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ra-tJa . CITY OF COLLEGE STATION
~.~. ' LEGAL DEPARTMENT
' Post Office Box 9960 ' 11 01 Texas Avenue
College Station, Texas 77842-0960
(409) 764-3507
M E M 0 RAN D UM
TO: Jim Callaway, city Planner
FROM:
Cathy Locke, City Attorney ~
Wolfe Nursery Contract
RE:
DATE:
October- 6,1992
Attached for your review is theiniti-aldraft of the proposed
contra.ct Development Agreement with Wolfe Nursery.
CL:jls
Attachment
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OUTLINE FORDEVELOPl\1ENT AGREEMENT
WOLFE NURSERY
1. Dedica.tionof minimum reservation or development of improvements from WPC Master
Plan to be. deferred. Deferral to be:
A specific period, such as three years; said period' shall pro,vide for extensions for4
variables: >> j'
Development or dedication to occur sooner if Owner or. City · acquires property on
other ~ide of creek;
Deferral of dedication must be executed by current property owner and must be
bin~ing on future owners;
Minimum reservation line. to be based on, elevations from Nat~an Mier study.
Alternative study may beu~ ifacceptable to City Staff or Coum~il..
2. Allowable'forOwner to build/own facilities within minimum .reservation: if such facilities
meet standards and intent of WPC MasterPlan. Construction within Minimum
Reservation requires dttf$'lopment so that the private developme~t can ~Flate to the park
d~y~loPfl':l~nt i~"a ITlaHrler that _is advantageous to both (public and private). This will
require: , " '
Maintaining a pedestrian walkway to preserve the physical continuity of the linear
park setting;' .
Providing for public pedestrian. access. (by dedication of an .easement or similar
instrument) through the private development to preserve the continuity of the park
function;
...>6
Maintaining; ;a1kway lighting and landscape d~velopmentina setting consistent with
the development"'of"WolfPell' Creek Park; -,.:,
Privately own~areas to be privately maintained.
3. Subordination of Dedication: '
The, ,dedication, of the Minimum Re.servation Line shall require the City to
subordinate its position in'the real property within said area for any improvements
which Developers undertake to improve for Developers' lenders and assigns. This
subordipatiqn. shall inure to the benefit of Developers' successors and Lenders of
Record.' .,'1
ref: 3359
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2. , ' Allowable' for Owner to build/own facilities within, minimum
reservati()fl if such facilities meet standards and intent ofWPC Master
Plan. Specific facility to be built is restaurant. Gonstructionwithin
MinimuIll Reservation requires development so that the private ,.
development can relate to the park development in a manner that is
advantageous" to both (public and prtvate}. This Will require:
Maintaining a "pedestrtan walkway to preserve the physical
continuIty oftfie linearparkq setting;
Pl"ovidirtl[forpubIic pedestrian access(by dedication of an
easemen't or similar mstrument) throul[li the private development
to preserve the continuity of the park fUnction;
Maintainingwalkwax lit!hting and landscaJ1~_developmentin a
setting ' consistent Wlth'fhe development o:fWolf Pen Creek Park.
Privately .owned, areas to 'be privately maintained.
J
"
CITY OF COLI...EGE STATION
Post Office Box 9960 1101 Texas Avenue
College Station, Texas..71842-096Q
(409)764-3500
December ..11.,....1992
Mr . Paul... ... Clarke
Cla.rke&Wyndham,Inc.
36'08E. .' .29th
Bryan, . Texas.... '.11802
RE:Clarke and Wyndham'.Oevelppment .Agreement
Dear Mr.
IWa$prov~d.ed.acopyofyol.lrlett.er ,of DecTmber .8,199.2 ,by
Jim ~al1~wa.y. .li1!Clsked~hat.I~espond,to,YOQr;r:eque$tthatwolfe
Nurse:ry .not . becQn.sidereda.sUqCesso17int.~tle ,under., . the Develop-
mentAgreement7 '" , HedpesagrT~wi'thtlratrequ.est>tothe ,extent.
that ,it ...ClPpliesol'lly, .t.oi~l'l'eCl;r:eClincluded\Vithin ,thesite:plan
apP;roved'bY 'thTD~si.~n~Tvie\\7130a:r:<3.iQnoctober19, ,.1992,andt.he
plc\nning . and ,z ~l'lil'l<.1(t()llllllissiQnOnNpvembTr5" ..199.2. ,In the event
that.WolfeNur~ery "5>~m~t5>a .,fSl.l:bst.it~te ..site .plClntha,t. includes
~Ilyoftl1e ,.minimumrE!:;ervat.ipn, . ,it.wi..ll.beconsi.derE!dliJnder the
Developme.nt AgTe~1ll.eIl~i. ,'];'hisagreement..willcontinuei.l'l, full
force and effect to all(,')fthe .remai.ni.ngproperty>inthe sutton
Place... .Subdivision. I.hope :thatthis answers all of' your
questions.
Yours very truly,
~,--
Cathy Locke
City Attorney
CL:di
cc: Jim
121092
dilalclarke2
:(;Jv
tjid
From:
To:
Date:
Subject:
Natalie.Ruiz
hcargill
7/18/97 4:06pm
Wolfe Nursery Site
I just spoke with Jim,Wallace in Houston and he is purchasing the Wolfe
Nursery site at Holleman and the Bypass. He had some questions concerning the
development agreement for the Sutton Place subdivision and how it pertains to
the redevelopment of the site. He sa.id that he's seen the develo,pment
agreement but he is still not sure if it is binding to the new owner. He has
a letter written by Cathy Locke that makes .himthink it may, not apply to the
new owner.
I told him that the development agreement references Wolfe Nursery's "heirs
and assigns" and that we would assume thenew.owner is responsible for the
conditions outlined in the devil agreement. He asked that you contact his
attorney to discuss the matter. Her name'is Sherrie Thomas at, (713) 840-7710.
I told him that I would give you the message.
Let me know if you need additional information. I think you guys have a copy
of the developrnentagreement and the correspondence from Cathy that he is
referring to. Thanks in advance for your help!
ee:
jcallaway, jkee, klaza, svolk
CITY OF COLLEGE STATION
Post Office Box 9960 . ' . 1101 Texas Avenue
College Station, Texas TIS42-0960
(409) 764..3500
MEMORANDUM
TO:
FROM:
DATE:
Planning and Zoning Commission
Jane Kee, Senior Plannr
RE:
October 26, 1992
Wolfe Nursery Project Located In The WPC District
This is the second project to come before the Co:rnmission ~i~q~1 ~d~pt~oh!1
of the Wolf Pen Creek Zoning District. The first was averY!, ~mq' :R~dJl~~ti
that was never built. , ThiS",isthe first large scale projeytt il n ,~ilqei
locatedat the comer of Holleman and the East Bypass.. It i"'1~ ppn~~~~ G>~
an . enclosed building, several greenhouses and an 1 outdi([)~r ~ll~deil
structure. '
By ordinance the P&Z acts as the approving body for ~C;P~~j~ct~ Wth.i
recommendation from the Design Review Board. The D~ y~n!~~~ts ipf! ~hei
3 members . of the Project Review Committee plus 4appo~nted I werqJ)~!rs .11
Presently these appointed members are David BrpGh~i! i ~m~pi1he~
kIlowle dge able in , ,aesthetic judgment), Julius Gribou taichlt~ft)j'!ii .~krtj
Munroe (land owner inthedistrict) and Steve Hansen (b~s~e~sllp~~s~n).ii
The factors that the DRB, and thus the P&Z, review each p~oje~i ifo~!li;a~~: Ii
! , II I I; ) 1.1
! i !' :: i !
i : :! !:I !
1. Conformance with the City's land use and develop~'H~nt,~ptle~
2. Logic of Design
3. Exterior space utilization
4. Architectural character
5. Attractiveness
6. Material selection
7. Harmony and compatibility
8. Circulation - vehicular and pedestrian
9. Maintenance aspects
The Design Review Board (DRB) held three meetings with architects!
representing Wolfe Nursery. The Board recommends approval of the~ite
and landscape plan. as most recently presented to them. The notes, of;
that review are included in your packet.
.,
MEMORAJNDUM
October 19, 1992
SUBJECf:
Wolfe Nursery, Inc., CharlesE.Smith
6500W Freeway, Ft Worth,TX 16116
Clarke & Wyndham, Paul Clarke I Pat Siegert
3608 East 29th St,. Bryan, TX 11802
Design Review Board: .. .. (~.., .. .'.-'1
Jane Kee, Senior. Planner "",- ,.,.~
Veronica Morgan, Assista " .. . to the City Engineer
Mike Lane, P & Z. Commissioner
David Brochu, Chairman
Julius Gribou
Others Attending:
N atalieThomas, Planning. Technician
Deborah Keating, Project Engineer
Samantha. Smith,. Engineering Assistant
Tony Michalsky, .. Electrical. Operations Co.ord
George Spain, Fire Inspector
Steve Beachy, Parks Director
Coy Perry, Building Official
Ed Hard, Transporta tionPlanner
PARKING. . LOT PLAN - Wolfe Nursery; . (third review) to be located on
the so.uthwest quadrant of the intersection of Holleman Drive and the East
, By PasS', lot 1 and part of lot 2 in the Sutton Place Subdivision. (92~420)
TO:
FROM:
The Wolf Pen Creek. DesigpReview Board (PRE). reviewed .the above mentioned
parking lot plan Wednesday,pct9ber. 14, 1992. The Board agreeq, that the revised plan
addressed the. major .concernsex'pressed by the Board at the p ryvio us meetings. The
site plan as submitted is mCJ}:-eon target with the jdeaLloQk. for priYate development in
the Wolf Pen Creek Corridor. . Although the plan should contain · more technical
information prior to. Jinalapproval, the Board agreed. to forward ... the .., plan to the
Planning and Z0l1ingCol.11111ission for furtherreyiew.. The applicant informed. the Board
that some of the ,. elemel1ts shown on the site plan may not. beyconomically. feasible.
Cost" estimates on the proposed pavers were.... much higlJef th~n, anticipateq. The
applicant requested to ,look at alternatives such as stamping and dying of concrete or
exposed aggregate to defin.e the pedestrian crosswalks. The following. comments were
made by the various reviewing agents:
PRCReport
Wolfe Nursery
Case #92-420
Page 2
DESIGN REVIEW BOARD:
Shdwproposedchangeson the revised site plan to be reviewed by the Planning
andZoningeJommission. ""Suggested that.eutbacks not be made along the
perimeter of the site, and instead possibly cutback around the shade structures.
Since the pavers are not being used in the park area, it is not essential that they
be used in this development; however, the pavers do have a great impact on the
site and help defipe the pedestrian walkWays and', br~ak ,up the monotony of, the
~~aps~ of concrete. .' ,Encourag~dthat alternatives be, ,researched to provide
basica.lly the same impact and definition of the walkWays.
Sllggested that the siding material being used in place of the stucco facade be
presented at the Planning and Zoning Commission meeting.
ThecOIlsistentl11aterial .and coloring along the Holleman side of the building is
Illl1chmore acceptable; however, the varied elevations along the roof line are not
necessary.
'Fhe proposedsignage iSll1uch more acceptable and isa focal point for the site.
PLANNING:
If the proposed>monumentsignis built within the low profile' sign specifications, a
seco~d Jow , profile ,sign . can be ,installed' as ,long as the. two signs maintain a 150'
separfltion. ,If the proposed . monument sign is not built, within the ,low. profile sign
sPtcifications,a second sign will not be allowed · on this. site. One directional, sign
locat~d .at the entrances is 'allowed as long as it is no larger than 3 square feet
with 1.10.. more than . one-half of the sign containing copy.
ELECfRICAL:
Ul1derground ,electrical service ,is, required for this '.,site. ,The developer is
re~p()nsible for thecostdifferentiaJbetween underground and electrical service.
Submit load data, transformer location, service size, service location and a letter
requesting , undergrounci .,service to Electrical Operations Coordinator Tony
Michalsky at {409} 764-3660.
Show.'. existing. utility . poles.
Provide. a 20' utility easement and conduit from the transformer to the rear
property'. line. The developer is responsible for. everything . from the transformer
to. . the meter.
CoordiIlateJighting requirements pertaining to the entrance drive along Highway
6. with Electrical Operations Coordinator Tony ,Michalsky. ;
" .
..
PRC Report
Wolfe Nursery
Case #92-420
Page 3
G.T.E.:
Supply. .one 211. conduit from. the building termination tQ the pedestal located along
Holleman. Coordinate details with G.T.E. Representative Laverne Akin at (409)
821-4723.
SUBMIT 10 COPIES .oPTHE.REVISED SITE PLAN BY OCTOBER 28, 1992 TO
BE REVIEWED BY STAFF . AND INCLUDED IN THE. PLANNING AND ZONING
COMMISSION PACKETS FOR THE MEETING OF NOVEMBER 5, 1992.
"' .....'.
MEMORAN.DUM
September 23, 1992
Wolfe Nursery, Inc., Charles E. Smith
6500 WFreeway,FtWorth, TX76l16
Clarke & Wyndham, Paul Clarke 1 Pat Siegert
3608 East 29th St, Bryan,TX 778
FROM: Design Review . Board:
Jane Kee,Senior Plan' e
V eronicaMorgan,Assis ant 0 the City Engineer
Mike Lane,P. & Z Com · sioner
David Broqhu, Chairman
Julius Gribou
Others Attending:
Natalie . Thomas, Planning Technician
Samantha Smith, Engineering Assistant
Shirley Volk,Development Coordinator
Tony Michalsky,. Electrical Operations Coord
Deborah Keating, Project Engineer
George Spain, Fire Inspector
Claude Cunningham, CSISDRepresentative
Kean. Register, Lone Star Gas Representative
Don Fazzino, Lone Star Gas. Representative
Laverne Akin, GTE Representative
Jim Smith, Sanitation Superintendent
TO:'
SUBJECf: PARKING. LOT PLAN- Wolfe Nursery; (second review) to be located on
the southwest quadrant of the intersection of Holleman Drive and the East
ByPass, lot land part of 10t2 in the SuttonPlaceSubdivisiol). (92-420)
The Wolf Pen Creek Design Review Board (DRB) reviewed the above mentioned
parking .lot plan Wednesday, September 23, 1992. The. Board reviewed the original plan
on September 2, 199f aIldagreed that the propo~ed use oLa.nursery ,was acceptable
and desirable. in the 'WolfPeIl CreekzoIlingdistrict;howeverthesiteplan as submitted
wasinqomplete and did not indllde enough inforlUation fora technical review or review
of the Wolf Pen. Creek Design Standard~. At. the September 23, 1992 meeting, the
Board determined . that all concerns expressed.. at . the first meeting .had not been
addressedan.d the site plan was incomplete. The following comments and concerns
were expressed by.theBoard:
j,"'l
,.
DRB Report
Case #92-420
Wolfe Nursery
Page 2
DESIGN REVIEW BOARD:
General Concerns
The proposed. planted island located along the west drive that screens the guest
pickup, and.. delivery ,area, is effective and, . helps address the Board's concerns
pertaining to theview'ofthe . project from Holleman.
The elevation drawings., are not to scale. and are very rough in terms of an actual
depiction ,of the project.,. The trees are depicted' to be 'much larger than actual
size. When the site plan is reviewed by the Planning and Zoning Commission,
more realistic elevation drawings should be presented.
In general, the .landscaping design lacks creativity and initiative. The screening
along the south .side of the 'development which .faces the creek, is inadequate.
The proposed 1 gallon junipers on. 5' centers will not provide an effective screen.
The landscape plan of this area is misleading showing a solid band of green while
in reality, the proposed 1 gallon junipers will. never touch one another. The
plants should be placed closer together ora larger plant should be used.
The elevation drawings show ivy growing along the chain link fence; however, this
is not addressed on the landscaping plan. The proposed ivy should be .of an
evergreen type material 'and incorporated into the screening of the dumpster
area.
The proposed rowofabelias along the East Bypass serve no practical purpose,,"'"""'"
and are monotonous. The Board suggested that the hedge be removed and use
the funds from'this planting to, enhance other areas of the site or to place accent
landscaped. areas. . Fllong' the East ByPass instea.d of"a solid hedge. This spot
treatment could also be implemented along Holleman with the use of berms and
elevation changes. The proposed screening along Holleman is not effective.
The revised site plan 'lacks the ,elevation changes,. . retaining walls and other park
features<discussed during the previous review. The proposed pavers could be
used in the' crosswalk areas.
The architecture of the building ignores the fact that this is a corner site. The
north side of the building should include features from the front of the building
such as the use of the same stucco material, varying the elevation of the top of
the building, using the same colors and even possibly placing the same facade
from the front of the building on the Holleman side. The proposed metal
paneling for the facade would have to b.e approved by the Board.
Submit colored elevation drawings of the sign. The sign should incorporate
textures, colors and designs from the architecture of the building to tie the two
together. The pylon sign shown in the photograph does .not accomplish this.
This area could be a focal point of the development if the sign were enhanced
with landscaping elements including berms and retaining walls. The crosswalk
areas could ,also .betied into this corner through pavers and other improvements.
"If' "
DRB. Report
Case .,.#92-420
Wolfe Nursery
Page 3
Suggested that aPr>licant . provide drawings of certain key areas of the site such as
the dumpster, sign, crosswalk areas and any .otherkey landscaped areas to show
more detail.
The. two triangular shaped parking jslands located on the north side of the site
where the ' crosswalk enters, the parking lot, could integrate brick pavers as
allowed by the landscaping ordinance or have lands.caping. The islands cannot be
concrete.
The north. side of. the building where electrical equipment will be located should
be effectively scre.ened from Holleman, as should any mechanical equipment.
Technical Concerns:
Provide a parking legend on the site plan.
Show parking island dimensions..
Submit details on the shade structure.
The note pertaining to lighting should ,b.e made more clear to state that the
proposed fixtures will. match those being used in the park.
Show sidewalk along Holleman and properly note the dimensions with respect to
pavement width and distance fromba.ck of curb.
Submit. more information on the proposed brick pavers such as color, material,
etc.
Raised . curb '. details will need .to .be added prior to building permit issuance.
Show the ownership of abutting parcels.
Show the 100 year floodplain if lo.catedon this site as per the 1991 FEMA maps.
G. T. B.:
Supply OIle 2"cQnduitfr0ll1. the building ,to. the pedestal located along Holleman.
Coordinate telephone service with <GTE Representative Laverne Akin at (409)
821-4723.
FIRE:
If the greenhouse is attached to the building, both structures must be fully
sprinklered. Coordinate details with Fire Inspector George Spain at (409) 764-
3705.
,~."
DRBReport
Case #92~420
Wolfe Nursery
Page 3
WATER/WASTEWATER:
Submit. minimum and maximum water flows to Operations Manager Dean Sharp
at (409) 764~3660.
Note that the. water and sanitary sewer service lines shown are public lines.
If the City. has ., to repair a public .. water or sanitary sewer service line and
landscaping is destroyed, it is the pro,perty owner's responsibility to replace the
landscaping shown on the site plan.
DRAINAGE:
Once the site.layout isdecided,.contact Project Engineer Deborah Keating at
(409) 764~3570. to schedule a meeting to discuss the drainage information
required for permitting.
BUILDING:
There is on~ extra handicap. parking space provided., This. space cannot be
completely.. deleted, hut can Qe '. designated as a regular parking space. The
reIl1ainingarea .could be.. used to enlarge a parking/island such as the triangular
shaped island located on the south side where ,the crosswalk enters the site.
SUBMIT 13 COPIES .OFTHE REVISED >SITE PLAN AND ALL ADDITIONAL
INFORMATION TO' ..,BEREVIEWED.BYSTAFFFOR COMPLETENESS PRIOR
TO SCHEDULING A THIRD DESIGN REVIEW BOAR.DMEETING.
MEMORANDUM
September 14, 1992
TO:
Wolfe Nursery, Inc., Charles E. Smith
6500 W. Freeway, Ft Worth, TX76116
Clarke..&Wyndham, Paul. Clarke fPat Siegert
3608 East.. 29th 8t, Bryan, .TX77802
FROM: Design Review Board:/ '
Jane. Kee, Senior Planne;r;~..
Veronica Morgan, Assisa to the City Engineer
Mike Lane, P& Z Com issioner
David Brochu, . Chairman
Steve Hansen
J uliusGribou
Bart Munro
Others Attending:
N atalieThomas,Pla.nningTechnician
Saman tha ..Snlith,Engineering<Assistant
Shirley VQlk,DevelopmentCoordinator
T.onyMichalsky,Electrical Operations. Coord
Deborah Keating, Project Engineer
George' Spain, Fire Inspector
SUBJECf: PARKING LOT PLAN .-Wolfe Nursery; to be located on the southwest
quadrant of the. intersection of Holleman . Drive. and ,the. East By Pass, lot 1
and part of lot 2 in. the Sutton Place Subdivision. (92-420)
The Wolf PenCr,eek Design Review Board (DRB) reviewed the above mentioned
parking lot plan ",ednesday, September 2, 1992. . The Board agteed that the proposed
use of a nursery was acceptable and desirable in the Wolf Pen Creekcorridor; however,
the site planas submitted was incomplete and did not include enough information for a
technical review .or review of ,. the Wolf ,Pen . Creek Design Standards. The following
comments and concerns were expressed by the Board:
PLANNING:
Parking for this develQpmentwill be figured ,as follows: ,1 space per 250 square
feet of enclosed. retail area and 1 space per 1000 square feet for outdoor retail
area.
ENGINEERING:
All proposed and existing utilities should be,'shown.
.,....e '/1i&
>:"
PR C Report'
Wolfe Nursery
Case #92-420
Page 2
GENERAL CONCERNS:
The. sitepla.n should address · the conditions listedintheW olfPen . Creek Zoning
Ordinance including landscaping, screening, signage and pedestrian accessways.
The site should be aesthetically pleasing from.. all directions; especially.the rear of
the building. and the side. that will fac~<the creek. Requested · elevati~ndrawings
from e.achsideof the development that will include the building, greenhouse,
shade area, landscaping, etc.
COl1cerned with the app~arance of a conyrete driveway surrounding this site and
isolating ,thisdeveloPll1ent from the. park. '. The parking .area and driyeway could
be reconfigured to incorporat~ and blend with the park area. Sugges~ed that the
architect incorporate features from the. park, .. such .as landscaping, retaining .walls
and pavers to help blend in with the park setting. (Parking lotlighting should be
shown 'on the.site plan 'and. match those 'used in the park.)
The proposed' screening of the chain link fence is inadequate. A more creative
approach should be used . to screen the proposed fencing.
The entire site could take on an Arboretium-typesetting where the planting
materials and features integrate with the retail stock.
Submit more inform.ationand details .on the proposed metal building.
SUBMIT .13CQPIES OF THE REVISED SITE PLAN AND ALL, ADDITIONAL
INFORMATION TO BE REVIEWED BY STAFF FOR COMPLETENESS PRIOR
TO SCHEDULING A SECOND DESIGN REVIEWBQARD MEETING.
08/26/92 13:54
S 817735 094S
SUNBEL T i NURSERY.,
02
-Ht,INON 'tNGINEEfUNG !NC ~~h:~"t,~-2B2"'$1$6
Au, 19 92 10 :}6No. 002 P. O~
~-iug 1 Y. ':f:.t 1 u...!~ NO. UlJ4 ,... U;l
August 4f. J992
TOz Uono"abl'H8101" & Cfty Council
'ROH'MhftPShhsltChairman. Planhfing& ZonitJgCommbsfcm
sua.)tC,.: Re$ultltl'l" Planning & Zon1nocomnrlss10nMt.tfno of Auoust 3
At .ftl.".tfngof AU9ust3, th, PlanntngaZoninvC(Jmnriss1on took actfon 0'1
the '011 owt PJg:
Puft1fc "'.rfnV=Zoning Case 92.55
Applicant: · 'lann1IJg.aTra"SP()~t<<tfO"DfP....tment
OESCAIPTJOH:
Requ.fttoam.nd<S.et,on 1-600CDef1nttfon'h Stctton2..Soo (PItr'lI1itted
US'S)lndSectfor'!IIUO.O(Off,.Streetpark1ngand Lo.ding). .Of . the 1JJflfnv
ord1naneetolm.ncfithe>d.tfnftfOnS,p'rmf.tttddbtr1ct,. and Plrktng
reqU 1 r.m.nt,fOt"nur'8rtlt. <and garden o,.nt,,.,.
APPItOVO, '-...J:..L.
STIPULATIONSr
fftc:oIMlOndtd,'or.ppt-o'lal. The cbange$ are und."ltn'd toryout" 1nfOrmltion.
Section 1..600 DEFINItIONS
DEHtElh -4"<11
.. TAILED t _
~
ew.. e illJtlon)
Nursery .An Istilblhhm ~,.,.~...~~,., diSplay,
JtQ1"a91 and Salt .. . IJJ · ,> · > . . . ... '. Dfl~rg~ .p ants, srubs l"dtl"l."
and .othermtte'rffftuse.t-~tnoot"oroYtdoor Phnt1n9s. (Revised
defin1t1on)
~.
08/26/92 13:55
Z 817 735 0948 SUNBELT NURSERY
03
Honor,b1tMayor& City Counc11
Zontn9CIse .....92...55
AU9ust~,1.992
PIVI2 of2
Sect 1 on · 2 - 500. · PERHITTED USES
a.t'd.n~e"terswoutdb..llow'dbyr1ght 1n the fo11owing zoning district.:
Rt'CBtlCtCE,C8-1,ll.1and~I..2.
NUY's't:i.swouldbell1ow8d by right 1n thl followin9 zOning ~1ltrictS% At
~.l tndL.a'f
NUrs'ri1~$..wouldbr.L.'1owedw1th a Specific '." Use P*rlltit i(SUP) in the
fol1ow.1ngzon1ngdistr1ct~: R,CB;lC, CE,C8.1 to-I and O.2~
(S.tRtvisldTabltot Permitted Uses)
Section 3-1100 OFF.STREET PARK!NGANO LOADING
~~~::~,~'-1f~.1'i'~~-!~J::~~l~r ~"BI ,JVl OQ,
'~I~~M~'~lr~.t\~~t,;~~I~~~~lir.:~~,~1.4f1 oo~. I~.I)'~' ,one ~D'CI
'CRCITYCOUNCILH.EETINQOF: August 24t 1992
MS/da
As of this date, the Cftyhas issued Development Permit #150 which permits work to
commence 011 site with the exception of the area within the fioodway.
In order to grant an unencumbered Development P~rmit for the Wolfe Nursery
development at SH6 and Holleman Drive you must acquire a variance to the
requirements of City Code Chapter 13, Section 5, Paragraph G (attached). The
procedure for obtaining avarianc~ is outlined'in Section 6: VARIANCES which is
attached for your, inforniation.Whenyou have submitted the required 'information we
will schedule your request for con:sideration by the Zoning Board of Adjustments as
soon as possible.
ClJ--ctoo
DEVELOPMENT PERMIT
PERMIT NO. 150
CASENO. 92-420
FOR AREASWImIN.THE SPECIAL. FLOOD HAZARD AREA
RE:CHAPTER 130FTHE'COLLEGE STATION CITY CODE
Lot 2 and Part of Lot 1 - Sutton Place 2.548 acres
SITE ADDRESS:
906 Holleman Drive
OWNER:
In accordance with your City policy,the developer shotild plan to furrrish and install,
in compliance with,City,'speCifications, all required, electrical G6hdJrit and pour the required
concrete pad for said 150kVA transformer. .', The electric layout <Irawing enclosed provides
details regarding the required number and sizes of conduit, installation depth, proposed
conduit locati()ns,rjserpole conduit requirements, etc; the transformer pad details should
be furnished when the dimensions of the transformer proposed to be used are known.
In accordance with the established policy of your City, the developer is responsible
. for reimbursing your City for the additional cost of an underground layout over a normal
overhead electric layout. As, in past instances, we recommend that this additional cost to
your City be determined on the basis of th~difference between your City's actual costs
incurred in installing the' proposed undergrotlI1d layout and the estimated cost of the most
Jimmy D.McCord,P.E.
President
nnrtih
ams.rioan
SigOS™
north american signs,incc.
Mailing Address: P.O. Box 30 . South Bend, IN 46624-0030
Shipping Address: 3601 WestLathrop -South Bend, IN 46628-4346
National Toll Free (800)348-5000
Fax #(219) 289-8118
Ph. (219) 234-5252
~~
July .8, 1993
Sabine ,Kuenzel
P.O. Box 9960
CollegeStat.ion,
TX 77842
Subject.
Wolfe.' Nursery, #792
6900 . East ... Bypass
College Station, TX
Dear Sabine,
Per our conversation < in June, enclosed is a comput.er color
graphipof. t.he . nort.h ej.evat.ion of ,t.he newW61fe Nursery st.ore. The
graphic shows the'.' set of channe).letters t.hatwe'd like to place on
the wall.
As you are aware, the side of the building was painted
Tealglo, per request of the Design Review Board. Standard Wol:fe
stor.es llsve< thesideelev..ations painted Townhouse Tan. Ift-he
elevat.ion1rlereTaninst.eadof .t.he Tealglo (a darkgr(:?~nJ+.i then a
set. of let. ters identical. t.o t.hose on t.he st.orefron.t. wou~~:''''~I~~been
appropriat.e for t.his. elevat.ion. The st.orefront let.~~J:"~.,:i~Clye ,a
t.urquoise face and thuswC)uld not., be visibleont.h~'f~frCl't.ipn
paint.ed Tealglo. Since th,eBoard. request.ed the dark~~m~.lnrJWj~ "~e
alt.ered t.he, color.' of t.he. proposed let.'t,ers ,so t.hat.t.~:f1)ji,J~.l.~.. }?e
visible. A sample of theplex material that. . will be. ~~~?i :'ifpr' .., t.he
face is enclosed. The style and'size of the proposed let.tfe'X"swill
be identical. t.o those on the st.orefront..
Also enclosed iea line drawi.ng of the 'proposed let t.ers.
A:fteryou have reviewed t.his information, would you call me t.o
discuss the sign permit?
Thank you for yourhe1p, Sabine.
Sincerely,
Cher....A. Madison
'.':Account Manager
U(!jta/ Cfioat#~~ WOM/~ W~"
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P1111111111111!!illillllliiliIIIIIIIltlllliiiiiiliili,1lll,liiiiiiilillliii
eUN6ELTNUR5ERY
GROUP, .'.lNC.
is, the leading specialty nursery retailer
insixmajormetropoUtan areas with 1.00
storest~atfeaturenur!;e,rystock. and
lawnar1d~arden · produc~.
O~igi.~aUyformedasawholly owned
subsidiaf)'~fPi~r 1. Imp?rm,lnc.,Suni)elt
operates under threeproAlinent retail
trade names tl1at have existed in their
markets for more that 30 years: Wolfe
Nur$eryinTe~as.. and()~lahoma,
NurserylandG(l~den Cen~ers in Califor-
nia, and TipTop Nurseries in Arizona.
Sunbelt'smi,ssi.onis to generate
profitable sales by fulfilling people's basic
desire to create morebeautiful,livable
homes, with plants, trees.; and gardens.
Sunbeltparticipates .1n this market as a
specialty retailer and innovator,offering
new ideas and merchandise that help
customers enjoy gardening activities and
enrich their lives.
Sunbelt's commitment to customers,
who are regarded as guests, <is to always
provide:
e 'Expert advice readily ,available from
trained ..associates
e Quality merchandise
.Productassortm.entsthat are deep,
broad and always . fresh
e Stores that are, ..clean,orderly .and
easy to shop
· .Prici ngthat is . fair .' and,. reasonable
· Cheerful customer service
FINANCIAL ~IGf.4LIGf.4T5
Year, ended January 31,
CONTENT5
A Letter From
the President .......... 2
From a Strong Foundation .. 4
Selected Financial Data ... 10
Management's Discussion. . 11
Balance Sheet, . . . . . . . . · · 15
Statement of Operations . .. 16
Statement of Cash Flows .. 17
Sta~ement of Changes in
Shareholders' Equity . . . . 18
Notes to Financial
State m e nts ........... 19
Reports of Independent
Accountants ...... ..' . .31
Stock Prices and Corporate
Information '. . . . . ,. .. . . .32
Corporate Directory . . . . . . 33
Management Team . . . . . . . 34
1991
$142,027,000
5,892,000
1992
$140,078,000
3,214,000
0.54
69,272,000
46,242,000
$5.45
5,947,000
Sales
Net Income
Per Share
Total Assets
S.hareholders' Equity
Per Share
Average Shares Outstanding
56,238,000
$ 8,370,000
A LErTER,FROM TI-IE FRE51DENT
DEAR. SHAREHOLDER,
Thanks to a' successful Initial Public
Offering (IPO) In October 199t,Sunbelt
Nurse'ryGroupis'stronger and better
positioned for growth than at any time in
the Company's history.
In many ways, our re.emergence as a
publicly'held corporation is a
co,ntinuation of ' ,the .same.,Sunbelt
Nursery Group that traces its beginnings
to the original store that Ross Wolfe
opened. in 1919. Our years of experience
provide the advantageofasound
foundation that 'is. key to our continued
succe~s.We know our way in the highly
competitive retailnu rserybusi nessand,
most importantly, ourqustomersknow us.
At the same time,Sunbeltis very much
a newcol'llpanywtlere we have outgrown
the old w~ys ofdQingbusiness.We are
building,r~newed rrlationships with those
who shop!our stores and with each other
within Sunbelt.
A key part of this renewal is greeting
those .whoshop our stores, as . guests.
W:e'retraining every assocIate on the
Sunbelt team to focus his or her attention
on making. sure our guests visit stores
thata:re~ttractive: and easy to shop.
We're upgrading the quality of our
facilities and enhancing the shopping
experience of our guests. We've refined
our management organization to be as
efficient and supportive as possible. To
lower costs and give the most value to
shoppers,we'veconsolidated
merchandising management at the
corporate level.
Product .and vendor .selection and
pricing~oliciesare, controlled by central
management, that receIves direct
compan}'.widefeedback from store and
district.managers'to.fine tune purchasing
and ,pricing decisions.
Management participates in tailoring
product selection for each market so the
highest quality merchandise is selected
and uniformly displayed . At the.' same
time, it's possible to quickly respond to
seasona.1 trends and apply consistent
merchandise layouts and programs.
Using. information as a competitive
edgeis,'aprimarygoal of these new
programs that enhance communications
externally with consumers and internally
between operations . management and
store.level associates.
We are designing and implementing an
information management system that will
provide 'key data on the movement of
merchandise throughout the Company.
Gathering and. using this merchandise.
tracking.. data.willestablish the next
competitive advantageforSunbelt.
Attaining this level of knowledge about
our busin;ess can only help Sunbelt
surpass it's goal of a 50 percent increase
in sales during the next three years.
Our results for fiscal 1992 show
Sunbelt earned. less income than in fiscal
1991, although'salesand gross profits
were about.. the same. ,The difference
2
Sunbelt's renovated stores include large, adjoining, weather-proof greenhouses with retractable
sun-reflecting screens, providing tender plants protection from a variety of weather conditions.
in, pretax earnings is largely due to
interest and amortization .expenses
associated with our lPO consummated in
October 1991.
It should be noted, 'however, that gross
profit margins for fiscal 1992 remained
a very healthy 46.40/0 '. for the year despite
the negative impact of. drought and a soft
economy in Southern California, coupled
with. record' rain fall. last year in most of
our operating areas in Texas.
Sunbelt's true'strength is ,seen in the
Consolidated Balance Sheet. At year
end, we had $12.1 million in' cashon
hand, no short-term. debt, a relatively
smallamounfof long-term debt and $46
million in Shareholders' Equity. In
addition, we have avalilable $20 million
from a combination of bank credit and
sale-leaseback financing, and other
sources for sale-leaseback and . build-to-
suit landlord-based financing to help fund
our expansion 'program.
Sunbelt is ina strong' position and is
well under way with our previously
announced program to renew our
facilities through renovation ,relocation
and expansion.
At the beginning of fiscal 1993, we
were working on more than 30 real estate
deals thatwiH help us enlarge and
relocate a majority of.our':Texas'stores,
and openl5 to 20new'storesduringthe
next two to three years. There are
currently two stores.' undergoing
3
renovation in Houston. Already
completed are two renovations in Dallas,
one.. each in.' Houston and Odessa, and
new storesln South lake, Texas, and' San
Dimas, . California.
These new facilities, ,. all in existing
markets,w.ill:allow us to expand. product
lines":andlncrease. operating. leverage
ag ai nstrllanagemel1tand ..marketi ng
expensesinlocationsweiknow. well, and
where sh~~e~.rsreco~ni~~an~welcome us.
We. haY~!~.focused'~~rate~y based on
developingiasetof prototype stores that
best serve our existing. markets where we
know howitobe successful. The new
faci .Iitieswi If 9 iveusoperati ngefficiency
in our market niche that includes the
attractive combination of quality
merchandi~eand a high level of service.
SunbeltNurseryGroupis ready for
success. Wewelcorne our' new
shareholders,'. and .,.Iook, forward to
reporting to them news of our progress
as we more fuUy develop our program of
renewal and. growth.in the marketplace.
Sincerely,
~...~~
, Donald W. Davis
President, and Chief Executive Officer
April 8, 1992
,Glass-front greenhouses help to set a mood of openness and allow colorful merchandise to
create inviting images and encourage consumers to shop at Sunbelt stores.
F~OM'. A5rRONt;FOUNDArlON
Workingfroma. foun~.ationofexperien.ce
and.fi nancial strength,Su nbelt Nursery
G roup is ..rebu i I di ngits ..faciliti es, . work
forc~ ,artd>l11arkets. .i~tQa~ron~~r,
hea~~ierforporation,>ppi$~~.~r~~Fc~sS.
Th~.e$!lential.~spe~tpfSun~~It'sre-
em~r~en?e as a,~lJbli.~lytr~~~d~9rT1PClny
in~?~o~~rJ9.~t.)heWtly~r,i:!l~h~
Com'pany's .commitmentto ..renewlng the
most vital of old relationships, that of its
customers.
Sunbelt's goal, is to strengthen
customer loyalty. by. creating a ,co.mplete
shep~i~~i~xperience. that is. altogether
pleCl~apli~~d sCltisfying.Tomakethisgoal
a r~ali~~~r~unbeltisupgrad in~ ,., and
exp~rt~in~~he facilities~nd rn~rchan~ise
it offers shoppers, and is training Sunbelt
4
5UN6EL T 5 TORE 5 OF T.I-4E FUTURE, TODAY
associates, who. comprise the Company's
workforce, to practice Service Excellence
at all times.
During the next two to three years,
Sunbelt will complete a renovation and
expansion program that includes
remodeling and enlarging a majority of
our Texas stores, and opening .15 to 20
new stores company-wide. The, purpose
of the program is to build Sunbelt's
stores of the future today. The new stores
are larger, easy-to-shop facilities that
support the sale of a greater variety of
products over an increased selling
seasonJna more attractive environment.
The new and remodeled stores are
about twice as large as existing units,
many of which' are operating at or near
capacity. In addition to much more selling
space in the. main building, each contains
a large, adjoining, weatherproof
greenhouse where needed and a fenced
sales' area., This compares to existing
stores with outside areas that are only
partially protected from the weather.
The. bigger new stores contain an
average of 12,OOOsquare,feet of interior
selling space, plus 16,000 square, feet of
controlled-environment greenhouse that
allow the Spring selling season to begin
earlier and reduce weather-related
markdowns, increasing gross'profit
margins. These stores can be,shopped
in comfort regard less of weather, and
their larger selling space ac~ommodates
large volumes of attractively presented
merchandise.
The renovation and expan'sion. program
is expected to.,generate increased sales
thatwillpay back.expansion expenditures
5
over a,short period. Average store sales
for the newer units are expected. to be
$2.5 million, compared to $1.5 million at
older, smaller stores. In addition,
improved margins will increase operating
leverage against expenses for
advertising, purchasing, distributio.n and
management.
Shoppers at Sunbelt stores select from
products that are oriented to local
growing conditions and needs. Typical~
inventories include trees,landscape'
shrubs, flowers, indoor tropical plants,
lawn and garden tools, seeds, soil
enriching amendments, baskets, pottery,
fertilizers, pesticides, lawn furniture,
fountains and garden accessories.
During the,Christmas season,fr~sh-cut
and artificial Christmas trees, poi'nsettias
and other seasonal items are sold.
Sunbelt's private-label Perma-Gro'
products, an assortment of premium
quality fertilizers, root stimulator and soil
Outdoor shade a'reas, adjacent 'to ) green-
houses, expand landscape selling . areas.
Ev~ry Sunbelt store, has. a Yard . & Garden
A,nswer CenteroHering expert information.
enrichments, . feature distinctive
pac:kagin.g and are available exclusively
at Company stores. Perma-Groproducts
are recognized by consumers as being
of 1very high quality and are sought by
shoppers. This gives Sunbelt stores a
cOlnpetitive edge against larger retailers
both as a point of product differentiation
and as a. cost advantage.
Sunb.elt stores also feature..container
gardening .suppliesthat combine various
nursery merchandiselnto finished
products that customers. can use and
enjoy immediately . to decorate their
homes,condominiu msandapartments.
Sunbelt shopp'ersaremore than
customer~ . served by salespeople. AU
visitors .are . greeted as guests and
assisted, bySunbelt associates who offer
expert information a:nd problem-solving
advice.tomeet guests' lawn and garden
needs.
Service Excellence is a C.ompany-wide
commitment to training and
communications that stresses courtesy,
c,om petency,cooperationand
cheerfuln'ess in aU contacts between
guests, associates and management. Its
purpose is to. establish and maintain an
upbeat" professiona'! attitude that ensures
superior service and highly trained
personnel. ' -
Every Sunbeltassociateisschooled
and coached on how to achieve success
for themselves and their Company by
continuously ,creating positive
impressions . with guests and others.
Areas stressed include the.importance of
first impressions andchee rfu Igreeti ngs,
neatness of work area ,and personal
appearance, positive attitude and body
language, listening skills, problem solving
and time management.
Training is.' given by store managers
with the support of proprietary videos
and workbooks. that ensure consistent
application :amongall stores. Part and
parcel, of Service Excelle.nce are new
uniforms that instill pride by helping
every associate present a ,professional
appearance to guests.
In addition, associates are encouraged
to study for and meet state certificat,on
requirements to become members of
state nursery societies. Todate,more
than 400 full-time Sunbelt associates are
state-certified nursery professionals.
Experience shows that shopping
guests seek them out fot expert advice
onhow'tochoose and care for their
plants. .Inaddition, associates help guests
find and select related .products, move
them smoothly through check out,
SERVICE EXCELLENCE: STRUC
quickly load their vehicles and get them
on ,their way.
To further assist guests, each store has
a Yard . and Garden Answer Center staffed
by . knowledgeable associates. during
peak shopping . periods.' Answer Centers
also provide self-service . access to more
than 1 00 proprietary how-to-do-it
publications on how to . plan and execute
successful landscape and garden
projects. They are free for the taking.
Providing infOrmation to guests as they
shop is further enhanced by a new
6
Expansive greenhouses allowspace for a larger merchandise assortment and offer a comfortable
shopping environment for Sunbelt guests, during any type of weather.
TURING 5UFERIOR 5ERVICE 6""" FROFE5510NAL5,
signage program that features color
photographs of how mature plants will
appear and details of proper planting
methods and growth characteristics.
Guests at Sunbelt stores tend to be
middle-, to upper-income, college-
educated homeowners. Within this
demographic profile, the .Company
develops loyalty by promoting
landscaping and gardening as a leisure~
time activity. For example, the 62 Plus
Club, which offers special discounts and
shopping days for senior citizens, has
attracted more than 60,000 members
7
Attractive and informative signs are "silent
salespeople'" that increase sales.
Greenhouse construction, combined with high-tech shade materia/allow for a cool and
shopping experience and optimum plant protection in a controlled environment.
wlho consistently return to Sunbelt stores
for their nursery and garden needs.
In total, the lawn and garden industry
generCites some $21 billion in annual
sales .for. an average of $284 per
household. The industry is highly
fragmented and no single retailer has
captured a significant percentage of the
national market. Sunbelt currently serves
a segment that' equals less than one
percent of the total market, providing
great potential for profitable growth for
many years.
Sunbelt's strengths spring from its
focused strategy of developing prototype
stores that are easy-to-shop and ideally
suited to serve its market niche, and of
expanding within current markets to gain
maximum leverage against management
and marketing expenses. This strategy is
supported by a commitment to provide
unique,guest-oriented expertise, superior
service, and a large assortment of quality
merchandise, complemented by
innovative marketing activities.
The Com.pany's expansion and
renovation program is developing larger
stores with improved merchandise mixes
that will enjoy extended selling seasons
and reduced markdowns regardless of
weather conditions. They will be capable
of producing increased sales and
improved operating leverage.
'WIT~ ALL WE KNOW, IT ~A5 TO GROW'
8
FINANCIAL INFORMATION
Year ended January 31, 1992
9
5ELECTED FINANCIAL DATA
Sunbelt Nursery Group, Inc.
(In thousands, except per share data)
SUMMARY OF
OPERATIONS
Net .sales
Gross profit
Income (loss) before
provision . for
income taxes and
extraordinary item
Income.(loss) before
extraordinary item
Net income (loss)
Net income (loss) per
share before
extraordinary item (a)
t~etinpome (loss)
per~h:are (a)
FINANf;IAL POSITION
Worki~g capital
Inventories
Net. property
and equipment
Total assets
long-term debtandcapital .
lease obligations
Shareholders' equity
OTHER · INFORMATION
Depreciation and
amo.rtization
Capital expenditures
Weighted average
shares outstanding (a)
Number of retail stores
Two-month Ten-month
Year ended period ended period ended .Year ended Year ended Year ended
January 31 , January 31, November 30, January 31, January 31, January 31,
1992 1991 1.990 1990 1989 1988
$140,078
65,018
$19,975
8,600
$122,052
57,851
$145,094
65,782
$165,797
68,020
$141,241
57,035
4,433 (2,175) 8,431 (8,976) (5,437) (7,716)
2,535 (2,<175) 5,087 (8,976) (5,437) (7,214)
3,214 (2,175) 8,067 (8,976) (5,437) (7,214)
0.43 (0.45)
0.54 (0.45)
14,745 3,617 5,970 (2,020) (4,496) (4,856)
21,395 19,714 19,215 15,895 18,392 18,578
13,134 9,829 9,840 9,829 14,962 14,747
69,272 56,238 38,538 32,001 45,922 51 , 130
1.,071 25,343 1 ,813 2,765 5,050 5,043
46,242 8,370 8,695 510 10,032 15,417
3,499
$5,943
539
$ 412
2,218
$ 2,363
2,997
$ 1 ,282
3,840
$ 4,540
3,450
$ 4,002
5,947
99
4,800
97
96
98
151
131
(a) Net income (loss) per share for periods subsequent to November 30, 1990, reflects the recapitalization
of the CompanyeffectiveAugustJ5, ..,9.9,. Net income per share and average shares outstanding data
are not presented for periods . prior to November 30, .1.990,. as the historical capital structure of such
prior periods is not comparable to the. capital structureexisting.afterNovember30, 1990, as a result
of such recapitalization. .SeeNote 15 of Notes .to Consolidated. Financial Statements.
10
MANAGEMENT'5 DI5CU5510N AND ANAL Y515 OF RE5UL T5
OF OFERATION5 AND FINANCIAL CONDITION
THE COMPANY
Sunbelt Nursery Group, Inc. (the "Company" or "Sunbelt") was incorporated in Delaware in 1983 as
a holding company of the nursery retailing businesses of Pier 1 Imports, Inc. ("Pier 1 Imports"). In 1985,
all shares of common stock of the Company were distributed as a dividend to the shareholders of Pier
1 Imports, and the Company operated as a public company from 1985 until 1990. In November 1990,
the Company again became a wholly owned subsidiary of Pier 1 Imports. In October 1991, the Company
sold 3,680,000 shares in an initial public offering that reduced Pier 1 Imports' ownership interestto 56.60/0
of the outstanding Common Stock. In February 1992, Pier 1 Imports entered into binding agreements
to sell 600,000 shares of Common Stock, the consummation of which reduced Pier 1 Imports' ownership
interest in the Company to 49.5 0/0.
Sunbelt, through its subsidiaries, is a specialty retailer of lawn and garden products in Texas, Oklahoma,
Arizona and California. The Company operates 100 lawn and garden centers through Wolfe Nursery in
Texas and Oklahoma, through Tip Top Nurseries in Arizona, and through NurserylandGardenCenters
in California. Company stores are primarily located in the six major metropolitan areas of Dallas-Fort Worth,
Houston, San Antonio-Austin, Phoenix, San Diego and Los Angeles. Although part of a regional chain,
the stores in each trade area retain an established identity and focus merchandising and product mix
to the target markets in their geographic areas. Company stores are typically free-standing -buildings with
an interior selling space devoted to tropical plants, decorative items and other accessories, a covered
area containing fountains, patio furniture, tools, fertilizers and insecticides, and a large yard for bedding
plants, shrubs and trees. During the Christmas season, the Company sells freshly cut and artificial Christmas
trees and other seasonal decorative items.
Sunbelt's strategies include the continuation and expansion of the Company as a leading nursery specialty
retailer in each of its geographic markets. The Company implements this strategy by providing quality
products at competitive prices in large, convenient facilities staffed by trained personnel, including certified
nursery professionals who offer customers technical gardening information and individualized service.
Sunbelt is implementing a renovation and expansion program during its 1993-1995 fiscal years', which
currently provides for the enlargement or relocation of approximately 40 stores and opening of 15 to 20
stores, all within existing markets.
COMPARISON OF FISCAL 1992 WITH 1991
Net sales in fiscal 1992 were relatively unchanged as compared to the prior year. This was primarily
attributable toa slight increase in sales in Texas, offset by a drop in sales in California due to continuing
drought conditi'ons and a soft economy. Comparable store sales decreased 3.1 010 in fiscal 1992 compared
to the prior year, with stores in Texas showing no change, stores in Arizona showing increases and stores
in California showing decreases.
Gross profit, as a percentage of sales, was 46.8 % and 46.4 % in fiscal 1991 and 1992, respectively,
remaining virtually unchanged between periods.
General, admihistrative and selling expense, asa percentage of sales, increased slightly during fiscal 1992
to 40.00/0 as compared to 39.5 % for fiscal 1991 due to increases in payroll, rent and advertising expenses.
Push-down accou nti ng entries, which were requ'i red because of the red uctionof Pier 11 m ports' ownersh i p
of the Company through'the...initial. public offering, caused amortization expense and interest expense to
increase by $1 ,717,000 during fiscal 1992. Eliminating the effect of push-down entries, interest expense
decreased $61,000 from fiscal 1991, reflecting a decrease in overall debt levels during fiscal 1992.
Depreciation and amortization increased by $339,000 during fiscal 1992 as compared to fiscal 1991 after
elinlination of push-down entries as a result of depreciation of assets acquired during the year.
Income before taxes and extraordinary item decreased by $1.9 million to $4.4 million during fiscal 1992
11
'MANAGEMENT'5DJ5CU5510N ANDANALY5150F RE5ULT5
OF OPE RAT I ON5 AND FINANCIAL. CONDITION
(Continued)
as compared to $6.3 million during fiscal 1991. This decrease resulted primarily from a combination of
push-down interest and amortization expenses which totaled approximately $1.7 million and a decrease
in gross profit of approximately $1.4 million dueto~lightly lower sales. Partially offsetting these amounts
were a d~crease.inthe provisionf9r~toreclosingsofaPJ>roxi01ately$t.lmillioninfisca1.1992 and a $788,000
charge recognized in fiscal 199..1... relating. to the write-off of certain intangible assets.
Net income decreased to $3.2 . million forfiscalt992 from $5.9 million .forfiscal 1991 as a result of the
above mentioned factors~nd thefa~tt~atdurin{J t~~firsUwomonths of fiscal 1992, the Company exhausted
its net operating loss carryforwarqs.The CO~P~Il~ recorded an extraordinary item of $679,000 for net
operating loss carryforwardsduring fiscal 1~92ascompared to $3.0 million in fiscal 1991.
COMPARISON OF FISCAL 1991 WITH 1990
INet sales in fiscal 1991 declined by 2.1 010 due to the reduction of 53 stores in operation as a result of
1the restructuring that was completed in August .1989. Comparable store sales, however, increased 8.5 %.
Thisincl'ease was primarily due toJavorable spl'jngweatherconditions in Texas coupled with increased
demand for nursery products following a harsh winter which destroyed many customers' plants.
~Gross profit,asapercentage. of sales, increased from 45.3 0/0 in fiscal 1990 to 46.8 % in fiscal 1991. The
iincrease was attributable to more consolidated purchasing that yielded volume discounts, producing higher
iinitialgross profit margins on certain products. In addition, the Company experienced fewer markdowns
due to greater inventory turn during the key spring seUing season. The increased> inventory turn was driven
Iby greater demand for nu~sery products in Texas as a result of severe winter weather conditions.
General., administrative and selling expenses increased$1.1millionfortheyearended January 31, 1991,
compared to the year ended January 31 , 1990. The increase was due to increases in incentive bonuses
and the impact of changes .in the minimum wage law.
Interest expense, net of interest income, which was $763,000 for the fiscal year ended January 31, 1990,
decreased to $255,000 for the fiscal year ended January 31,1991. Without the additional interest adjustment
as result of the $24. 7.. million .ofpush-downdebt,.. there would have been $42,000 of . interest income for
the 1991 fiscal year (see Note 1 of.Notes to Consolidated Financial.Statements).The decrease in interest
expense, excluding interest attributable to the push-down debt, was due to a significant increase in cash
flow from operations and a . decrease .in working. capital needs because of fewer stores.
Net income for the fiscal year ended January 31, 1991 , increased to $5.9 million from a net loss of $9.0
miUionfor the fiscal year ended January 31, 1990. The Company utilized $3.0 million of net operating
loss. carryforwards in fiscal 1991 and paid $.4 million for. alternative minimum income taxes. The $14.9
million improvement in net income is attributable to the Company's elimination of unprofitable stores,
restructuring expenses and the improved operating performance of the remaining 98 stores.
COMPARISON.. OF FISCAL<1990. WITH 1989
Net sales declined $20. 7miUionfl'om fiscal 1989 to fiscal 1990. The decrease was primarily attributable
to the closing of 30. stores and 23 licensed departments in Sears.stores in the summer of 1989. Comparable
store sales increased 1.3 % from fiscal 1989 to fiscal 1990.
Gross profit,asapercentageof sales, increased f.rom 41.0 % to 45.3 0/0 from fiscal 1989 to fiscal 1990.
Thisi ncreaseresu Ited . from higher margins due toclosi ngu nprofitablestores, fewer markdowns on
advertised items, better care of perishable items and better product purchasing.
General, administrative. andseUing expenses decreased $12.5 m ill ioO fro 01 $67.5 million for the year ended
January 31, 1989, to $55.0 million for.the year ended January .31, 1990. This decrease was primarily
due to the. restructuring that reduced the number of stores from 151 to 98. Depreciation and amortization
12
MANAGEMENT'5 DI5CU5510N AND ANAL Y515 OF ~5UL T5
OFOFERATION5 AND FINANCIAL CONDITION
(Continued)
decreased from $3.8 million during fiscal 1989 to $3.0 milliondurin9 fiscal 1990 due to the reduction
in the number of stores.
Interest expense, net of interest income, decreased '$130,000 from fiscal 1989 to -$763,000 in fiscal 1990.
This decrease was due to the receipt of $5.0 minion from..the sale of preferred stock to the Company's
then majority shareholder, combined with lower working capital expenditures resulting from the restructuring.
Net loss for the fiscal year ended January 31, 1990, increased to $9.0 million from $5.4 million for the
fiscal year' ended January 31, 1989, principally due to restructuring expenses that were partially offset
by improved operating performance of the remaining 98 stores.
SEASONALITY AND QUARTERLY INFORMATION
The Company has experienced a substantial part of its sales volume during the first quarter of each fiscal
year, similar to the seasonal pattern experienced by most lawn and garden product retailers. The first
quarter and .first six months accounted for an average of approximately 36.2 % and 63.3 %, respectively,
of: the Company's annual revenues. for fiscal 1992 and 1991. All of the Company's operating profits are
realized in the first six months of the fiscal year and the Christmas selling season.
The following tables present selected quarterly financial information for the fiscal years ended January
31, 1992 and 1991. As discussed in Note 1, the..financial information presented below with..respect to
the periods prior to November 30, 1990 is not comparable to the periods subsequent to November 30,
1990. Earnings per share data is not presented in the quarterly periods of fiscal 1991 as the historical
capital structure of such periods is. not comparable with the capital structure existing after the recapitalization
of the Company (see Notes 2 and 15 of Notes to Consolidated Financial Statements).
FISCAL 1992
(In thousands except per share data)
Net sales
Gross profit
Income (loss) before extraordinary item
Net income (loss)
Income (loss) before extraordinary item/share
Net income (Ioss)/share
Average common shares outstanding
Fi rst
Quarter
$53,608
25,926
5,316
5~995
1.11
$ 1.25
4,800
Second
Quarter
$36,934
17,493
1 ,585
1 ,585
0.33
$ 0.33
4,800
Third
Quarter
$24,391
10,332
(2,327)
(2,327)
(0.41 )
$ (0.41)
5,711
Fourth
Quarter
$25,145
11 ,267
(2,039)
(2,039)
(0.24)
$ (0.24)
8,480
FISCAL 1991
(In thousands)
Net sales
Gross profit
Income (loss) before extraordinary item
Net .income (loss)
Fi rst
Quarter
$48,504
22,976
4,263
6,760
Second
Quarter
$39,438
19,445
3,000
4,757
Third
Quarter
$26,834
11 ,677'
(657)
(1,042)
Fourth
Quarter
$27,251
12,353
(3,694)
(4,583)
The quarterly periods for fiscal 1992 are not comparable to the.quarterly periodsfor.fiscal1991 because
ofachange in the basis of assets and liabilities of the Company. resulting from the acquisition by Pier
1 Imports. The primary differences resultfrom additional amortization and interest expense related to push-
down of goodwill and debt (see Note 1 of Notes to Consolid'ated Financial Statements). These items reduced
13
t1ANAGEMENT'5D 15CU5510NANDANALY515OFRE5ULT5
OF OPERATION5AND...FINANCIAL CONDITION
(Continued)
net earnings during the fourth quarter of 1991 and.thefirst, second, third and fourth quarters of 1992
by $383,000, $557,000, $581,000, .$466,000 .and $113,000, respectively.
I neluded in the second quarter offiscal...~ 991.. is a$1,862,OOOgain due to the. results of physical inventories.
In addition, during thefourthquarterofJiscal 1991, th~ Company recorded a charge of $1, 123,000 related
to therelo.cation and closure of certain stores and a $788,000 charge related to the write-off of certain
intangible. assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company hashistoricaHysatisfieditscapital requirements with a combination of internally generated
funds .and debt fromban~lo<ms.Sin<:.eOctober1991,when the Company sold common stock in an initial
public offeri ng, capital has been available through lines of creditfrom two commercial banks.. The. amount
of working capital. fluctuates substantially during the year and is generally strongest at the end of May.
The primary sourcesofJiquldityforthe three years ended January 31 ,1992,were operations,$21.3miUion;
sale of common stock, $28.1 million; and sale of. assets, $2.5minion.Th esefunds were primarily used
for the payment ofadividend to Piertlmports,. $18.1 million; the acquisition of property. and eq~ipment
aggre.gating $10.0 million; acquisitions of independent nurseries, $.4 million; restructuring expens~s,$6.1
minion; and paYrnentofdividendsonpreferred stock, since retired, $.6 million. During the year ended
January 31. 19~21>cas" increased$lO.5miHion. This increase resultedprimarily from the $10 minion
net proceeds retained by the CompanyJrom thepublic offering of its Common Stock in October 1991
and from cash provided by operations. During October 1991, the Company settled its intercompany balance
with Pier 1 Imports and received $4.7 million in cash. The primary use of funds during fiscal 1992, other
than to acquire inventory,was$5.9miHionto acquire property and equipment.
The Company has two revolving line of credit facilities aggregating $10 million that expire May 31, 1993,
and June 30, 1993, of which $9,225,000 is unused. The.loanagreements contain certain financial covenants
and cross-default provisions in theeventofa default under eith.er loan agreement or under Pier 1 ImpQrts'
Competitive Advance and Revolving Credit. Agreement (see Note 5 of Notes to Consolidated Financial
Statements). At January 31 ,t992,theCompanyhad$1.1 million of long-term debt, net of current portion,
outstanding.
The Company is implementing a program that will. upgrade and enlarge or relocate approximately 40 stores
and open 15 to 20 new stores, which will be completed in the next three years. The Company . estimates
that this program will require approximately $24 million in cash for construction costs, furniture and fixtures,
increased inventory leyels,. andc.ertain lease termination costs. Funds. are Elxpected to COme from the
Company's operati()ns,eldsting<:ash,and. short-term Hnes ()fcredit. In addition, $60 minion in operating
lease financings are anti~ipat~d tqbe supplied. from. sale-leaseback transactions with build-to-suitdevelopers,
other independent .investors and. an. unrelated party that pr()vides a renewable build-to-suit financing facility
to Pier 1 Imports and the Company, of which $10 million is accessible to the Company.
Of the Company's. 1 OOst()res, 97 are financed with long-term leases. The Company's minimum lease
commitments at January 31, 1992,throughtheexpiration of their existing terms, are $42.8 million. These
commitments are expected to be funded from cash flow from operations.
The Company believes that its sources of cash during the next three years will be adequate to meet its
capital needs and fund. its operations.
14
C,ON50L IDA TED BALANCE5~EET
Sunbelt Nursery Group, Inc.
Year ended January 31
1992 1991
(In thousands)
ASSETS
Current. .assets:
Cash and. cash equivalents
Accounts receivable, net
Inventories
Other current assets
Total current assets
Pr'operty and. equipment,. at cost
Less accumulated depreciation
Net property and equipment
Goodwill, net
Deferred income taxes
Other assets
Total Assets
$12,055
151
21,395
1 ,011
'34,612
16,257
3,123
13,134
20,373
781
372
$69,272
$ 1,569
167
19,714
1 , 163
22,613
10,252
423
9,829
23,365
431
$56,238
The accompanying notes are an integral part of these consolidated financial statements.
15
$ 9,953
2,513
3, 121
666
214
2,529
18~996
23,430
1 ,913
25,343
2',863
666
10,544
(2,175)
8,370
, $56,238
LIABILITIES AND ~HAREHOLDERS' EQUITY
Current liabilities:
Accounts payable
Payable to Pier 1 Imports
Accrued compensation
Current portion of long~term debt and capitcd leases
Income taxes payable
Other> current liabilities
Total current . liabilities
Long-:term . debt:
Payable to . Pier 1, Imports
Other long-term debt and capital leases
Total long-term. ~ebt
R,eserve for store. closings
Other long-term liabilities
Shareholders' equity:
Common stock, $.01 par value, 1,000 shares ..authorized,
'issued and outstanding
Com monstock, $.01 par. value, 2 5 million shares
authorized,Q,480,000 issued. and outstanding
Additional paid-i ncapital
Retained earnings (deficit)
Total shareholders' equity
ComrnitmentsandcontingenciE!s (Notes 5, 7.~nd .14)
Total Liabilities and Shareholders' Equity
$11,124
3,404
855
246
4,238
19,867
1,071
1,071
1,717
375
85
45,118
1,039
46,242
$69,272
CON50LIDATE.D5TATEMENT OF OPERATION5
Sunbelt <Nursery Group, .Inc.
(In thousands, except per share data)
Net sales
Cost of goods sold, excluding
depreciation
Gross profit
General,...administrative and
selling expense
Depreciation .and. amortization
Interest. income
Interest expense
Provision for store closings
Inf?i"I1I~~~~~~] ...ibefore.prevision..for
i~~~~~~~.~e!; a.nd . extraordinary.. itel11
Prpvisionfor income taxes
11~~rn~ !'~Iq~~~ ,b~fore.<extraordinary item
E~r~~~~in~~ jt~~-u~HiZ:Cltionof
net.oper'a!i [lgloss carryforward s
Net In~()ITl~[loss]
Year
ended
January 31 ,
1992
$140,078
75,060
65,018
55,964
3,499
(506)
1 ,628
4,433
1,898
2,535
$
679
3,214
Income (loss) per share. before
extraordinary item
Extraordinary. item-utilization of
net · operati ng ..loss . carryforwards
Net income (loss) per share
$ 0.43
0.11
$. 0.54
The accompanying notes are an integral part of these consolidated financial statements.
16
Two-month
period
ended
January 31,
1991
$ 19,975
11 ,375
8,600
9,975
539
(60)
321
(2,175)
(2,175)
$ (2,175)
$ (0.45)
$ (0.45)
Ten-month
period
ended
November 30,
1990
$122,052
64,201
57,851
46,085
2,218
(443)
437
1 , 123
8,431
3,344
5,087
2,980
$ 8,067
Year
ended
January 31 ,
1990
$145,094
79,312
65,782
54,998
2,997
(400)
1 , 163
16,000
(8,976)
(8,976)
$ (8,976)
CON50LIDATED 5TATEMENTOF CA5t4 FLOW5
Sunbelt Nursery. Group, Inc.
(In thousands) Two-month Ten-month
Year ended period ended period ended Year ended
January 31 , January 31 , November 30, January 31 ,
1992 1991 1990 1990
OPERATING ACTIVITIES:
Net income (loss) $ 3,214 $ (2,175) $ 8,067 $ (8,976)
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation and amortization 3,499 539 2,218 2,997
Deferred income taxes [781]
Loss (gain) on sale of fixed assets [153] 313 (263)
Provision for store closings 1 , 123 16,000
Loss during phase-out period for closeds~ores . (1,209)
Payment of store closing costs included
in provision for store closings [285] (169) (2,480) (3,131 )
Imputed 'interest on payableto
Pier 1 Imports 1 ,228 297
Decrease in subscriptions receivable 360 15
Changes in operating assets and liabilities:
Decrease (increase) in inventories [1.681 ] (359) (3,320) 1 ,375
Decrease (increase) in accounts
receivable and other assets 657 146 (864) 877
Increase (decrease) in accounts paY,able 1,171 (1 ,283) 1 ,816 (2,992)
Change in Pier 1 Imports intercompany account [2,513] 2,513
Increase in other liabilities 2,736 620 162 1 ~964
Net cash provided by
operating activities 7,092 129 7,395 6,657
INVESTING ACTIVITIES:
Purchase of property and equipment [5,943] (412) (2,363) (1,282)
Purchase of net assets of acquired business (396)
Proceeds from sale of property and equipment 32 2,516
Net cash provided by [used for]
investing activities [5,911 ] (808) (2,363) 1 ,234
FINANCING ACTIVITIES:
Decrease in short-term borrowings (1,200) (6,301)
Payments of dividends on preferred stock (321 ) (279)
Issuance of stock 28,072
Payment of dividend to Pier 1 Imports [18,072]
Sale (purchase) of treasury stock 79 (49)
Proceeds from issuance of long-term debt 476
Principal payments on long-term debt, including
notes payable and capital lease obligations [695] (929) (1 ,070) (1 ,956)
Net cash provided by [used for]
financing activities 9,305 (453) (2,512) (8,585)
Increase [decrease] in cash and
cash equivalents 10,486 (1,132) 2,520 (694)
Cash and cash equivalents at beginning of period 1 ,569 2,701 181 875
Cash and cash equivalents at end of period $ 12.055 $ 1 ,569 $ 2,701 $ 181
The accompanying notes are an integral part of these consolidated financial statements.
17
C:ON50L IDA TED5TATEMENT OFCJ-JANGE5
Il~ 5J-JAREJ-JOLDER5IEQUITY
SiunbeltNursery Group, Inc.
Balance at January 31,1989
Sale of 25,200 shares of treasury
stock to employees
Reduction of subscriptions receivable
Purchase.of 24,791 . shares of treasury
stock from. employees
Sale of 20,000 shares .to
stock purchase plan
Net loss
P'referreddividends
l3~alance at January31,1990
Sale of 38,611 shares of treasury
stock to employees
Retirement .of subscriptions receivable
P1urchaseof 27,450 shares . of treasury
stoqk from employees
Net income
Preferred dividends
Balance at November.30, <1990
(In thousands)
Additional Retained
Common Paid-In Earnin~s Treasury Subscriptions
Stock Capital . (Deficit) Stock Receivable
$38 $23,071 $(12,493) $(251) $ (333)
Balance as of Decemb.er.1, ..1990
Net loss
Balance at January 31, 1991
Issuance of stock
Ca p'ita I contributed by Pier 1 Imports
Net income
Balance at January ..31,1992
$ 1 $10,544 $
(2,175)
1 10,544 (2,175)
84 27,988
6,586
3,214
$85 $45,118 $ 1 ,039
Tile accompanying notes are an . integral part of these consolidated. financial statements.
18
NOTE5 TO- CON50LIDATED FINANCIAL 5TATEMENT5
Sunbelt Nursery Group, Inc.
N!OTEl
THE COMPANY AND BASIS OF PRESENTATION
Sunbelt is a specialty: retailer of nursery and garden pro,duct~ operating under three prominent retail trade
names: Wolfe Nursery-in Oklahotr'la and Texas, Nurseryland Garden Centers in California and Tip Top
Nurseries in Arizona. No single customer accounts for more than 10% of sales. Prior to October 1, 1990,
Intermark, Inc. ("Intermark") owned a 50.40/0 interest in the Company and also owned a controlling inter~st
in Pier 1 Imports, Inc,. ("Pierl Imports"). Intermark subsequently disposed of its entire interest in Pier
1 Imports. Effective October 1, 1990, Pier 1 Imports acquired Intermark's interest in the-Company and
commenced a tender offer for the remaining shares, which was consummated effective November 30,
1990, at which time Pier 1 Imports became the sole shareholder of the Company.
The financial statements of the Company presented herein with respect to periods through the date of
the consummation of Pier 1 Imports' tender offer reflect the Company's historical cost basis. As a result
of the consummation of the tender offer and subsequent merger with a subsidiary of Pier 1 Imports, the
Company became wholly owned by Pier 1 Imports. Therefore, the Company's financial statements for
periods subsequent to November 30, 1990 have been subject to adjustment to reflect a new basis for
step acquisition accounting and push-down accounting adjustments which resulted in the push-down of
goodwill of $21 ,203,000 and the push-down of debt payable to Pier 1 Imports, including imputed interest,
aggregating $24,700,000. This amount approximates the debt incur,red by Pier 1 Irnports'in connecfion
wiith its tender offer for Sunbelt. The push-down of debt was recorded by the Company asa result of
its intent to pay a c;li"idend to Pier 1 Imports from the proceeds of its..stock offering completed in 'October
1991. Pier 1 Imports informed the Company that it intended to use this amount of proceeds to payba:nk
indebtedness. In addition, the merger of the Company with a subsidiary of Pier 1 Imports resulted in Pier
1 Imports holding 1 ,000 shares of the Company's common stock, par value $.01 per share, which
repr~sented 100 % of the Company's then issued and outstanding capital stock. These events resulted
in a recapitalization of the Company in which the Company's series B cumulative convertible preferred
stock was canceled; the outstanding common stock was canceled and 1 ,000 shares of new common stock~
par value $.01 per share, were issued; and the Company's accumulated deficit and the net effect of the
push-down accounting adjust.ments. were closed to additi'onal paid-in capital.
As a result, the consolidated financial information for periods through November 30, 1990 is not comparable
to the periods subsequent to November 30, 1990.
The following table summarizes the unaudited consolidated pro forma. results of operation~, Cissumi,n9 that
the acquisition of the Company by Pier 1 Imports and push-down accounting had been appliedClt February
1, 1990. The pro forma average common shares. outstanding reflects the recapitalization as described
in Note 15. This pro forma summary does not necessarily represent results-which would have occurred
if the acquisition had taken place on the..basisassumed, nor are they indicative of the results of future
operations.
(Ill thousands, except per share amounts)
Net sales
Income before extraordinary item
Income before extraordinary item per share
Average common shares outstanding
Year ended
January 31, 1991
$142,027
2,648
$ 0.55
4,800
In October 1991, the Company completed the sale of 3,680,000 shares of newly issued common stock
in a public offering. Subsequent to the sale, Pier 1 Imports' ownership approximated 56.6 0/0. Net proceeds
of: the offering approximated $28.1 million, of which $18.1 million was utilized to pay a dividend to Pier 1
19
NOTE5 . TO..CON50LIDATED. FINANCIAL 5TATEMENT5
Sunbelt Nursery Group,lnc.
(Continued)
Imports and the rern~inderwiUbeutililed to finance future. store renovations, relocations and. enlargements.
These financial state me ots reflect push-down debt based on a pre-offering estimate of the dividend to
Pie.r 1. Imports of$24.7rnillion.Subsequentto thecOlnpletion .of the stock offering, an adjustment of
$6.6 million was recorded toeliminateth~remainingpush-dowo debt resulting from th~differencebetween
the amount refle<:tedioth~sefinCincial.staternents.al1dthe amount oUhe di~idendpaid to Pier 1 Imports,
with such difference credited to additional paid-in capital representing an addition to the permanent equity
of the Company.
In February 1992, Pier 1 'Imports entered into binding agreements to sell a total of 600,000 shares of
itsSunbelt common stock. After giving effect to this sale of stock, Pier 1 Imports' ownership interest
in Sunbelt has been reduced to 49.50/0 .
NOTE 2
SUMMARY OF ACCOUNTING POLICIES
Basis of Ccwsolidation-Theconsolidated financial statem~ntsinclud~. the accounts of the Company and
its subsidiaries,aU..o.f which . are wholly. owned. .Allsignificantintercompany accounts and transactions
, have been eliminated · in consolidation.
l=levenue Recognition-.TheCompany recognizes revenue when the customer takes possession of the
rnerchandise. .
Cash Equivalents - For purposes of the statemenfofcashflows, the Company considers all highly liquid
investments purchased with a maturity of three. months or less to be cash equivalents.
Inventories -Inventoriesarecomprised primarily of finished merchandise and are stated at the lower of
avera~e cost or market; . average cost being determined .principally on the retail inventory method.
Property and Equipment - Property and equipment, including renewals and improvements which extend
the life of existingproperties'iarecapitalized. at cost and depreciated using the straight-line method over
estimated useful.livesor lease terms, if shorter. Expenditures for normal maintenanc~ and repairs are
expensed as incurred. The cost of property and equipment sold or otherwise retired and the related
accumulated depreciation and amortization are removed from the accounts and any resultant gain or loss,
after taking into consideration proceeds from sale, is credited or charged to income.
Store Closing and Relocation. Costs- When the decision to close or relocate a retail unit is made, the
Company provides. for estimated future net lease obligations, nonrecoverable investment i~ fixed assets
and other expenses directly related to the cessation of operations.
Income...Taxes .-.The.Cornpany..anditsi~ubsidiaries..fil~d...consolidated tax returns.. through December 31,
1990.. For the period January 1, .1991 throu~h Septemb~r30, 199t, the operations of the Company and
its subsidiaries. will be. included in Pier 1. Imports 'col1splidated tax returns. The Company and. its subsidiaries
will file a consolidated return for the five months ended February 29, 1.992. Income taxes in the accompanying
financial istatementsforthe period subsequent to~ecember 31 , J990 through September 30, 1991 are
recorded in accordance with the income taxsharing.~greement between the Company and Pier 1 Imports.
This agreement requires the recording of income ,~~~s as if separate tax returns had been filed by each
company, exceptthatthetaxbenefitofinterest expen~eresulting from the debtpushed-downtoth.e Company
is allocated toSunbelt. Deferred income taxes an~~rovidedfor income and. expense items recognized
in different periods for financial reporting and inCOme tax purposes.
In February 1992, the Financial Accounting Standar~sBoardissuedtheStatement of Financial Accounting
Standards No. 109 ("SFAS 1 09"), "Accounting for Income Taxes." SFAS 109 mandates the liability method
20
NOTE5 TO CON50LIDATED FINANCIAL 5TATEMENT5
Sunbelt Nursery Group, Inc.
(Continued)
of computing deferred tax~s and must be adopted by the Company no later than fiscal 1994. Earlier adoption
is permitted. Upon adoption, the principles of the Statement may be applied retroactively through restatement
of previ()u~ly issuedfinancia,l statements, or on a prospective basis. Because of the significant complexities
ofthe new accounting requirements, the Company has not decided in which year it will adopt SFAS 109,
or if ,it will restate prior periods. Asa result, the. effect of the adoption of SFAS 109 on the Company's
consolidated financial position and results.of operations has not been determined; however, suchadoption
is not expected to have a significant effect.
Goodwill-Goodwill represents the excess purchase cost over the fair value ofthe net assets of businesses
acquired. Effective Oecember1, 1990, the Company recorded goodwill in the amount of $21,203,000
as a result of the push-down accounting as discussed in Note 1. In fiscal 1992, the Company reduced
push-down goodwill by $2,575,000 as a result of the recognition of tax benefits associated with purchased
net operating losses and the realization of tax benefits resulting from the higher tax basis of net assets
acquired over their estimated fair value (see Note 10). No retroactive restatement of the Company's financial
statements related to the adjustment of goodwill amortization is reflected in the accompanying financial
statements since the effect of such -adjustments would be immaterial. Goodwill is being amortized on a
straight-line basis over 40 years. Accumulated amortization at January 31, 1992 and 1991 is $814,000
and $116,000 respectively.
Earnings per share-Earnings per share are computed on the weighted averagenumber of shares plus
common stock equivalents outstanding during the period. Earnings per share data are not presented for
periods prior to Noyember30. 1990 as the historical capital structure in such periods. is not comparable
with the capital structure existing after the recapitalization of the Company as discussed in Note 1. The
average number of shares outstanding for periods subsequent to November 30, 1990, reflects the
recapitalization of t~e Company effective August 15, 1991 (see Note 15) as if such recapitalization were
effective at the beginning of each respective period. For the year ended January 31, 1992, the average
number of shares outstanding approximates 5,947,000 shares.
The unaudited supplemental net income (loss) before extraordinary item per common share for the two-
month p,eriod ended January 31, 1991 and the year ended January 31, 1992, of $(.27) and $.44, respectively,
assumed the Occurrence at the beginning of each of these periods of the sale of the newly issued. common
stock and the useofproceeds to pay Cl dividend of $18.1 million to Pier 1 Imports which, together with
a capital contribution by Pier f Imports of $6.6 million, eliminates the push-down debt of $24.7 million
as discussed in Note 1.
NOTE :3
STORE CLOSINGS AND RELOCATIONS
In May 1989, the Company announced a plan to 'close a number of unprofitable outlets and to withdraw
from. selected. markets. This. included a total of 53 retail. outlets, 23 of which were Sears .Iicensed departments,
14 of which represented the Atlanta market, 5 of which represented the Oklahoma City market, and 11
of which represented stores.in.markets where the' Company continues its'operations. The Company recorded
expenses 01$16,000,000 in fiscal 1990, which represented the estimated cost of these store closings,
including the- write-off of $4,400,000 of goodwill and other intangibles.
In the ten-month period ended November 30,1990, the Company recorded an additional reserve of
$1 ,123,000 to provide for estimated losses resulting. from relocation and. closure of certain stores in
connection with the Company's renovation and expansion program.
21
t\lOTE5 TOCON50LIDATEDFINANCIAL 5TATEMENT5
Sunbelt Nursery Group, Inc.
(Con tin u:e d)
NOTE 4
PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, including. capital leases, consisted of the following as of January 31 :
1992 1991
(In thousands)
$ 2,278 $ 2,196
5,043 2,337
7,630 4,960
1,306 759
16,257 10,252
3,123 423
$13,134 $ 9,829
Buildings
Equipment, furniture and fixtures
Leasehold interests and. improvements
Land
Less accumulated depreciation
lrhe January 31, 1991 amounts reflect step acquisition adjustments as discussed in Note 1.
-
NOTE. 6
ILONG.:rERM DEBT
On December 1,.19~O,the pompanyrecorded.apayableto Pi.er .1 Imports which, at January 31, 1991
had a balance of $23,430,000, which is net of i.",puted interest o.f $1,270,000, computed at 7.5 % annually.
Such payable was. retired in. October. 1991 with proceeds from a common stock offering (see Note 1).
()ther long-term debt consisted of the following .as of January 31:
1992 1991
(In thousands)
Purchase obUgationinconnectionwithbusiness acquired {net of imputed interest
at 11 0/0 of $19,000 and $72,000 at January 31, 1992 and 1991, respectively),
payable in quarterly installments of $82,500 through December 1992
Other
Capital lease obligations
Less current portion. due. within one year
$ 311
394
1 ,221
1,926
855
$1,071
$ 588
707
1 ,284
2,579
666
$ 1 ,913
At January 31 , 1992, maturities of other long-term debt during the next five fiscal years were:
Current
Portion
(In thousands)
$ 855
320
167
152
93
339
$1 ,926
IFiscal Year
1993
1994
1995
1996
1997
Thereafter
Total
22
NOTE5 TO CON50LIDATED FINANCIAL 5T ATEMENT5
(Continued)
Prior to November 1990, the Company had a short-term bank line of credit. This credit facility satisfied
the Company's working capital requirements and provided for letters of credit. After November 19.90,
Pier 1 Imports' Competitive Advance Facility with nine commercial banks provided the credit needs of
the Company. This was effected through intercompany loan balances between the two companies. At JaniJary
31,) 1991 the Company owed Pier 1 Imports $2,513,000 under this arrangement. Beginning March 1991,
intercompany interest income and expense was charged based on the average intercompany balance at
a rate, of 8.50/0 per annum and is recorded as such (see Note 12).
Effective December 30,1991 and January 31,1992, the. Company entered into loan agreemel'ltswith
two commercial banks to provide a total of $10,000,000 of revolving lines of credit until May 31 , 1993,
and June 30, 1993. Advances will accrue interest at LIBOR plus 1 ~ 0/0. In addition, facility fees ofY4 0/0
andY2 % are charged and a commitment fee of ~ % is charged on any unutilized loan amounts. Both
commitments require the maintenance of certain covenants which include a minimum level of net worth,
cash flow, earnings, inventory turnover and current ratio tests, restrictions on the sale of assets, $10,000,000
limitation on outs~anding bank indebtedness and prohibition of certain payments, including dividends.
Both commitments are guaranteed by Pier 1 Imports and provide for cross-default provisions in the event
of a default under either loan agreement or under Pier 1 Imports' Competitive Advance and Revolving
Credit Agreement. At January 31, 1992, $775,000 of one $5,000,000 credit agreement was utilized for
letters of credit.
Pier ,1 m POr;tS ~.a$l'l1a~e;.Cl~ail~ble to the, C;.<:)I11P~I)Y el;.. portio 11. 9f .its ~g reement witb. a non-related party,
up to $10 million, to leas.estoresto be constructed by a non~related third party.
NOTE 6
REDEEMABLE PREFERRED STOCK
During September 1988, the CompariysQld50,000 .shares of Series A cumulative, convertible, mandatorily
redeemable pr~ferred stock with astatedval~eof $100per share to Intermark. The preferred stockp~id
dividends of $9 per share per annum, payabie quarterly, and was convertible into common stock of the
Company at $7 per share. During fiscal 1990. dividends of $232,600 were paid by issuing 2,326 sh~res
of additional preferred stock of the same series and by cash payments of $279,000. During the ten months
ended November 30, 1990, dividends were paid by a cash paym,ent ~f$100,000.
During March 1990, the Company redeemed .and retired all the outstanding shares of the Series A
cumulative convertible preferred stock at its stated value by issuing 53,451 shares of Series B ~um':JICltive
convertible preferred stock with a stated value of $100 per share to Intermark. These new shares had
dividend features similar to the Series A cumulative convertible preferred stock. Subsequently, these new
shares were sold by Intermark to Pier 1 Imports. During the ten months ended November 30, 1990, dividends
on such shares were paid by cash payments totalling $221,000. In conjunction with Pier 1 Imports'
acquisition of the Company, these shares were canceled.
NOTE 1
LEASE OBLIGATIONS
The Company leases certain property, consisting principally of retail stores, under leases expiring through
the year 2008. Capital leases are. recorded on the Company's . balance sheet as assets along with'the
related lease obligation. All other lease obligations are operating leases, and payments are reflected in
the Company's consolidated statement of operations as rental expense. Assets recorded under capital leases
23
NOTE5 TOCON50LIDATEDF1NANCIAL5TATEMENT5
(Continued)
are included in property and equipment as follows:
Buildings
Equipment, furniture .and fixtures
1992 1991
(In thousands)
$809 $ 558
213
1 ,022
241
$ 781
558
33
$ 525
Accumulated amortization
At January 31, 1992, the Company had the following minimum lease commitments:
Fiscal Capital
Year Leases
Operating
Leases
41993
41994
41995
41996
'1997
-rhereafter
Total lease commitments
Less imputed interest
Present value of total capital lease . obligations,
including current portion ..of.$261,000
(In thousands)
$ 411 $ 6,471
326 5,884
259 5,363
219 4,583
139 3,726
468 14,922
1,822 $40,949
601
$1,221
Rental expenseapproxi mated $7,332 ,000, $1,168.,000, $5,801 ,000 and $7,732 ,000, including approximately
~S528,000,$80,000, $547,000 and $537,000 of contingent rentals based upon a specified percentage of
sales for the fiscal year 1992, the two months ended January 1991, the ten months ended November
1990, and .for the fiscal year .1990, respectively. .Subleaserentals.. were immaterial each year.
NOTE 8
MANAGEMENT BENEFIT PLANS
~n October .1985, the. Board of Directors of the Company approved the sale of 120,000 shares of its common
stock pursuant to the Company's . Management Stock Purchase Plan, at its estimated
value to certain key employees and officers.The>officerscmdemployees ~xecuted .10-year notes in the
amount of the purchase price. The .notes,beClrin~lnterestat rates. of. 7.34% to. 9..22% per annum,
compounded semiannually, were Jecorded~ssub~cdptions.receivable on the Company's consolidated
balance sheet, and were secured by pledges of theipurchased stock.
In conjunction with the acquisition of the Company by Pier 1 Imports, all such shares were purchased
and subscriptions receivable were paid from the proceeds thereof.
24
NOTE5 TO CON50LIDATED FINANCIAL 5TATEMENT5
(Continued)
The following table summarizes the activity of the Company's Management Stock Purchase Plan:
Subscriptions
Receivable
(In!. thousands)
Balance at January 3J, 1990
Repurchase of stock
Balance at January 31, 1991
Shares
99
(99]
$420
(420)
$ -
Repurchases of stock resulting in a reduction in subscriptions receivable are due to the repayments of
th~ notes by employees in the form of stock and cash.
On August 14, 1991, the Company's Board of Directors adopted an Executive Officers' Medical Plan under
which qualifying medical, dental and related expenses incurred by certain key employees and officers
and their dependents, subject to annual limits, will be paid to each plan participant. The Company had
no contribution to this plan in fiscal 1992. Also on August 14,1991, the Company's Board of Directors
authorized an Executive Officers' Financial Planning Plan pursuant to which the Company will pay an
annual tax and financial planning allowance to certain executives in an amount equal to 1.5% of the
participant's annual base salary to cover tax and financial planning expenses. The Company's contribution
under this plan for fiscal 1992 was approximately $6,000.
On August 14, 1991, the Company's Board of Directors adopted a Benefit Restoration Plan (the "Restoration
Plan") to permit certain members of management and highly compensated employees to defer current
income which cannot be contributed to the Company's Retirement Plan due to statutory funding and
contribution limitations. A participant's contributions to the Restoration Plan will receive a matching
Company contribution as if the participant's salary deferral had been contributed to the Retirement Plan.
Participants will vest in their Restoration Account balance in the same manner as if deferrals and Company
Contributions under the Restoration Plan had been contributed to the Retirement Plan. As of January
31, 1992, there were 11 employees in the plan and, for fiscal 1992, the Company contributed approximately
$3,000.
NOTE ~
STOCK OPTION PLANS
The Company's stock compensation program, adopted in October 1985, provided for the grant of options
to employees, officers and directors of the Company. The program allowed the grant of stock options intended
to qualify as incentive stock options under Section 422A of the Internal Revenue Code of 1986, as well
asnon"statutory options, stock appreciation rights and restricted stock. Incentive options were not granted
at less than the fair market value of the Company's stock On the date of grant and non-statutory options
were not granted at lessthan 50% of the fair market value of the Company's stock on the date of grant.
The options were exercisable at the ,rate of 20% per year on a cumulative basis, beginning one year after
the. date" of grant.
The following summarizes the activity under the 1985 Incentive StockOption Plan and Non-statutory Stock
Option Plan: Inc. .ent. i..v.e S,toCk Non-.s. tatu to 1)'. . Stock
Option Plan Op~ion. Plan
Outstanding at January 31, 1990
Granted
Exercised
<putstanding at November 30, 1990
I
Number of Option price Number of Option price
shares per share shares per share
199,240 $3.25-1 0.00 46,000 $4.00-1 0.00
5,000 6.00
199,240 3.25-10.00 51 ,000 4.00-1 0.00
25
NOTE5 TO CON50LIDATEDFINANCIAL5TATEMENT5
(Continued)
In November 1990, pursuantto the cash tender offer to purchase the remaining shares of the Company,
Pier 1.lmportspaidtheoptionholderst~edifferer1cebetween the exerc:iseprice of the outstanding options
and the price pershcue offered to\shareholdersinthe tender offer to cancel the options. As a resu It of
this offer,. all opti~nswere. canceledandthis~l~nw~sterminated.
On Augl,Jst 14,1991, theCol1lpanY'sBoardof~irect()rs and sole shareholder approved the Company's
1991 Stock Option>Pla~, whichprovidesfortheiss~ance<ofstock optionsto the Company's officers,
directorsandkeY~l11ployees. Options coverin~rn~ggregate of 500,000 shares of common stock may
be granted un~~.rt~~ plan. Sharessubjecttoarly~ptionthatexpires,terminates or is forfeited will again
be availa~lefor()~ti~ns subsequen~lygranted. C~rrently, there are 36 participants in the plan. The vesting
period ofoptionsi~~eterminedat the discretion()fth~plan administrative committee. The options currently
outstanding become exercisable. at the rate of 200/0 per year on a cumulative basis beginning one year
after the date of grant. Initialparticlpants intheplan exchanged any options previously granted to them
under Pier 1 Imports' stock option plan for options under the Company's Plan. The exercise price for
such stock options varied for eachindividualand was based on the initial offering price ofthe Company's
common stock and the equity accumulated in. Pier 1 Imports options held by them, if any.
Oi rectors who are not em ployees of either the Com panyor Pier 11 m ports ("Non-employee Directors")
are automatically granted non-qualified stock options to purchase 3,000 shares of common stock on the
day following each annual shareholders' meeting with an exercise price equivalent to the market value
()f the shares at the date of grant. Upon the completion of the common stock offering in October 1991
(see Note 1), twonon-employeedirecotrs each received options covering 3,000 shares of common stock
pursuant .to. the Stock Option Plan. The exercise. price .for such . options is $8.50 .per share.
lrhe following table summarizes the activity underthe1991 Stock Option Plan. All stock options currently
outstanding are non-qualified. . Employee Stock Non-employee Director
Options Stock Options
Number of
shares
Option price
per. share
Number of
shares
Option price
per share
Granted
Canceled
~utstanding at January 31,1992
330,000
30,000
300,000
$4.65-8.50
6.57
$4.65-8.50
6,000
$8.50
6,000
$8.50
NOTE ](2)
INCOME TAXES
No income taxeshave beenprovided.during fiscal 1990 or the two montilsendedJanuary 31 ,1991 as
a result of operating lo~ses. Theincometaxpr()vision for the ten months. ended November 30, 1990 and
for fiscal 1992 consists of. thefollowi n9:
{1n thousands)
Federal:
Charge in lieu of taxes. payable
Alternative minimum tax
Current
Deferred
State:
Current
Deferred
Year. ended
January 31 ,1992
Ten months ended
November 30, 1990
$2,393
$2,844
364
98
(781)
136
188
$1,898
$3,344
26
NOTE5 TO CON50LIDATED FINANCIAL 5TATEMENT5
(Continued)
The accompanying consolidated financial statements reflect extraordinary items of $679,000 and $2,980,000
for fiscall992 .and the ten-month period ended . November 30, 1990, respectively, representing the tax
benefit attributable to utilization of net operating loss carryforwards.
Deferred income taxes result from timing differences irl the recognition of revenue and expense for tax
and financial reporting purposes. The source of these differences and their related tax effect are as follows:
Two months Ten months
Year ended ended ended
January 31, January 31 , November 30,
1992 1991 1990
$(44) $(608)
75 296
Reserve for s~ore closings
Depreciation
Deferred gain
Non-compete .agreement
Vacation accrual
Other
Tax (benefits) not recognized subject to future
realization and deferred taxes not recognized
due to ..utilization of net .operating .Iosses
$
[609]
[148]
[24]
$[781]
Year ended
January 31 ,
1990
$1,272,
341
424
268
(42)
(92)
(49)
11
$-
136
$ -
(1 ,988)
$
At January 31, 1991, the Company had net ()p;r~tin9Iosscarryforwards of approximately $4,495,000 for regular
tax purposes, of which $2,467,000 represented purchased loss carryforwards at November 30, 1990. The tax bE!nefits
attributable to the purchased ..Ioss carryforwardswere not recorded as an asset at the date of acquisition by.Pier
1 Imports since realization of such net operating loss carryforwards in subsequent periods was not assured. The
utilization of these loss carryforwards during fiscal 1992 has been recorded as a reduction of goodwill. In addition,
at November 30, 1990 the tax basis of the net assets acquired exceeded their estimated fair value by approximately
$6,500,000. The fair value of the net assets acquired was not adjusted at the date of acquisition to reflect tax benefits
that might result due to the uncertaintyconcerningthe realization of such benefits flowing from the higher tax basis.
During fiscal 1992 . the tax benefits attributable to approximately $4,000,000 of. such higher tax basis has been
recognized asa reduction of goodwill or as an adjustment to the related asset/liability due to their utiliza~ionbeing
assured as of January 31, 1992. Realization of the tax benefits attributable to the remaining $2,500,000 of excess
tax basis will be recognized as a reduction to tax expense in the period in which their utilization is assured.
For the ten-month period ended November 30, 1990, the Company paid alternative minimum taxes of $364,000.
The utilization of this credit during fiscal 1992 has been recorded asa reduction of goodwill
The difference between the provision for income tax and an amount computed. by applying the statutory federalil1colT.'~
tax rate to income is reconciled as follows:
Year ended
January 31 ,
1992
Federal tax provision (benefit) computed at statutory rate 34%
Amortization and write-off of intangibles 5
State taxes 3
Other 1
Loss for which no current tax benefit is available
Alternative minimum tax
43%
Two months Ten months
ended ended Year. ended
January 31, November 30, January 31,
1991 1990 1990
(34) 0/0 340/0 (34) 0/0
2 1 5
1
31 29
4
_ 0/0 40 0/0 - 0/0
27
NOTE5 TO CON50LIDATED FINANCIAL 5TATEMENT5
Continued
NOTE 11
EMPLOYEE BENEFIT PLANS
Prior to the purchase of the Company by Pier 1 Imports, substantially all employees and directors of the
Company were eligib,le to participate in the Company's Stock Purchase Plan after 90 days of employment.
Underthe terms of the plan, employees could contribute up to 10010 of their annual compensation and
directors could contributetheir directors' fees. The Company matched from 500/0 to 1000/0 of the participants'
contributions, depending 'upon length of participation in the plan. The Company's contributions to the
plC;l1'l v-iere $60,000 in the two months ended January 31 ,199.1 ; $331,000 in the ten months ended November
:iO, ...1.990; and. $394,000. in fiscal 1990. The plan ,was terminated. in December 1990.
Effective February 1, 1991 through October 31,.1991, substantiaHyall employees of the Company were
eligible to participate in Pier 1 Imports' Stock Purchase Plan. Each employee participant could contribute
uptol00/0 of the eligible portions of annual compensation. The Company contributed from 100/0 to 500/0
of the participants' contributions, depending upon length of participation and date of entry into the plan.
()ompany contributions to the plan . were $255,000 for fiscal .1992.
()n~August 14, 1991, the Board of Directors of the Company authorized the Company's Stock Purchase
f)lan,under which common stock is purchased onbehalfofparticipants at market prices through regular
payroll deductions. Commencing November 1 , 1991,the Company makes matching contributions ranging
f:rom10 010 to 50% (up toamaximum of 100/0 of annual compensation) with the amount of the Company's'
contribution depending upon the years of continuous participation by the employees in the Stock Purchase
Plan. Participants in the plan who were participants in the Company's Stock Purchase Plans in effect
prior to November 1990 and who were allocated pornpany contributions under prior plans at rates between
50% and 100% will receive matching Company col1tributionsat the highest rate attained by the participants
under prior plans. Contributions by outside directors~relimited to the amount of their monthly directors'
fees. Company contributions to the plan for fiscal 1992 were $115,000.
Effective February 1, 1991 through October 31 , 1991, the Company's employees were eligible to participate
in Pier 1 Imports' defined contributions employee retirement plan. All full and part-time personnel who
were at least 21 years old and who were employed for six months were eligible to participate in the plan.
Employees could contribute from 1 % to 15010 of their.compensation, subject to the statutory ceiling, and
the Company contributed up t03 0/0. Company contributions to the plan were $156,000 during fiscal 1992.
As authorized by the Board of Directors . of the Company on August 14, 1991, and effective November
1, .1991, the.Company implemented.a defined contribution retirement and savings plan that.is intended
to qualify under Section 40 1 (a) and 401(k) of the Internal Revenue Code of 1986, as amended. Employees
of the Company and its subsidiaries who are atlea~t21 years of age and have attained at least one-half
year of service are eligible to participate. Particip~nt~may contribute from 1 % to 150/0 of annual earnings,
subject to statutory limitations. The Company ~i1lm~,ke matching contributions ranging from 1 % up to
a maximum of 3 % depending on the level of th~,~~~icipant's contributions. In addition, the Company
may make discretionary contributions out of net Pf.8~~':fompany contributions for fiscal 1992 were $60,000.
As of January 31, 1992, approximately .1,426 aS$()ciates were eligible toparticipatf} of which 482 were
participating in the plan.
28
NOTE5 TO CON50LIDATED FINANCIAL 5TATEMENT5
(Continued)
NOTE 12
RELATED PARTY TRANSACTIONS
LOAN COMMITMENTS
In February 1989, the Company andlntermark entered into a credit support agreement as consideration
for the extension of credit by the Company's bank. The agreement provided that Intermark would pay
all balances due the bank on June 1, 1989, the expiration date of such line of credit. The Company pai'd
Intermark 1 0/0. per annum of the outstanding borrowings at the bank (plus the face.amount of any letters
of credit . issued on behalf of the Company) in consideration for this agreement. A total of. $34,000 was
paid in fiscal 1990. These agreements expired in June 1989 with no requirement for funding by Intermark.
In July 1989, the Company entered into a loan agreement with a bank for a $15 million revolving credit
agreement. This agreement was supported by a guarantee agreement between Intermark and the bank.
The Company paid Intermark 14 %of the total line plus % % per annum of the .unused portion under the
line for its guarantee. A total of $43,000 was paid in fiscal 1990 and $40,000 in the ten months ended
November 25, 1990. This guarantee expired in July 1990 with no requirement fO,r funding by Intermark.
COMMITMENTS
The Company leases three stores, an office and warehouse from an employee of the Company. The rental
payments were $170,000,$64,000, $134,000 and $132,000 for the year ended January 31, 1992, the
nyo months ended January 31 , 1991, the ten months ended November 30, 1990 and the year ended January
31, 1990, respectively. Future lease commitments are $740,000.
I~TERCC)MPANYCHARGES
E~c1uding the push-down of debt as described in Note 5, no interest income .or expense was recorded
or intercompany .balancespayable to or receivable from Pier 1 Imports for the two month period ended
J~nuary 31, 1991. Effective March 1991, interestincome/expense is computed based on the net average
n10nthly intercompany payable or receivable balance at a rate of 8.5 % per annum. Intercompany interest
I.. . . .. . ... .. ... ..... ..
ir1come of $301,000, net of intercompany interest expense, was recorded for the year ended January 31, 1992.
! .
The Co. mpa. ny..a. nd..Pie. r flmports have a number of fina.. ncial, operating and other arrangement..sand. have
I " .
ehgaged in certain transactions believed to be of mutual benefit. Certain of such arrangements will continue
a~dhave been incorporated in a Services Agreement, which was approved by all of the di.sinterested
,I
directors of the Company.
T~e Services Agreement between the Company and Pier 1 Imports is effective for one yeadrom the date
of the sale ofthe Compiiny's common stock in the offering consummated October 4, 1991. The Services
~greement may be terminated at any time upon 60 days prior written notice from Pier 1 Imports to the
Company,or upon 30 days prior written notice from the Company to Pier 1 Imports. Pursuant to the
abreement, Pier 1 Imports may from time to time provide the following serviceS: (i) accounting payroll
sbrvices through December .31, 1991, .at a cost of $.80 per check prepared and $1.85 for each FormW-2
i~sued; (ii)administration of the Company's employee benefit plans at the. rate of $5,400 per month plus
alone-time fee of. $20,000 to aid in implementing the plans; (iii).use of certain t~lecommunications equipment
for a fee of $1,250 per month; (iv) printing services at the rate of $.0275 per page; (v) peiriodic use of
dFrtain Pier 1 Imports information systems personnel at $60 per hour per person to assist in the installation
9f the Company's retail store systems; (vi) legal services from Pier 1 Imports' in-house legal department
~r a fee of $8,000 per month; and (vii) use of certain personnel in Pier 1 Imports' real estate department
I
for a fee of $41,600 per month to assist in new store site selection, supervision of construction and property
rhanagement. All such services except legal services have been discontinued. Pier 1 Imports continues
tb maintain insurance policies that cover the Company and its subsidiaries, and the Company reimburses
I
~ier 1 Imports for the portion of the premiums of such policies relating to the insurance exposure
29
NOTE5 TOCON50LIDATED FINANCIAL 5TATEMENT5
(Continued)
applicable to the Company and its subsidiaries. During fiscal 1992, the Company paid Pier 1 Imports,
approximately.$469,000 pursuant to the services agreement.
. NOTE 13
SUPPLEMENTAL..CASH FLOW.INFORMATION
During fiscal 1990, the Company sold 24,000 shares of common stock to officers and an employee under
the terms of.themanagement stock purchase .planfor.approximately $164,000, recording a subscription
receivable balance in connection with this saleof$l 02,000.
For the two month period ended January 31, 1991, the Company recorded goodwill of $21,203,000 and
debt payable to Pier 1 Imports, including imputed.interest,of $24,700,000 reflecting push-down accounting
adjustments resulting from the step acquisition of the Company by Pier 1 Imports (see Note 1). During
fuscal1992,theCompany recorded an adjustment of $6.6 millionasa credit to additional paid-in capital
representing an addition topermanentequityoftlrl.e Company (see Note 11 and reduced goodwill by
$2,575,000 for certain acquired tax benefits (see Note! 10). In addition, during thethird quarter the Company
entered into a capital lease agreement to acquire furniture valued at approximately $207,000.
Cash paid for interest and cash received or paid for income taxes was as follows:
Two months Ten months
ended ended
January 31, November 30,
1991 1990
$84 $482
$153
(In thousands)
Interest ..paid
Income taxes paid (received)
Year ended
January 31 ,
1992
$1;929
$ 249
Year ended
January 31,
1990
$1,198
$ (519)
NOTE 14
LITIGATION
Twenty-two individual plaintiffs filed suit on February 1 , 1988, in the 113th District Court of Harris County,
Texas (the case was later removed to Federal Court), against Wolfe Nursery, Inc., an apartment complex
owner, a chemical distributor, a chemical manufacturer, and others. The plaintiffs are former apartment
building employees and residents who. allege that improper use and application of chlordane-based. pesticides
resulted in personal injury and at least one death. The chemicals were allegedly purchased at a store
operated by Wolfe Nursery. The plaintiffs have agreed to settle with Wolfe Nursery within its insurance
policy limits and Wolfe Nursery will be dismissed from the suit upon the execution of the definitive settlement
agreement.
lrhere are various claims, lawsuits, investigations and dpendingactions against the Company. and its
subsidiaries incident to the operations of its business. Liability, if any, associated with these matters is
not determinable at January 31, 1992. While certain of the lawsuits involve substantial amounts, it is the
opinion of management thattheultimateresolutionof such litigation will not have a material adverse effect
on the Company's financial position.
NOTE 19
RECAPITALIZATION OFSHAREHOLDERS'EQUITY
On August 14, 1991, the Company's Board of Directors and sole shareholder approved the recapitalization
of the Company. by adopting a Restated .Certificateof tncorporationauthorizing 25,000,000 shares of
common stock, par value $.01 per share, and 5,000,000 shares of preferred stock, par value $.01 per
share, and by exchanging the former 1 ,000 shares of issued and outstanding common stock for 4,800,000
shares of common stock.
30
REFORT OF INDEFENDENT ACCOUNT ANT5
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OFSUNBELTNURSERYGROUF', INC.
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements
of operations, of cash flows and of changes in shareholders' equity present fairly, in all material respects,
the financial position of Sunbelt Nursery Group, Inc. and its subsidiaries at January 31, 1992 and 1991,
and the results of their operations and their cash flows for the year ended January 31, 1992, .and for
the two-month period ended. Januilry 31, 1991, in conformity with generally accepted accounting principles.
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 ofthese
statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We believe that our audits provide
a reasonable basis for the opinion expressed above.
PRICE, WATERHOUSE
Fort. Worth, Texas
March 17, 1992
TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF SUNBELT NURSERY GROUF', INC.
In our opinion; the accompanying consolidated statements of operations, of cash flows and of changes
in shareholders' equity present fairly, in all material respects, the results of their operations and their
cash flows for the year ended January 31, 1990 and for the ten~month period endedNovember30,1990,
in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain reasonable assurance about
w:he~h~r the financi~l~tatements are free of material misstatement. An audit includes examining,on..a
test basis, evidence supporting .the amounts and disclosures in the financial statements, asse~singthe
accounting principles used and significant estimates made by management, and evaluating the o"erall
financial statement presentation. We believe that our audits provide a.reasonablebasis .for .the opinion
expressed above.
W,tw~
PRICE WATERHOUSE
Fort Worth, ..Texas
August 15, 1991
31
5TOCK F~ICE5 AND....INFO~ATION
Fiscal 1992
1 st Quarter
2nd Quarter
3rd Quarter
4th Quarter
High Low
87/8 75/8
73/4 43/4
Prices from the American Stock Exchange. No dividends on common stock were paid in 1992.
Withapproximat~ly2,6.~OsharehCllders of record, Sunbelt Nursery Group, Inc. is .listed on the
American Stock Exchange. Trading Symbol:SBN
-
14NNUAL MEETING
lrhe annual meeting of shareholders will be held on. Thursday,May28,. 1992 at 10:00, a.m. at
t:heHyattRegencyDFW,DFW Airport, Texas 75261
-
l(Z)-K .REFO~T...INFO~ATION
Copies of theCompany's.annualrElPort to the Securities and Exchange Commission on FOrm 10-K
.:lre available upon written request to the .Secretaryof the Company.
-
MARKETING REG ION 5
~~~
..:S~:..
-..'~~~ ..'.-
- -
_.-
--
'nuI,elyland
Nurseryland
California
lTpAtlOp
nursery
Tip Top Nurseries
Arizona
~q~
~. p
Q
Wolfe Nursery
Texas,. Oklahoma
Los Angeles
15 stores
San.. Diego
14 stores Phoenix
9 stores
North...Texasl
Oklahoma
34. stores
San Antoniol
Austin
10 · stores
32
60ARD OF DlRECTOR5
CLARK A. JOHNSON
Chairman and Chief Executive Officer
Pier 1 I m ports, Inc.
DONALD W. DAVIS
President and Chief Executive Offic'er
Sunbelt Nursery Group, Inc.
MARVIN J. GIROUARD
President .and Chief Operating Officer
, Pier 1 I m ports, Inc.
OFFICER5
DONALDW. DAVIS
President. and Chief Executive Officer
ROBERT L. BROADHEAD
Senior Vice President
and Chief'Operations Officer
W.-MICHAEL COOK
Vice President Merchandising
ADDITIONAL INFORMATION
CORPORATE OFFICES
One Ridgmar Centre
6~00 West Freeway, Suite 600
F~rt Worth, Texas 76116
Telephone (817)738-8111
RICHARD J. GYDE
President and Chief Executive- Officer
NutriSystems
LUTHER A. HENDERSON
Chairman and Chief Executivei Officer
Medical Ventures, Inc.
TONY J...CHRON
Vice President Real Estate
and Store Development
MARK L. JONES
'Vice President Finance,
Secretary and Treasurer
TERESA E. GRAHAM
Assistant Secretary
TRANSFER AGENT AND REGISTRAR
Ameritrust j. Dallas, Texas
INDEPENDENT ACCOUNTANTS
Price Waterhouse j Fort Worth, Texas
GENERAL COUNSEL
Kelly, Hart & Hallman j Fort Worth, Texas
33