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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000898430-02-001766.txt : 20020503
<SEC-HEADER>0000898430-02-001766.hdr.sgml : 20020503
ACCESSION NUMBER: 0000898430-02-001766
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 12
CONFORMED PERIOD OF REPORT: 20020202
FILED AS OF DATE: 20020503
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: COST PLUS INC/CA/
CENTRAL INDEX KEY: 0000798955
STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES [5700]
IRS NUMBER: 941067973
STATE OF INCORPORATION: CA
FISCAL YEAR END: 0130
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-14970
FILM NUMBER: 02633073
BUSINESS ADDRESS:
STREET 1: 201 CLAY ST
STREET 2: P O BOX 23350
CITY: OAKLAND
STATE: CA
ZIP: 94607
BUSINESS PHONE: 4158937300
MAIL ADDRESS:
STREET 1: 201 CLAY ST
STREET 2: P O BOX 23350
CITY: OAKLAND
STATE: CA
ZIP: 94623
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED FEBRUARY 2, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO ____________.
COMMISSION FILE NUMBER 0-14970
COST PLUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
CALIFORNIA 94-1067973
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
200 4TH STREET
OAKLAND, CALIFORNIA 94607
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (510) 893-7300
SECURITIES REGISTERED PURSUANT TO NONE
SECTION 12(B) OF THE ACT:
SECURITIES REGISTERED PURSUANT TO COMMON STOCK, $.01 PAR VALUE
SECTION 12(G) OF THE ACT: PREFERRED SHARE PURCHASE RIGHTS
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing sale price of the common stock on March 28,
2002, was approximately $590.8 million as reported for such date on the Nasdaq
National Market. On that date, 21,593,139 shares of Common Stock, $.01 par
value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended February 2, 2002 ("Annual Report") are incorporated by reference into
Part II and Part IV.
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held June 27, 2002 ("Proxy Statement") are incorporated by
reference into Part III.
<PAGE>
An asterisk "*" denotes a forward-looking statement reflecting current
expectations that involve risks and uncertainties within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, including statements
that include the words "believes", "expects" or "anticipates" or similar
expressions. Actual results may differ materially from those discussed in such
forward-looking statements due to a number of factors including those set forth
below and elsewhere in the Form 10-K and in documents which are incorporated by
reference herein. Cost Plus, Inc. ("the Company") may from time to time make
additional written and oral forward-looking statements, including statements
contained in the Company's filings with the Securities and Exchange Commission
and in its reports to shareholders. The Company does not undertake to update any
forward-looking statement that may be made from time to time by or on behalf of
the Company.
PART I
ITEM 1. BUSINESS
THE COMPANY
Cost Plus, Inc. ("Cost Plus World Market" or "the Company") is a leading
specialty retailer of casual home furnishings and entertaining products. As of
February 2, 2002, the Company operated 150 stores under the name "World Market,"
"Cost Plus World Market," "Cost Plus" or "Cost Plus Imports" in 19 states,
primarily in the western United States, but with stores as far east as Georgia,
North Carolina and Virginia. Cost Plus World Market's business strategy is to
differentiate itself by offering a large and ever-changing selection of unique
products, many of which are imported, at value prices in an exciting shopping
environment. Many of Cost Plus World Market's products are proprietary or
private label, often incorporating the Company's own designs, "World Market"
brand name, quality standards and specifications and typically are not
available at department stores and other specialty retailers.
Cost Plus World Market's expansion strategy is to open stores primarily in
metropolitan and suburban markets that can support multiple stores and enable
the Company to achieve advertising, distribution and operating efficiencies. The
Company may also selectively enter mid-size markets which can support one or two
stores that the Company believes can meet its profitability criteria. The
Company's stores are located predominantly in high traffic metropolitan and
suburban locales, often near major malls. In fiscal 2001, the Company opened a
total of 23 stores, including 12 in the existing markets of San Francisco,
Fresno, Los Angeles and San Diego, CA; Seattle, WA; Tucson, AZ; Austin, TX;
Chicago, IL and Cleveland, OH and 11 in new markets of Eugene, OR;
Winston/Salem, Raleigh/Durham and Charlotte, NC; Stockton, Santa Barbara and
Bakersfield, CA; Atlanta GA and Washington, DC.
MERCHANDISING
Cost Plus World Market's merchandising strategy is to offer customers a
broad selection of distinctive items related to the theme of casual home
furnishing, home entertaining and consumables.
Products. The Company believes its distinctive and unique merchandise
differentiates the Company from other retailers. Many of Cost Plus World
Market's products are proprietary or private label, often incorporating the
Company's own designs, "World Market" brand name, quality standards and
specifications and typically are not available at department stores and other
specialty retailers. In addition to strengthening the stores' product offering,
proprietary and private label goods typically offer higher gross margin
opportunities than branded goods. A significant portion of Cost Plus World
Market's products are made abroad in approximately 70 countries and many of
these goods are handcrafted by local artisans. The Company's product offerings
are designed to provide solutions to customers' casual living and home
entertaining needs. The offerings include home decorating items such as
furniture, rugs, pillows, lamps, window coverings, frames and baskets. Cost Plus
World Market's furniture products include ready-to-assemble living and dining
room pieces, unusual handcrafted case goods and occasional pieces, as well as
outdoor furniture made from a variety of materials such as rattan, hardwood and
wrought iron. The Company also sells a number of tabletop and kitchen items
including glassware, ceramics, textiles and cooking utensils. Kitchen products
offer the casual gourmet an assortment of products organized around a variety of
themes such as baking, food preparation, barbeque and international dining.
2
<PAGE>
Cost Plus World Market offers a number of gift and decorative accessories,
including collectibles, cards, wrapping paper and Christmas and other seasonal
items. Because many of the gift and collectible items come from around the
world, they contribute to the exotic atmosphere of the stores.
Cost Plus World Market also offers its customers a wide selection of
gourmet foods and beverages, including wine, microbrewed and imported beer,
coffee, tea and mineral water. The wine assortment offers a number of moderately
priced premium wines, including a variety of well recognized labels, as well as
wines not readily available at neighborhood wine or grocery stores. Consumable
products, particularly beverages, generally have lower margins than the
Company's average. Coffee, purchased as green beans, is roasted at the Company's
own roasting plant and offered fresh in stores. Gourmet foods include packaged
products from around the world and seasonal items that relate to "old world"
holidays and customs. Packaged snacks, candy and pasta are displayed in open
barrels and crates. All food items typically have a shelf life of six months or
longer.
The Company replaces or updates many of the items in its merchandise
assortment on a regular basis in order to encourage repeat shopping and to
promote a sense of discovery. The Company regularly marks down retail prices and
eliminates items that do not meet its turnover expectations.
Format and Presentation. The Company's stores are designed to evoke the
feeling of a "world marketplace" through colorful and creative visual displays
and merchandise presentations, including goods in open barrels and crates,
groupings of related products in distinct "shops" within the store and in-store
activities such as cooking demonstrations and food and coffee tastings. The
Company believes that its "world marketplace" effect provides customers with a
fun shopping experience and encourages browsing throughout the store.
The average selling space of a Cost Plus World Market store is
approximately 16,000 square feet, which allows flexibility for merchandise
displays, product adjacencies and directed traffic patterns. Complementary
products are positioned in proximity to one another and cross merchandising
themes are used in merchandise displays to tie different product offerings
together. The unobstructed floor plan allows the customer to see virtually all
of the different product areas in a Cost Plus World Market store from the
entrance. The "power" aisle, where bulk displays highlight sharply priced items,
leads the customer through the store into the different product areas. The
Company has a seasonal shop located in the heart of the store to feature
seasonal products in themes, such as Christmas, Easter and outdoor. Store
signage, including permanent as well as promotional signs, is developed by the
Company's in-house graphic design department. End caps, bulk stacks and free
standing displays are changed frequently.
The Cost Plus World Market store format is also designed to reinforce the
Company's value image through exposed ceilings, concrete floors, simple wooden
fixtures and open or bulk presentations of merchandise. The Company displays
most of its inventory on the selling floor and makes effective use of vertical
space, for example, a display of chairs arranged on a wall and rugs hanging
vertically from racks.
The Company believes that its customers usually visit a Cost Plus World
Market store as a destination with a specific purchase in mind. The Company also
believes that once in the store, its customers often spend additional time
shopping and browsing and purchasing more items than they originally intended.
Pricing. Cost Plus World Market offers quality products at competitive
prices. The Company complements its competitive everyday prices with
opportunistic buys, enabling the Company to pass on additional savings to the
customer. The Company routinely shops a variety of retailers to ensure that its
products are competitively priced.
Planning and Buying. Cost Plus World Market effectively manages a large
number of products by utilizing centralized merchandise planning, tracking and
replenishment systems. The Company regularly monitors merchandise activity at
the item level through its management information systems to identify and
respond to product trends. The Company maintains its own central buying staff
which is responsible for establishing the assortment of inventory within its
merchandise classifications each season, including integrating trends or themes
identified by the Company into its different product categories. The Company
attempts to moderate the risk associated with merchandise purchasing by testing
selected new products in a limited number of stores. The Company's long-standing
relationships with overseas suppliers, its international buying agency
3
<PAGE>
network and its knowledge of the import process facilitate the planning and
buying process. The buyers work closely with suppliers to develop unique
products that will meet customers' expectations for quality and value. The
Company's buyers communicate with district and store managers and use the
management information systems to tailor the merchandise mix of individual
stores to regional conditions and to better ensure that in-stock availability
will be maintained in accordance with the specific requirements of each store.
ADVERTISING
The Company advertises through weekly promotional advertisements in major
daily newspapers and on radio. The Company's approach is to regionalize its
advertising and use the most efficient media mix within each geographic area.
The Company uses full color tabloids and color or black and white newspaper
advertisements to highlight product offerings. For new store grand openings, the
Company uses a combination of newspaper and radio.
PRODUCT SOURCING AND DISTRIBUTION
The Company purchases most of its inventory centrally, which allows the
Company to take advantage of volume purchase discounts and improve controls over
inventory and product mix. The Company purchases its merchandise from
approximately 2000 suppliers and no supplier represented over 5% of total
purchases in the fiscal year ended February 2, 2002. A significant portion of
Cost Plus World Market's products are made abroad in approximately 70 countries
in Europe, North and South America, Asia, Africa and Australia. The Company has
established a well developed overseas sourcing network and enjoys long standing
relationships with many of its vendors. As is customary in the industry, the
Company does not have long-term contracts with any suppliers. The Company's
buyers often work with suppliers to produce unique products exclusive to Cost
Plus World Market. The Company believes that, although there could be delays in
changing suppliers, alternate sources of merchandise for core product categories
are available at comparable prices. Cost Plus World Market typically purchases
overseas products on a free-on-board shipping point basis and the Company's
insurance on such goods commences at the time it takes ownership. The Company
also purchases a number of domestic products, especially in the gourmet food and
beverage area. Due to state regulations, wine and beer are purchased from local
distributors, with purchasing controlled by the Corporate buying office.
The Company currently services all of its stores from its general
merchandise distribution center and separate furniture facility both located in
Stockton, California. Domestically sourced merchandise is usually delivered to
the distribution center by common carrier or by Company trucks. Any significant
interruption in the operation of these facilities would have a material adverse
effect on the Company's financial position and results of operations.* In
mid-year 2002, the Company expects to open a 500,000 square foot full-service
distribution center in Windsor, Virginia. The Company believes that its
Stockton, California distribution center will be able to handle, or can be
upgraded to handle, the Company's store expansion plans until the Virginia
distribution center becomes fully operational.*
MANAGEMENT INFORMATION SYSTEMS
Each of the Company's stores is linked to the Cost Plus World Market
headquarters in Oakland, California through a point-of-sale system and frame
relay data network that interfaces with an IBM AS/400 computer. The Company's
information systems keep records, which are updated daily, of each merchandise
item sold in each store, as well as financial, sales and inventory information.
The point-of-sale system also has scanning, "price look-up" and on-line
credit/debit card approval capabilities, all of which improve transaction
accuracy, speed checkout time and increase overall store efficiency. The Company
continually upgrades its in-store information systems to improve information
flow to store management and enhance other in-store administration capabilities.
4
<PAGE>
Purchasing operations are facilitated by the use of computerized
merchandise information systems which allow the Company to analyze product
sell-through and assist the buyers in making merchandise decisions. The
Company's central replenishment system includes SKU and store-specific, "model
stock" logic which enables the Company to maintain adequate stock levels on
basic goods in each location. The Company believes its centralized purchasing
system has helped it to optimize in-store inventory levels and improve in-stock
conditions.*
The Company uses several other customized management information and
control systems to direct the Company's operations and finances. These
computerized systems are designed to ensure the integrity of the Company's
inventory, allow the merchandising staff to reprice merchandise, process
payroll, pay bills, control cash, maintain fixed assets and track promotions,
throughout all of the Company's stores. The Company's distribution operations
use systems to receive, locate, pick and ship inventory to stores. The Company
believes that these systems allow for higher operating efficiency and improve
profitability.*
Additional systems also enable the Company to produce the periodic
financial reports necessary for developing budgets and monitoring individual
store and consolidated Company performance. The Company believes that its
current management information system can be upgraded to support the Company's
planned expansion for the foreseeable future.*
COMPETITION
The markets served by the Company are highly competitive. The Company
competes against a diverse group of retailers ranging from specialty stores to
department stores and discounters. The Company's product offerings compete with
such specialty retailers as Bed, Bath & Beyond, Linens n' Things, Crate &
Barrel, Pottery Barn, Michaels Stores, Pier 1 Imports, Trader Joe's and
Williams-Sonoma. Specialty retailers tend to have higher prices and a more
narrow assortment of products than Cost Plus World Market. Department stores
typically have higher prices than Cost Plus World Market for similar
merchandise. Discounters may have lower prices than Cost Plus World Market, but
the product assortment is generally more limited. The Company competes with
these and other retailers for customers, suitable retail locations and qualified
management personnel.
EMPLOYEES
As of February 2, 2002, the Company had approximately 1,700 full-time and
approximately 2,200 part-time employees. Of these, approximately 3,300 were
employed in the Company's stores and approximately 600 were employed in the
distribution center and corporate office. The Company regularly supplements its
work force with temporary staff, especially in the fourth quarter of each year,
to service increased customer traffic during the peak Holiday selling season.
Employees in 12 stores in Northern California are covered by a collective
bargaining agreement which expires on May 31, 2003. The Company believes that it
enjoys good relationships with its employees.*
TRADEMARKS
The Company regards its trademarks and service marks as having significant
value and as being important to its marketing efforts. The Company has
registered its "Cost Plus," "Cost Plus World Market," "Cost Plus World Market"
logos, "Electric Reindeer", "Mercado Del Mundo", "Texas Turtle", "Where you can
afford to be different" and "World Market" marks with the United States Patent
and Trademark Office on the Principal Register. The Company has applied for the
registration of its "Aaku", "Asian Passage", "Atacama", "Castello Del Lago",
"Crandall Brooks", "Credo", "Crossroads," "Donaletta" logo, "Marche Du Monde",
"Market Classics", "Maui Morning", "Praline Perk" and "Soiree" marks with the
United States Patent and Trademark Office on the Principal Register. The Company
has also secured California state registration of its "Crossroads" trademark.
The Company's policy is to pursue prompt and broad registration of its marks and
to vigorously oppose infringement of its marks.
RISK FACTORS
Seasonality and Quarterly Fluctuations. The Company's business is highly
seasonal, reflecting the general pattern associated with the retail industry of
peak sales and earnings during the Holiday selling season. Due to the importance
of the Holiday selling season, the fourth quarter of each fiscal year has
historically contributed and the Company expects it will continue to contribute,
a disproportionate percentage of the Company's net sales and most of its net
income for the entire fiscal year.* Any factors negatively affecting the Company
during the Holiday selling season in any year, including unfavorable economic
conditions, could have a material adverse effect on the Company's financial
condition and results of
5
<PAGE>
operations. The Company generally experiences lower sales and earnings during
the first three quarters and, as is typical in the retail industry, may incur
losses in these quarters.* The results of operations for these interim periods
are not necessarily indicative of the results for a full fiscal year. In
addition, the Company makes decisions regarding merchandise well in advance of
the season in which it will be sold, particularly for the Holiday selling
season. Significant deviations from projected demand for products could have a
material adverse effect on the Company's financial condition and results of
operations, either by lost gross sales due to insufficient inventory or lost
gross margin due to the need to mark down excess inventory.
The Company's quarterly results of operations may also fluctuate based upon
such factors as delays in the flow of merchandise, changes in the anticipated
opening of the Company's new distribution center in Virginia in mid-2002, the
number and timing of new store openings and related store preopening expenses,
the amount of net sales contributed by new and existing stores, the mix of
products sold, the timing and level of markdowns, store closings, refurbishments
or relocations, competitive factors, changes in fuel and other shipping costs,
general economic conditions, increases in utility costs in California and other
states where the Company has operations, labor market fluctuations, changes in
accounting rules and regulations and unseasonable weather conditions.*
Effect of Economic Conditions and Geographic Concentration. The success of
the Company's business depends to a significant extent upon the level of
consumer spending. Among the factors that affect consumer spending are the
general state of the economy, the level of consumer debt, prevailing interest
rates and consumer confidence in future economic conditions. A substantial
number of the Company's stores are located in the western United States,
principally in California. Lower levels of consumer spending in this region
could have a material adverse effect on the Company's financial condition and
results of operations. Reduced consumer confidence and spending may result in
reduced demand for the Company's products, limitations on the Company's ability
to increase prices and may require increased levels of selling and promotional
expenses, thereby adversely affecting the Company's financial condition and
results of operations.
Risks Associated with Expansion. The Company's ability to continue to
increase its net sales and earnings will depend in part on its ability to open
new stores and to operate such stores on a profitable basis. The Company's
continued growth will also depend on its ability to increase sales in its
existing stores. The Company opened 23 stores in fiscal 2001 and presently
anticipates opening a net of 25 stores in fiscal 2002. The Company intends to
open stores in both existing and new geographic markets.* The opening of
additional stores in an existing market could result in lower net sales from
existing Company stores in that market. The success of the Company's planned
expansion will be dependent upon many factors, including the identification of
suitable markets, the availability and leasing of suitable sites on acceptable
terms, the hiring, training and retention of qualified management and other
store personnel, the availability of appropriate financing and general economic
conditions. To manage its planned expansion, the Company must ensure the
continuing adequacy of its existing systems, controls and procedures, including
product distribution facilities, store management, financial controls and
information systems. There can be no assurance that the Company will be able to
achieve its planned expansion, that new stores will be effectively integrated
into the Company's existing operations or that such stores will be profitable.*
The Company's expansion strategy includes opening stores in new geographic
markets. These new markets may present competitive and merchandising challenges
that are different from those currently faced by the Company in its existing
geographic markets. The Company may incur higher costs related to advertising
and distribution in connection with entering new markets. If the Company opens
stores in new markets that do not perform to the Company's expectations or if
store openings are delayed, the Company's financial condition and results of
operations could be materially adversely affected. In addition, in order to sell
wine and beer, the Company is required to obtain alcoholic beverage licenses for
each of its new stores and the laws regulating the issuance of alcoholic
beverage licenses differ from state to state. Any delays in receiving alcoholic
beverage licenses for new stores could have an adverse impact on such stores'
operations.
Dependence on a Single Distribution Facility. The Company's distribution
functions for all of its stores are currently handled from a single facility in
Stockton, California. Any significant interruption in the operation of this
facility would have a material adverse effect on the Company's financial
condition and results of operations. At this time the Company is opening a
500,000 square foot, full-service distribution center in Windsor, Virginia.*
Operational inefficiencies during start-up or failure to successfully coordinate
the operations of these facilities could have a material adverse effect on the
Company's financial condition and results of operations.*
6
<PAGE>
Risks Associated with Importing. The Company imports a significant portion
of its merchandise from approximately 70 countries. The Company relies on its
long-term relationships with its suppliers but has no long-term contracts with
such suppliers. The Company's future success will depend in large measure upon
its ability to maintain its existing supplier relationships or to develop new
ones.
As an importer, the Company's business is subject to the risks generally
associated with doing business abroad, such as foreign governmental regulations,
economic disruptions, delays in shipments, freight cost increases and changes in
political or economic conditions in countries in which the Company purchases
products. The threat of a longshoreman's strike could impede the flow of goods
to its distribution centers.* The Company's business is also subject to the
risks associated with any new or revised United States legislation and
regulations related to imported products, including quotas, duties, taxes and
other charges or restrictions on imported merchandise. Additionally, since
certain of the Company's purchases are made in currencies other than the U.S.
Dollar and its financial results are reported in U.S. Dollars, fluctuations in
the rates of exchange between the U.S. Dollar and other currencies may have a
material adverse effect on the Company's financial condition and results of
operations. Historically, the Company has not hedged its currency risk and does
not currently anticipate doing so in the future. If any such factors were to
render the conduct of business in particular countries undesirable or
impractical or if additional United States quotas, duties, taxes or other
charges or restrictions were imposed upon the importation of the Company's
products in the future, the Company's financial condition and results of
operations could be materially adversely affected.
Risks Associated with Merchandising. The Company's success depends in part
upon the ability of its merchandising staff to anticipate the tastes of its
customers and to provide merchandise that appeals to their preferences. The
Company's strategy requires it to introduce in a timely manner products from
around the world that are affordable, distinctive in quality and design and that
are not widely available from other retailers. Many of the Company's products
require long lead times. In addition, a large percentage of the Company's
merchandise changes regularly. The Company's failure to anticipate, identify or
react appropriately to changes in consumer trends could lead to, among other
things, either excess inventories and higher markdowns or a shortage of products
and could have a material adverse effect on the Company's financial condition
and results of operations.
Changes in Energy Costs. The Company incurs significant costs for the
purchase of fuel in transporting goods to its distribution center and stores and
for the purchase of utility service for its store, distribution center and
corporate office locations. Significant increases in the cost of fuel and
utility services could have a material adverse effect on the Company's financial
condition and results of operations.
Competition. The markets served by the Company are highly competitive. The
Company competes against a diverse group of retailers ranging from specialty
stores to department stores and discounters. The Company's product offerings
compete with such specialty retailers as Bed, Bath & Beyond, Linens n' Things,
Crate & Barrel, Pottery Barn, Michaels Stores, Pier 1 Imports, Trader Joe's and
Williams-Sonoma. The Company competes with these and other retailers for
customers, suitable retail locations and qualified management personnel. Many of
the Company's competitors have significantly greater financial, marketing and
other resources than the Company and there can be no assurance that the Company
will be able to compete successfully in the future.
Dependence on Key Personnel. The success of the Company's business will
continue to depend upon its key personnel. The Company does not maintain any key
man life insurance policies. The loss of the services of one or more of its key
personnel could have a material adverse effect on the Company's financial
condition and results of operations.
Possible Volatility of Stock Price. The stock market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These broad market fluctuations
have adversely affected the market price of the Company's common stock. Factors
such as fluctuations in the Company's operating results, a downturn in the
retail industry, changes in stock market analysts' recommendations regarding the
Company, other retail companies or the retail industry in general and general
market and economic conditions may have a significant effect on the market price
of the Company's common stock.
7
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ITEM 2. PROPERTIES
As of April 2, 2002, the Company operated 153 stores in 19 states. The average
selling space of a Cost Plus World Market store is approximately 16,000 square
feet. The table below summarizes the distribution of stores by state:
<TABLE>
<S> <C> <C> <C>
Arizona.................. 9 Idaho............... 1 Nevada.................. 3 Virginia................. 5
California............... 49 Illinois............ 12 New Mexico.............. 2 Washington............... 7
(Northern California ... 21) Indiana............. 1 North Carolina.......... 7 Wisconsin................ 1
(Southern California ... 28) Michigan............ 9 Ohio.................... 13
Colorado................. 4 Missouri............ 3 Oregon.................. 5
Georgia ................. 4 Nebraska............ 1 Texas................... 17
</TABLE>
The Company leases land and buildings for 146 stores (of which 16 are capital
leases), leases land and owns the buildings for six stores and owns the land and
building for one store. The Company currently leases its executive headquarters
in Oakland, California pursuant to a lease which expires in October 2008. The
Company currently leases its distribution facility of approximately 520,000
square feet and a coffee plant of 15,000 square feet in Stockton, California
pursuant to a lease which expires in September 2006 and has two renewal options
for five years each. In July 2001, the Company leased a furniture warehouse of
approximately 260,000 square feet in Stockton, California pursuant to a lease
which expires in June 2003 and has two renewal options for six months each. In
January 2002, the Company leased a distribution facility of approximately
500,000 square feet in Virginia pursuant to a lease which expires in January
2022 and has four renewal options for five years each.
The Company believes its distribution facilities are adequate to meet
immediate needs.* The second distribution facility located in Virginia, expected
to open in 2002, will allow for continued growth in stores.* The Company uses
additional warehouse facilities to handle seasonal requirements and expects
these facilities will be available in the future as needed.*
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a purported class action lawsuit alleging it
improperly classified certain California-based managers as "exempt" from
overtime rather than entitled to overtime pay as are non-exempt hourly
employees. The action, entitled Barry, et al, v. Cost Plus, Inc., was filed in
--------------------------------
the Orange County Superior Court in California on September 17, 2001. The
complaint seeks an injunction against any unlawful practices, restitution of
wages improperly withheld, unpaid overtime, penalties and costs, including
attorneys' fees. The case is in the discovery stage and a hearing has yet to be
held on the plaintiff's motion for class certification. The Company believes the
plaintiff is not entitled to class certification and intends to vigorously
oppose the motion. Furthermore, the Company believes it has strong defenses
against the charges contained in the lawsuit, which it will also vigorously
pursue. Although this lawsuit is subject to the uncertainties inherent in the
litigation process, based upon information presently available to management,
the Company does not expect the ultimate resolution of the action will have a
material effect on its financial condition.* Nonetheless, it is possible the
Company could incur a charge to earnings when the case is resolved and the
effect on a single quarter's earnings could be material if a conclusion to the
suit is reached in the first, second or third quarters of the fiscal year when
earnings are typically less than in the fourth quarter.*
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
8
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Murray H. Dashe 59 Chairman of the Board, Chief Executive Officer and
President
Gary D. Weatherford 45 Executive Vice President, Operations
Michael J. Allen 47 Senior Vice President, Store Operations
Joan S. Fujii 55 Senior Vice President, Human Resources
Stephen L. Higgins 52 Senior Vice President, Merchandising
John J. Luttrell 47 Senior Vice President and Chief Financial Officer
Judith A. Soares 52 Senior Vice President, Cost Plus Management Services, Inc.
</TABLE>
Mr. Dashe joined the Company in June 1997 and has served as Chairman of the
Board and Chief Executive Officer since February 1998 with continued
responsibilities as President. In September 1997, Mr. Dashe was appointed
President with continued responsibilities as Vice Chairman of the Board. From
June 1997 to September 1997, Mr. Dashe served as the Company's Vice Chairman of
the Board. Mr. Dashe is responsible for overseeing all day-to-day operations and
long-term strategies of the Company. From August 1992 to June 1997, he was Chief
Operating Officer of Leslie's Poolmart, Inc., a swimming pool supply retail
chain and was a director of that company from August 1989 to November 1996. From
April 1990 through June 1992, he was President and Chief Executive Officer of
RogerSound Labs, a Southern California retailer of audio/video consumer
electronics. From September 1985 through April 1990, Mr. Dashe held several
positions with SILO, a consumer electronics and appliance retailer, including
Regional President, Regional Vice President and Director of Stores. Previously,
he was employed in an executive capacity by other retailers, including Allied
Stores Corp., now Federated Department Stores, where he served in a variety of
positions, including Vice President/Director of Stores.
Mr. Weatherford was named Executive Vice President, Operations in March 2002
with responsibility for Information Services, Distribution, Store Operations and
Visual Merchandising. Mr. Weatherford joined the Company in January 1988, served
as Vice President, Store Operations from June 1995 until February 1998 when he
was promoted to Senior Vice President, Store Operations. From April 1991 to June
1995, Mr. Weatherford served as a Regional Manager for the Company and from
January 1990 to April 1991 he was a Senior Store Manager for the Company. From
January 1988 to January 1990, Mr. Weatherford served as a Buyer and Store Design
Director for the Company.
Mr. Allen joined the Company in December 1988 as a Regional Manager and later
was promoted to Director of Store Operations and in 1998 became Vice President,
Real Estate and Store Development. In March 2002, Mr. Allen was promoted to
Senior Vice President, Store Operations with responsibility for Store
Operations, Development and Real Estate. Prior to coming to Cost Plus, he was a
District Manager for Liquor Barn, a discount beverage retailer, from 1986 to
1988. From 1981 to 1985, he was a store manager for Safeway Corporation, a food
grocery chain.
Ms. Fujii was named the Company's Senior Vice President, Human Resources in
February 1998. Ms. Fujii joined the Company in May 1991 and served as Vice
President, Human Resources from October 1994 until February 1998. From May 1991
to October 1994, Ms. Fujii served as the Company's Director of Human Resources.
From September 1975 to May 1991, she was employed by Macy's California in
various operations and human resources management positions, ultimately serving
as Vice President, Human Resources at Macy's Union Square store in San
Francisco.
Mr. Higgins joined the Company in December 1999 as Vice President,
Merchandising and was promoted to Senior Vice President in September 2000. Prior
to joining the Company and from November 1996 to November 1999, Mr. Higgins
served as President, Chief Operating Officer of Centex Life Solutions, a health
and wellness products retailer. From September 1994 to October 1996, Mr. Higgins
was President, Chief Executive Officer of Everything Organized, a storage and
organization retailer. From January 1992 to August 1994, Mr. Higgins was
President, Chief Operating Officer of Tuesday Morning the nation's largest
off-price Home/Gift retailer and from October 1988 to December 1992, he was its
Senior Vice President of Merchandising.
9
<PAGE>
Mr. Luttrell joined Cost Plus, Inc. in May 2000 as Vice President, Controller
and was promoted to his current position in August 2001 as Senior Vice President
and Chief Financial Officer. From October 1998 to May 2000, Mr. Luttrell served
as Controller of Bugle Boy Industries, a manufacturer of clothing ("Bugle Boy").
In February 2001, Bugle Boy filed for protection under Chapter 11 of the Federal
Bankruptcy Act. From 1995 to 1998, he was a consultant for his own private
practice. Mr. Luttrell is a Certified Public Accountant.
Ms. Soares joined Cost Plus, Inc. in May 1998 as Vice President, Information
Services. In March 2002, Ms. Soares was promoted to Senior Vice President, Cost
Plus Management Services, Inc. having responsibility for Information Services,
Distribution and Logistics. Prior to joining Cost Plus, Inc., Ms. Soares served
as Vice President of Information Services for Natural Wonders, a specialty gift
retailer, from June 1996 to May 1998. From April 1993 to March 1996, Ms. Soares
served as Vice President of Information Services for Home Express, a specialty
home products retailer. From March 1990 to March 1993, Ms. Soares served as Vice
President of Development for The Gap, a specialty apparel retailer. Ms. Soares
has served in various positions within information systems for Mervyn's and
Lucky stores from 1980 to 1990.
PART II
Information called for by Part II (Items 5, 6, 7 and 8) has been filed as
Exhibit 13 to this report on Form 10-K. Such information is incorporated herein
by reference.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this item is incorporated herein by reference to
the Company's fiscal 2001 Annual Report to Shareholders (on page 26), filed as
Exhibit 13 to this report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
the Company's fiscal 2001 Annual Report to Shareholders (on page 22), filed as
Exhibit 13 to this report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this item is incorporated herein by reference to
the Company's fiscal 2001 Annual Report to Shareholders (on pages 18 - 26),
filed as Exhibit 13 to this report on Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is incorporated herein by reference to
the Company's 2001 fiscal Annual Report to Shareholders (on page 25), filed as
Exhibit 13 to this report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS
The information required by this item is incorporated herein by reference to
the Company's fiscal 2001 Annual Report to Shareholders (on pages 23 and
27 - 41), filed as Exhibit 13 to this report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
Information called for by Part III (Items 10, 11, 12 and 13) of this report on
Form 10-K has been omitted as the Company
10
<PAGE>
intends to file with Securities and Exchange Commission not later than May 30,
2002 a definitive Proxy Statement pursuant to Regulation 14A promulgated under
the Securities Exchange Act of 1934. Such information will be set forth in such
Proxy Statement and is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is incorporated herein by reference to
the section entitled "Executive Officers of the Registrant" at the end of Part I
of this report and the section entitled "Election of Directors" of the Proxy
Statement for the Company's 2002 Annual Meeting of Shareholders.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to
the section entitled "Executive Compensation and Other Matters" in the Proxy
Statement for the Company's 2002 Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to
the section entitled "Security Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement for the Company's 2002 Annual Meeting of
Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to
the section entitled "Certain Relationships and Related Transactions" in the
Proxy Statement for the Company's 2002 Annual Meeting of Shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)1.Financial Statements:
The following financial statements of Cost Plus, Inc. are incorporated
herein by reference to the Company's fiscal 2001 Annual Report to
Shareholders for the year ended February 2, 2002, filed as Exhibit 13
to this report on Form 10-K:
Consolidated Balance Sheets as of February 2, 2002 and February
3, 2001
Consolidated Statements of Operations for the fiscal years ended
February 2, 2002, February 3, 2001 and January 29, 2000
Consolidated Statements of Shareholders' Equity for the fiscal
years ended February 2, 2002, February 3, 2001 and January 29,
2000
Consolidated Statements of Cash Flows for the fiscal years ended
February 2, 2002, February 3, 2001 and January 29, 2000
Notes to Consolidated Financial Statements
Independent Auditors' Report
2.Financial Statement Schedules:
Financial statement schedules of Cost Plus, Inc. have been omitted
from Item 14(d) because they are not applicable or the information
is included in the financial statements or notes thereto.
3.List of Exhibits:
See Exhibit Index beginning on page 13.
11
<PAGE>
(b) Reports on form 8-K:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COST PLUS, INC.
Date: May 1, 2002 By: /s/ MURRAY H. DASHE
________________________________
MURRAY H. DASHE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
May 1, 2002
/s/ MURRAY H. DASHE
__________________________ Chairman of the Board, Chief
MURRAY H. DASHE Executive Officer and President
(Principal Executive Officer)
/s/ JOHN J. LUTTRELL May 1, 2002
___________________________ Senior Vice President and
JOHN J. LUTTRELL Chief Financial Officer
/s/ JOSEPH H. COULOMBE Director May 1, 2002
___________________________
JOSEPH H. COULOMBE
/s/ BARRY J. FELD Director May 1, 2002
___________________________
BARRY J. FELD
/s/ DANNY W. GURR Director May 1, 2002
___________________________
DANNY W. GURR
/s/ KIM D. ROBBINS Director May 1, 2002
___________________________
KIM D. ROBBINS
/s/ FREDRIC M. ROBERTS Director May 1, 2002
___________________________
FREDRIC M. ROBERTS
/s/ THOMAS D. WILLARDSON Director May 1, 2002
___________________________
THOMAS D. WILLARDSON
</TABLE>
12
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibits
- ----------- -----------------------
3.1 Amended and Restated Articles of Incorporation as filed with the
California Secretary of State on April 1, 1996, incorporated by
reference to Exhibit 3.1 to the Form 10-K filed for the year ended
February 1, 1997.
3.1.1 Certificate of Amendment of Restated Articles of Incorporation as
filed with the California Secretary of State on February 25, 1999,
incorporated by reference to Exhibit 3.1 to the Form 10-Q filed for
the quarter ended May 1, 1999.
3.1.2 Certificate of Amendment of Restated Articles of Incorporation as
filed with the California Secretary of State on September 24, 1999,
incorporated by reference to Exhibit 3.1.2 of the Form 10-K filed
for the year ended January 29, 2000.
3.2 Certificate of Determination as filed with California Secretary of
State on July 27, 1998, incorporated by reference to Exhibit 3.2 to
the Form 10-K filed for the year ended January 30, 1999.
3.3 Amended and Restated By-laws dated February 22, 2001, incorporated
by reference to Exhibit 3.3 of the Form 10-K filed for the year
ended February 3, 2001.
4.0 Preferred Shares Rights Agreement, dated June 30, 1998, between Cost
Plus, Inc. and BankBoston, N.A., including the Certificate of
Determination, the form of Rights Certificate and the Summary of
Rights, incorporated by reference to Exhibit 1 to the Form 8-A filed
on July 27, 1998.
10.1 Form of Indemnification Agreement between the Company and each of
its directors and officers, incorporated by reference to Exhibit
10.1 to the Registration Statement on Form S-1 effective April 3,
1996.
10.2 Lease Agreement, dated August 27, 1991, as amended, between the
Company and The Stockton Port District for certain warehouses for
storage and distribution located in Stockton, California and
extension thereto dated February 21, 1996, incorporated by reference
to Exhibit 10.6 to the Registration Statement on Form S-1 effective
April 3, 1996.
10.3 Lease agreement between the Company and Square I, LLC for certain
Corporate office space located in Oakland, California, incorporated
by reference to Exhibit 10.1 to the Form 10-Q filed for the quarter
ended October 31, 1998.
10.4 Lease agreement between the Company and GEM 460 Associates I, LLC
for a storage and distribution warehouse located in Isle of Wight
County, Virginia, incorporated by reference to Exhibit 10.19 of the
Form 10-Q filed for the quarter ended May 5, 2001.
10.5 Business Loan Agreement, dated May 19, 2000, between the Company and
Bank of America National Trust and Savings Association, incorporated
by reference to Exhibit 10.2 to the Form 10-Q filed for the quarter
ended April 29, 2000.
13
<PAGE>
10.5.1 Amendment Number 1 to Business Loan Agreement, dated October 2, 2000,
between the Company and Bank of America National Trust and Savings
Association, incorporated by reference to Exhibit 10.5.1 of the Form
10-K filed for the year ended February 3, 2001.
10.5.2 Amendment Number 2 to Business Loan Agreement, dated September 13,
2001, between the Company and Bank of America, N.A, incorporated by
reference to Exhibit 10.1 of the Form 10-Q filed for the quarter
ended November 3, 2001.
10.6+ 1994 Stock Option Plan and form of Stock Option Agreement thereunder,
incorporated by reference to Exhibit 10.3 to the Registration
Statement on Form S-1 effective April 3, 1996.
10.7+ 1995 Stock Option Plan, as amended, incorporated by reference to
Exhibit 10.1 of the Form 10-Q filed for the quarter ended August 4,
2001.
10.7.1+ Form of Stock Option Agreement, 1995 Stock Option Plan, incorporated
by reference to Exhibit 10.4 to the Form 10-K filed for the year
ended February 1, 1997.
10.8+ 1996 Director Option Plan, as amended, incorporated by reference
to Exhibit 10.1 to the Form 10-Q filed for the quarter ended July 29,
2000.
10.8.1+ Form of Stock Option Agreement, 1996 Director Option Plan,
incorporated by reference to Exhibit 10.4 to the Form 10-Q filed for
the quarter ended July 31, 1999.
10.9+ 1996 Employee Stock Purchase Plan, incorporated by reference to
Exhibit 10.13 to the Registration Statement on Form S-1 effective
April 3, 1996.
10.10+ The Cost Plus, Inc. Deferred Compensation Plan effective October 1,
1997, incorporated by reference to Exhibit 10.11 to the Form 10-K
filed for the year ended January 31, 1998.
10.11+ 1997 Executive Officer and Key Employee Loan Plan, dated May 7, 1997,
incorporated by reference to Appendix C of the Company's Proxy
Statement dated May 22, 1997.
10.12+ Employment Agreement, dated June 12, 1997, between the Company and
Murray H. Dashe, incorporated by reference to Exhibit 10.4 to the
Form 10-Q filed for the quarter ended August 2, 1997.
10.12.1+ Amendment to Employment Agreement, dated January 13, 1999, between
the Company and Murray H. Dashe, incorporated by reference to Exhibit
10.16.2 to the Form 10-K filed for the year ended January 30, 1999.
10.12.2+ Amendment to Employment Agreement, dated July 22, 1999, between the
Company and Murray H. Dashe, incorporated by reference to Exhibit
10.6 to the Form 10-Q filed for the quarter ended July 31, 1999.
10.12.3+ Amendment to Employment Agreement, dated March 29, 2001, between the
Company and Murray H. Dashe, incorporated by reference to Exhibit
10.12.4 of the Form 10-K filed for the year ended February 3, 2001.
10.12.4+ Amendment to Employment Agreement, dated March 1, 2002, between the
Company and Murray H. Dashe.
10.13+ Employment Severance Agreement, as amended, dated July 22, 1999,
between the Company and Gary D. Weatherford, incorporated by
reference to Exhibit 10.9 to the Form 10-Q filed for the quarter
ended July 31, 1999.
10.13.1+ Amendment to Employment Agreement, dated March 1, 2002, between the
Company and Gary D. Weatherford.
14
<PAGE>
10.14+ Employment Severance Agreement, as amended, dated July 22, 1999,
between the Company and Joan S. Fujii, incorporated by reference to
Exhibit 10.10 to the Form 10-Q filed for the quarter ended July 31,
1999.
10.14.1+ Amendment to Employment Severance Agreement dated March 29, 2001,
between the Company and Joan S. Fujii, incorporated by reference to
Exhibit 10.16.2 of the Form 10-K filed for the year ended
February 3, 2001.
10.14.2+ Amendment to Employment Agreement, dated March 1, 2002, between the
Company and Joan S. Fujii.
10.15+ Executive Transition Agreement, dated May 7, 1999, between the
Company and Ralph D. Dillon, incorporated by reference to Exhibit
10.1 to the Form 10-Q filed for the quarter ended May 1, 1999.
10.16+ Amended and Restated Severance Agreement dated March 29, 2001,
between the Company and Stephen L. Higgins, incorporated by reference
to Exhibit 10.18 of the Form 10-K filed for the year ended February
3, 2001.
10.16.1+ Amendment to Employment Agreement, dated March 1, 2002, between the
Company and Stephen L. Higgins.
10.17+ Employment Severance Agreement, dated August 29, 2001, between the
Company and John J. Luttrell, incorporated by reference to Exhibit
10.2 of the Form 10-Q filed for the quarter ended August 4, 2001.
10.17.1+ Amendment to Employment Agreement, dated March 1, 2002, between the
Company and John J. Luttrell.
10.18+ Employment Agreement, dated March 1, 2002, between the Company and
Michael J. Allen.
10.19+ Employment Agreement, dated March 1, 2002, between the Company and
Judith A. Soares.
10.20 Promissory Note, dated April 2, 2002, between the Company and Murray
H. Dashe.
13 Registrant's 2001 Annual Report to Shareholders (only those portions
specifically incorporated by reference into this Report are deemed
"filed" with the Securities and Exchange Commission).
21 List of Subsidiaries of the Company.
23 Independent Auditors' Consent.
+ Management compensation plan or arrangement.
15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.12(4)
<SEQUENCE>3
<FILENAME>dex10124.txt
<DESCRIPTION>AMENDMENT #4 TO MURRAY DASH EMPLOYMENT AGMT
<TEXT>
<PAGE>
Exhibit 10.12.4
AMENDMENT NO. 4 TO
EMPLOYMENT AGREEMENT
This Amendment No. 4 (the "Amendment") to that certain Employment
Agreement dated June 12, 1997 by and between Cost Plus, Inc., a California
corporation (the "Company"), and Murray Dashe (the "Executive"), as amended on
January 13, 1999, July 22, 1999 and March 29, 2001 (as amended, the "Employment
Agreement"), is entered into this 1st day of March, 2002 by and between the
Company and the Executive.
RECITALS
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Amendment to Sections 3(a) and 3(b). Sections 3(a) and 3(b) of the
-----------------------------------
Employment Agreement are hereby amended to read in their entirety as follows:
"3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in
-------------------------
Section 3(b), if the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2004 and
the Executive signs a Release of Claims, then the Company
shall pay Executive's Base Compensation to the Executive for
twenty-four (24) months from the Termination Date with each
monthly installment payable on the last day of such month.
Executive shall not be entitled to receive any payments if
Executive voluntarily terminates employment other than as a
result of an Involuntary Termination.
(b) Benefits upon Termination After a Change of
-------------------------------------------
Control. If after a Change of Control the Executive's
-------
employment terminates as a result of Involuntary Termination
prior to June 15, 2004 and the Executive signs a Release of
Claims, then the Company shall pay Executive's Base
Compensation to the Executive for twenty-four (24) months from
the Termination Date with each monthly installment payable on
the last day of such month. Executive shall not be entitled to
receive any payments if Executive voluntarily terminates
employment other than as a result of an Involuntary
Termination."
2. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
3. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and constructed and interpreted in
accordance with, the law of the State of California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COMPANY:
COST PLUS, INC.,
a California corporation
By: /s/ Joan Fujii
----------------------------------------------------
Name: Joan Fujii
Title: Senior Vice President, Human Resources
EXECUTIVE:
/s/ Murray Dashe
----------------------------------------------------
Murray Dashe
[SIGNATURE PAGE TO
COST PLUS, INC./MURRAY DASHE
AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13(1)
<SEQUENCE>4
<FILENAME>dex10131.txt
<DESCRIPTION>AMENDMENT #2 TO GARY WEATHERFORD SEVERANCE AGMT
<TEXT>
<PAGE>
Exhibit 10.13.1
AMENDMENT NO. 2 TO
EMPLOYMENT SEVERANCE AGREEMENT
This Amendment No. 2 (the "Amendment") to that certain Employment
Severance Agreement dated July 22, 1999 by and between Cost Plus, Inc., a
California corporation (the "Company"), and Gary Weatherford (the "Executive"),
as amended on March 29, 2001 (as amended, the "Employment Agreement"), is
entered into this 1st day of March, 2002 by and between the Company and the
Executive.
RECITALS
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Amendment to Sections 3(a) and 3(b). Sections 3(a) and 3(b) of the
-----------------------------------
Employment Agreement are hereby amended to read in their entirety as follows:
"3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in
-------------------------
Section 3(b), if the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2003 and
the Executive signs a Release of Claims, then the Company
shall pay Executive's Base Compensation to the Executive for
twelve (12) months from the Termination Date with each
monthly installment payable on the last day of such month.
Executive shall not be entitled to receive any payments if
Executive voluntarily terminates employment other than as a
result of an Involuntary Termination.
(b) Benefits upon Termination After a Change of
-------------------------------------------
Control. If after a Change of Control the Executive's
-------
employment terminates as a result of Involuntary Termination
prior to June 15, 2003 and the Executive signs a Release of
Claims, then the Company shall pay Executive's Base
Compensation to the Executive for eighteen (18) months from
the Termination Date with each monthly installment payable
on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily
terminates employment other than as a result of an
Involuntary Termination."
2. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
3. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and constructed and interpreted in
accordance with, the law of the State of California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COMPANY:
COST PLUS, INC.,
a California corporation
By: /s/ Murray Dashe
--------------------------------------------------
Name: Murray Dashe
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ Gary Weatherford
--------------------------------------------------
Gary Weatherford
[SIGNATURE PAGE TO
COST PLUS, INC./GARY WEATHERFORD
AMENDMENT NO. 2 TO EMPLOYMENT SEVERANCE AGREEMENT]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14(2)
<SEQUENCE>5
<FILENAME>dex10142.txt
<DESCRIPTION>AMENDMENT #2 TO JOAN FUJII SEVERANCE AGMT
<TEXT>
<PAGE>
Exhibit 10.14.2
AMENDMENT NO. 2 TO
EMPLOYMENT SEVERANCE AGREEMENT
This Amendment No. 2 (the "Amendment") to that certain Employment
Severance Agreement dated July 22, 1999 by and between Cost Plus, Inc., a
California corporation (the "Company"), and Joan Fujii (the "Executive"), as
amended on March 29, 2001 (as amended, the "Employment Agreement"), is entered
into this 1st day of March, 2002 by and between the Company and the Executive.
RECITALS
--------
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Amendment to Sections 3(a) and 3(b). Sections 3(a) and 3(b) of the
-----------------------------------
Employment Agreement are hereby amended to read in their entirety as follows:
"3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in
-------------------------
Section 3(b), if the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2003 and
the Executive signs a Release of Claims, then the Company
shall pay Executive's Base Compensation to the Executive for
nine (9) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive
shall not be entitled to receive any payments if Executive
voluntarily terminates employment other than as a result of
an Involuntary Termination.
(b) Benefits upon Termination After a Change of
-------------------------------------------
Control. If after a Change of Control the Executive's
-------
employment terminates as a result of Involuntary Termination
prior to June 15, 2003 and the Executive signs a Release of
Claims, then the Company shall pay Executive's Base
Compensation to the Executive for twelve (12) months from
the Termination Date with each monthly installment payable
on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily
terminates employment other than as a result of an
Involuntary Termination."
2. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
3. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and constructed and interpreted in
accordance with, the law of the State of California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COMPANY:
COST PLUS, INC.,
a California corporation
By: /s/ Murray Dashe
--------------------------------------------------
Name: Murray Dashe
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ Joan Fujii
--------------------------------------------------
Joan Fujii
[SIGNATURE PAGE TO
COST PLUS, INC./JOAN FUJII
AMENDMENT NO. 2 TO EMPLOYMENT SEVERANCE AGREEMENT]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16(1)
<SEQUENCE>6
<FILENAME>dex10161.txt
<DESCRIPTION>AMENDMENT #1 TO STEPHEN HIGGINS SEVERANCE AGMT
<TEXT>
<PAGE>
Exhibit 10.16.1
AMENDMENT NO. 1 TO
AMENDED AND RESTATED EMPLOYMENT SEVERANCE AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Amended and
Restated Employment Severance Agreement (the "Employment Agreement") dated March
29, 2001 by and between Cost Plus, Inc., a California corporation (the
"Company"), and Stephen Higgins (the "Executive") is entered into this 1st day
of March, 2002 by and between the Company and the Executive.
RECITALS
--------
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Amendment to Sections 3(a) and 3(b). Sections 3(a) and 3(b) of the
-----------------------------------
Employment Agreement are hereby amended to read in their entirety as follows:
"3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in
-------------------------
Section 3(b), if the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2003 and
the Executive signs a Release of Claims, then the Company
shall pay Executive's Base Compensation to the Executive for
six (6) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive
shall not be entitled to receive any payments if Executive
voluntarily terminates employment other than as a result of
an Involuntary Termination.
(b) Benefits upon Termination After a Change of
-------------------------------------------
Control. If after a Change of Control the Executive's
-------
employment terminates as a result of Involuntary Termination
prior to June 15, 2003 and the Executive signs a Release of
Claims, then the Company shall pay Executive's Base
Compensation to the Executive for nine (9) months from the
Termination Date with each monthly installment payable on
the last day of such month. Executive shall not be entitled
to receive any payments if Executive voluntarily terminates
employment other than as a result of an Involuntary
Termination."
2. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
3. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and constructed and interpreted in
accordance with, the law of the State of California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COMPANY:
COST PLUS, INC.,
a California corporation
By: /s/ Murray Dashe
--------------------------------------------------
Name: Murray Dashe
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ Stephen Higgins
--------------------------------------------------
Stephen Higgins
[SIGNATURE PAGE TO
COST PLUS, INC./STEPHEN HIGGINS
AMENDMENT NO. 1 TO AMENDED AND RESTATED EMPLOYMENT SEVERANCE AGREEMENT]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17(1)
<SEQUENCE>7
<FILENAME>dex10171.txt
<DESCRIPTION>AMENDMENT #1 TO JOHN LUTTRELL SEVERANCE AGMT
<TEXT>
<PAGE>
Exhibit 10.17.1
AMENDMENT NO. 1 TO
EMPLOYMENT SEVERANCE AGREEMENT
This Amendment No. 1 (the "Amendment") to that certain Employment
Severance Agreement (the "Employment Agreement") dated August 29, 2001 by and
between Cost Plus, Inc., a California corporation (the "Company"), and John
Luttrell (the "Executive") is entered into this 1st day of March, 2002 by and
between the Company and the Executive.
RECITALS
--------
WHEREAS, the parties hereto desire to amend certain provisions of the
Employment Agreement as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for other valuable consideration the receipt of which is
hereby acknowledged, the parties agree as follows:
1. Amendment to Sections 3(a) and 3(b). Sections 3(a) and 3(b) of the
-----------------------------------
Employment Agreement are hereby amended to read in their entirety as follows:
"3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in
-------------------------
Section 3(b), if the Executive's employment terminates as a
result of Involuntary Termination prior to June 15, 2003 and
the Executive signs a Release of Claims, then the Company
shall pay Executive's Base Compensation to the Executive for
nine (9) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive
shall not be entitled to receive any payments if Executive
voluntarily terminates employment other than as a result of
an Involuntary Termination.
(b) Benefits upon Termination After a Change of
-------------------------------------------
Control. If after a Change of Control the Executive's
-------
employment terminates as a result of Involuntary Termination
prior to June 15, 2003 and the Executive signs a Release of
Claims, then the Company shall pay Executive's Base
Compensation to the Executive for twelve (12) months from
the Termination Date with each monthly installment payable
on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily
terminates employment other than as a result of an
Involuntary Termination."
2. Counterparts. This Amendment may be signed in any number of
------------
counterparts, all of which counterparts, taken together, shall constitute one
and the same instrument.
3. Governing Law. This Amendment and the rights and obligations of the
-------------
parties hereto shall be governed by, and constructed and interpreted in
accordance with, the law of the State of California.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
COMPANY:
COST PLUS, INC.,
a California corporation
By: /s/ Murray Dashe
--------------------------------------------------
Name: Murray Dashe
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ John Luttrell
--------------------------------------------------
John Luttrell
[SIGNATURE PAGE TO
COST PLUS, INC./JOHN LUTTRELL
AMENDMENT NO. 1 TO EMPLOYMENT SEVERANCE AGREEMENT]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>8
<FILENAME>dex1018.txt
<DESCRIPTION>MIKE ALLEN SEVERANCE AGMT
<TEXT>
<PAGE>
Exhibit 10.18
EMPLOYMENT SEVERANCE AGREEMENT
This Employment Severance Agreement (the "Agreement") is made and
entered into effective as of March 1, 2002 (the "Effective Date") by and between
Cost Plus, Inc., a California corporation (the "Company"), and Mike Allen (the
"Executive").
RECITALS
A. The Board of Directors of the Company (the "Board") believes the
Company should provide the Executive with certain severance benefits should the
Executive's employment with the Company terminate under certain circumstances,
with such benefits to provide the Executive with enhanced financial security and
sufficient incentive and encouragement to remain with the Company.
B. Certain capitalized terms used in the Agreement are defined in
Section 5 below.
AGREEMENT
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. Duties and Scope of Employment. The Company shall employ the
------------------------------
Executive in the position of Senior Vice President, Store Operations with such
duties, responsibilities and compensation as in effect as of the Effective Date.
The Board and the Chief Executive Officer of the Company (the "CEO") shall have
the right to revise such responsibilities and compensation from time to time as
the Board or the CEO may deem necessary or appropriate. If any such revision
constitutes "Involuntary Termination" as defined in Section 5(c) of this
Agreement, the Executive shall be entitled to benefits upon such Involuntary
Termination as provided under this Agreement.
2. At-Will Employment. The Company and the Executive acknowledge
------------------
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
the Executive shall not be entitled to any payments, benefits, damages, awards
or compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
practices or in accordance with other agreements between the Company and the
Executive. This Agreement shall remain in effect until the earlier of (i) the
date that all obligations of the parties hereunder have been satisfied or (ii)
the date upon which this Agreement terminates by consent of the parties hereto.
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section
-------------------------
3(b), if the Executive's employment terminates as a result of Involuntary
Termination prior to June 15, 2003 and the Executive signs a Release of Claims,
then the Company shall pay Executive's Base Compensation to the Executive for
six (6) months from the Termination Date with each monthly
<PAGE>
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(b) Benefits upon Termination After a Change of Control. If after
---------------------------------------------------
a Change of Control the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2003 and the Executive signs a Release
of Claims, then the Company shall pay Executive's Base Compensation to the
Executive for nine (9) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(c) Stock Options; Bonus. Except as otherwise provided for in the
--------------------
Company's 1995 Stock Option Plan or in Executive's stock option agreements,
Executive shall not be entitled to receive any unvested stock options or partial
bonus payments for an incomplete bonus plan year.
(d) Miscellaneous. In addition, (i) the Company shall pay the
-------------
Executive any unpaid base salary due for periods prior to the Termination Date;
(ii) the Company shall pay the Executive all of the Executive's accrued and
unused vacation through the Termination Date; and (iii) following submission of
proper expense reports by the Executive, the Company shall reimburse the
Executive for all expenses reasonably and necessarily incurred by the Executive
in connection with the business of the Company prior to termination. These
payments shall be made promptly upon termination and within the period of time
mandated by applicable law.
4. Non-Solicitation. In consideration for the mutual agreements as
----------------
set forth herein, Executive agrees that Executive shall not, at any time, within
twelve (12) months following termination of Executive's employment with the
Company for any reason, directly or indirectly solicit the employment or other
services of any individual who at that time shall be or within the prior twelve
(12) months shall have been an employee of the Company.
5. Definition of Terms. The following terms referred to in this
-------------------
Agreement shall have the following meanings:
(a) Base Compensation. "Base Compensation" shall mean Executive's
-----------------
monthly base salary for services performed based on the average base salary for
the six (6) months prior to the Termination Date.
(b) Cause. "Cause," unless otherwise defined in the Agreement,
-----
means the Executive's (i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of duties,
(iii) engaging in a transaction in connection with the performance of duties to
the Company or any of its subsidiaries thereof which transaction is adverse to
the interests of the Company or any of its subsidiaries and which is engaged in
for personal profit or (iv) willful violation of any law, rule or regulation in
connection with the performance of duties (other than traffic violations or
similar offenses).
-2-
<PAGE>
(c) "Change of Control" means the occurrence of any of the
following events:
(i) The acquisition by any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act of 1934) (other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act of 1934), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company's then outstanding voting securities;
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual not otherwise an Incumbent
Director whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
(iii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the shareholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
(iv) The sale of all or substantially all of the assets of
the Company determined on a consolidated basis; or
(v) The complete liquidation or dissolution of the Company.
(d) Involuntary Termination. "Involuntary Termination" shall
-----------------------
mean:
(i) termination of Executive's employment by the Company for
any reason other than Cause;
(ii) a material reduction in Executive's salary, other than
any such reduction which is part of, and generally consistent with, a general
reduction of officer salaries;
(iii) a material reduction by the Company in the kind or
level of employee benefits (other than salary and bonus) to which Executive is
entitled immediately prior to such reduction with the result that Executive's
overall benefits package (other than salary and bonus) is substantially reduced
(other than any such reduction applicable to officers of the Company generally);
-3-
<PAGE>
(iv) any material breach by the Company of any material
provision of this Agreement which continues uncured for 30 days following notice
thereof;
provided that none of the foregoing shall constitute Involuntary
-------- ----
Termination to the extent Executive has agreed thereto.
(e) Release of Claims. "Release of Claims" shall mean a waiver by
-----------------
Executive, in a form satisfactory to the Company, of all employment related
obligations of and claims and causes of action against the Company.
(f) Termination Date. "Termination Date" shall mean the date on
----------------
which an event which would constitute Involuntary Termination occurs, or the
later of (i) the date on which a notice of termination is given, or (ii) the
date (which shall not be more than thirty (30) days after the giving of such
notice) specified in such notice.
6. Confidentiality. Executive acknowledges that during the course of
---------------
Executive's employment, Executive will have produced and/or have access to
confidential information, records, notebooks, data, formula, specifications,
trade secrets, customer lists and secret inventions, and processes of the
Company and its affiliated companies. Therefore, during or subsequent to
Executive's employment by the Company, Executive agrees to hold in confidence
and not directly or indirectly to disclose or use or copy or make lists of any
such information, except to the extent authorized by the Company in writing. All
records, files, drawings, documents, equipment, and the like, or copies thereof,
relating to the Company's business, or the business of an affiliated company,
which Executive shall prepare, or use, or come into contact with, shall be and
remain the sole property of the Company, or of an affiliated company, and shall
not be removed from the Company's or the affiliated company's premises without
its written consent, and shall be promptly returned to the Company upon
termination of employment with the Company.
7. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement pursuant to this subsection
(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement and all
----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. Notice.
------
-4-
<PAGE>
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Executive,
mailed notices shall be addressed to Executive at the home address, which
Executive most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of the CEO.
(b) Notice of Termination. Any termination by the Company for Cause
---------------------
or by the Executive as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement. Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than 30 days after the
giving of such notice). The failure by the Executive to include in the notice
any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing Executive's
rights hereunder.
9. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Executive shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Executive may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified, waived
------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Executive and by an authorized officer of the Company
(other than the Executive). No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
---------------
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Severance Provisions in Other Agreements. The Executive
----------------------------------------
acknowledges and agrees that the severance provisions set forth in this
Agreement shall supersede any such provisions in any employment agreement
entered into between the Executive and the Company.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
-5-
<PAGE>
(f) Severability. The invalidity or unenforceability of any
------------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) No Assignment of Benefits. The rights of any person to payments
-------------------------
or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this subsection shall be
void.
(h) Employment Taxes. All payments made pursuant to this Agreement
----------------
will be subject to withholding of applicable income and employment taxes.
(i) Assignment by Company. The Company may assign its rights under
---------------------
this Agreement to an affiliate, and an affiliate may assign its rights under
this Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Executive.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
[Remainder of Page Intentionally Blank]
-6-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY:
COST PLUS, INC.,
a California corporation
/s/ Murray Dashe
--------------------------------------------
By
Murray Dashe
--------------------------------------------
Name
Chief Executive Officer and President
--------------------------------------------
Title
EXECUTIVE:
/s/ Mike Allen
--------------------------------------------
Mike Allen
[Signature Page to
Cost Plus, Inc. / Mike Allen
Employment Severance Agreement]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>9
<FILENAME>dex1019.txt
<DESCRIPTION>JUDY SOARES SEVERANCE AGMT
<TEXT>
<PAGE>
Exhibit 10.19
EMPLOYMENT SEVERANCE AGREEMENT
This Employment Severance Agreement (the "Agreement") is made and entered into
effective as of March 1, 2002 (the "Effective Date") by and between Cost Plus,
Inc., a California corporation (the "Company"), and Judy Soares (the
"Executive").
RECITALS
A. The Board of Directors of the Company (the "Board") believes the Company
should provide the Executive with certain severance benefits should the
Executive's employment with the Company terminate under certain circumstances,
with such benefits to provide the Executive with enhanced financial security and
sufficient incentive and encouragement to remain with the Company.
B. Certain capitalized terms used in the Agreement are defined in Section 5
below.
AGREEMENT
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. Duties and Scope of Employment. The Company shall employ the Executive
------------------------------
in the position of Senior Vice President, Distribution and Information Systems
with such duties, responsibilities and compensation as in effect as of the
Effective Date. The Board and the Chief Executive Officer of the Company (the
"CEO") shall have the right to revise such responsibilities and compensation
from time to time as the Board or the CEO may deem necessary or appropriate. If
any such revision constitutes "Involuntary Termination" as defined in Section
5(c) of this Agreement, the Executive shall be entitled to benefits upon such
Involuntary Termination as provided under this Agreement.
2. At-Will Employment. The Company and the Executive acknowledge that the
------------------
Executive's employment is and shall continue to be at-will, as defined under
applicable law. If the Executive's employment terminates for any reason, the
Executive shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
available in accordance with the Company's established employee plans and
practices or in accordance with other agreements between the Company and the
Executive. This Agreement shall remain in effect until the earlier of (i) the
date that all obligations of the parties hereunder have been satisfied or (ii)
the date upon which this Agreement terminates by consent of the parties hereto.
3. Severance Benefits.
------------------
(a) Benefits upon Termination. Except as provided in Section
-------------------------
3(b), if the Executive's employment terminates as a result of Involuntary
Termination prior to June 15, 2003 and the Executive signs a Release of Claims,
then the Company shall pay Executive's Base
<PAGE>
Compensation to the Executive for six (6) months from the Termination Date with
each monthly installment payable on the last day of such month. Executive shall
not be entitled to receive any payments if Executive voluntarily terminates
employment other than as a result of an Involuntary Termination.
(b) Benefits upon Termination After a Change of Control. If after
---------------------------------------------------
a Change of Control the Executive's employment terminates as a result of
Involuntary Termination prior to June 15, 2003 and the Executive signs a Release
of Claims, then the Company shall pay Executive's Base Compensation to the
Executive for nine (9) months from the Termination Date with each monthly
installment payable on the last day of such month. Executive shall not be
entitled to receive any payments if Executive voluntarily terminates employment
other than as a result of an Involuntary Termination.
(c) Stock Options; Bonus. Except as otherwise provided for in the
--------------------
Company's 1995 Stock Option Plan or in Executive's stock option agreements,
Executive shall not be entitled to receive any unvested stock options or partial
bonus payments for an incomplete bonus plan year.
(d) Miscellaneous. In addition, (i) the Company shall pay the
-------------
Executive any unpaid base salary due for periods prior to the Termination Date;
(ii) the Company shall pay the Executive all of the Executive's accrued and
unused vacation through the Termination Date; and (iii) following submission of
proper expense reports by the Executive, the Company shall reimburse the
Executive for all expenses reasonably and necessarily incurred by the Executive
in connection with the business of the Company prior to termination. These
payments shall be made promptly upon termination and within the period of time
mandated by applicable law.
4. Non-Solicitation. In consideration for the mutual agreements as set
----------------
forth herein, Executive agrees that Executive shall not, at any time, within
twelve (12) months following termination of Executive's employment with the
Company for any reason, directly or indirectly solicit the employment or other
services of any individual who at that time shall be or within the prior twelve
(12) months shall have been an employee of the Company.
5. Definition of Terms. The following terms referred to in this Agreement
-------------------
shall have the following meanings:
(a) Base Compensation. "Base Compensation" shall mean Executive's
-----------------
monthly base salary for services performed based on the average base salary for
the six (6) months prior to the Termination Date.
(b) Cause. "Cause," unless otherwise defined in the Agreement,
-----
means the Executive's (i) intentional failure to perform reasonably assigned
duties, (ii) dishonesty or willful misconduct in the performance of duties,
(iii) engaging in a transaction in connection with the performance of duties to
the Company or any of its subsidiaries thereof which transaction is adverse to
the interests of the Company or any of its subsidiaries and which is engaged in
for personal profit or (iv) willful violation of any law, rule or regulation in
connection with the performance of duties (other than traffic violations or
similar offenses).
-2-
<PAGE>
(c) "Change of Control" means the occurrence of any of the
following events:
(i) The acquisition by any "person" (as such term is used
in Sections 13(d) and 14(d) of the Exchange Act of 1934) (other than the Company
or a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company) of the "beneficial ownership" (as defined in
Rule 13d-3 under the Exchange Act of 1934), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of the total
voting power represented by the Company's then outstanding voting securities;
(ii) A change in the composition of the Board occurring
within a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual not otherwise an Incumbent
Director whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company);
(iii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least fifty percent (50%) of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the approval by the shareholders of the Company of a plan of
complete liquidation of the Company or of an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
(iv) The sale of all or substantially all of the assets of
the Company determined on a consolidated basis; or
(v) The complete liquidation or dissolution of the Company.
(d) Involuntary Termination. "Involuntary Termination" shall
-----------------------
mean:
(i) termination of Executive's employment by the Company
for any reason other than Cause;
(ii) a material reduction in Executive's salary, other than
any such reduction which is part of, and generally consistent with, a general
reduction of officer salaries;
(iii) a material reduction by the Company in the kind or
level of employee benefits (other than salary and bonus) to which Executive is
entitled immediately prior to such reduction with the result that Executive's
overall benefits package (other than salary and bonus) is substantially reduced
(other than any such reduction applicable to officers of the Company generally);
-3-
<PAGE>
(iv) any material breach by the Company of any material
provision of this Agreement which continues uncured for 30 days following notice
thereof;
provided that none of the foregoing shall constitute Involuntary Termination to
- -------- ----
the extent Executive has agreed thereto.
(e) Release of Claims. "Release of Claims" shall mean a waiver by
-----------------
Executive, in a form satisfactory to the Company, of all employment related
obligations of and claims and causes of action against the Company.
(f) Termination Date. "Termination Date" shall mean the date on
----------------
which an event which would constitute Involuntary Termination occurs, or the
later of (i) the date on which a notice of termination is given, or (ii) the
date (which shall not be more than thirty (30) days after the giving of such
notice) specified in such notice.
6. Confidentiality. Executive acknowledges that during the course of
---------------
Executive's employment, Executive will have produced and/or have access to
confidential information, records, notebooks, data, formula, specifications,
trade secrets, customer lists and secret inventions, and processes of the
Company and its affiliated companies. Therefore, during or subsequent to
Executive's employment by the Company, Executive agrees to hold in confidence
and not directly or indirectly to disclose or use or copy or make lists of any
such information, except to the extent authorized by the Company in writing. All
records, files, drawings, documents, equipment, and the like, or copies thereof,
relating to the Company's business, or the business of an affiliated company,
which Executive shall prepare, or use, or come into contact with, shall be and
remain the sole property of the Company, or of an affiliated company, and shall
not be removed from the Company's or the affiliated company's premises without
its written consent, and shall be promptly returned to the Company upon
termination of employment with the Company.
7. Successors.
----------
(a) Company's Successors. Any successor to the Company (whether
--------------------
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement pursuant to this subsection
(a) or which becomes bound by the terms of this Agreement by operation of law.
(b) Executive's Successors. The terms of this Agreement and all
----------------------
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
8. Notice.
------
-4-
<PAGE>
(a) General. Notices and all other communications contemplated by
-------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Executive,
mailed notices shall be addressed to Executive at the home address, which
Executive most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of the CEO.
(b) Notice of Termination. Any termination by the Company for
---------------------
Cause or by the Executive as a result of a voluntary resignation or an
Involuntary Termination shall be communicated by a notice of termination to the
other party hereto given in accordance with Section 8(a) of this Agreement. Such
notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 30 days after
the giving of such notice). The failure by the Executive to include in the
notice any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing Executive's
rights hereunder.
9. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. The Executive shall not be required to
-------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Executive may receive from any
other source.
(b) Waiver. No provision of this Agreement shall be modified,
------
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Executive and by an authorized officer of the
Company (other than the Executive). No waiver by either party of any breach of,
or of compliance with, any condition or provision of this Agreement by the other
party shall be considered a waiver of any other condition or provision or of the
same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or
---------------
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.
(d) Severance Provisions in Other Agreements. The Executive
----------------------------------------
acknowledges and agrees that the severance provisions set forth in this
Agreement shall supersede any such provisions in any employment agreement
entered into between the Executive and the Company.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California.
-5-
<PAGE>
(f) Severability. The invalidity or unenforceability of any provision or
------------
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
(g) No Assignment of Benefits. The rights of any person to payments or
-------------------------
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection shall be void.
(h) Employment Taxes. All payments made pursuant to this Agreement will be
----------------
subject to withholding of applicable income and employment taxes.
(i) Assignment by Company. The Company may assign its rights under this
---------------------
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Executive.
(j) Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
[Remainder of Page Intentionally Blank]
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
COMPANY:
COST PLUS, INC.,
a California corporation
/s/ Murray Dashe
---------------------------------------
By
Murray Dashe
---------------------------------------
Name
Chief Executive Officer and President
---------------------------------------
Title
EXECUTIVE:
/s/ JUDY SOARES
---------------------------------------
JUDY SOARES
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.20
<SEQUENCE>10
<FILENAME>dex1020.txt
<DESCRIPTION>PROMISSORY NOTE
<TEXT>
<PAGE>
Exhibit 10.20
PROMISSORY NOTE
$992,244.11 Oakland, California
April 2, 2002
For value received, Murray Dashe, an individual currently residing at
[address] ("Dashe"), hereby absolutely and unconditionally promises to pay to
Cost Plus, Inc. (the "Lender") the principal amount of Nine Hundred Ninety-two
Thousand Two Hundred Forty-four Dollars and Eleven Cents ($992,244.11), together
with interest at the applicable federal rate under Internal Revenue Code Section
1274 for short-term debts compounded annually in effect at the date of this
agreement. Accrued interest on the unpaid principal amount shall be due and
payable in cash on each anniversary of the issue date set forth above.
1. Repayments and Prepayments.
--------------------------
(a) This Note shall be due and payable on the earlier to occur of: (i) March
25, 2005, or (ii) the third business day after the sale by Dashe of his
current residence located at [address]. Interest shall continue to accrue
on this Note until such time as all principal and interest due is paid in
full.
(b) Dashe may prepay this Note at any time, either in whole or in part, without
premium or penalty and without the prior consent of Lender.
(c) Dashe shall also apply the net proceeds of the sale of his condominium
located at [address] to any balance due under the terms of this Promissory
Note on or before the third business day after the closing of the sale by
Dashe of such condominium.
2. Events of Default; Acceleration.
-------------------------------
(a) Upon the occurrence of any Event of Default (as defined below), the entire
unpaid principal and interest due on this Note shall be immediately due and
payable. The occurrence of any of the following events shall constitute an
"Event of Default"; (i) failure to pay any amount owing by Dashe hereunder
when due and payable, if such amount is still outstanding five days after
Dashe receives written notice or default by Lender; (ii) the voluntary
termination of Dashe's employment with Lender; or (iii) the initiation of
any bankruptcy or insolvency proceeding by or against Dashe, or a general
assignment of assets by Dashe for the benefit of creditors.
(b) No remedy herein conferred upon Lender is intended to be exclusive of any
other remedy, and each and every remedy shall be cumulative and in addition
to every other remedy hereunder, now or hereafter existing at law or in
equity or otherwise.
3. Notices.
--------
(a) All notices, reports and other communications required or permitted
hereunder shall be in writing and may be delivered in person, by telecopy
with written confirmation, via overnight delivery service or U.S. mail, in
which event such notice must be mailed first-class, certified or
registered, postage fully prepaid, addressed (i) if to Lender, at Cost
Plus, Inc., 200 4th Street, Oakland, California 94607 (or such other
address as such Lender shall have furnished Dashe in writing), attention of
Joan S. Fujii, Senior Vice President Human Resources and (ii) if to Dashe,
c/o Cost Plus, Inc. 200 4th Street, Oakland, California 94607 (or such
other address as Dashe shall have furnished Lender in writing).
<PAGE>
(b) Each such notice, report or other communication shall for all purposes
under this Note be treated as effective or having been given when delivered
if delivered personally or, if sent by mail, at the earlier of its receipt
or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed
as aforesaid, or, if sent by telecopier with written confirmation, at the
earlier of (i) 24 hours after confirmation of transmission by the sending
telecopier machine or (ii) delivery of written confirmation.
4. Miscellaneous.
--------------
(a) Upon the approval of the Board of Directors of Lender, the obligations of
Dashe and the rights of Lender may be waived (either generally or in a
particular instance, either retroactively or prospectively, and either for
a specified period of time or indefinitely), and with the same consent
Dashe may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the
provisions of this Note. Neither this Note nor any provisions hereof may be
changed, waived, discharged or terminated orally, but only by a written
statement executed by both Dashe and the Lender.
(b) No failure or delay by Lender to exercise any right hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege preclude any other right, power or privilege. The
provisions of this Note are severable, and if any one provision hereof
shall be held invalid or unenforceable in whole or in part in any
jurisdiction, such invalidity or unenforceability shall affect only such
provision in such jurisdiction. This Note expresses the entire
understanding of the parties with respect to the transactions contemplated
hereby. Dashe and every endorser and guarantor of this Note regardless of
the time, order or place of signing hereby waives presentment, demand,
protest and notice of every kind, and assents to any extension or
postponement of the time for payment or any other indulgence, to any
substitution, exchange or release of collateral, and to the addition or
release of any other party or person primarily or secondarily liable.
(c) If Lender retains an attorney for collection of this Note, or if any suit
or proceeding is brought for the recovery of all, or any part of, or for
protection of the indebtedness respected by this Note, then Dashe agrees to
pay on written, itemized demand all reasonable and customary costs and
expenses of the suit or proceeding, or any appeal thereof, incurred by
Lender, including without limitation, reasonable attorneys' fees.
(d) This Note shall for all purposes be governed by, and construed in
accordance with the laws of the State of California (without reference to
conflict of laws).
(e) This Note shall be binding upon Lender's and Dashe's successors and
assigns.
IN WITNESS WHEREOF, Dashe has executed this Note as of the date first
hereinabove written.
/s/ Murray H. Dashe
- ---------------------------
Murray H. Dashe
DATE Repayment Amount Check # Acknowledge By
---- ---------------- ------- --------------
4/26/02 $250,000 6467 Jane Baughman/Secretary
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>11
<FILENAME>dex13.txt
<DESCRIPTION>2001 ANNUAL REPORT TO SHAREHOLDERS
<TEXT>
<PAGE>
EXHIBIT 13
Murray H. Dashe
Chairman, Chief Executive Officer and President
To Our Shareholders
In 2001, Cost Plus World Market faced its most challenging year in a decade.
Like many retailers, we were confronted by a slowing economy and the dramatic
decline in consumer spending which followed the events of September 11.
Additionally, problems that arose during the development and deployment of new
distribution systems and processes temporarily impeded the flow of merchandise
to our stores, further damaging third quarter sales. I'm pleased to report,
however, that we rose to meet all of these challenges. In the fourth quarter,
merchandise flowed more quickly and smoothly than ever in our history, and our
fourth quarter operating results were at record levels. This momentum has
continued into fiscal 2002.
CPWM 4
<PAGE>
[PICTURE]
Murray H. Dashe
Chairman, Chief Executive Officer and President
CPWM 5
<PAGE>
SOLID OPERATING RESULTS For the 52 weeks ended February 2, 2002, Cost Plus World
Market sales were $568.5 million, up 15.2% from $493.7 million for the 53 weeks
of fiscal 2000. The majority of this sales growth came from our stores outside
California, since the impact of the recession has been greater in our home
state. Same store sales for the year rose 0.3%, primarily reflecting the
softness of the midyear period, but fourth quarter same store sales rebounded to
a 2.7% increase year-to-year. While net income for fiscal 2001 at $20.2 million,
or $0.93 per share, lagged the prior year's $21.7 million, or $1.00 per share,
the Company's strong return to record earnings of $19.8 million, or $0.91 per
share, in the fourth quarter, provided evidence that we had effectively resolved
the issues facing us.
Along the way we improved operating efficiencies and eliminated weaknesses. The
challenges of this past year also proved the capability of a number of key
employees whose performances in the face of adversity were truly exceptional.
Some of these people have recently been promoted in recognition of their
contributions, and this letter would be incomplete without acknowledging their
efforts -- and indeed, the efforts of all Cost Plus World Market's employees --
during 2001. We are confident that our management team is now the strongest it
has ever been, and among the finest in the retail industry.
From management's perspective, then, the Company emerged from fiscal 2001 leaner
and stronger, and able to identify and solve tough problems effectively. We also
feel that our solid financial results for the year and the consistently strong
performance of our new stores demonstrate the continuing power of Cost Plus
World Market's unique retail concept.
The rest of this year's annual report is devoted to describing this successful
concept in more detail, and you are encouraged to read on to learn how the
particular attributes that differentiate Cost Plus World Market -- our unique
product assortment, our value orientation, and the casual, comfortable and fun
shopping environment of our stores -- translate into competitive advantage and
consistently strong operating results.
A UNIQUE -- AND PROVEN -- RETAIL CONCEPT At the heart of this concept is our
ability to source, develop and sell products that shoppers often won't find
anywhere else. Customers come to Cost Plus World Market knowing they'll find
great values and high quality, but they also expect to find originality and
authenticity. That has always been one of our hallmarks and it is why as much as
60% of our product assortment is new every year. Doing this successfully
requires a clear sense of market trends -- which comes from listening carefully
to our customers -- coupled with a great deal of creativity from our buyers and
product development teams. It also requires constant experimentation. Throughout
the year, we test new product ideas in a limited number of stores to determine
which merchandise has enduring, broad-based appeal. Those products are then
rolled out into all our stores. The most successful products can evolve into
categories; the most successful categories can grow into entire departments.
The ability to develop and establish popular new product lines has made Cost
Plus World Market an increasingly strong competitor in the growing market for
home furnishings. It has also helped drive our top and bottom line growth for
more than a decade. In 2001, for example, we saw steadily rising consumer demand
for our home office furniture and bed and bath furnishings, both of which are
recent experiments that have quickly grown into popular new product categories.
By focusing a higher percentage of our November and December marketing efforts
around these and other home furnishing categories, we were able to stimulate
increased sales of all our home merchandise during the important Holiday selling
season. The Holiday
6 CPWM
<PAGE>
season is traditionally very strong for our food and beverage products, and this
year was no exception. However, the shift in sales mix toward our higher-margin
home furnishing offerings had a positive impact on our fourth quarter
profitability. And, again, we are seeing these sales trends continuing into
fiscal 2002.
A COMMITMENT TO PROFITABLE GROWTH Supporting such a large, eclectic and
continuously changing product assortment requires a highly efficient
distribution operation, and as previously noted, in fiscal 2001 we implemented
new systems and significantly strengthened our distribution management
Company-wide in order to improve our overall inventory management. That goal has
been achieved.
This success has resulted from the hard work of many individuals throughout the
Company and is reflected in how much more efficient our distribution operations
are today. We have learned a great deal from our distribution development
experience, and we are putting those lessons to work as we prepare for the
mid-2002 opening of our new 500,000 square-foot distribution center near
Norfolk, Virginia. With exhaustive planning, in-depth training and a carefully
phased rollout, we are confident that the new facility will come online
successfully and be operating efficiently at needed capacity by the Holiday
season.
BUILDING ON OUR MOMENTUM IN FISCAL 2002 Indeed, as we move forward into fiscal
2002, we are confident about all aspects of Cost Plus World Market's operations.
Our unique and evolving product assortment is generating strong store traffic
and growing customer interest in our expanded home furnishings offering. Our
Company-wide cost control efforts continue to improve our operating efficiency.
And our concept is proving very popular in each new market we enter. Our goal
for fiscal 2002 is to add a net of 25 new stores -- mostly in the Midwest, East
and Southeast -- for a total of 175 stores in 23 states at year end, with more
than 70% of our stores outside our home base of California. Ultimately we
believe we can operate up to 450 stores nationwide located in both large and
medium-sized metropolitan markets, meaning there is still a great deal of growth
potential for Cost Plus World Market.
Our job now is to realize that potential, and all of us at the Company are
committed both to improving our operating performance and to translating our
success into increased shareholder value at Cost Plus World Market. We look
forward to reporting to you on our continued progress toward these goals in the
months and years ahead.
/s/ Murray Dashe
Murray H. Dashe
Chairman, Chief Executive Officer and President
March 2002
CPWM 7
<PAGE>
Net Sales
(dollars in millions)
1997 260.5
1998 315.1
1999 402.3
2000 493.7
2001 568.5
Operating Income
(dollars in millions)
1997 18.1
1998 22.9
1999 33.1
2000 36.2
2001 34.1
Net Income
(dollars in millions)
1997 10.0
1998 13.2
1999 19.7
2000 21.7
2001 20.2
Five Year Compound
Annual Growth Rate
1997-2001
Stores Sales Operating Income Net Income
21% 21% 18% 22%
16 CPWM
<PAGE>
<TABLE>
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS 18
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA 22
CONSOLIDATED BALANCE SHEETS 27
CONSOLIDATED STATEMENTS OF OPERATIONS 28
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 29
CONSOLIDATED STATEMENTS OF CASH FLOWS 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 31
INDEPENDENT AUDITORS' REPORT 41
DIRECTORS, OFFICERS AND CORPORATE DATA 42
STORE LOCATIONS 43
</TABLE>
CPWM 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
An asterisk "*" denotes a forward-looking statement reflecting current
expectations that involve risks and uncertainties. Actual results may differ
materially from those discussed in such forward-looking statements and
shareholders of Cost Plus, Inc. (the "Company" or "Cost Plus") should carefully
review the cautionary statements set forth in this Annual Report, including
"Quarterly Results and Seasonality" beginning on page 23. The Company may from
time to time make additional written and oral forward-looking statements,
including statements contained in the Company's filings with the Securities and
Exchange Commission and in its reports to shareholders. The Company does not
undertake to update any forward-looking statement that may be made from time to
time by or on behalf of the Company.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Cost Plus, Inc. and its subsidiaries' discussion and analysis of its financial
condition and results of operations are based upon the Company's consolidated
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires the Company to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and related disclosure of contingent assets and liabilities. Estimates
and assumptions include, but are not limited to, inventory values, fixed asset
lives, intangible asset values, deferred income taxes, self-insurance reserves
and the impact of contingencies and litigation. The Company bases its estimates
on historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from those
estimates under different assumptions or conditions. The Company has also chosen
certain accounting policies when options are available, including:
. the retail inventory method of accounting for inventories.
. the intrinsic value method to account for common stock incentive
awards.
These accounting policies are applied consistently for all years presented.
Operating results would be affected if other alternatives were used. Information
about the impact on operating results by using APB Opinion No. 25 "Accounting
for Stock Issued to Employees" is included in footnote 7 to the consolidated
financial statements.
Although not all inclusive, the Company believes that the following
represent the more critical estimates and assumptions used in the preparation of
the consolidated financial statements.
REVENUE RECOGNITION The Company's revenue recognition process does not involve
significant judgment or estimates. A provision for sales returns is estimated
and recorded in the current year based on actual returns subsequent to year end.
NET SALES Net sales consist of sales from comparable stores and non-comparable
stores. A store is not included in comparable store sales until the first day of
the fiscal month beginning with the fourteenth full fiscal month of sales.
Non-comparable store sales include sales in the current fiscal year from stores
opened during the previous fiscal year before they are considered comparable
stores and new stores opened during the current fiscal year.
INVENTORY Inventories are stated at the lower of cost or market under the retail
inventory method ("RIM"), in which the valuation of inventories at cost and the
resulting gross margins are calculated by applying a calculated cost-to-retail
ratio to the retail value of inventories. RIM is an averaging method that is
widely used in the retail industry due to its practicality. Also, the Company's
use of the retail inventory method will result in valuing inventories at lower
of cost or market as markdowns are currently taken as a reduction of the retail
value of inventories. Inherent in the RIM calculation are certain significant
management judgments and estimates including, among others, merchandise markon,
markdowns
18 CPWM
<PAGE>
and shrinkage, which impact the ending inventory valuation at cost as well as
resulting gross margins. These estimates, coupled with the fact that the RIM is
an averaging process can, under certain circumstances, produce distorted or
inaccurate cost figures. To reduce the potential of such distortions in the
valuation of inventory, the Company's RIM utilizes 26 departments in which
fairly homogeneous classes of merchandise inventories having similar gross
margins are grouped. In addition, failure to take timely markdowns could result
in an overstatement of cost under the lower of cost or market principle. When
necessary, the Company records a markdown allowance that reduces inventory value
to the lower of cost or market. Management believes that the Company's RIM
provides an inventory valuation that reasonably approximates cost and results in
carrying inventory at the lower of cost or market.*
INSURANCE / BENEFITS The Company records estimates for certain health and
welfare, workers' compensation and casualty insurance costs that are
self-insurance programs with per occurrence and aggregate limits on losses.
Should a greater amount of claims occur compared to what was estimated or costs
of medical care increase beyond what was anticipated, reserves recorded may not
be sufficient and additional costs to the consolidated financial statements
could be required.
OTHER ACCOUNTING ESTIMATES Estimates inherent in the preparation of the
Company's financial statements include those associated with the evaluation of
the recoverability of deferred tax assets and goodwill as well as those used in
the determination of liabilities related to litigation, claims and assessments.
Various assumptions and other factors underlie the determination of these
significant estimates. The process of determining significant estimates is fact
specific and takes into account factors such as historic experience and current
and expected economic conditions. The Company constantly reevaluates these
significant factors and makes adjustments where facts and circumstances dictate.
To date, actual results have not significantly deviated from those determined
using the estimates described above.
The Company has not recorded a valuation allowance to reduce its deferred
tax assets. The Company has considered future taxable income and ongoing prudent
and feasible tax planning strategies in assessing the need for the valuation
allowance. In the event the Company were to determine that it would not be able
to realize all or part of its net deferred tax assets in the future, an
adjustment to the deferred tax assets would be charged to income in the period
such determination was made. Likewise, should the Company determine it would be
able to realize deferred tax assets in the future in excess of the net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made.
The Company had goodwill in the amount of $4.2 million at February 2, 2002.
In connection with the adoption of Statement of Financial Accounting Standard
(SFAS) No. 142, "Goodwill and Other Intangible Assets," the Company performed an
impairment test which resulted in no impairment being identified.
The Company is involved in litigation, claims and assessments incidental to
its business, the disposition of which is not expected to have a material effect
on the Company's financial position or results of operations.* It is possible,
however, that future results of operations for any particular quarterly or
annual period could be materially affected by changes in the Company's
assumptions related to these proceedings.* The Company accrues its best estimate
of the probable cost for the resolution of claims. When appropriate, such
estimates are developed in consultation with outside counsel handling the
matters and are based upon a combination of litigation and settlement
strategies. To the extent additional information arises or the Company's
strategies change, it is possible that the Company's best estimate of its
probable liability in these matters may change.*
CPWM 19
<PAGE>
FORWARD-LOOKING STATEMENTS AND FACTORS AFFECTING FUTURE PERFORMANCE
This report includes a number of forward-looking statements, which reflect the
Company's current beliefs and estimates with respect to future events and the
Company's future financial performance, operations and competitive position. The
words "expect," "anticipate," "estimate," "believe," "looking ahead,"
"forecast," "plan" and similar expressions identify forward-looking statements.
The Company's continued success depends, in part, upon its ability to
increase sales at existing locations, to open new stores and to operate stores
on a profitable basis. There can be no assurance that the Company's existing
strategies and store expansion program will result in a continuation of revenue
and profit growth. Future economic and industry trends that could potentially
impact revenue and profitability remain difficult to predict.
The forward-looking statements that are contained in this report are
subject to known and unknown risks and uncertainties that could cause the
Company's actual results to differ materially from historical results or current
expectations. These factors include, without limitation, a general deterioration
in economic trends, ongoing competitive pressures in the retail industry,
obtaining acceptable store locations, timely introduction and customer
acceptance of its merchandise offering, the Company's ability to successfully
open its new distribution center in a timely and cost-effective manner, the
Company's ability to successfully extend its geographic reach into new markets,
unseasonable weather trends, changes in the level of consumer spending on or
preferences for home-related merchandise, the Company's ability to attract and
retain the retail talent necessary to execute its strategies, international
political strife and the effects on the flow or price of merchandise from
overseas, further terrorist attacks and our nation's response thereto and the
Company's ability to implement and integrate various new systems and
technologies. In addition, the Company's corporate headquarters, one of its
distribution centers and approximately one-third of its stores are located in
California. Therefore, a downturn in the California economy or a major natural
disaster there could significantly affect the Company's operating results and
financial condition.
In addition to the above factors, the retail industry is highly seasonal.
The net sales of the Company for the fourth (Holiday) fiscal quarter are
historically higher than each of the first three fiscal quarters. The Company
has realized a significant portion of its profits in each fiscal year during the
fourth fiscal quarter. If intensified price competition, lower than anticipated
consumer demand or other factors were to occur during the fourth fiscal quarter,
the Company's fiscal year results could be adversely affected.
RESULTS OF OPERATIONS
FISCAL 2001 COMPARED TO FISCAL 2000
NET SALES Net sales increased $74.8 million, or 15.2%, to $568.5 million in
fiscal 2001, a 52-week fiscal year, from $493.7 million in fiscal 2000, a
53-week fiscal year. The increase in net sales was attributable to new stores
and a slight increase in comparable store sales. Comparable store sales rose
0.3% for fiscal 2001, compared to a 4.6% increase in fiscal 2000. Comparable
store sales were impacted by lower sales in the third fiscal quarter due
primarily to the weak economy, temporarily exacerbated by the September 11th
tragedy and an impeded flow of goods to stores associated with the installation
of a new warehousing system. Comparable store sales decreased 7.4% in the third
fiscal quarter, yet recovered to a 2.7% increase for the fourth fiscal quarter
of 2001. As of February 2, 2002, the Company operated 150 stores compared to 127
stores as of February 3, 2001.
20 CPWM
<PAGE>
GROSS PROFIT As a percentage of net sales, gross profit was 34.4% in fiscal 2001
and 35.9% in fiscal 2000. The reduction is substantially explained by a sales
mix shift to lower margin consumable goods and higher markdowns to stimulate
foot traffic. Reduced leverage on occupancy costs from a higher percentage of
new stores in the base and increased transportation costs also negatively
impacted margin. Newer stores generally have higher occupancy costs as a
percentage of sales until they reach maturity.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES As a percentage of net
sales, SG&A expenses increased slightly to 27.6% in the current year from 27.5%
last year. The increase in the SG&A expense rate resulted primarily from reduced
sales leverage on lower comparable store sales growth, higher depreciation due
to new stores and new information systems.
STORE PREOPENING EXPENSES Store preopening expenses, which include grand opening
advertising and preopening merchandise setup expenses, were $4.6 million in
fiscal 2001 and $5.0 million in fiscal 2000. Expenses vary depending on the
particular store site and whether it is located in a new or existing market. The
Company opened 23 stores in fiscal 2001 compared to 24 stores in fiscal 2000.
NET INTEREST EXPENSE Net interest expense, which includes interest on capital
leases and interest expense net of interest income, was $962,000 in fiscal 2001
and $666,000 in fiscal 2000. The increase in net interest expense was due to
lower interest earned on investments due to a significant drop in the prime rate
and higher average borrowings.
INCOME TAXES The Company's effective tax rate was 39.0% in both fiscal 2001 and
fiscal 2000.
FISCAL 2000 COMPARED TO FISCAL 1999
NET SALES Net sales increased $91.4 million, or 22.7%, to $493.7 million in
fiscal 2000, a 53-week fiscal year, from $402.3 million in fiscal 1999, a
52-week fiscal year. The increase in net sales was attributable to new stores
and an increase in comparable store sales. Comparable store sales rose 4.6% for
fiscal 2000, as a result of a larger average transaction. As of February 3,
2001, the Company operated 127 stores compared to 103 stores as of January 29,
2000.
GROSS PROFIT As a percentage of net sales, gross profit was 35.9% in fiscal 2000
and 36.5% in fiscal 1999. This change is substantially explained by heavier
promotional and clearance markdowns to meet competitive sales pressures, reduced
leverage on occupancy costs from a higher percentage of new stores in the base,
as well as increased fuel and transportation costs. Newer stores generally have
higher occupancy costs as a percentage of sales until they reach maturity.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A") EXPENSES As a percentage of net
sales, SG&A expenses increased slightly to 27.5% in the current fiscal year from
27.4% in fiscal 1999. The increase in the SG&A expense rate resulted primarily
from higher advertising expenditures to respond to a more difficult retail
environment in the fourth quarter.
STORE PREOPENING EXPENSES Store preopening expenses, which include grand opening
advertising and preopening merchandise setup expenses, were $5.0 million in
fiscal 2000 and $3.7 million in fiscal 1999. Expenses vary depending on the
particular store site and whether it is located in a new or existing market. The
Company opened 24 stores in fiscal 2000 compared to 18 stores in fiscal 1999.
NET INTEREST EXPENSE Net interest expense, which includes interest on capital
leases and interest expense net of interest income, was $666,000 in fiscal 2000
and $859,000 in fiscal 1999. The modest decrease in net interest expense was due
to higher interest rates on short-term investments and a modest increase in the
average cash balances available for investment.
INCOME TAXES The Company's effective tax rate was 39.0% in both fiscal 2000 and
fiscal 1999.
CPWM 21
<PAGE>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year
--------------------------------------------------------
(In thousands, except per share and selected operating data) 2001 2000/1/ 1999 1998 1997
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $568,472 $493,661 $402,292 $315,135 $260,494
Cost of sales and occupancy 372,948 316,500 255,383 200,023 164,394
--------------------------------------------------------
Gross profit 195,524 177,161 146,909 115,112 96,100
Selling, general and administrative expenses 156,832 135,923 110,108 89,261 75,238
Store preopening expenses 4,612 5,044 3,671 2,927 2,744
--------------------------------------------------------
Income from operations 34,080 36,194 33,130 22,924 18,118
Net interest expense 962 666 859 1,226 1,679
--------------------------------------------------------
Income before income taxes 33,118 35,528 32,271 21,698 16,439
Income taxes 12,916 13,856 12,586 8,462 6,432
--------------------------------------------------------
Net income $ 20,202 $ 21,672 $ 19,685 $ 13,236 $ 10,007
========================================================
Net income per share -- basic $ 0.95 $ 1.04 $ 0.97 $ 0.67 $ 0.53
Net income per share -- diluted $ 0.93 $ 1.00 $ 0.93 $ 0.65 $ 0.51
Weighted average shares outstanding -- basic 21,355 20,813 20,321 19,724 18,734
Weighted average shares outstanding -- diluted 21,756 21,568 21,189 20,363 19,574
========================================================
Selected Operating Data:
Percent of sales:
Gross profit 34.4% 35.9% 36.5% 36.5% 36.9%
Selling, general and administrative expenses 27.6% 27.5% 27.4% 28.3% 28.9%
Income from operations 6.0% 7.3% 8.2% 7.3% 7.0%
Number of stores:
Opened during period 23 24 18 15 12
Closed during period -- -- -- -- --
Open at end of period 150 127 103 85 70
Average sales per selling square foot/2/ $ 258 $ 273 $ 269 $ 258 $ 259
Comparable store sales increase 0.3% 4.6% 8.6% 5.5% 7.0%
========================================================
Balance Sheet Data (at period end):
Working capital $117,381 $ 98,001 $ 80,663 $ 61,031 $ 52,630
Total assets 317,940 252,865 214,699 173,141 152,000
Note payable and capital lease obligations,
less current portion 33,216 13,474 14,416 15,110 15,692
Total shareholders' equity 198,709 169,121 138,335 109,403 95,609
Current ratio 2.54 2.59 2.47 2.43 2.52
Debt to equity ratio 17.2% 8.2% 10.9% 14.3% 16.9%
========================================================
</TABLE>
/1/ The Company's fiscal year end is the Saturday closest to the end of January.
Fiscal 2000 was 53 weeks and ended on February 3, 2001. All other fiscal
years presented consisted of 52 weeks.
/2/ Calculated using net sales for stores open during the entire period divided
by the selling square feet of such stores.
22 CPWM
<PAGE>
INFLATION
The Company does not believe that inflation has had a material effect on its
financial condition and results of operations during the past three fiscal
years. However, there can be no assurance that the Company's business will not
be affected by inflation in the future.
QUARTERLY RESULTS AND SEASONALITY
The following table sets forth the Company's unaudited quarterly operating
results for the eight most recent quarterly periods.
<TABLE>
<CAPTION>
Fiscal Quarters Ended
-----------------------------------------------------------------------
(In thousands, except per share data and number of stores) May 5, 2001 August 4, 2001 November 3, 2001 February 2, 2002
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $112,915 $112,101 $113,544 $229,912
Gross profit 37,261 37,342 36,294 84,627
Net income (loss) 1,233 1,509 (2,321) 19,781
Net income (loss) per share
Basic $ 0.06 $ 0.07 $ (0.11) $ 0.93
Diluted $ 0.06 $ 0.07 $ (0.11) $ 0.91
Number of stores open
at end of period 132 137 145 150
</TABLE>
<TABLE>
<CAPTION>
Fiscal Quarters Ended
-----------------------------------------------------------------------
(In thousands, except per share data and number of stores) April 29, 2000 July 29, 2000 October 28, 2000 February 3, 2001/1/
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $ 92,238 $ 92,765 $101,913 $206,745
Gross profit 31,791 31,633 35,333 78,404
Net income 1,133 1,449 283 18,807
Net income per share
Basic $ 0.06 $ 0.07 $ 0.01 $ 0.90
Diluted $ 0.05 $ 0.07 $ 0.01 $ 0.87
Number of stores open
at end of period 109 113 122 127
</TABLE>
/1/ The three months ended February 3, 2001 was a fourteen-week period as
compared to the three months ended February 2, 2002 which was a thirteen-
week period.
The Company's business is highly seasonal, reflecting the general pattern
associated with the retail industry of peak sales and earnings during the fourth
quarter (Holiday) season. Due to the importance of the Holiday selling season,
the fourth quarter of each fiscal year has historically contributed and the
Company expects it will continue to contribute, a disproportionate percentage of
the Company's net sales and most of its net income for the entire fiscal year.*
Any factors negatively affecting the Company during the Holiday selling season
in any year, including unfavorable economic conditions, could have a material
adverse effect on the Company's financial condition and results of operations.
The Company generally experiences lower sales and earnings during the first
three quarters and, as is typical in the retail industry, may incur losses in
these quarters. The results of operations for these interim periods are not
necessarily indicative of the results for a full fiscal year. In addition, the
Company makes decisions regarding merchandise well in advance of the season in
CPWM 23
<PAGE>
which it will be sold, particularly for the Holiday selling season. Significant
deviations from projected demand for products could have a material adverse
effect on the Company's financial condition and results of operations, either by
lost gross sales due to insufficient inventory or lost gross margin due to the
need to mark down excess inventory.
The Company's quarterly results of operations may also fluctuate based upon
such factors as delays in the flow of merchandise, changes in the anticipated
opening of the Company's new distribution center in mid-2002, the number and
timing of store openings and related store preopening expenses, the amount of
net sales contributed by new and existing stores, the mix of products sold, the
timing and level of markdowns, store closings, refurbishments or relocations,
competitive factors, changes in fuel and other shipping costs, general economic
conditions, increases in utility costs in California and other states where the
Company has operations, labor market fluctuations, changes in accounting rules
and regulations and unseasonable weather conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary uses for cash are to fund operating expenses, inventory
requirements and new store expansion. Historically, the Company has financed its
operations primarily from internally generated funds and seasonal borrowings
under the Company's revolving credit facility. The Company believes that the
combination of its cash and cash equivalents, internally generated funds and
available borrowings under a revolving line of credit will be sufficient to
finance its working capital and capital expenditure requirements for at least
the next twelve months.*
Net cash provided by operating activities totaled $28.0 million for fiscal
2001, an increase of $5.9 million from fiscal 2000. The increase in net cash
provided by operating activities is primarily due to an increase in current
liabilities, partially offset by an increase in inventories and deposits on
equipment for the Company's second distribution center to be opened in fiscal
2002.
Net cash used in investing activities, primarily capital expenditures for
new stores, totaled $27.4 million in fiscal 2001 compared to $26.5 million in
fiscal 2000. The Company estimates that fiscal 2002 capital expenditures will
approximate $26.5 million, including approximately $14.0 million for new stores,
$5.0 million for information systems projects, the most significant of which is
a warehouse management system for the Virginia distribution center (VDC), and
$5.1 million for distribution center projects, primarily equipment to outfit the
VDC.* Additionally $4.5 million of equipment purchases for the VDC will be
financed under capital lease arrangements.*
Net cash provided by financing activities was $6.0 million in fiscal 2001
and $4.8 million in fiscal 2000 which were primarily proceeds from the issuance
of common stock in connection with the Company's stock option and stock purchase
plans.
The table below presents significant contractual obligations of the Company
at February 2, 2002.
<TABLE>
<CAPTION>
Contractual Obligations (in millions) Less than 1 year 1-3 years 4-5 Years After 5 Years Total Amount Committed
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating leases $ 42.3 $ 117.4 $ 70.4 $ 121.0 $ 351.1
Capital leases (principal and interest) 4.0 12.1 8.0 52.0 76.1
--------------------------------------------------------------------
Total contractual obligations $ 46.3 $ 129.5 $ 78.4 $ 173.0 $ 427.2
====================================================================
</TABLE>
As of February 2, 2002, the Company did not have any other debt outstanding. The
Company has no financial arrangements involving special purpose entities or
lease agreements commonly described as synthetic leases.
24 CPWM
<PAGE>
The Company has an unsecured revolving line of credit agreement with a
bank. The agreement allows for cash borrowings and letters of credit up to $25.0
million from January 1, 2002 through the expiration date of June 1, 2002.
Interest is paid monthly based on the Company's election of the bank's reference
rate minus 0.75% (4.00% at February 2, 2002) or IBOR/LIBOR plus 0.9%. The
Company is subject to certain financial covenants customary with such
agreements. At February 2, 2002, the Company had no outstanding borrowings under
the line of credit and $8.2 million outstanding under letters of credit.
The line of credit represents the Company's only commercial credit
facilities. The Company believes the line of credit is sufficient to provide for
borrowing needs.*
The Company has received two proposals for an unsecured credit facility to
replace the agreement expiring on June 1, 2002. The terms of each of the
proposals provide up to a maximum of $75 million in available credit. The
Company anticipates it will be subject to certain financial covenants customary
with such agreements.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities," as amended, in fiscal 2001. Adoption of this statement does
not have an impact on the Company's current financial position or results of
operations.
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 142, "Goodwill and Other Intangible Assets," (effective for the Company for
fiscal 2002). SFAS No. 142 specifies that goodwill and certain intangible assets
will no longer be amortized but instead will be subject to periodic impairment
testing. The adoption of the new standard will reduce annual amortization
expense by approximately $312,000, in fiscal 2002.*
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which becomes effective for the
Company for fiscal 2002. Adoption of this standard is not expected to have a
material effect on the Company's financial position or results of operations.*
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company is exposed to financial market risks, which include changes in U.S.
interest rates and, to a lesser extent, foreign exchange rates. The Company does
not engage in financial transactions for trading or speculative purposes.
INTEREST RATE RISK The interest payable on the Company's bank line of credit is
based on variable interest rates and is therefore affected by changes in market
interest rates. If interest rates on existing variable rate debt were to rise 40
basis points (a 10% change from the Company's borrowing rate as of February 2,
2002), the Company's results of operations and cash flows would not be
materially affected. In addition, the Company has fixed and variable income
investments consisting of cash equivalents and short-term investments which are
also affected by changes in market interest rates.
FOREIGN CURRENCY RISKS The Company enters into a significant amount of purchase
obligations outside of the United States of America which are settled in U.S.
Dollars and, therefore, the Company has only minimal exposure to foreign
currency exchange risks. The Company does not hedge against foreign currency
risks and believes that foreign currency exchange risk is immaterial.
CPWM 25
<PAGE>
STOCK ACTIVITY
The Company's common stock is currently traded on the over-the-counter market
and is quoted on the Nasdaq National Market under the symbol "CPWM." The
following table sets forth the high and low closing sales prices, for the
periods indicated, as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
Price Range
----------------
High Low
----------------
<S> <C> <C>
FISCAL YEAR ENDED FEBRUARY 2, 2002
First Quarter $27.81 $21.13
Second Quarter 30.18 25.25
Third Quarter 27.00 15.29
Fourth Quarter 27.94 20.20
FISCAL YEAR ENDED FEBRUARY 3, 2001
First Quarter $35.19 $15.94
Second Quarter 35.88 24.13
Third Quarter 38.81 24.81
Fourth Quarter 31.94 19.19
</TABLE>
As of April 9, 2002, the Company estimated it has approximately 6,200
shareholders. The Company's present policy is to retain its earnings to finance
growth and does not intend to pay cash dividends.
26 CPWM
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
February 2, February 3,
(In thousands, except share amounts) 2002 2001
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 45,420 $ 38,815
Merchandise inventories 131,344 109,829
Other current assets 16,789 11,107
------------------------
Total current assets 193,553 159,751
Property and equipment, net 110,922 78,694
Goodwill 4,178 4,340
Other assets 9,287 10,080
------------------------
Total assets $317,940 $252,865
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 43,990 $ 31,592
Income taxes payable 10,082 9,933
Accrued compensation 8,305 8,506
Other current liabilities 13,795 11,719
------------------------
Total current liabilities 76,172 61,750
Capital lease obligations 33,216 13,474
Other long-term obligations 9,843 8,520
Shareholders' equity:
Preferred stock, $.01 par value: 5,000,000 shares
authorized; none issued and outstanding -- --
Common stock, $.01 par value: 67,500,000 shares
authorized; issued and outstanding 21,549,643 and
21,005,337 shares 215 210
Additional paid-in capital 131,730 122,349
Retained earnings 66,764 46,562
------------------------
Total shareholders' equity 198,709 169,121
------------------------
Total liabilities and shareholders' equity $317,940 $252,865
========================
</TABLE>
See notes to consolidated financial statements.
CPWM 27
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
February 2, February 3, January 29,
(In thousands, except per share amounts) 2002 2001 2000
--------------------------------------
<S> <C> <C> <C>
Net sales $568,472 $493,661 $402,292
Cost of sales and occupancy 372,948 316,500 255,383
--------------------------------------
Gross profit 195,524 177,161 146,909
Selling, general and administrative expenses 156,832 135,923 110,108
Store preopening expenses 4,612 5,044 3,671
--------------------------------------
Income from operations 34,080 36,194 33,130
Interest income 882 1,293 1,179
Interest expense (1,844) (1,959) (2,038)
--------------------------------------
Income before income taxes 33,118 35,528 32,271
Income taxes 12,916 13,856 12,586
--------------------------------------
Net income $ 20,202 $ 21,672 $ 19,685
======================================
Net income per share
Basic $ 0.95 $ 1.04 $ 0.97
Diluted $ 0.93 $ 1.00 $ 0.93
======================================
Weighted average shares outstanding
Basic 21,355 20,813 20,321
Diluted 21,756 21,568 21,189
======================================
</TABLE>
See notes to consolidated financial statements.
28 CPWM
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
------------------------
Paid-in Retained Shareholders'
(In thousands, except shares) Shares Amount Capital Earnings Equity
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 30, 1999 19,936,517 $ 199 $ 103,999 $ 5,205 $ 109,403
Stock issued under Employee
Stock Purchase Plan 9,332 -- 249 249
Exercise of stock options 576,035 6 4,761 4,767
Tax effect of disqualifying
stock dispositions 4,231 4,231
Net income 19,685 19,685
----------------------------------------------------------------
Balance at January 29, 2000 20,521,884 205 113,240 24,890 138,335
Stock issued under Employee
Stock Purchase Plan 15,768 -- 380 380
Exercise of stock options 467,685 5 5,138 5,143
Tax effect of disqualifying
stock dispositions 3,591 3,591
Net income 21,672 21,672
----------------------------------------------------------------
Balance at February 3, 2001 21,005,337 210 122,349 46,562 169,121
Stock issued under Employee
Stock Purchase Plan 16,417 -- 355 355
Exercise of stock options 527,889 5 6,029 6,034
Tax effect of disqualifying
stock dispositions 2,997 2,997
Net income 20,202 20,202
----------------------------------------------------------------
Balance at February 2, 2002 21,549,643 $ 215 $ 131,730 $ 66,764 $ 198,709
================================================================
</TABLE>
See notes to consolidated financial statements.
CPWM 29
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------
February 2, February 3, January 29,
(In thousands) 2002 2001 2000
----------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 20,202 $ 21,672 $ 19,685
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 16,320 13,887 11,052
Loss on disposal of property and equipment 203 407 173
Deferred income taxes 234 (2,103) (2,425)
Changes in assets and liabilities:
Merchandise inventories (21,515) (18,427) (20,722)
Other assets (5,667) (3,172) (997)
Accounts payable 12,398 6,520 6,515
Other liabilities 5,832 3,317 9,119
----------------------------------------
Net cash provided by operating activities 28,007 22,101 22,400
----------------------------------------
Cash Flows From Investing Activities:
Purchases of property and equipment (27,411) (26,529) (17,023)
----------------------------------------
Net cash used in investing activities (27,411) (26,529) (17,023)
----------------------------------------
Cash Flows From Financing Activities:
Principal payments on capital lease obligations (380) (691) (582)
Proceeds from the issuance of common stock 6,389 5,523 5,016
----------------------------------------
Net cash provided by financing activities 6,009 4,832 4,434
----------------------------------------
Net increase in cash and cash equivalents 6,605 404 9,811
Cash and Cash Equivalents:
Beginning of period 38,815 38,411 28,600
----------------------------------------
End of period $ 45,420 $ 38,815 $ 38,411
========================================
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 912 $ 669 $ 960
========================================
Cash paid for taxes $ 9,537 $ 11,672 $ 9,724
========================================
Non-cash Financing:
Capital lease obligation related to distribution center $ 20,632 $ -- $ --
========================================
</TABLE>
See notes to consolidated financial statements.
30 CPWM
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
BUSINESS Cost Plus, Inc. and subsidiaries (the "Company") is a specialty
retailer of casual home living and entertaining products. At February 2, 2002,
the Company operated 150 stores in 19 states under the names "World Market,"
"Cost Plus World Market," "Cost Plus" and "Cost Plus Imports." The Company's
product offerings are designed to provide solutions to customers' casual home
furnishing and home entertaining needs. The offerings include home decorating
items such as furniture and rugs, as well as a variety of tabletop and kitchen
products. Cost Plus World Market stores also offer a number of gift and
decorative accessories including collectibles, cards, wrapping paper and other
seasonal items. In addition, Cost Plus World Market offers its customers a wide
selection of gourmet foods and beverages, including wine, micro-brewed and
imported beer, coffee and tea. The Company accounts for its operations as one
operating segment.
FISCAL YEAR The Company's fiscal year end is the Saturday closest to the end of
January. The current fiscal year ended February 2, 2002 (fiscal 2001) contained
52 weeks. Consistent with the National Retail Federation fiscal calendar, the
fiscal year ended February 3, 2001 (fiscal 2000) contained 53 weeks. The fiscal
year ended January 29, 2000 (fiscal 1999) consisted of 52 weeks.
PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the
accounts of Cost Plus, Inc. and its subsidiaries. Intercompany balances and
transactions are eliminated in consolidation.
ACCOUNTING ESTIMATES The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, including disclosures of contingent assets
and liabilities, as of the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of cash and
cash equivalents, accounts receivable and accounts payable approximates their
estimated fair value.
STOCK-BASED COMPENSATION The Company accounts for stock-based awards to
employees using the intrinsic value method prescribed by Accounting Principles
Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." The
disclosure requirements of Statement of Financial Accounting Standard (SFAS) No.
123, "Accounting for Stock-Based Compensation," are set forth in footnote 7 to
the consolidated financial statements.
CASH EQUIVALENTS The Company considers all highly liquid investments with
original maturities of three months or less as cash equivalents.
INVENTORIES Inventories are stated at lower of cost or market under the retail
inventory method ("RIM"), in which the valuation of inventories at cost and the
resulting gross margins are calculated by applying a calculated cost-to-retail
ratio to the retail value of inventories. Cost includes certain buying and
distribution costs related to the procurement, processing and transportation of
merchandise. Management believes that the Company's RIM provides an inventory
valuation which reasonably approximates cost and results in carrying inventory
at the lower of cost or market.*
CPWM 31
<PAGE>
PROPERTY AND EQUIPMENT Furniture, fixtures and equipment are stated at cost and
are depreciated using the straight-line method over the following estimated
useful lives:
Store fixtures and equipment 3-10 years
Leasehold improvements Lesser of life of the asset or life of lease
Computer equipment and software 3-5 years
CAPITAL LEASES Noncancelable leases which meet the criteria of capital leases
are capitalized as assets in property and equipment and amortized on a
straight-line basis over their related lease terms.
OTHER ASSETS Other assets include lease rights and interests, deferred taxes and
other intangibles. Lease rights and interests are amortized on a straight-line
basis over their related lease terms.
GOODWILL Goodwill is amortized on a straight-line basis over 40 years.
Accumulated amortization as of February 2, 2002 and February 3, 2001 was $2.4
million and $2.2 million, respectively.
IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS The Company's management believes
that the carrying value of long-lived assets is appropriate and no adjustments
to the carrying value of such assets is necessary.*
SELF-INSURANCE The Company is self insured for workers' compensation, general
liability costs and certain health insurance plans with per occurrence and
aggregate limits on losses. The self-insurance liability recorded in the
financial statements is based on claims filed and an estimate of claims incurred
but not yet reported.
DEFERRED RENT Certain of the Company's operating leases contain predetermined
fixed escalations of minimum rentals during the initial term. For these leases,
the Company recognizes the related rental expense on a straight-line basis over
the life of the lease and records the difference between amounts charged to
operations and amounts paid as deferred rent. As part of its lease agreements,
the Company may receive certain lease incentives, primarily construction
allowances. These allowances are also deferred and are amortized on a
straight-line basis over the life of the lease as a reduction of rent expense.
The cumulative net excess of recorded rent expense over lease payments made in
the amount of $8.6 million and $7.6 million is reflected in other liabilities in
the balance sheets as of February 2, 2002 and February 3, 2001, respectively.
REVENUE RECOGNITION Revenue is recognized at the point of sale, net of estimated
sales returns.
ADVERTISING EXPENSE Advertising costs, which include newspaper, television,
radio and other media advertising, are expensed as incurred. For the fiscal
years 2001, 2000 and 1999, advertising costs were $30.6 million, $27.2 million
and $21.7 million, respectively.
STORE PREOPENING EXPENSES Store preopening expenses include grand opening
advertising, labor, travel and hiring expenses and are expensed as incurred.
CONCENTRATION OF CREDIT RISK Financial instruments, which potentially subject
the Company to concentration of credit risk, consist principally of cash and
cash equivalents. The Company places its cash with high quality financial
institutions. At times, such balances may be in excess of FDIC insurance limits.
INCOME TAXES Income taxes are accounted for using an asset and liability
approach that requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in the
Company's consolidated financial statements or tax returns.
32 CPWM
<PAGE>
COMPREHENSIVE INCOME The Company's comprehensive income and net income are the
same for all periods presented.
NET INCOME PER SHARE SFAS No. 128 "Earnings Per Share," requires earnings per
share (EPS) to be computed and reported as both basic EPS and diluted EPS. Basic
EPS is computed by dividing net income by the weighted average number of common
shares outstanding for the period. Diluted EPS is computed by dividing net
income by the weighted average number of common shares and dilutive common stock
equivalents (stock awards and stock options) outstanding during the period.
Dilutive EPS reflects the potential dilution that could occur if options to
issue common stock were exercised into common stock. The following is a
reconciliation of the weighted average number of shares used in the Company's
basic and diluted per share computations.
Fiscal Year Ended
-------------------------------------------
February 2, February 3, January 29,
(In thousands) 2002 2001 2000
-------------------------------------------
Basic shares 21,355 20,813 20,321
Effect of dilutive stock options 401 755 868
-------------------------------------------
Diluted shares 21,756 21,568 21,189
===========================================
Certain options to purchase common stock were outstanding but were not included
in the computation of diluted earnings per share because the effect would be
anti-dilutive. For the fiscal years ended February 2, 2002, February 3, 2001 and
January 29, 2000, these options totaled 288,374; 241,049 and 46,036,
respectively.
IMPACT OF NEW ACCOUNTING STANDARDS In June 1998, the FASB issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which was
subsequently amended by SFAS Nos. 137 and 138 in June 2000. The adoption of
these standards did not have an impact on the financial position or results of
operations of the Company because the Company does not have derivative
instruments which require such valuation.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." The standard provides that intangible assets with finite useful lives
be amortized and that goodwill and intangible assets with indefinite lives not
be amortized, but rather be tested at least annually for impairment. The Company
will adopt the standard in fiscal 2002. Beginning in fiscal 2002, the Company
will stop the amortization of goodwill with a net carrying value of $4.2 million
for a net annual reduction in amortization of $162,000. The Company has
evaluated such goodwill under the specified transitional impairment test and
does not believe such evaluation will result in an impairment loss.* The net
carrying value of other intangible assets included in other assets was $731,000.
Amortization expense related to these assets in fiscal 2001 totaled $132,000.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The Company does not believe the adoption of this
statement in fiscal 2002 will have an impact on its consolidated financial
statements.*
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Long-Lived Assets," which addresses accounting for and reporting
of the impairment or disposal of long-lived assets that will be effective for
fiscal year 2002. The Company has determined that the adoption of SFAS No. 144
will have no impact on its financial position or results of operations.*
CPWM 33
<PAGE>
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
February 2, February 3,
(In thousands) 2002 2001
-------------------------
Land and land improvements $ 530 $ 530
Building and leasehold improvements 61,221 52,872
Furniture, fixtures and equipment 74,645 60,281
Facilities under capital leases 45,296 27,449
-------------------------
Total 181,692 141,132
Less accumulated depreciation and amortization (70,770) (62,438)
-------------------------
Property and equipment, net $ 110,922 $ 78,694
=========================
NOTE 3. OTHER ASSETS
Other assets consist of the following:
February 2, February 3,
(In thousands) 2002 2001
-------------------------
Deferred income taxes $ 4,500 $ 4,454
Lease rights and interests 3,146 3,146
Other intangibles 1,400 1,220
Other 4,027 4,521
-------------------------
Total 13,073 13,341
Less accumulated amortization (3,786) (3,261)
-------------------------
Other assets, net $ 9,287 $ 10,080
=========================
NOTE 4. LEASES
The Company leases certain properties consisting of retail stores, warehouses,
the corporate office and equipment. Store leases typically contain initial terms
and provisions for two to three renewal options of five to ten years each, with
renewal periods from 2002 to 2040 at the then-current market rates. The retail
store, warehouse and corporate office leases generally provide that the Company
assumes the maintenance and all or a portion of the property tax obligations on
the leased property.
34 CPWM
<PAGE>
The minimum rental payments required under capital leases (with interest rates
ranging from 8.1% to 12.7%) and noncancelable operating leases with an initial
lease term in excess of one year at February 2, 2002, are as follows:
<TABLE>
<CAPTION>
(In thousands) Capital Leases Operating Leases Total
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fiscal year:
2002 $ 4,038 $ 42,283 $ 46,321
2003 4,038 41,138 45,176
2004 4,038 39,347 43,385
2005 3,999 36,898 40,897
2006 3,989 35,909 39,898
Thereafter through the year 2040 55,966 155,518 211,484
-----------------------------------------
Minimum lease commitments 76,068 $ 351,093 $427,161
======================
Less amount representing interest (41,962)
----------
Present value of capital lease obligations 34,106
Less current portion (890)
----------
Long-term portion $ 33,216
==========
</TABLE>
Accumulated depreciation related to capital leases was $12.1 million and
$13.9 million at February 2, 2002 and February 3, 2001, respectively.
Depreciation expense related to capital leases is classified as occupancy cost.
For fiscal years 2001, 2000 and 1999 such depreciation expense was $964,000,
$1.2 million and $1.2 million, respectively. Interest expense related to capital
leases was $1.7 million, $1.8 million and $1.9 million for fiscal years 2001,
2000 and 1999, respectively.
Minimum and contingent rental expense, which is based upon certain factors such
as sales volume and property taxes, under operating and capital leases and
sublease rental income are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------
February 2, February 3, January 29,
(In thousands) 2002 2001 2000
-----------------------------------------
<S> <C> <C> <C>
Operating leases:
Minimum rental expense $ 36,671 $ 28,488 $ 22,732
Contingent rental expense 751 981 937
Less sublease rental income (1,137) (1,070) (1,281)
-----------------------------------------
Total $ 36,285 $ 28,399 $ 22,388
=========================================
Capital leases -- contingent rental expense $ 1,119 $ 1,047 $ 1,072
=========================================
</TABLE>
Total minimum rental income to be received from noncancelable sublease
agreements through 2011 is approximately $3.6 million as of February 2, 2002.
CPWM 35
<PAGE>
NOTE 5. REVOLVING LINE OF CREDIT
The Company has an unsecured revolving line of credit agreement with a bank. The
agreement allows for cash borrowings and letters of credit up to $25.0 million
from January 1, 2002 through the expiration date of June 1, 2002. Interest is
paid monthly based on the Company's election of the bank's reference rate minus
0.75% (4.00% at February 2, 2002) or IBOR/LIBOR plus 0.9%. The Company is
subject to certain financial covenants customary with such agreements. At
February 2, 2002, the Company had no outstanding borrowings under the line of
credit and $8.2 million outstanding under letters of credit. Interest expense
under borrowing arrangements was $172,000, $167,000 and $132,000 for fiscal
years 2001, 2000 and 1999, respectively.
The Company has received two proposals for an unsecured credit facility to
replace the agreement expiring June 1, 2002. The terms of each of the proposals
provide up to a maximum of $75 million in available credit. The Company
anticipates it will be subject to certain financial covenants customary with
such agreements.
NOTE 6. INCOME TAXES
The provision for income taxes consists of the following:
Fiscal Year Ended
----------------------------------------
February 2, February 3, January 29,
(In thousands) 2002 2001 2000
----------------------------------------
Current:
Federal $ 10,788 $ 13,442 $ 12,408
State 1,894 2,517 2,603
----------------------------------------
Total current 12,682 15,959 15,011
----------------------------------------
Deferred:
Federal 422 (1,788) (2,074)
State (188) (315) (351)
----------------------------------------
Total deferred 234 (2,103) (2,425)
----------------------------------------
Provision for income taxes $ 12,916 $ 13,856 $ 12,586
========================================
The differences between the U.S. federal statutory tax rate and the Company's
effective tax rate are as follows:
Fiscal Year Ended
----------------------------------------
February 2, February 3, January 29,
2002 2001 2000
----------------------------------------
U.S. federal statutory tax rate 35.0% 35.0% 35.0%
State income taxes (net of U.S.
federal income tax benefit) 3.3 4.0 4.4
Non-deductible expenses 0.2 0.3 0.3
Other 0.5 (0.3) (0.7)
----------------------------------------
Effective income tax rate 39.0% 39.0% 39.0%
========================================
36 CPWM
<PAGE>
Significant components of the Company's deferred tax assets and liabilities are
as follows:
--------------------------
February 2, February 3,
(In thousands) 2002 2001
--------------------------
Current deferred tax asset (liability):
Deductible reserves and other $ (39) $ 241
Long-term deferred tax asset (liability):
Deferred rent 3,154 2,963
Capital leases 12 (860)
Lease rights (484) (549)
Depreciation 922 1,827
Deferred compensation 546 414
Other 350 659
--------------------------
Total 4,500 4,454
--------------------------
Net deferred tax assets $ 4,461 $ 4,695
==========================
NOTE 7. EQUITY AND STOCK COMPENSATION PLANS
SHAREHOLDER RIGHTS PLAN Each outstanding share of common stock has a Preferred
Share Purchase Right (expiring on June 30, 2008) which is exercisable only upon
the occurrence of certain change in control events.
OPTIONS The Company currently has options outstanding under two employee stock
option plans: the 1994 Stock Option Plan (1994 Plan) and the 1995 Stock Option
Plan (1995 Plan). The 1994 Plan permitted the granting of options to employees
to purchase up to 1,940,976 shares of common stock at prices ranging from 85% to
100% of fair market value as of the date of grant. Options are exercisable over
ten years and became fully vested upon the Company's initial public offering in
April 1996. Upon approval of the 1995 Plan, the 1994 Plan was terminated except
for options then outstanding.
The 1995 Plan permits the granting of options to employees and directors to
purchase, at fair market value as of the date of grant, up to 4,718,006 shares
of common stock, less the aggregate number of shares relating to options granted
and outstanding under the 1994 Plan (821,120 at February 2, 2002). Options are
exercisable over ten years and vest as determined by the Board of Directors,
generally over three or four years. A 350,000 increase in the number of shares
of common stock reserved for issuance was approved by the Board of Directors in
February 2001 and by shareholders in June 2001.
On March 13, 1996, the Board of Directors approved the 1996 Director Stock
Option Plan (Director Option Plan) which was last amended by the shareholders in
June 2000. The Director Option Plan permits the granting of options to
non-employee directors to purchase up to 253,675 shares of common stock at fair
market value as of the date of grant. Options are exercisable over ten years and
vest as determined by the Board of Directors, generally over four years.
CPWM 37
<PAGE>
A summary of activity under the previous option Plans is set forth below:
Weighted
Average
Exercise
Shares Price
----------------------
Outstanding at January 30, 1999 (462,690 exercisable
at a weighted average price of $6.89) 1,853,621 $ 9.36
Granted 644,509 22.27
Exercised (576,035) 8.69
Canceled and expired (202,918) 14.96
----------------------
Outstanding at January 29, 2000 (366,508 exercisable
at a weighted average price of $8.02) 1,719,177 13.80
Granted 623,137 19.72
Exercised (467,685) 10.97
Canceled and expired (143,106) 19.51
----------------------
Outstanding at February 3, 2001 (659,880 exercisable
at a weighted average price of $13.89) 1,731,523 16.21
Granted 1,000,532 22.60
Exercised (527,889) 11.43
Canceled and expired (234,063) 20.56
----------------------
Outstanding at February 2, 2002 1,970,103 $ 20.23
======================
The following table summarizes information about the weighted average remaining
contractual life (in years) and the weighted average exercise prices for stock
options both outstanding and exercisable as of February 2, 2002:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ---------------------------------------------------------------- --------------------------
Number Remaining Number
Exercise Price Range of Shares Life (Yrs.) Exercise Price of Shares Exercise Price
- ---------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
$ 2.56--$ 2.64 21,871 3.2 $ 2.60 21,871 $ 2.60
5.03-- 7.00 88,629 4.3 5.79 88,629 5.79
8.00-- 10.72 116,839 5.4 10.16 116,839 10.16
13.11-- 19.19 542,983 7.6 16.09 188,442 15.38
20.00-- 27.17 981,682 9.1 22.71 131,111 23.76
31.13-- 33.81 218,099 7.4 32.44 155,395 32.56
---------------------------------------- --------------------------
1,970,103 8.0 $ 20.23 702,287 $ 18.27
======================================== ==========================
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN On March 13, 1996, the Board of Directors approved
the 1996 Employee Stock Purchase Plan (Purchase Plan). A total of 675,000 shares
have been authorized for issuance under the Purchase Plan, of which 565,319
remain available for issue as of February 2, 2002. Employees who work at least
20 hours per week and more than five calendar months per calendar year and have
been so employed for at least one year are eligible to have a specified
percentage (not to exceed 10%) of each salary payment withheld to purchase
common stock at 90% of its fair market value as of the last day of the purchase
period. During fiscal 2001, 2000 and 1999, employees purchased approximately
16,417; 15,768 and 9,332 shares, respectively, of the Company's common stock
under the Purchase Plan at weighted average per-share prices of $21.65, $24.08
and $26.70, respectively.
38 CPWM
<PAGE>
ADDITIONAL STOCK PLAN INFORMATION The Company continues to account for its
stock-based awards using the intrinsic value method in accordance with APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and its related
interpretations. Consequently, no compensation expense has been recognized in
the financial statements for employee stock arrangements.
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes a fair
value method of accounting for stock options and other equity instruments. SFAS
No. 123 requires the disclosure of pro forma net income and earnings per share
as if the Company had adopted the fair value method. For determining pro forma
earnings per share, the fair value of the stock options and employees' purchase
rights were estimated using the Black-Scholes option pricing model with the
following assumptions:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
February 2, February 3, January 29,
Stock Options 2002 2001 2000
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life after vesting (in years) 1.8 1.8 1.8
Expected volatility 62.5% 65.0% 63.0%
Risk free interest rates 4.4% 6.4% 5.4%
Weighted average fair value per share granted $12.10 $11.22 $12.35
Expected dividends -- -- --
</TABLE>
The Company's calculations are based on a multiple option approach and
forfeitures are recognized as they occur. Had compensation cost for these stock
option and stock purchase plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the methods of SFAS No.
123, the Company's net income and earnings per share would have been reduced to
the pro forma amounts indicated below:
Fiscal Year Ended
---------------------------------------
February 2, February 3, January 29,
(In thousands, except per share data) 2002 2001 2000
---------------------------------------
Net income:
As reported $ 20,202 $ 21,672 $ 19,685
Pro forma 16,382 17,981 17,724
Basic net income per share:
As reported $ 0.95 $ 1.04 $ 0.97
Pro forma 0.77 0.86 0.87
Diluted net income per share:
As reported $ 0.93 $ 1.00 $ 0.93
Pro forma 0.75 0.83 0.84
CPWM 39
<PAGE>
NOTE 8. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan for employees who meet certain service and age
requirements. Participants may contribute up to 25% of their salaries to a
maximum of $11,000 per year or participants age 50 or older may contribute up to
100% of their salaries to a maximum of $12,000 per year. The Company matches 50%
of the employee's contribution, up to a maximum of 4% of base salary. The
Company contributed approximately $442,000 in fiscal 2001, $328,000 in fiscal
2000 and $105,000 in fiscal 1999.
In addition, a non-qualified deferred compensation plan is available to
certain employees whose benefits are limited under Section 401(k) of the
Internal Revenue Service Code. Compensation deferrals approximated $685,000 for
fiscal 2001 and $514,000 for fiscal 2000.
NOTE 9. COMMITMENTS AND CONTINGENCIES
The Company estimates that fiscal 2002 capital expenditures will approximate
$26.5 million.* In addition, the Company has arranged for approximately $4.5
million of equipment purchases for a new distribution center to be financed
under a capital lease arrangement.*
The Company is involved in litigation, claims and assessments incidental to
its business, the disposition of which is not expected to have a material effect
on the Company's financial position or results of operations.* It is possible,
however, that future results of operations for any particular quarterly or
annual period could be materially affected by changes in the Company's
assumptions related to these proceedings.* The Company accrues its best estimate
of the probable cost for the resolution of claims. When appropriate, such
estimates are developed in consultation with outside counsel handling these
matters and are based upon a combination of litigation and settlement
strategies. To the extent additional information arises or the Company's
strategies change, it is possible that the Company's best estimate of its
probable liability in these matters may change.*
40 CPWM
<PAGE>
INDEPENDENT AUDITORS' REPORT
BOARD OF DIRECTORS AND SHAREHOLDERS
COST PLUS, INC.
OAKLAND, CALIFORNIA
We have audited the accompanying consolidated balance sheets of Cost Plus, Inc.
and subsidiaries (the "Company") as of February 2, 2002 and February 3, 2001,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the three fiscal years in the period ended February 2,
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cost Plus, Inc. and
subsidiaries as of February 2, 2002 and February 3, 2001 and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended February 2, 2002 in conformity with accounting principles generally
accepted in the United States of America.
/s/ Deloitte & Touche LLP
San Francisco, California
March 15, 2002
<PAGE>
DIRECTORS, OFFICERS AND CORPORATE DATA
Directors
Murray H. Dashe
Chairman, Chief Executive Officer and President, Cost Plus, Inc.
Joseph H. Coulombe/1/
Independent Management Consultant
Barry J. Feld/2/
President, Chief Executive Officer, PCA International, Inc.
Professional Photography Service Firm
Danny W. Gurr/1/
President, The Quarto Group, Inc.
Illustrated Book Publisher
Kim D. Robbins/2/
Director of Product Development, Jack Nadel, Inc.
Direct Response Marketing Agent
Fredric M. Roberts/2/
President, F. M. Roberts and Company, Inc.
Investment Banking Firm
Thomas D. Willardson/1/
Independent Financial Consultant
/1/ Member of the Audit Committee of the Board of Directors.
/2/ Member of the Compensation Committee of the Board of Directors.
Corporate Data
Corporate Headquarters
Cost Plus, Inc.
200 4th Street
Oakland, CA 94607
www.costplusworldmarket.com
Annual Report (Form 10-K)
A copy of the Company's fiscal 2001 Annual Report on Form 10-K as filed with the
Securities and Exchange Commission is available to shareholders by contacting
the Investor Relations Department at the address above or by calling (510)
893-7300, ext. 3003.
Transfer Agent and Registrar
Bank Boston
c/o EquiServe, LP
Boston, MA
(781) 575-3120
Independent Auditors
Deloitte & Touche LLP
San Francisco, CA
Corporate Counsel
Wilson Sonsini Goodrich & Rosati
Palo Alto, CA
Senior Officers
Murray H. Dashe
Chairman of the Board, Chief Executive Officer and President
Gary D. Weatherford
Executive Vice President, Operations
Michael J. Allen
Senior Vice President, Store Operations
Joan S. Fujii
Senior Vice President, Human Resources
Stephen L. Higgins
Senior Vice President, Merchandising
John J. Luttrell
Senior Vice President and Chief Financial Officer
Judith A. Soares
Senior Vice President, Cost Plus Management Services, Inc.
Officers
Jane L. Baughman
Vice President, Financial Planning, Treasurer and Corporate Secretary
Gail H. Fuller
Vice President, Divisional Merchandise Manager, Trend Director
Lisa J. Griffin
Vice President, Planning and Allocation
Patricia A. Juckett
Vice President, Marketing and Advertising
Cliff A. March
Vice President, Information Services
Clay E. Selland
Vice President, Controller
[PHOTO]
Our new distribution center in Windsor, Virginia.
42 CPWM
<PAGE>
Cost Plus World Market Across the Country
One Hundred Fifty-three Stores Nationwide*
Arizona San Mateo Michigan Oregon
Chandler Santa Ana Ann Arbor Clackamas
Mesa Santa Barbara Auburn Hills Eugene
Peoria Santa Cruz Kentwood Gresham
Phoenix (2) Santa Rosa Lansing Portland
Scottsdale (2) Sherman Oaks Portage Tigard
Tucson (2) Stockton Rochester Hills
Temecula Shelby Township Texas
California Thousand Oaks Troy Austin (4)
Bakersfield Torrance Westland Dallas
Brea Valencia Fort Worth
Citrus Heights Vallejo Missouri Grapevine
City of Industry Walnut Creek Brentwood Houston (5)
Colma Woodland Hills Chesterfield Plano (2)
Concord Sunset Hills San Antonio (3)
Escondido Colorado
Fremont Aurora Nebraska Virginia
Fresno Denver (2) Omaha Arlington
Glendale Thornton Fairfax
La Jolla Nevada Falls Church
La Mesa Georgia Las Vegas (2) Kingstowne
Lakewood Atlanta (4) Reno Sterling
Los Angeles (2)
Marin Idaho New Mexico Washington
Mission Viejo Boise Albuquerque Bellevue
Modesto Santa Fe Lynnwood
Mountain View Illinois Seattle
Northridge Aurora North Carolina Spokane
Oakland Chicago (2) Cary Tacoma
Oceanside Evanston Charlotte (3) Tukwila
Ontario Gurnee Durham Woodinville
Oxnard Kildeer Greensboro
Palm Desert Northbrook Winston-Salem Wisconsin
Pasadena Oak Brook Madison
Pleasanton Orland Park Ohio
Roseville Schaumburg Akron *As of April 2, 2002
Sacramento Skokie Avon
San Diego St. Charles Cincinnati (4)
San Dimas Columbus (3)
San Francisco Indiana Mayfield Heights
San Jose (2) Carmel Mentor
San Luis Obispo North Canton
North Olmsted
CPWM 43
<PAGE>
1505-AR-2002
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>12
<FILENAME>dex21.txt
<DESCRIPTION>LIST OF SUBSIDIARIES
<TEXT>
<PAGE>
Exhibit 21
Cost Plus, Inc.
List of Subsidiaries
<TABLE>
<CAPTION>
State of
Name Incorporation
---- -------------
<S> <C>
Cost Plus of Idaho, Inc............ Idaho.......
Cost Plus of Texas, Inc. Texas.......
Cost Plus Management Services, Inc. California..
Cost Plus Marketing Services, Inc.. California..
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>13
<FILENAME>dex23.txt
<DESCRIPTION>INDEPENDENT AUDITORS' CONSENT
<TEXT>
<PAGE>
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
333-56975, 333-67441, 333-83561, 333-45710 and 333-68322 of Cost Plus, Inc. and
subsidiaries on Form S-8 of our report dated March 15, 2002, incorporated by
reference in this Annual Report on Form 10-K of Cost Plus, Inc. and
subsidiaries for the year ended February 2, 2002.
San Francisco, California
May 1, 2002
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----