EX-13 9 dex13.txt REGISTRANT'S 2000 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13 cost plus world market annual report 2000 letter to our shareholders 01 five year summary of selected financial data 05 management's discussion and analysis 06 consolidated balance sheets 12 consolidated statements of operations 13 consolidated statement of shareholders' equity 14 consolidated statements of cash flows 15 notes to consolidated financial statements 16 independent auditors' report 27 directors, officers and corporate data 28 store locations 29
COST PLUS WORLD MARKET 1 letter to our shareholders Dear Shareholder: Fiscal 2000 was the second consecutive year, and only the second year in the Company's 42 year history, in which we produced earnings in all four quarters. Our sales volume of $493.7 million and earnings of $1.00 per share for the year, representing a 54% growth in earnings per share over two years, are also new records for us. These accomplishments were particularly noteworthy, given the challenging economic and retail climate of the fourth quarter. Despite the relatively severe impact felt by Cost Plus and most retailers during the holiday season, we were pleased with the rapid response of our management team in producing earnings in line with revised expectations and inventories well-positioned to enter our spring season. Sales growth in fiscal 2000 was fueled by a 23% increase in our store base and a 4.6% increase in same-store sales on top of an 8.6% increase last year. This marks the tenth consecutive year the Company has produced same store sales growth in excess of 4.5%, a track record quite unique in retailing. Looking forward, we will continue to manage our organization with fresh thinking and attention to detail. And, we will work particularly hard to ensure that our value orientation remains a cornerstone of our operating philosophy. Our customers visit our stores, not only to discover goods from all over the world, but also to find attractive price points in this cautious economic climate. Our emphasis on cost-effective marketing, merchandising and distribution strategies has again paid off. We continue to make regular investments in infrastructure, technology and management talent to help ensure that our stores operate efficiently. Our firm belief in simplicity, discipline and fiscally prudent growth is clearly exemplified by our national expansion which is financed entirely from internal cash flow. 2 COST PLUS WORLD MARKET Financially strong, we will continue our expansion with 23 planned new store openings in 2001. Last year, we opened 24 new stores, as promised, and introduced Cost Plus World Market to five new markets: Atlanta, Charlotte, Raleigh/Durham, San Luis Obispo and metropolitan Washington, DC. Throughout our expansion, our new stores have continued to perform to our internal expectations. Certainly, this is encouraging evidence that our retail concept retains broad appeal as we expand beyond major markets and include mid-sized markets in our growth plans. At Cost Plus, we believe that our unique retail shopping experience is a major point of differentiation. When coupled with our commitment to provide exciting merchandise from around the world at consistently great prices, we believe it will allow us to continue to expand on a profitable basis for years to come. We would like to thank those who have supported us in our endeavors to build a high-quality retail company: our employees, our customers and our shareholders. [PHOTO OF MURRAY H. DASHE] /S/ MURRAY H. DASHE MURRAY H. DASHE CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT COST PLUS WORLD MARKET 3 now coast to coast Our store count grew 23% last year to 127 stores, the sixth consecutive year of double-digit expansion. In the process, we introduced the World Market concept to such diverse markets as Atlanta, San Luis Obispo and Washington, DC. In our earlier years as a successful retailer, Cost Plus World Market proved that our concept was attractive in major markets around the United States. We are now pleased to report that, based on more recent successes in such areas as Omaha, Nebraska, Spokane, Washington, and Reno, Nevada, the concept is scalable to mid-markets, as well. As a result, the Company now believes that there is potential for as many as four hundred Cost Plus World Market stores in the United States. This truly gives us many more years of growth ahead. Profitable growth achieved market-by-market and store-by-store, is the guiding principle of our nationwide expansion program. To achieve this, we often cluster store openings in new cities to achieve immediate economies of scale and regularly add stores to existing markets to maximize penetration. Rigorous internal performance standards require that new stores achieve operating margins comparable to existing stores within three years. Again, in 2000, that objective was achieved. Cost Plus World Market's investment in growth in 2000 was not limited to stores. Our technology infrastructure was significantly enhanced, while maintaining relative simplicity in its execution. In addition, we continued to utilize our Stockton, California distribution center to leverage existing assets while building a state-of-the-art facility near Norfolk, Virginia. This facility will open by mid-2002, and will enable the Company to meet the growing consumer demand for a Cost Plus World Market throughout America. 4 COST PLUS WORLD MARKET five year compound annual growth rates 1996 - 2000 [GRAPH APPEARS HERE] stores 21% sales 22% operating income 26% net income 42%
net sales operating income net income dollars in millions dollars in millions dollars in millions [GRAPH APPEARS HERE] [GRAPH APPEARS HERE] [GRAPH APPEARS HERE] 96 214.8 96 15.0 96 7.4 97 260.5 97 18.1 97 10.0 98 315.1 98 22.9 98 13.2 99 402.3 99 33.1 99 19.7 00 493.7 00 36.2 00 21.7
COST PLUS WORLD MARKET 5 five year summary of selected financial data
Fiscal Year --------------------------------------------------------------------- (In thousands, except per share and selected 2000/1/ 1999 1998 1997 1996 operating data) --------------------------------------------------------------------- Statement of Operations Data: Net sales $ 493,661 $ 402,292 $ 315,135 $ 260,494 $ 214,814 Cost of sales and occupancy 316,500 255,383 200,023 164,394 135,072 --------------------------------------------------------------------- Gross profit 177,161 146,909 115,112 96,100 79,742 Selling, general and administrative expenses 135,923 110,108 89,261 75,238 62,649 Store preopening expenses 5,044 3,671 2,927 2,744 2,053 --------------------------------------------------------------------- Income from operations 36,194 33,130 22,924 18,118 15,040 Net interest expense 666 859 1,226 1,679 2,451 --------------------------------------------------------------------- Income before income taxes 35,528 32,271 21,698 16,439 12,589 Income taxes 13,856 12,586 8,462 6,432 5,162 --------------------------------------------------------------------- Net income $ 21,672 $ 19,685 $ 13,236 $ 10,007 $ 7,427 ===================================================================== Net income per share--diluted $ 1.00 $ 0.93 $ 0.65 $ 0.51 $ 0.41 Weighted average shares outstanding--diluted 21,568 21,189 20,363 19,574 18,237 ===================================================================== Selected Operating Data: Percent of sales: Gross profit 35.9% 36.5% 36.5% 36.9% 37.1% Selling, general and administrative expenses 27.5% 27.4% 28.3% 28.9% 29.2% Income from operations 7.3% 8.2% 7.3% 7.0% 7.0% Number of stores: Opened during period 24 18 15 12 9 Closed during period -- -- -- -- -- Open at end of period 127 103 85 70 58 Average sales per selling square foot/2/ $ 273 $ 269 $ 258 $ 259 $ 252 Comparable store sales increase/3/ 4.6% 8.6% 5.5% 7.0% 6.1% ===================================================================== Balance Sheet Data (at period end): Working capital $ 98,001 $ 80,663 $ 61,031 $ 52,630 $ 24,807 Total assets 252,865 214,699 173,141 152,000 128,198 Note payable and capital lease obligations, less current portion 13,474 14,416 15,110 15,692 14,215 Total shareholders' equity 169,121 138,335 109,403 95,609 73,209 Current ratio 2.59 2.47 2.43 2.52 1.72 Debt to equity ratio 8.2% 10.9% 14.3% 16.9% 20.0% =====================================================================
1 The Company's fiscal year end is the Saturday closest to the end of January. Fiscal 2000 was 53 weeks and ended on February 3, 2001. All other fiscal years presented consist of 52 weeks. 2 Calculated using net sales for stores open during the entire period divided by the selling square feet of such stores. 3 A store is considered as comparable at the beginning of its fourteenth full month of operation. 6 COST PLUS WORLD MARKET management's discussion and analysis of financial condition and results of operations An asterisk "*" denotes a forward-looking statement reflecting current expectations that involve risks and uncertainties. Actual results may differ materially from those discussed in such forward-looking statements, and shareholders of Cost Plus, Inc. (the "Company" or "Cost Plus") should carefully review the cautionary statements set forth in this Annual Report, including "Quarterly Results and Seasonality" beginning on page 8. The Company may from time to time make additional written and oral forward-looking statements, including statements contained in the Company's filings with the Securities and Exchange Commission and in its reports to shareholders. The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company. Results of Operations Fiscal 2000 Compared to Fiscal 1999 Net Sales Net sales increased $91.4 million, or 22.7%, to $493.7 million in fiscal 2000 from $402.3 million in fiscal 1999. The increase in net sales was attributable to new stores and an increase in comparable store sales. Comparable store sales rose 4.6% for fiscal 2000, as a result of a larger average transaction. As of February 3, 2001, the Company operated 127 stores compared to 103 stores as of January 29, 2000. Gross Profit As a percentage of net sales, gross profit was 35.9% in fiscal 2000 and 36.5% in fiscal 1999. This change is substantially explained by heavier promotional and clearance mark-downs to meet competitve sales pressures, reduced leverage on occupancy costs from a higher percentage of new stores in our base and from lower sales, as well as increased fuel and transportation costs. New stores generally have higher occupancy costs as a percentage of sales until they reach maturity. Selling, General and Administrative ("SG&A") Expenses As a percentage of net sales, SG&A expenses increased slightly to 27.5% in the current fiscal year from 27.4% last fiscal year. The increase in the SG&A expense rate resulted primarily from higher advertising expenditures to respond to a more difficult retail environment in the fourth quarter. Store Preopening Expenses Store preopening expenses, which include grand opening advertising and preopening merchandise setup expenses, were $5.0 million in fiscal 2000 and $3.7 million in fiscal 1999. Expenses vary depending on the particular store site and whether it is located in a new or existing market. The Company opened 24 stores in fiscal 2000 compared to 18 stores in fiscal 1999. COST PLUS WORLD MARKET 7 Net Interest Expense Net interest expense, which includes interest on capital leases and interest expense net of interest income, was $666,000 in fiscal 2000 and $859,000 in fiscal 1999. The modest decrease in net interest expense was due to higher interest rates on short-term investments and a small increase in the average cash balances available for investment. Income Taxes The Company's effective tax rate was 39.0% in both fiscal 2000 and fiscal 1999. Fiscal 1999 Compared to Fiscal 1998 Net Sales Net sales increased $87.2 million, or 27.7%, to $402.3 million in fiscal 1999 from $315.1 million in fiscal 1998. The increase in net sales was attributable to new stores and an increase in comparable store sales. Comparable store sales rose 8.6% for fiscal 1999, as a result of a larger average transaction size and an increase in customer count. As of January 29, 2000, the Company operated 103 stores compared to 85 stores as of January 30, 1999. Gross Profit As a percentage of net sales, gross profit was 36.5% in both fiscal 1999 and fiscal 1998. Improvements in merchandise margin offset higher occupancy costs in new stores. New stores generally have higher occupancy costs, as a percentage of net sales, until they reach maturity. The improvements in merchandise margin percentage resulted primarily from lower markdowns and an increase in initial markon. Selling, General and Administrative ("SG&A") Expenses As a percentage of net sales, SG&A expenses decreased to 27.4% in fiscal 1999 from 28.3% in fiscal 1998. The decrease in the SG&A expense rate resulted primarily from leveraging store payroll, advertising expense, corporate overhead and store expenses against higher net sales and an expanded base of stores. Store Preopening Expenses Store preopening expenses, which include grand opening advertising and preopening merchandise setup expenses, were $3.7 million in fiscal 1999 and $2.9 million in fiscal 1998. Expenses vary depending on the particular store site and whether it is located in a new or existing market. The Company opened 18 stores in fiscal 1999 compared to 15 stores in fiscal 1998. Net Interest Expense Net interest expense, which includes interest on capital leases and interest expense net of interest income, was $859,000 in fiscal 1999 and $1.2 million in fiscal 1998. The decrease in net interest expense was due to higher cash balances primarily resulting from higher operating cash flows and proceeds from the issuance of common stock in connection with the Company's stock option and stock purchase plans. Income Taxes The Company's effective tax rate was 39.0% in both fiscal 1999 and fiscal 1998. 8 COST PLUS WORLD MARKET Inflation The Company does not believe that inflation has had a material effect on its financial condition and results of operations during the past three fiscal years. However, there can be no assurance that the Company's business will not be affected by inflation in the future. Quarterly Results and Seasonality The following table sets forth the Company's unaudited quarterly operating results for its eight most recent quarterly periods.
Three Months Ended -------------------------------------------------------------------- (In thousands, except per share data and April 29, 2000 July 29, 2000 Oct. 28, 2000 Feb. 3, 2001/1/ number of stores) -------------------------------------------------------------------- Net sales $ 92,238 $ 92,765 $ 101,913 $ 206,745 Gross profit 31,791 31,633 35,333 78,404 Net income 1,133 1,449 283 18,807 Net income per share Basic $ 0.06 $ 0.07 $ 0.01 $ 0.90 Diluted $ 0.05 $ 0.07 $ 0.01 $ 0.87 Number of stores open at end of period 109 113 122 127 Three Months Ended ------------------------------------------------------------------- (In thousands, except per share data and May 1, 1999 July 31, 1999 Oct. 30, 1999 Jan. 29, 2000 number of stores) ------------------------------------------------------------------- Net sales $ 75,389 $ 76,556 $ 82,834 $ 167,513 Gross profit 25,864 26,540 29,008 65,497 Net income 707 1,108 478 17,392 Net income per share Basic $ 0.04 $ 0.05 $ 0.02 $ 0.85 Diluted $ 0.03 $ 0.05 $ 0.02 $ 0.82 Number of stores open at end of period 90 94 99 103
------------ /1/ The three months ended February 3, 2001 was a fourteen-week period as compared to the three months ended January 29, 2000 which was a thirteen- week period. COST PLUS WORLD MARKET 9 The Company's business is highly seasonal, reflecting the general pattern associated with the retail industry of peak sales and earnings during the Christmas season. Due to the importance of the Christmas selling season, the fourth quarter of each fiscal year has historically contributed, and the Company expects it will continue to contribute, a disproportionate percentage of the Company's net sales and most of its net income for the entire fiscal year.* Any factors negatively affecting the Company during the Christmas selling season in any year, including unfavorable economic conditions, could have a material adverse effect on the Company's financial condition and results of operations. The Company generally experiences lower sales and earnings during the first three quarters and, as is typical in the retail industry, may incur losses in these quarters. The results of operations for these interim periods are not necessarily indicative of the results for a full fiscal year. In addition, the Company makes decisions regarding merchandise well in advance of the season in which it will be sold, particularly for the Christmas selling season. Significant deviations from projected demand for products could have a material adverse effect on the Company's financial condition and results of operations, either by lost gross sales due to insufficient inventory or lost gross margin due to the need to mark down excess inventory. The Company's quarterly results of operations may also fluctuate based upon such factors as the number and timing of store openings and related store preopening expenses, the amount of net sales contributed by new and existing stores, the mix of products sold, the timing and level of markdowns, store closings, refurbishments or relocations, competitive factors, changes in fuel and other shipping costs and general economic conditions. Liquidity and Capital Resources The Company's primary uses for cash are to fund operating expenses, inventory requirements and new store expansion. Historically, the Company has financed its operations primarily from internally generated funds and borrowings under the Company's revolving credit facilities. The Company believes that the combination of its cash and cash equivalents, internally generated funds and available borrowings under its revolving line of credit will be sufficient to finance its working capital and capital expenditure requirements for at least the next twelve months.* Net cash provided by operating activities totaled $22.1 million for fiscal 2000, a decrease of $0.3 million from fiscal 1999. Improved profitability and an increase in depreciation expense were offset by a reduction in net liabilities. Net cash used in investing activities, primarily capital expenditures for new stores, totaled $26.5 million in fiscal 2000 compared to $17.0 million in fiscal 1999. The Company estimates that fiscal 2001 capital expenditures will approximate $33.5 million.* Net cash provided by financing activities was $4.8 million in fiscal 2000, which was primarily proceeds from the issuance of common stock in connection with the Company's stock option and stock purchase plans. Net cash provided by financing activities was $4.4 million in fiscal 1999, and was also related to the proceeds received from common stock issued under the Company's stock option and stock purchase plans. 10 COST PLUS WORLD MARKET Effective May 19, 2000, the Company entered into a new, unsecured revolving line of credit agreement with a bank, which expires June 1, 2002. This agreement replaced the amended October 12, 1998 revolving line of credit agreement. The new agreement allows for cash borrowings and letters of credit of up to $10.0 million from January 1 through June 30 of each year, $40.0 million from July 1, 2000 through December 31, 2000 and $50.0 million from July 1, 2001 through December 31, 2001. Interest is paid monthly based on the Company's election of the bank's reference rate minus 0.75% (7.75% at February 3, 2001) or IBOR/LIBOR plus 0.9%. The Company is subject to certain financial covenants customary with such agreements. At February 3, 2001, the Company had no outstanding borrowings under the line of credit and $4.1 million outstanding under letters of credit. Impact of New Accounting Standards Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company does not utilize derivative instruments, however it has adopted SFAS 133 effective February 4, 2001. Management does not expect the adoption of SFAS 133 to have a significant impact on the financial position, results of operations, or cash flows of the Company. Quantitative and Qualitative Disclosure About Market Risk The Company is exposed to market risks, which include changes in U.S. interest rates and, to a lesser extent, foreign exchange rates. The Company does not engage in financial transactions for trading or speculative purposes. Interest Rate Risk The interest payable on the Company's bank line of credit is based on variable interest rates and is therefore affected by changes in market interest rates. If interest rates on existing variable rate debt were to rise 80 basis points (a 10% change from the Company's borrowing rate as of February 3, 2001), the Company's results of operations and cash flows would not be materially affected. In addition, the Company has fixed and variable income investments consisting of cash equivalents and short-term investments which are also affected by changes in market interest rates. COST PLUS WORLD MARKET 11 Foreign Currency Risks The Company enters into a significant amount of purchase obligations outside of the United States which are settled in U.S. Dollars and therefore, the Company has only minimal exposure to foreign currency exchange risks. The Company does not hedge against foreign currency risks and believes that foreign currency exchange risk is immaterial. Stock Activity The Company's common stock is currently traded on the over-the-counter market and is quoted on the Nasdaq National Market under the symbol "CPWM." The following table sets forth the high and low closing sales prices, for the periods indicated, as reported by the Nasdaq National Market. As of March 10, 2001, the Company had 37 shareholders of record. This number excludes individual shareholders holding stock in nominee or street name by brokers. The Company's present policy is to retain its earnings to finance growth, and it does not intend to pay cash dividends.
Price Range ------------------------------- High Low ------------------------------- Fiscal Year Ended February 3, 2001 First Quarter $ 35.19 $ 15.94 Second Quarter 35.88 24.13 Third Quarter 38.81 24.81 Fourth Quarter 31.94 19.19 Fiscal Year Ended January 29, 2000 First Quarter $ 24.17 $ 15.11 Second Quarter 33.42 20.92 Third Quarter 38.03 26.58 Fourth Quarter 39.94 17.44
12 COST PLUS WORLD MARKET consolidated balance sheets
February 3, January 29, (Dollars in thousands, except per share amounts) 2001 2000 -------------- ------------- Assets Current assets: Cash and cash equivalents $ 38,815 $ 38,411 Merchandise inventories 109,829 91,402 Other current assets 11,107 5,654 ---------------------------------- Total current assets 159,751 135,467 Property and equipment, net 78,694 67,520 Other assets, net 14,420 11,712 ---------------------------------- Total assets $ 252,865 $ 214,699 ================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 31,592 $ 26,061 Income taxes payable 9,933 9,237 Accrued compensation 8,506 8,909 Other current liabilities 11,719 10,597 ---------------------------------- Total current liabilities 61,750 54,804 Capital lease obligations 13,474 14,416 Other long-term obligations 8,520 7,144 Shareholders' equity: Preferred stock, $.01 par value: 5,000,000 shares authorized; none issued and outstanding -- -- Common stock, $.01 par value: 67,500,000 shares authorized; issued and outstanding 21,005,337 and 20,521,884 shares 210 205 Additional paid-in capital 122,349 113,240 Retained earnings 46,562 24,890 ---------------------------------- Total shareholders' equity 169,121 138,335 ---------------------------------- Total liabilities and shareholders' equity $ 252,865 $ 214,699 ==================================
See notes to consolidated financial statements. COST PLUS WORLD MARKET 13 consolidated statements of operations
Fiscal Year Ended ----------------------------------------------------------------- February 3, January 29, January 30, (In thousands, except per share amounts) 2001 2000 1999 ----------------------------------------------------------------- Net sales $ 493,661 $ 402,292 $ 315,135 Cost of sales and occupancy 316,500 255,383 200,023 ----------------------------------------------------------------- Gross profit 177,161 146,909 115,112 Selling, general and administrative expenses 135,923 110,108 89,261 Store preopening expenses 5,044 3,671 2,927 ----------------------------------------------------------------- Income from operations 36,194 33,130 22,924 Net interest expense 666 859 1,226 ----------------------------------------------------------------- Income before income taxes 35,528 32,271 21,698 Income taxes 13,856 12,586 8,462 ----------------------------------------------------------------- Net income $ 21,672 $ 19,685 $ 13,236 ================================================================= Net income per share Basic $ 1.04 $ 0.97 $ 0.67 Diluted $ 1.00 $ 0.93 $ 0.65 ================================================================= Weighted average shares outstanding Basic 20,813 20,321 19,724 Diluted 21,568 21,189 20,363 =================================================================
See notes to consolidated financial statements. 14 COST PLUS WORLD MARKET consolidated statement of shareholders' equity
Common Stock Additional Retained Total ------------------------ Paid-in Earnings Shareholders' (In thousands, except shares) Shares Amount Capital (Deficit) Equity ------------------------- ------------- -------------- ------------ Balance at January 31, 1998 19,549,101 $ 195 $ 103,445 $ (8,031) $ 95,609 Repurchase of stock (337,503) (3) (3,747) (3,750) Stock issued under Employee Stock Purchase Plan 16,889 -- 195 195 Exercise of stock options 708,030 7 3,149 3,156 Tax effect of disqualifying stock dispositions 957 957 Net income 13,236 13,236 ------------------------------------------------------------------------- Balance at January 30, 1999 19,936,517 199 103,999 5,205 109,403 Stock issued under Employee Stock Purchase Plan 9,332 -- 249 249 Exercise of stock options 576,035 6 4,761 4,767 Tax effect of disqualifying stock dispositions 4,231 4,231 Net income 19,685 19,685 ------------------------------------------------------------------------- Balance at January 29, 2000 20,521,884 205 113,240 24,890 138,335 Stock issued under Employee Stock Purchase Plan 15,768 -- 380 380 Exercise of stock options 467,685 5 5,138 5,143 Tax effect of disqualifying stock dispositions 3,591 3,591 Net income 21,672 21,672 ------------------------------------------------------------------------- Balance at February 3, 2001 21,005,337 $ 210 $ 122,349 $ 46,562 $ 169,121 =========================================================================
See notes to consolidated financial statements. COST PLUS WORLD MARKET 15 consolidated statements of cash flows
Fiscal Year Ended -------------------------------------------------------- February 3, January 29, January 30, (In thousands) 2001 2000 1999 -------------------------------------------------------- Cash Flows From Operating Activities: Net income $ 21,672 $ 19,685 $ 13,236 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,887 11,052 9,116 Loss on disposal of property and equipment 407 173 120 Deferred income taxes (2,103) (2,425) (1,927) Changes in assets and liabilities: Merchandise inventories (18,427) (20,722) (14,074) Other assets (3,172) (997) (990) Accounts payable 6,520 6,515 4,400 Other liabilities 3,317 9,119 6,734 ------------------------------------------------------- Net cash provided by operating activities 22,101 22,400 16,615 ------------------------------------------------------- Cash Flows From Investing Activities: Purchases of property and equipment (26,529) (17,023) (14,555) ------------------------------------------------------- Net cash used in investing activities (26,529) (17,023) (14,555) ------------------------------------------------------- Cash Flows From Financing Activities: Principal payments on capital lease obligations (691) (582) (494) Proceeds from the issuance of common stock 5,523 5,016 3,350 Cash used for common stock repurchase -- -- (3,750) Net cash provided by (used in) ------------------------------------------------------- financing activities 4,832 4,434 (894) ------------------------------------------------------- Net increase in cash and cash equivalents 404 9,811 1,166 Cash and cash equivalents: Beginning of period 38,411 28,600 27,434 ------------------------------------------------------- End of period $ 38,815 $ 38,411 $ 28,600 ======================================================= Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ 669 $ 960 $ 1,230 ======================================================= Cash paid for taxes $ 11,672 $ 9,724 $ 7,533 ======================================================= See notes to consolidated financial statements.
16 COST PLUS WORLD MARKET notes to consolidated financial statements Note 1. Summary of Business and Significant Accounting Policies Business Cost Plus, Inc. and subsidiaries (the "Company") is a specialty retailer of casual home living and entertaining products. At February 3, 2001, the Company operated 127 stores in 19 states under the names "World Market," "Cost Plus World Market," "Cost Plus" and "Cost Plus Imports." The Company's product offerings are designed to provide solutions to customers' casual home furnishing and home entertaining needs. The offerings include home decorating items such as furniture and rugs, as well as a variety of tabletop and kitchen products. Cost Plus World Market stores also offer a number of gift and decorative accessories including collectibles, cards, wrapping paper and other seasonal items. In addition, Cost Plus World Market offers its customers a wide selection of gourmet foods and beverages, including wine, micro-brewed and imported beer, coffee and tea. The Company accounts for its operations as one operating segment. Fiscal Year The Company's fiscal year end is the Saturday closest to the end of January. The fiscal year ended February 3, 2001 (fiscal 2000) contained 53 weeks. All other fiscal years presented consist of 52 weeks. Principles of Consolidation The consolidated financial statements include the accounts of Cost Plus, Inc. and its subsidiaries. Intercompany balances and transactions are eliminated in consolidation. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosures of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A provision for sales returns is estimated and recorded in the current year based on actual returns subsequent to year end. Fair Value of Financial Instruments The carrying value of current assets and current liabilities approximates their fair market value. Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less as cash equivalents. Merchandise Inventories Inventories are stated at the lower of cost or market as determined under the retail inventory method. Cost includes certain buying and distribution costs related to the procurement, processing and transportation of merchandise. COST PLUS WORLD MARKET 17 Property and Equipment Furniture, fixtures and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives, which are generally three to ten years. Buildings and leasehold improvements are amortized on a straight-line basis over the lesser of the related lease terms or their useful lives. Capital Leases Noncancelable leases which meet the criteria of capital leases are capitalized as assets and amortized on a straight-line basis over their related lease terms. Other Assets Goodwill is amortized on a straight-line basis over 40 years. Lease rights and interests are amortized on a straight-line basis over their related lease terms. Long-Lived Assets The Company's policy is to review annually the recoverability of all long-lived assets or whenever events or changes indicate that the carrying amount of an asset may not be recoverable. Based upon the Company's review as of February 3, 2001 and January 29, 2000, no adjustments to the carrying value of such assets were necessary. Deferred Rent Certain of the Company's operating leases contain predetermined fixed escalations of minimum rentals during the initial term. For these leases, the Company recognizes the related rental expense on a straight-line basis over the life of the lease and records the difference between amounts charged to operations and amounts paid as deferred rent. As part of its lease agreements, the Company may receive certain lease incentives, primarily construction allowances. These allowances are also deferred and are amortized on a straight- line basis over the life of the lease as a reduction of rent expense. Advertising Expense Advertising costs are expensed as incurred. For the fiscal years ended February 3, 2001, January 29, 2000 and January 30, 1999, advertising costs were $27,156,000, $21,651,000 and $17,371,000, respectively. Store Preopening Expenses Store preopening expenses include grand opening advertising, labor, travel and hiring expenses and are expensed as incurred. Concentration of Credit Risk Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents. The Company places its cash with high quality financial institutions. At times, such balances may be in excess of FDIC insurance limits. Income Taxes Income taxes are accounted for using an asset and liability approach that requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's consolidated financial statements or tax returns. 18 COST PLUS WORLD MARKET Comprehensive Income Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," requires that any items recognized under accounting standards as components of comprehensive income be reported in an annual financial statement that is displayed with the same prominence as other financial statements. The Company's comprehensive income and net income are the same for all periods presented. Net Income per Share The following is a reconciliation of the weighted average number of shares used in the Company's Basic and Diluted per share computations.
Fiscal Year Ended ----------------------------------------- February 3, January 29, January 30, (In thousands) 2001 2000 1999 ----------------------------------------- Basic shares 20,813 20,321 19,724 Effect of dilutive stock options 755 868 639 ----------------------------------------- Diluted shares 21,568 21,189 20,363 =========================================
Stock-Based Compensation The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations. Impact of New Accounting Standards Statement of Financial Accounting Standards No. 133 ("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities, is effective for all fiscal years beginning after June 15, 2000. SFAS 133, as amended, establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. Under SFAS 133, certain contracts that were not formerly considered derivatives may now meet the definition of a derivative. The Company does not utilize derivative instruments, however it has adopted SFAS 133 effective February 4, 2001. Management does not expect the adoption of SFAS 133 to have a significant impact on the financial position, results of operations, or cash flows of the Company. COST PLUS WORLD MARKET 19 Note 2. Property and Equipment Property and equipment consist of the following:
February 3, January 29, (In thousands) 2001 2000 ------------------------------------- Land and land improvements $ 530 $ 530 Building and leasehold improvements 52,872 44,188 Furniture, fixtures and equipment 60,281 45,218 Facilities under capital leases 27,449 28,694 ------------------------------------- Total 141,132 118,630 Less accumulated depreciation (62,438) (51,110) ------------------------------------- Property and equipment, net $ 78,694 $ 67,520 =====================================
Note 3. Other Assets Other assets consist of the following:
February 3, January 29, (In thousands) 2001 2000 ------------------------------------- Goodwill $ 3,972 $ 3,972 Deferred income taxes 4,454 2,222 Lease rights and interests 3,146 3,146 Other 8,340 7,160 ------------------------------------- Total 19,912 16,500 Less accumulated amortization (5,492) (4,788) ------------------------------------- Other assets, net $ 14,420 $ 11,712 =====================================
Note 4. Leases The Company leases certain properties consisting of retail stores, warehouses, the corporate office and equipment. Store leases typically contain provisions for two to three renewal options of five to ten years each, with renewal periods from 2001 to 2040 at the then-current market rates. The retail store, warehouse and corporate office leases generally provide that the Company assumes the maintenance and all or a portion of the property tax obligations on the leased property. 20 COST PLUS WORLD MARKET The minimum rental payments required under capital leases (with interest rates generally at 12.75%) and noncancelable operating leases with an initial lease term in excess of one year at February 3, 2001, are as follows:
(In thousands) Capital Leases Operating Leases Total ------------------------------------------------------------------------------------------------------- Fiscal year: 2001 $ 2,067 $ 33,113 $ 35,180 2002 2,073 32,264 34,337 2003 2,073 31,263 33,336 2004 2,073 30,175 32,248 2005 2,034 27,934 29,968 Thereafter through the year 2040 25,500 145,610 171,110 ------------------------------------------------------- Minimum lease commitments 35,820 $300,359 $336,179 Less amount representing interest (21,966) ================================ -------- Present value of capital lease obligations 13,854 Less current portion (380) -------- Long-term portion $ 13,474 ========
Accumulated depreciation related to capital leases amounted to $13,894,000 and $13,164,000 at February 3, 2001 and January 29, 2000, respectively. Depreciation expense related to capital leases is classified as occupancy cost. For the fiscal years ended February 3, 2001, January 29, 2000 and January 30, 1999, such depreciation expense was $1,198,000, $1,223,000 and $1,223,000, respectively. Interest expense related to capital leases was $1,772,000, $1,898,000 and $1,962,000 for the fiscal years ended February 3, 2001, January 29, 2000 and January 30, 1999, respectively. Minimum and contingent rental expense, which is based upon certain factors such as sales volume and property taxes, under operating and capital leases, as well as sublease rental income, are as follows:
Fiscal Year Ended ------------------------------------------------- February 3, January 29, January 30, (In thousands) 2001 2000 1999 ------------------------------------------------- Operating leases: Minimum rental expense $28,488 $22,732 $17,100 Contingent rental expense 981 937 821 Less sublease rental income (1,070) (1,281) (1,153) ---------------------------------------------- Total $28,399 $22,388 $16,768 ============================================== Capital leases--contingent rental expense $ 1,047 $ 1,072 $ 1,022 ==============================================
Total minimum rental income to be received from noncancelable sublease agreements through 2011 is approximately $4,665,000 as of February 3, 2001. COST PLUS WORLD MARKET 21 Note 5. Revolving Line of Credit Effective May 19, 2000, the Company entered into a new, unsecured revolving line of credit agreement with a bank, which expires June 1, 2002. This agreement replaced the amended October 12, 1998 revolving line of credit agreement. The new agreement allows for cash borrowings and letters of credit of up to $10.0 million from January 1 through June 30 of each year, $40.0 million from July 1, 2000 through December 31, 2000 and $50.0 million from July 1, 2001 through December 31, 2001. Interest is paid monthly based on the Company's election of the bank's reference rate minus 0.75% (7.75% at February 3, 2001) or IBOR/LIBOR plus 0.9%. The Company is subject to certain financial covenants customary with such agreements. At February 3, 2001, the Company had no outstanding borrowings under the line of credit and $4.1 million outstanding under letters of credit. Interest expense under borrowing arrangements was $167,000, $132,000 and $109,000 for the fiscal years ended February 3, 2001, January 29, 2000 and January 30, 1999, respectively. Note 6. Income Taxes The provision for income taxes consists of the following:
Fiscal Year Ended ---------------------------------------------------- February 3, January 29, January 30, (In thousands) 2001 2000 1999 ---------------------------------------------------- Current: Federal $13,442 $12,408 $ 8,621 State 2,517 2,603 1,768 ----------------------------------------------- Total current 15,959 15,011 10,389 ----------------------------------------------- Deferred: Federal (1,788) (2,074) (1,556) State (315) (351) (371) ----------------------------------------------- Total deferred (2,103) (2,425) (1,927) ----------------------------------------------- Provision for income taxes $13,856 $12,586 $ 8,462 ===============================================
22 COST PLUS WORLD MARKET The differences between the U.S. federal statutory tax rate and the Company's effective tax rate are as follows:
Fiscal Year Ended -------------------------------------------- February 3, January 29, January 30, 2001 2000 1999 -------------------------------------------- U.S. federal statutory tax rate 35.0% 35.0% 35.0% State income taxes (net of U.S. federal income tax benefit) 4.0 4.4 4.3 Non-deductible expenses 0.3 0.3 0.4 Other (0.3) (0.7) (0.7) ----------------------------------------- Effective income tax rate 39.0% 39.0% 39.0% =========================================
Significant components of the Company's deferred tax assets and liabilities are as follows:
February 3, January 29, (In thousands) 2001 2000 ------------------------------- Current deferred tax asset: Deductible reserves $ 241 $ 370 Long-term deferred tax asset (liability): Deferred rent 2,963 2,435 Capital leases (860) (1,215) Lease rights (549) (624) Depreciation 1,827 854 Deferred compensation 414 318 Other 659 454 ------------------------ Total 4,454 2,222 ------------------------ Net deferred tax assets $4,695 $ 2,592 ========================
Note 7. Equity and Stock Compensation Plans Shareholder Rights Plan Each outstanding share of common stock has a Preferred Share Purchase Right (expiring on June 30, 2008) which is exercisable only upon the occurrence of certain change in control events. COST PLUS WORLD MARKET 23 Options. The Company currently has options outstanding under two employee stock option plans: the 1994 Stock Option Plan ("1994 Plan") and the 1995 Stock Option Plan ("1995 Plan"). The 1994 Plan permitted the granting of options to employees to purchase at fair market value as of the date of grant, up to 1,940,976 shares of common stock at prices ranging from 85% to 100% of fair market value as of the date of grant. Options are exercisable over ten years and became fully vested upon the Company's initial public offering in April 1996. Upon approval of the 1995 Plan in November 1995, the 1994 Plan was terminated except for options then outstanding. The 1995 Plan permits the granting of options to employees and directors to purchase, at fair market value as of the date of grant, up to 4,368,006 shares of common stock, less the aggregate number of shares outstanding under the 1994 Plan grants or any shares issued upon exercise of options granted under the 1994 Plan (821,120 at February 3, 2001). Options are exercisable over ten years and vest as determined by the Board of Directors, generally over three or four years. An additional 350,000 increase in the number of shares of common stock reserved for issuance was approved by the Board of Directors in February 2000 and by shareholders in June 2000. On March 13, 1996, the Board of Directors approved the 1996 Director Stock Option Plan ("Director Option Plan") which was last amended by the shareholders in June 2000. The Director Option Plan permits the granting of options to non- employee directors to purchase up to 253,675 shares of common stock at fair market value as of the date of grant. Options are exercisable over ten years and vest as determined by the Board of Directors, generally over four years. A summary of activity under the above option Plans is set forth below:
Weighted Average Shares Exercise Price -------------------------------------- Outstanding at January 31, 1998 (733,527 exercisable at a weighted average price of $4.34) 2,360,092 $ 6.99 Granted 470,250 13.46 Exercised (708,030) 4.34 Canceled and expired (268,691) 8.94 ----------------------------- Outstanding at January 30, 1999 (462,690 exercisable at a weighted average price of $6.89) 1,853,621 9.36 Granted 644,509 22.27 Exercised (576,035) 8.69 Canceled and expired (202,918) 14.96 ----------------------------- Outstanding at January 29, 2000 (366,508 exercisable at a weighted average price of $8.02) 1,719,177 13.80 Granted 623,137 19.72 Exercised (467,685) (10.97) Canceled and expired (143,106) (19.51) ----------------------------- Outstanding at February 3, 2001 1,731,523 $ 16.21 =============================
24 COST PLUS WORLD MARKET Additional information regarding options outstanding as of February 3, 2001 is as follows:
Options Exercisable --------------------------------- Weighted Remaining Average Weighted Weighted Number Contractual Average Number Average Range of Exercise Prices Outstanding Life (Yrs.) Exercise Price Exercisable Exercise Price ------------------------------------------------------------------------------------------------------------------------------- $ 2.56-$ 2.64 21,871 4.2 $ 2.60 21,871 $ 2.60 5.03- 7.00 216,669 5.3 5.80 199,793 5.70 8.00- 10.72 346,915 6.5 10.46 151,612 10.23 13.11- 17.81 792,244 8.4 15.79 162,312 14.90 20.06- 27.17 112,775 9.2 24.94 11,775 26.29 31.13- 33.81 241,049 8.8 32.35 112,517 32.80 ----------------------------------------------------------------------------------------------- 1,731,523 7.7 $16.21 659,880 $13.89 ===============================================================================================
At February 3, 2001, 778,526 and 121,290 shares were available for future grants under the 1995 Stock Option Plan and the 1996 Director Stock Option Plan, respectively. Employee Stock Purchase Plan On March 13, 1996, the Board of Directors approved the 1996 Employee Stock Purchase Plan ("Purchase Plan"). A total of 675,000 shares have been authorized for issuance under the Purchase Plan, of which 121,290 remain available for issue as of February 3, 2001. Employees who work at least 20 hours per week and more than five calendar months per calendar year and have been so employed for at least one year are eligible to have a specified percentage (not to exceed 10%) of each salary payment withheld to purchase common stock at 90% of its fair market value as of the last day of the purchase period. Additional Stock Plan Information As discussed in Note 1, the Company continues to account for its stock-based awards using the intrinsic value method in accordance with Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees," and its related interpretations. Consequently, no compensation expense has been recognized in the financial statements for employee stock arrangements. COST PLUS WORLD MARKET 25 Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," requires the disclosure of pro forma net income and earnings per share as if the Company had adopted the fair value method at the beginning of fiscal 1995. Under SFAS 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company's stock option awards. These models also require subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The Company's calculations were made using the Black-Scholes option pricing model with the following weighted average assumptions:
Fiscal Year Ended ------------------------------------------------ February 3, January 29, January 30, 2001 2000 1999 ------------------------------------------------ Stock volatility 65.0% 63.0% 52.6% Risk free interest rates 6.4% 5.4% 5.4% Expected life after vesting (in years) 1.8 1.8 1.8 Weighted average fair value per share granted $11.22 $12.35 $6.57 Expected dividends -- -- --
The Company's calculations are based on a multiple option valuation approach, and forfeitures are recognized as they occur. If the computed fair values of the fiscal 1995 through fiscal 2000 awards had been amortized to expense over the vesting period of the awards, consistent with the methods of SFAS 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below:
Fiscal Year Ended ------------------------------------------------ (In thousands, except February 3, January 29, January 30, per share data) 2001 2000 1999 ------------------------------------------------ Net income As reported $21,672 $19,685 $13,236 Pro forma 17,981 17,724 11,983 Basic net income per share As reported $ 1.04 $ 0.97 $ 0.67 Pro forma 0.86 0.87 0.61 Diluted net income per share As reported $ 1.00 $ 0.93 $ 0.65 Pro forma 0.83 0.84 0.59
The impact of outstanding non-vested stock options granted prior to fiscal 1995 has been excluded from the pro forma calculation; accordingly, pro forma adjustments presented in the previous table are not necessarily indicative of future period pro forma adjustments, when the calculation will include all applicable stock options. 26 COST PLUS WORLD MARKET Note 8. Employee Benefit Plans The Company has a 401(k) plan for employees who meet certain service and age requirements. Participants may contribute up to 15% of their salaries to a maximum of $10,500 per year and qualify for favorable tax treatment under Section 401(k) of the Internal Revenue Service Code. In fiscal 1997, the Company began matching 25% of the employee's contribution, up to a maximum of 3% of base salary. In fiscal 2000, the Company increased its matching to 50% of the employee's contribution, up to a maximum of 4% of base salary. The Company contributed approximately $328,000 in fiscal 2000, $105,000 in fiscal 1999 and $90,000 in fiscal 1998. In addition, a non-qualified deferred compensation plan is available to certain employees whose benefits are limited under Section 401(k) of the Internal Revenue Service Code. Compensation deferrals approximated $514,000 for fiscal 2000 and $253,000 for fiscal 1999. Note 9. Related Party Transactions In February 1998, the Company repurchased 337,503 shares of common stock for $3,750,000 from its former Chief Executive Officer. COST PLUS WORLD MARKET 27 independent auditors' report Board of Directors and Shareholders Cost Plus, Inc. Oakland, California We have audited the accompanying consolidated balance sheets of Cost Plus, Inc. and subsidiaries as of February 3, 2001 and January 29, 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for the fiscal years ended February 3, 2001, January 29, 2000 and January 30, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Cost Plus, Inc. and subsidiaries as of February 3, 2001 and January 29, 2000 and the results of their operations and their cash flows for the fiscal years ended February 3, 2001, January 29, 2000 and January 30, 1999 in conformity with accounting principles generally accepted in the United States of America. /s/ Deloitte & Touche LLP San Francisco, California March 12, 2001 28 COST PLUS WORLD MARKET directors, officers and corporate data
Directors Senior Officers Murray H. Dashe Murray H. Dashe Chairman, Chief Executive Officer and President, Chairman of the Board, Chief Executive Officer and Cost Plus, Inc. President Joseph H. Coulombe/1/ John F. Hoffner Independent Management Consultant Executive Vice President, Administration and Chief Financial Officer Barry J. Feld/2/ President, Chief Executive Officer, Kathi P. Lentzsch PCA International, Inc. Executive Vice President, Business Development Professional Photography Service Firm Joan S. Fujii Danny W. Gurr/1/ Senior Vice President, Human Resources President, Dorling Kindersley Publishing, Inc. Book and Media Publishing Products Richard L. Grice Senior Vice President, Logistics Kim D. Robbins/2/ Director of Product Development, Stephen L. Higgins Jack Nadel, Inc. Senior Vice President, Merchandising Direct Response Marketing Agent Gary D. Weatherford Fredric M. Roberts/2/ Senior Vice President, Store Operations President, F. M. Roberts and Company, Inc. Investment Banking Firm Officers Thomas D. Willardson/1/ Michael J. Allen Senior Vice President of Finance and Treasurer, Vice President, Store Development Leap Wireless International Wireless Communication Carrier Gail H. Fuller Vice President, Divisional Merchandise Manager, /1/ Member of the Audit Committee of the Board of Directors. Trend Director /2/ Member of the Compensation Committee of the Board of Directors. Alan J. Gardner Vice President, General Counsel and Secretary Corporate Data Patricia A. Juckett Corporate Headquarters Vice President, Marketing and Advertising Cost Plus, Inc. 200 4th Street John J. Luttrell Oakland, CA 94607 Vice President, Controller www.costplusworldmarket.com Ronald J. Rouse Vice President, Planning and Allocation Annual Report (Form 10-K) A copy of the Company's fiscal 2000 Annual Report on Judith A. Soares Form 10-K as filed with the Securities and Exchange Vice President, Information Systems Commission is available to shareholders by contacting: Investor Relations Department at the address above or by calling: (510) 893-7300, ext. 3003. Transfer Agent and Registrar Bank Boston c/o EquiServe, LP Boston, MA (781) 575-3120 Independent Auditors Deloitte & Touche LLP San Francisco, CA Of Counsel Wilson Sonsini Goodrich & Rosati Palo Alto, CA
COST PLUS WORLD MARKET 29 cost plus world market across the country one hundred thirty-two stores nationwide*
Arizona San Francisco Michigan Oregon Chandler San Jose (2) Ann Arbor Clackamas Mesa San Luis Obispo Auburn Hills Gresham Peoria San Mateo Kentwood Portland Phoenix (2) Santa Ana Lansing Tigard Scottsdale (2) Santa Cruz Portage Tucson Santa Rosa Rochester Hills Texas Temecula Shelby Township Austin (3) California Thousand Oaks Troy Dallas Brea Torrance Westland Fort Worth Citrus Heights Valencia Grapevine City of Industry Walnut Creek Missouri Houston (5) Colma West Los Angeles Brentwood Plano (2) Concord Woodland Hills Chesterfield San Antonio (3) Escondido Sunset Hills Fremont Colorado Virginia Fresno Aurora Nebraska Fairfax Glendale Denver (2) Omaha Falls Church La Jolla La Mesa Georgia Nevada Washington Lakewood Atlanta (3) Las Vegas (2) Bellevue Marin Reno Lynnwood Mission Viejo Idaho Seattle Modesto Boise New Mexico Spokane Mountain View Albuquerque Tacoma Northridge Illinois Santa Fe Tukwila Oakland Aurora Oceanside Chicago (2) North Carolina Wisconsin Ontario Evanston Cary Madison Palm Desert Gurnee Charlotte (2) Pasadena Northbrook *As of March 31, 2001 Pleasanton Oak Brook Ohio Roseville Orland Park Akron Sacramento Schaumburg Avon San Diego Skokie Cincinnati (4) San Dimas St. Charles Columbus (3) Mayfield Heights Indiana Mentor Carmel North Canton North Olmsted
[Graphic Appears Here] Cost Plus World Market Investor Relations 200 4th Street Oakland, CA 94607 www.costplusworldmarket.com