the Board of Directors of the Company met on
five occasions and took action by unanimous written consent in lieu of a
meeting on three occasions. Each of the Directors attended at least 75% of
the total number of meetings of the Board of Directors and of the Committees
on which he or she served.
Each Director who was not an officer of the Company was paid a fee of
$25,500 during the past fiscal year and also received $1,250 for each of
three Board meetings attended and $1,500 for two Board meetings attended,
which is the current fee for each Board meeting attended, and $500 for each
committee meeting attended. Directors receive annual grants of stock options
covering 3,000 shares per Director under the Non-Employee Director Stock
Option Plan and are eligible to participate in the Company's Stock Purchase
Plan by contributing monthly up to the full amount of their Director fees and
receiving matching contributions from the Company of 50% of their
contributions, excluding contributions made from Board meeting fees and
committee fees. In addition, during the past fiscal year Messrs. Hoak,
Berman & Gordon each received $9,900 for their service on a special committee
to investigate and make recommendations on trading losses. Directors of the
Company who are employees of the Company serve without compensation for their
services as Directors of the Company.
Executive Committee. The Executive Committee is entitled to exercise all
powers of the Board when the Board is not in session to the extent permitted
by law and the Bylaws. The Executive Committee took action by unanimous
written consent in lieu of a meeting on one occasion during the last fiscal
year. Executive Committee members are Directors Hoak (chairman), Scott,
Johnson and Berman.
The Executive Committee also performs the functions of the nominating
committee and is responsible for considering and making recommendations to
the Board regarding nominees for election to the Board and Board Committee
assignments. The Executive Committee will consider recommendations submitted
by Shareholders for nominees for election to the Board.
Audit Committee. The Audit Committee recommends independent auditors for
appointment by the Board and is responsible for reviewing the financial
condition of the Company and its internal controls. It also reviews audit
and other reports of the independent auditors and actions to be taken thereon
by management. The Audit Committee held four meetings during the last fiscal
year. Audit Committee members are Directors Berman (chairman), McKenzie and
Hoak.
Compensation Committee. The Compensation Committee establishes and
administers incentive-based compensation plans for senior executive officers
and reviews and makes recommendations to the Board concerning other
compensation policies. The Compensation Committee held two meetings and took
action by unanimous written consent on three occasions during the last fiscal
year. Compensation Committee members are Directors Gordon (chairman) and
Hoak.
<PAGE>
Security Ownership of Management
The following table indicates the ownership on April 1, 1996, of the
Company's Common Stock by each Director and nominee, each executive officer
named in the Summary Compensation Table, and all Directors and executive
officers as a group:
Shares Percent
Beneficially of
Name Owned(1)(2) Class
---- ----------- ------
Martin L. Berman. . . . . . . 481,863(3) 1.2%
Marvin J. Girouard. . . . . . 535,805 1.4%
Craig C. Gordon . . . . . . . 8,376 *
James M. Hoak . . . . . . . . 57,181 *
Clark A. Johnson. . . . . . . 823,343 2.1%
Sally F. McKenzie . . . . . . 24,448 *
Charles R. Scott. . . . . . . 97,918 *
Robert G. Herndon . . . . . . 9,000 *
J. Rodney Lawrence. . . . . . 59,778 *
E. Mitchell Weatherly . . . . 59,789 *
Charles H. Turner . . . . . . 12,080 *
All Directors and Executive
Officers as a Group . . . . 2,216,002 5.5%
------------------
(1) Included in the table are shares acquired through and held by the
Company's Stock Purchase Plan. Also included in the table are shares
issuable within 60 days of April 1, 1996, to Mr. Girouard (138,115
shares), Mr. Gordon (3,000 shares), Mr. Hoak (12,450 shares), Mr.
Johnson (262,856 shares), Mrs. McKenzie (22,263 shares), Mr. Berman
(6,150 shares), Mr. Scott (35,356 shares), Mr. Lawrence (25,652 shares),
Mr. Weatherly (23,647 shares), Mr. Turner (10,447 shares) and to all
Directors and Executive Officers as a group (564,322 shares), upon the
exercise of stock options granted pursuant to the Company's 1980 and
1989 Stock Option Plans.
(2) Unless otherwise indicated, the beneficial owner has sole voting and
investment power with respect to his shares.
(3) Includes 437,445 shares issuable upon conversion of the Company's 6 7/8%
convertible subordinated notes due 2002 and 28,000 shares of Common
Stock held by funds managed by Palisade over which Palisade has shared
voting and investment power.
* Represents less than 1% of the outstanding shares of such class.
Security Ownership of Certain Beneficial Owners
The following table indicates the ownership on April 1, 1996, by each
person who was known by the Company to own beneficially five percent or more
of any class of the Company's Common Stock:
Name and Shares Percent
Address of Beneficially of
Beneficial Owner Owned Class
-------------------- ------------- ---------
Clover Capital Management, Inc. 3,055,278 (1) 7.7%
11 Tobey Village Office Park
Pittsford, New York 14534
FMR Corp. 4,186,605 (2) 10.6%
82 Devonshire Street
Boston, Massachusetts 02109
ICM Asset Management, Inc. 2,207,021 (3) 5.6%
601 W. Main Avenue, Suite 917
Spokane, Washington 99201
------------------
(1) Includes 301,225 shares of Common Stock that may be acquired upon
conversion of the Company's 6 7/8% Convertible Subordinated Notes due
2002. Includes 3,053,178 shares over which such company has sole voting
power and 3,053,178 shares over which it has sole dispositive power.
(2) Includes 199,405 shares over which such company has sole voting power
and 4,186,605 shares over which such company has sole power to dispose
or to direct the disposition.
(3) Includes 1,223,107 shares over which such company has sole voting power
and 2,207,021 shares over which such company has sole dispositive power.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation with respect to
the past three fiscal years for services rendered in all capacities to the
Company and its subsidiaries by the Chief Executive Officer, the four other
most highly compensated executive officers and one former officer who was not
an executive officer at the end of the fiscal year.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------- ---------------------------
Other Securities All
Name and Fiscal Annual (1) Restricted Underlying Other (3)
Principal Position Year Salary Bonus Compensation Stock Awards(2) Options(#) Compensation
------------------ ------ -------- -------- ------------ --------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Clark A. Johnson 1996 $625,000 $625,000 $51,522 $93,759 36,145 $98,400
Chairman and Chief 1995 610,000 610,000 50,054 96,078 45,887 65,580
Executive Officer 1994 580,000 40,600 37,209 90,179 39,634 43,716
Marvin J. Girouard 1996 392,000 352,800 23,573 49,001 18,892 96,111
President and Chief 1995 380,000 342,000 30,702 49,882 23,821 78,582
Operating Officer 1994 365,000 25,550 28,245 47,251 21,292 51,954
J. Rodney Lawrence 1996 165,000 75,000 17,184 -- 10,000 21,602
Senior Vice President, 1995 156,000 55,500 18,807 -- 10,500 15,029
Legal and Secretary 1994 149,000 10,500 24,308 -- 8,750 18,061
E. Mitchell Weatherly 1996 155,000 70,000 19,802 -- 10,000 20,778
Senior Vice President 1995 147,500 52,000 28,324 -- 10,500 15,831
Human Resources 1994 140,000 9,800 20,956 -- 8,167 10,325
Charles H. Turner 1996 160,000 70,000 16,399 -- 10,000 8,730
Senior Vice President 1995 150,000 52,500 13,752 -- 10,500 6,044
Stores
Robert G. Herndon 1996 258,000 -- 25,422 25,803 9,947 19,700
Former Executive Vice 1995 250,000 212,500 21,863 26,256 12,538 30,421
President and Chief 1994 240,000 16,800 22,013 24,850 10,934 21,116
Financial Officer
----------------
<FN>
(1) Includes reimbursements for club dues, automobile expenses, financial planning, medical expenses and
aircraft allowance, if applicable.
(2) Dollar value of restricted stock is computed using the closing price of the Common Stock on September 28,
1995, the date of grant of the restricted stock. Recipients of such restricted stock awards will receive
cash dividends paid on such stock. Restricted stock held by Messrs. Johnson, Girouard and Herndon will
vest at the times and to the extent that 25% of the stock options granted in conjunction with the award
of restricted stock have been exercised and the option shares held for two years. The total amount and
the dollar value of restricted stock held at March 2, 1996, were: Mr. Johnson, 42,089 shares ($552,418);
Mr. Girouard, 21,745 shares ($285,403); Mr. Lawrence 17,578 shares ($230,711); Mr. Weatherly 16,407
shares ($215,342); Mr. Turner has no restricted grants; and Mr. Herndon, 2,877 shares ($37,761).
Restricted stock held by Mr. Lawrence and Mr. Weatherly was granted under a different plan.
(3) Includes Company matching contributions for Messrs. Johnson, Girouard, Lawrence, Weatherly, Turner and
Herndon of $5,965, $4,624, $5,386, $4,989, $3,993, and $2,439, respectively, under the Company's 401(k)
Retirement Plan, of $29,969, $17,063, $4,915, $4,604, $2,887, and $4,429, respectively, under the
Company's Benefit Restoration Plan, and of $62,466, $74,425, $11,301, $11,185, $1,850, and $12,832,
respectively, under the Company's Stock Purchase Plan.
</TABLE>
The Company has entered into Post-Employment Consulting Agreements with
Messrs. Johnson, Girouard, Lawrence, Weatherly, Turner and three other
executive officers (individually, an "Executive"). Upon termination of the
Executive's employment by the Company prior to retirement other than for
"cause" or by the Executive for "good reason," as defined in the agreements,
the Company will retain the Executive as a consultant for either two years
(in the case of Messrs. Johnson, Girouard, Lawrence and Weatherly) or one
year (in the case of Mr. Turner) and pay a monthly fee equal to his base
salary immediately prior to termination. The Executive will also receive 50%
of the Executive's cost for continuing medical and dental insurance coverage.
If the Executive enters into employment during the consulting period that
provides compensation equal to or greater than the amount of the consulting
fees, the Company will pay the Executive an immediate one-time payment in the
amount of 50% of the difference between the total fees that otherwise would
have been payable during the term of the consulting agreement and the
aggregate fees actually paid prior to reemployment. If the Executive enters
into employment during the consulting period that provides compensation less
than the consulting fees, the Company will reduce the monthly consulting fee
by the amount of the monthly compensation for reemployment and at the end of
the consulting period will pay the Executive 50% of the difference between
the total fees that otherwise would have been payable during the term of the
consulting agreement and the aggregate fees actually paid.
The Company maintains two supplemental retirement plans to aid in
attracting and retaining key executives. Messrs. Johnson, Girouard,
Lawrence, Weatherly and Herndon participate in a plan which provides that
upon death, disability, retirement or other termination (but commencing at
retirement age), a participant will receive annual benefits over 15 years
which, when added to Social Security retirement benefits, generally equal his
vested percentage of 50% of the participant's highest average annual salary
and bonus (based on a three-year average), but in no event more than
$350,000. If a participant retires after age 65, the percentage of his
highest average annual salary and bonus used to calculate his benefit is
increased above 50% by 5% for each year of service after age 65, but not
greater than 65%. Benefits vest for each participant at the rate of 10% per
year of service with a maximum of five years of credit allowed for service to
the Company prior to participation in the plan. Messrs. Johnson, Girouard,
Lawrence, Weatherly and Herndon are each fully vested. All participants in
the plan have elected to receive benefits in a lump sum distribution. Mr.
Turner and three other executive officers participate in a different
supplemental retirement plan which provides that upon death, disability,
attaining age 65 or later retirement from the Company, a participant will
receive an annuity based on annual benefits which, when added to Social
Security retirement benefits, generally equal a percentage (calculated as 3%
multiplied by the participants's total number of years of service to a
maximum of 60%) of the participant's highest average annual salary and bonus
(based on a three-year average), but in no event more than $350,000.
Benefits vest for each participant at the rate of 10% per year of
participation in the plan. If a participant retires prior to age 65, the
percentage of his highest average annual salary and bonus used to calculate
his benefit is reduced by 5% for each year his retirement precedes age 65.
Mr. Turner has no credited years of participation in the plan.
<PAGE>
Option Grants in the Last Fiscal Year
The following table sets forth information relating to stock options
granted during the fiscal year ended March 2, 1996, to the executive officers
named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration Grant Date
Name Granted(1) Fiscal Year (per share)(2) Date Present Value(3)
---- ---------- ----------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Clark A. Johnson 36,145 9.6% $10.38 09/28/05 $121,086
Marvin J. Girouard 18,892 5.0 10.38 09/28/05 63,288
J. Rodney Lawrence 10,000 2.7 10.38 09/28/05 29,400
E. Mitchell Weatherly 10,000 2.7 10.38 09/28/05 29,400
Charles H. Turner 10,000 2.7 10.38 09/28/05 29,400
Robert G. Herndon 9,947 2.7 10.38 09/28/05 33,322
----------------
<FN>
(1) Options were granted on September 28, 1995, to Messrs. Johnson, Girouard and Herndon and
become exercisable in installments of 25% of the amount awarded six months after the date
of grant and 25% on each of the following three anniversaries of the date of grant. Mr.
Herndon's options were forfeited February 8, 1996 upon his termination. Options were
granted on September 28, 1995, to Messrs. Lawrence, Weatherly and Turner and become
exercisable in annual installments of 20% of the amount awarded beginning one year after
the date of grant. With the consent of the administrative committee of the stock option
plan, an employee may elect to satisfy his income tax withholding obligations by the
delivery of previously owned shares or the withholding of shares otherwise issuable upon
exercise of the option. Options will terminate at the time of termination of employment
if the termination is for cause or for resignation without the consent of the Company, or
three months after termination in the case of any other termination, or one year after
death or disability.
(2) Exercise price is equal to the current market value at the date of grant.
(3) The present value of options on the date of grant was determined using a variation of the
Black-Scholes option pricing model. The estimated values under the Black-Scholes option
pricing model are based on the following assumptions at the time of grant: an exercise
price equal to the fair market value of the underlying Common Stock; an option term of 10
years; an interest rate of 6.2%, which represents the interest rate on a U.S. treasury
security with a maturity date corresponding to the option term; dividend payment rate of
$.12 per share per year; a volatility of 36.0%, which is based on Common Stock prices for
the one-year period prior to the date of grant; and standard actuarial assumptions,
estimated from a large universe of option holders, that yield reductions of 15.4% for the
three-year options and 25.7% for the five-year options to reflect the probability of
forfeiture of the option due to termination prior to vesting; and reductions of 21.3% for
the three-year options and 18.7% for the five-year options to reflect the probability of a
shortened option term due to termination of employment prior to the option expiration
date. These assumptions were made as of the time of grant and may or may not be valid
assumptions at later points in time. The actual value, if any, that an executive may
realize from the options will be the excess of the market price of the Common Stock on the
day of exercising the options over the exercise price of the options. The actual value may
or may not be near the value estimated in the table.
</TABLE>
<PAGE>
Aggregated Option Exercises in the Last Fiscal Year and Fiscal Year-End
Option Values
The following table provides information relating to the exercise of
stock options by the executive officers named in the Summary Compensation
Table during the last fiscal year, and the number and value of exercisable
and unexercisable stock options held by such officers at March 2, 1996.
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options Options
at Fiscal Year-End at Fiscal Year-End(1)
------------------------- -------------------------
Shares Acquired Value
Name on Exercise Realized(2) Exercisable Unexercisable Exercisable Unexercisable
----- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clark A. Johnson 158,401 $788,045 243,671 69,237 $1,812,912 $264,150
Marvin J. Girouard -- -- 128,069 36,125 830,538 88,126
J. Rodney Lawrence 3,683 18,525 23,902 23,650 177,679 100,953
E. Mitchell Weatherly 4,601 18,807 22,014 23,300 163,680 99,352
Charles H. Turner -- -- 8,015 24,647 33,057 101,272
Robert G. Herndon 1,655 10,228 -- -- -- --
-----------------
<FN>
(1) Computed as the difference between the option exercise prices and $13 1/8 (the closing price of
the Common Stock at fiscal year-end).
(2) Computed as the difference between the option exercise prices and the closing market price of the
Common Stock at the date of exercise.
</TABLE>
Board of Directors Compensation Committee Report on Executive Compensation
The Compensation Committee, which is composed entirely of independent,
non-employee directors, establishes and administers incentive-based
compensation plans for the senior executives, who are the Chief Executive
Officer, the Chief Operating Officer and the Chief Financial Officer, and
recommends to the Board of Directors other compensation of the senior
executives and compensation of such other officers as the Compensation
Committee deems appropriate. The Compensation Committee from time to time
retains an independent consultant to assist the Committee in determining
compensation levels and programs.
The Company's overall management compensation philosophy reflects a
strong incentive orientation with an aim that more than half of potential
senior executive compensation result from performance-based compensation
plans. In addition to base salary, executive compensation can include annual
bonus, stock options, restricted stock, benefits and perquisites. The
Compensation Committee's objective is to provide executives with salary and
incentive program opportunities that are valued near the size-adjusted median
of comparable companies in its industry, but with additional emphasis on
incentive compensation. As management responsibility increases, a greater
portion of the executive's compensation is directed toward performance-based
programs. These incentive programs involve short-term bonus plans to reward
annual performance and long-term, stock-based plans to encourage stock
ownership and reward the enhancement of shareholder value.
Section 162(m) of the Internal Revenue Code generally prohibits publicly
held companies such as the Company from deducting from corporate income all
compensation paid to the chief executive officer or any of the four other
most highly compensated officers that exceeds for each officer $1,000,000
during the tax year. Qualifying performance-based compensation paid pursuant
to plans approved by shareholders will not be subject to this deduction
limitation. It is the intent of the Compensation Committee to take
reasonable measures to obtain full corporate tax deductions for compensation
paid to the Company's executive officers. In 1994, the Company's
shareholders approved the Senior Management Annual Bonus Plan. The
Compensation Committee granted awards in the 1996 fiscal year under the
Senior Management Annual Bonus Plan and the Company's employee stock option
plan with the intention of those plans qualifying for the performance-based
compensation exclusion applicable to the deduction limitation.
Base salary levels of senior executive officers are reviewed annually by
the Compensation Committee. Salaries are based primarily upon salary levels
of executives in comparable companies in the industry and individual
performance of the executive during the preceding year. The Compensation
Committee considers the factors it deems relevant, but does not assign
specific weights to different factors. Comparable companies are considered
with reference to a peer group of 15 high-growth retail companies, whose
average performance is shown in the Stock Performance Graph below. The
Compensation Committee aims to set executive salaries near the size-adjusted
median of salaries paid by the peer group. At the time annual salaries were
established for the 1996 fiscal year, data specifying salary, bonus and long-
term compensation components of total cash compensation for executives of the
peer group companies were unavailable for the coming year as well as the
preceding year, and as a result certain assumptions and estimates were made
in comparing peer group executives' salary compensation levels. The salary
of the Chief Executive Officer was increased $15,000 to $625,000 for the 1996
fiscal year. Base salary for each of the Company's senior executives during
the last fiscal year fell above the median of estimated base salary for
comparable executives of the peer group companies.
The Company maintains two annual bonus plans, one for senior executives
and another for other management personnel. During the 1996 fiscal year, the
bonus plan for senior executives established a formula designed to reward for
superior total shareholder return of the Company during the year relative to
the prior year compared to the change in total shareholder return of the peer
group companies. Total shareholder return is defined as the percentage
change in price of the common stock at the end of the fiscal year compared to
the price of such stock at the end of the prior year plus the percentage
return on dividends paid (other than dividends paid in common stock), based
on the price of the common stock at the end of the prior year. In order for
executives to receive any bonus, the Company's performance must rank at least
twelfth relative to the companies in the peer group. From this threshold
level, the amount of bonus available to the two senior executives other than
the Chief Executive Officer ranges from approximately 32% of base salary if
the Company ranks twelfth in relative performance within the peer group, up
to approximately 110% of base salary if the Company ranks first. The amount
of bonus available to the Chief Executive Officer ranges from 40% of his base
salary if the Company ranks twelfth in relative performance up to 125% of
base salary if the Company ranks first. The bonus plan is designed to
provide a bonus opportunity that is competitive with size-adjusted bonuses
paid by the peer group companies when the Company's total shareholder return
is average relative to the peer group companies and to provide above average
bonus opportunity when the Company's total shareholder return is superior.
The bonus plan does not provide for discretionary bonuses when performance
targets are not met. In fiscal 1996, the Company's total shareholder return
ranked fourth in relative performance within the peer group, and the Chief
Executive Officer was awarded a bonus of $625,000.
The annual bonus for the Company's other executives is dependent upon
the attainment of budgeted levels of pretax earnings and provides bonus
awards based on a formula when earnings meet or exceed certain budgeted
levels. Target bonus amounts are set at from 10 to 35 percent of each
executive's base salary. Bonus targets were established to reflect the
average for bonus targets from a broad spectrum of comparable size companies,
including companies in the peer group.
Long-term incentives are provided through awards under stock option and
restricted stock plans. Under the stock option plan, executives and other
key employees may be awarded options to purchase Company stock, which in the
past have always been at a purchase price of fair market value on the date of
grant. Awards under the stock option plan are designed with the intention of
promoting the success of the Company and retention of the executive with the
Company in a manner that produces value to the employee only when there is a
corresponding increase in value to all shareholders. The Company has two
restricted stock plans to provide long-term incentives and encourage
ownership of stock by management. One plan is currently intended for senior
executives and is implemented in conjunction with the granting of stock
options. The other plan is designed for other executives and provides for
the vesting of restricted stock awards over a ten-year period. Under both
plans, executives may vote and receive dividends on unvested restricted
stock.
Long-term incentives for the senior executives are awarded in a
combination of stock option and restricted stock awards. Restricted stock is
awarded only in conjunction with the granting of stock options and is subject
to such restrictions as the Compensation Committee establishes at the time of
the award. Rights to transfer the restricted stock will be acquired by the
executive only upon the satisfaction of all restrictions. The Company
currently intends to award annually a combination of stock options and
restricted stock awards. During the 1996 fiscal year, stock options vesting
over three years with an exercise price at market value were granted to the
Chief Executive Officer, the Chief Operating Officer and the Chief Financial
Officer. The Compensation Committee intends to use stock options and
restricted stock in proportions that produce awards of approximately equal
value. In conjunction with the stock options, restricted stock was awarded
in amounts representing 25% of the shares subject to the corresponding stock
options. The restrictions on the stock will lapse only to the extent the
executive has exercised stock options that were granted in conjunction with
the restricted stock and has held the shares of option stock for two years.
The amounts of the stock option and restricted stock awards are intended to
approximate the size-adjusted median total long-term incentive compensation
paid to officers of the peer group companies. The number of currently held
options by each executive was not considered in making stock option and
restricted stock awards. During the 1996 fiscal year the Chief Executive
Officer was awarded 9,037 shares of restricted stock under this plan in
conjunction with the granting of options to purchase 36,145 shares under the
stock option plan. This stock option/restricted stock award was based on the
estimated value of the size-adjusted average annualized long-term
compensation awarded for chief executive officers in the peer group.
The Company provides benefits and perquisites to executive officers to
respond to competitive practices in the industry. The Compensation Committee
believes these benefits are typical for companies of its size.
COMPENSATION COMMITTEE
Craig C. Gordon
James M. Hoak, Jr.
Charles R. Scott*
Sally F. McKenzie*
* Mr. Scott and Mrs. McKenzie served as the sole members of the Compensation
Committee for the first four months of the Company's last fiscal year. Mr.
Gordon and Mr. Hoak served as the sole members during the remaining eight
months of the fiscal year.
Company Stock Price Performance Graph
The following graph provides an indicator of the percentage change
during the Company's last five fiscal years of cumulative total shareholder
return, assuming the reinvestment of dividends, of the Company's Common
Stock, the S&P 500 Index and the peer group, consisting of 15 high-growth
retail companies.
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Pier 1 Imports, Inc. 100 221 258 197 225 318
S&P 500 Index 100 116 128 139 149 200
Peer Group 100 148 169 155 137 137
The companies comprising the peer group are The Bombay Co., Inc.,
Charming Shoppes, Inc., Dayton Hudson Corporation, Dillard Department Stores,
Inc., Duty Free International, Inc., Fabri-Centers of America, Inc., The Gap,
Inc., The Home Depot, Inc., The Limited, Inc., Michaels Stores, Inc.,
Nordstrom, Inc., The Sherwin-Williams Company, Toys "R" Us, Inc., Wal-Mart
Stores, Inc., and Walgreen Co.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1988, the Company loaned Mr. Johnson $1,191,928 for the
purchase of shares of the Company's Common Stock in the open market. The
loan is evidenced by an unsecured promissory note which is payable on demand,
and if no demand is made, on December 31, 1997, unless such loan is renewed.
The note accrues interest at a floating rate of interest equal to 0.5% over
the daily weighted average interest rate applicable to the Company's variable
rate indebtedness. The note provides that no less than one-half of the
accrued interest will be due and payable on each December 31 and that the
remaining accrued interest, as of each December 31, will be added to the
principal amount of the note. The loan was granted in conjunction with the
termination of 91,080 stock options and the grant of other options to acquire
45,540 shares of Common Stock. Mr. Johnson was permitted to elect to
maintain the above-stated options or to surrender for termination such
options, and in consideration therefor, be granted options to purchase 50% of
the shares subject to the terminated options at an option price equal to the
fair market value of the shares on the date of grant and be loaned funds by
the Company to purchase up to 100% of the shares subject to the terminated
options. As of March 2, 1996, the principal amount of Mr. Johnson's
promissory note was $829,390.40.
In March 1993 the Company invested $3,000,000 in a limited partnership
fund that invests primarily in securities of companies with small to medium
size market capitalizations. The fund is managed by Whiffletree Corporation,
one of whose principals is Steven E. Berman, a brother of Martin L. Berman.
In 1995, the fund's partners, including the Company, approved the retention
of Palisade as a sub-advisor of the fund. Whiffletree Corporation is an
affiliate of Palisade, of which Martin L. Berman, a director of the Company,
is chief executive officer. The Company terminated the investment March 29,
1996, and received $4,672,900. The Company incurred fees, including
performance fees, to Whiffletree Corporation of approximately $274,319 during
the last fiscal year. An additional performance and first quarter fee for
the period between the close of the Company's fiscal year and March 29, 1996,
is estimated to be approximately $23,000. The Company also paid commissions
to Palisade in the amount of $22,105 in connection with the purchase of
Common Stock as part of the Company's stock purchase program.
In April 1994, the Company entered into an agreement with Smith Barney
Inc., with which Martin L. Berman was a managing director until April 1995,
to act as trustee of the Company's 401(k) defined contribution plan.
Additionally, Smith Barney Inc was retained to select and monitor management
of the plan's funds and to provide investment advice to participants of the
plan as they may request. For these services, the Company paid fees of
$64,471 in the last fiscal year.
In December 1989, a subsidiary of the Company and Berman Industries,
Inc., a company which is majority owned by Martin L. Berman, entered into a
Joint Operating and User Agreement (the "User Agreement") for each company to
hold an undivided 1/8 ownership in a Cessna jet aircraft. At the time of the
sale of the aircraft in December 1995 the User Agreement expired, ending the
shared interest in an aircraft with Berman Industries, Inc.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than
ten-percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than ten-percent shareholders are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company, all Section 16(a) filing
requirements applicable to its officers, directors and greater than ten-
percent beneficial owners with respect to the last fiscal year were observed,
except that one report each was filed late by Clark A. Johnson and Charles R.
Scott and one report was not filed by Robert G. Herndon.
PROPOSAL TO AMENDMENT THE 1989 EMPLOYEE STOCK OPTION PLAN
The Pier 1 Imports, Inc. 1989 Employee Stock Option Plan (the "Plan") is
intended to benefit the Company by providing certain officers and certain key
employees of the Company with additional incentives and giving them a greater
interest as shareholders in the success of the Company. The Plan was
adopted by the Company's Board of Directors and was approved by the Company's
shareholders on June 29, 1989. Approximately 95 employees participate in the
Plan. During the last fiscal year, the Company granted stock options
covering 359,985 shares to all employees of which options for 124,985 shares
were granted to executive officers.
The Board of Directors has determined that it is in the best interests
of the Company to amend the Plan to (i) increase the number of authorized
shares issuable under the plan by an additional 1,500,000 shares, (ii) extend
termination of the Plan from June 29, 1999 to June 30, 2004, (iii) provide
that no person may be granted options which in the aggregate exceed 15% of
the shares of Common Stock authorized from time to time under the Plan and
(iv) change the definition of "Disinterested Person" to include the
requirements of an "outside director" under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the"Code"). The amendments described in
(iii) and (iv) above are proposed in order for the Plan to qualify as a
performanced based compensation plan under Section 162(m) of the Code.
The Plan originally provided for issuance of up to 1,500,000 shares of
Common Stock, subject to adjustment for stock splits, stock dividends and
other changes to the capitalization of the Company. Currently options,
adjusted for such changes, have been granted covering an aggregate of
1,739,385 shares, leaving 195,377 shares remaining for issuance pursuant to
subsequent grants. If the proposed amendment is approved by shareholders,
the total number of shares that will then be issuable under the Plan will
increase to 1,695,377 shares.
The Plan is administered by a Committee of two or more Directors of the
Company who are "disinterested persons" as defined in Rule 16b-3 under the
Securities Exchange Act of 1934, as amended. The proposed amendment would
change the definition of "disinterested persons" who comprise the Committee
to include the requirements of the term "outside director" under Section
162(m) of the Code. The Committee has the discretion to determine the
participants to be granted options, the number of shares granted to each
person, the purchase price of the Common Stock covered by each option and
other terms of the option. Options intended to meet the requirements of
Section 162(m) of the Code will have an exercise price no less than the fair
market value of the Common Stock on the date of grant.
Options granted under the Plan may be either incentive stock options
qualifying under Section 422 of the Code or non-qualified stock options. In
the event any option terminates, expires or is surrendered without having
been exercised in full, the shares subject to such option will again be
available for issuance pursuant to options to be granted under the Plan. The
shares of Common Stock to be issued upon exercise of options may be
authorized but unissued shares or shares previously issued and reacquired by
the Company.
The term of an option will be fixed by the Committee, but in no event
will the term be more than 10 years (five years with respect to incentive
stock options granted to a holder of more than 10% of Common Stock then
outstanding) from the date of grant. Each option will be exercisable at such
times and upon such conditions as the Committee may determine, except that
the aggregate fair market value of Common Stock with respect to which
incentive stock options are exercisable for the first time by an optionee in
any calendar year may not exceed $100,000. The option exercise price will be
determined by the Committee, but may not be less than the par value of the
Common Stock, and in the case of incentive stock options may not be less than
the fair market value of the Common Stock on the date of grant or 110% of the
fair market value with respect to any incentive stock options granted to a
holder of more than 10% of the then outstanding Common Stock. Option holders
will pay the option exercise price in cash or, if permitted by the Committee,
in shares of Common Stock owned by the option holder. The Committee may
provide the option holder with the right to satisfy any withholding tax
obligation by delivery of previously owned shares or withholding shares
otherwise issuable upon exercise of a non-qualified stock option. The
Committee may include a right of relinquishment to permit the optionee to
relinquish all or part of the vested and unexercised portion of the option
for the number of shares of Common Stock having a market value equal to the
appreciated value of the option. The Committee may make adjustments to the
option exercise price and number of shares covered by outstanding options to
prevent dilution or enlargement of rights of option holders as a result of
certain corporate events, such as reorganizations, mergers, stock splits,
stock dividends or other changes in the capital structure of the Company.
The Committee may also make adjustments in the aggregate number of shares
subject to issuance under the Plan.
In the event of the retirement (with the written consent of the Company)
or other termination of employment of the optionee, the employee may exercise
the option at any time within three months after such retirement or
termination of employment unless such termination was for cause or voluntary
on the part of the employee or without the written consent of the Company, in
which case the option will terminate on the date of the employee's
termination, or unless the termination resulted from the death or disability
of the employee, in which event the option will terminate one year after the
death or disability of the employee.
Under the proposed amendments, the Plan will terminate on June 30, 2004.
The Board of Directors may, however, suspend, terminate or amend the Stock
Option Plan at any time prior to such date to conform it to any changes in
law or any other respect it deems to be in the best interests of the Company;
provided that without the approval of the shareholders no such amendment may
make any change in the plan for which shareholder approval is required by
(i) Rule 16b-3 under the Securities Exchange Act of 1934, (ii) the Code or
regulatory provisions dealing with incentive stock options, (iii) any rules
for listed company promulgated by any national stock exchange on which the
Company's stock is traded or (iv) any other applicable law.
Federal Income Tax Consequences
No taxable income will be realized by a participant upon the grant of a
non-qualified stock option. Upon exercise, the excess of the fair market
value of the shares at the time of exercise over the option exercise price
for such shares will generally constitute taxable compensation. The Company
or a subsidiary will be entitled to a deduction for such compensation income
(assuming any federal income tax withholding requirements are satisfied).
Upon disposition of the shares acquired upon exercise, any appreciation (or
depreciation) in the stock value after the date of exercise will be treated
as capital gain (or loss).
No taxable income will be recognized by a participant upon the grant or
exercise of an incentive stock option, assuming there is no disposition of
the option shares within two years after the option was granted or within one
year after the option was exercised (the "holding period"), and providing
that the participant has been employed by the Company or one of its
subsidiaries from the date of grant to a date that is not more than three
months before the date of exercise. The exercise of an incentive stock
option, however, could result in an item of tax preference for purposes of
the alternative minimum tax. The sale of incentive stock option shares after
the holding period at a price in excess of the participant's adjusted basis
(ordinarily the option exercise price) will constitute capital gain to the
participant, and neither the Company nor any subsidiary will be entitled to a
federal income tax deduction by reason of the grant or exercise of the option
or the sale of the shares. If incentive stock option shares are sold by the
participant prior to the expiration of the holding period, generally the
participant will have compensation income taxable in the year of such sale in
an amount equal to the excess, if any, of the fair market value of such
shares at the time of exercise of the option (or, if less, the amount
received upon the sale) over the option exercise price for such shares. The
Company or a subsidiary will be entitled to a deduction for such compensation
income (assuming any federal income tax withholding requirements are
satisfied).
Adoption of this Proposal requires approval by the affirmative vote of
the holders of a majority of the shares of Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
STOCKHOLDER PROPOSAL
Mark A. Boyar, whose address and stock ownership will be furnished by
the Company to any stockholder requesting such information, has informed the
Company that he intends to present for action at the Annual Meeting the
following resolution:
RESOLVED, that we the shareholders of Pier 1 Imports, Inc.
request that the board of directors retain an independent
investment banker to evaluate and report to the board on strategic
options available to maximize shareholder value, a summary of such
report to be made available to shareholders no later than three
months prior to the 1997 annual meeting.
Mr. Boyar has submitted the following statement in support of his proposal:
The value of Pier 1 common stock for the past five fiscal years has
significantly underperformed both that of its peer group and the S&P 500.
Management seems unable or unwilling to take steps to address this problem in
a positive manner; instead, management persists in pursuing various actions
which appear to contribute to the poor performance of Pier 1 stock,
including, among other things, adopting a "poison pill," awarding itself
highly generous bonuses, and placing some of its investment capital with
persons affiliated with a member of the board. In these circumstances, the
need for an independent evaluation of the options open to Pier 1 to enhance
shareholder value seems clear.
Statement of the Board in Opposition to the Stockholder Proposal
Your Directors are committed to the enhancement of shareholder value.
The Board believes the Company is well positioned to enjoy profitable growth
and at this time intends for management to concentrate its efforts on the
expansion and profitability of the Company's core business. Total
shareholder return of the Company during the past five years has outperformed
both the S&P 500 and the peer group of retail companies, as shown in the
preceding Stock Performance Graph. It can also be seen that total
shareholder return of the Company relative to that of its peer group has
improved dramatically during the past two years.
Mr. Boyar describes certain actions taken by management that he suggests
have contributed to poor performance in the price of the Company's stock. In
particular he mentions the adoption of the Company's share purchase rights
plan or "poison pill" as one such action. During its consideration of
adopting a poison pill, the Board was provided a study by its investment
banking firm showing that the adoption of a poison pill has had no
significant long-term effect on the stock price of companies adopting poison
pills. The Board also was given data from two independent studies conducted
in 1988 that showed that companies with share purchase rights plans generally
received significantly higher prices during a take-over than companies
without such plans. On the day prior to adoption of the Company's share
purchase rights plan the closing price of the Company's Common Stock was
$7 5/8 per share, and a little more than a year later on the last day of the
Company's last fiscal year the price was $13 1/8. In May 1996 the price of
the Company's stock reached a historic high of $15. It is also noteworthy
that over 1,700 public companies have adopted a share purchase rights plan
similar to that of the Company. Mr. Boyar asserts that the Company's senior
executive bonus program is also detrimental to the stock performance, but he
offers no basis for such assertion nor is the Board aware of anything that
indicates that the size of the Company's bonuses to executives has any effect
on stock price. It should be noted that senior executive bonuses for the past
three years have been based on the relative performance of the Company's
stock price plus dividend return, and bonuses have increased only to the
extent of the Company's relative shareholder return compared to its peer
group. Finally, Mr. Boyar suggests an adverse impact to shareholders because
the Company has had $3 million of its excess cash managed by persons
affiliated with a member of the Board. That investment was made as a
temporary placement of excess funds in 1993, more than a year prior to such
member's election to the Board of Directors. Although the Company received
an average annual compounded rate of return of 14.7% on these funds, the
Company closed the investment at the end of March 1996 to eliminate any
appearance of conflict.
Your Directors regularly review the Company's position and strategic
direction as well as available options and potential alternatives, and from
time to time consult with investment banking firms in this regard. The Board
has taken and will continue to take steps that it believes are prudent to
increase shareholder value. The Board is opposed to the proposal to engage
an investment banker because it is only one narrowly focused method, and not
the appropriate method at this time to maximize shareholder value.
Adoption of the Stockholder Proposal requires approval by the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE STOCKHOLDER
PROPOSAL.
OTHER BUSINESS
No other matters are scheduled to be presented for action at the meeting
other than the matters described in this Proxy Statement. If any other
business should properly come before the meeting, the persons named in the
proxy intend to vote thereon in accordance with their best judgment.
Relationship with Independent Auditors
The Board of Directors of the Company annually selects independent
public accountants to serve as auditors for the upcoming fiscal year. The
Board plans to select auditors for the 1997 fiscal year at the meeting of the
Board of Directors which follows the Annual Meeting of Shareholders.
At its meeting in June 1995, the Board of Directors appointed Price
Waterhouse LLP as auditors for the Company for fiscal year 1996. On March 1,
1996, the Company terminated the engagement of Price Waterhouse LLP as the
independent accountants for the audit of the Company's financial statements.
The decision to change the Company's independent accountants was recommended
by the Audit Committee of the Board of Directors. The reports of Price
Waterhouse LLP on the financial statements of the Company for each of the two
prior years contained no adverse opinion or disclaimer of opinion or any
qualification or modification as to uncertainty, audit scope or accounting
principles. During the two fiscal years ending February 26, 1994, and
February 25, 1995, and during the period February 26, 1995, through March 1,
1996, there were no disagreements with Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or
auditing scope or procedure that, if not resolved to the satisfaction of
Price Waterhouse LLP, would have caused a reference to the subject matter of
the disagreement in its audit report. On March 1, 1996, the Company notified
Ernst & Young LLP of the Company's intention to engage Ernst & Young LLP as
independent accountants for the audit of the Company's financial statements
for the fiscal year ending March 2, 1996. A representative of Ernst & Young
LLP is expected to be present at the Annual Meeting of Shareholders and will
be given the opportunity to make a statement if he so desires and to respond
to appropriate questions from Shareholders.
Shareholder Proposals for 1997 Annual Meeting
The date by which Shareholder proposals must be received by the Company
for inclusion in the Proxy Statement for the 1997 Annual Meeting of
Shareholders is January 15, 1997.
Proxy Solicitation
The cost of soliciting proxies will be borne by the Company. The
services of Kissel-Blake, Inc. will be employed for the purpose of
facilitating the solicitation. The fees of Kissel-Blake, Inc. in this
connection will be borne by the Company and are not expected to exceed $5,000
plus mailing and delivery expenses. In addition to solicitations by mail,
officers and regular employees of the Company may solicit proxies personally
and by telephone or other means, for which they will receive no compensation
in addition to their normal compensation. Arrangements may also be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation material to the beneficial owners of stock held of
record by such persons, and the Company will reimburse them for their
reasonable out-of-pocket and clerical expenses.
YOUR VOTE IS IMPORTANT
You are encouraged to let us know your preference by completing and
returning the enclosed proxy card.
J. Rodney Lawrence
Secretary
May 20, 1996
<PAGE>
APPENDIX
PIER 1 IMPORTS, INC.
301 Commerce Street, Suite 600
Fort Worth, Texas 76102
PROXY
Solicited on Behalf of the Board of Directors for Annual Meeting of
Shareholders, June 27, 1996
The undersigned hereby appoints CLARK A. JOHNSON, MARK L. HART, JR. and
J. RODNEY LAWRENCE, and each of them, proxies with full power of
substitution, to represent and to vote as set forth herein all the shares of
the Common Stock of Pier 1 Imports, Inc. held of record by the undersigned on
May 8, 1996, at the annual meeting of shareholders to be held at 10:00 a.m.
local time on June 27, 1996, at the Radisson Plaza Hotel, Grand Crystal
Ballroom, Section A, 815 Main Street, Fort Worth, Texas, and any adjournment
thereof.
This Proxy, when properly executed, will be voted in the manner
directed by the undersigned share- holder. If no direction is made, this
proxy will be voted "FOR" the election of the directors nominated, "FOR" the
proposed amendments to the Company's 1989 Employee Stock Option Plan, and
"AGAINST" the Stockholder Proposal.
You are encouraged to specify your choices by marking the appropriate boxes,
SEE REVERSE SIDE, but you need not mark any boxes if you wish to vote in
accordance with the Board of Directors' recommendations. The Proxies cannot
vote your shares unless you sign and return this card.
(Continued and to be signed and dated on the reverse side)
-----------------------------------------------------------------------------
Item 1.
Election of Directors. FOR all nominees [ ] WITHHOLD AUTHORITY to vote [ ]
listed below for all nominees listed below
*EXCEPTIONS [ ]
Nominees: Clark A. Johnson, Charles R. Scott, Marvin J. Girouard, Sally F.
McKenzie, James M. Hoak, Jr., Martin L. Berman and Craig C. Gordon
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominees's name in the space below.)
*Exceptions _______________________________________________________________
Item 2. Approval of the proposed amendments to the 1989 Employee Stock
Option Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 3. Act upon a stockholder proposal.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Item 4. In their discretion, the Proxies are authorized to vote as described
in the Proxy Statement and upon such other business as may properly
come before the meeting or any adjournment thereof.
Change of Address and/or [ ]
Comments Mark Here
NOTE: Please sign exactly as name appears
hereon. Joint owners should each sign. When
signing as attorney, executor, administer,
trustee or guardian, please give full title
as such.
Dated: __________________________, 1996
_______________________________________
Signature
_______________________________________
Signature if held jointly
Votes must be indicated
(x) in Black or Blue Ink [ ]
Please date, sign and return promptly in the enclosed envelope.
