FORM 10-Q/A
Amendment No. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended May 29, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from [ ] to [ ]
Commission File Number 1-7832
PIER 1 IMPORTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 75-1729843
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
301 Commerce Street, Suite 600, Fort Worth, Texas 76102
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(Address of principal executive offices, including zip code)
(817) 878-8000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ]. No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares outstanding as of June 25, 1993
- -------------------------- --------------------------------------
Common Stock, $1.00 par value 37,261,298
<PAGE>
Items 1 and 2 of Part I of the Company's Quarterly Report on Form 10-Q for
the quarter ended May 29, 1993 are amended and restated as set forth below.
PART I
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Item 1. Financial Statements.
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PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three Months Ended
May 29, May 30,
1993 1992
-------- --------
(as restated)
Net sales $158,593 $152,083
Operating costs and expenses:
Cost of sales (including buying and
store occupancy) 96,903 92,351
Selling, general and administrative expenses 47,098 43,373
Depreciation and amortization 3,694 3,725
-------- --------
147,695 139,449
-------- --------
Operating income 10,898 12,634
Nonoperating (income) and expense:
Interest income (634) (893)
Interest expense 4,910 4,505
Trading losses (Note 1) 3,981 --
-------- --------
8,257 3,612
-------- --------
Income before income taxes and equity
in net income of subsidiary 2,641 9,022
Provision for income taxes 1,920 2,527
-------- --------
Income before equity in net income of subsidiary 721 6,495
Equity in net income of subsidiary -- 1,560
-------- --------
Net income $ 721 $ 8,055
======== ========
Net income per share:
Primary $.02 $.21
==== ====
Fully diluted $.02 $.20
==== ====
Average shares outstanding during period,
including common stock equivalents:
Primary 39,553 39,118
====== ======
Fully diluted 46,115 43,456
====== ======
The accompanying notes are an integral part of these financial statements.
<PAGE>
PIER 1 IMPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(Unaudited)
May 29, February 27,
1993 1993
------------ ------------
(as restated)
ASSETS
Current assets:
Cash, including temporary investments of
$51,409 and $66,823, respectively $ 60,967 $ 73,585
Accounts receivable, net 43,971 34,920
Inventories 204,523 189,593
Other current assets 20,774 20,038
-------- --------
Total current assets 330,235 318,136
Properties, net 106,191 108,011
Other assets 33,492 34,350
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$469,918 $460,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $ 47,139 $ 33,139
Accounts payable and accrued liabilities 54,568 59,791
-------- --------
Total current liabilities 101,707 92,930
Long-term debt 147,315 147,246
Deferred income taxes 496 514
Other non-current liabilities 19,066 19,313
Stockholders' equity:
Common stock, $1.00 par, 100,000,000 shares
authorized, 37,617,000 and 37,607,000
issued, respectively 37,617 37,607
Paid-in capital 93,196 93,184
Retained earnings 74,385 74,413
Cumulative currency translation adjustments (385) (433)
Less - 162,000 and 263,000 common shares in
treasury, at cost, respectively (1,714) (2,599)
Less - subscriptions receivable and unearned
compensation (1,765) (1,678)
-------- --------
201,334 200,494
-------- --------
$469,918 $460,497
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
May 29, May 30,
1993 1992
------- -------
(as restated)
Cash flow from operating activities:
Net income $ 721 $ 8,055
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization 3,694 3,725
Deferred taxes and other 1,765 190
Equity in undistributed earnings of
subsidiary -- (1,560)
Change in cash from:
Inventories (14,930) 11,209
Accounts receivable and other current assets (7,827) (5,943)
Accounts payable and accrued expenses (3,863) 1,072
Other assets, liabilities, and other, net (1,246) 609
------- -------
Net cash (used in) provided by operating
activities (21,686) 17,357
------- -------
Cash flow from investing activities:
Capital expenditures (2,634) (2,896)
Proceeds from the disposition of properties 720 240
Other investing activities (3,000) --
------- -------
Net cash used in investing activities (4,914) (2,656)
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Cash flow from financing activities:
Cash dividends (749) (552)
Proceeds from issuance of long-term debt -- 72,432
Repayments of long-term debt -- (1,000)
Net borrowings (payments) under line of credit
agreements 14,000 (23,000)
Proceeds from sales of capital stock, treasury
stock, and other, net 731 1,131
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Net cash provided by financing activities 13,982 49,011
------- -------
Change in cash and cash equivalents (12,618) 63,712
Cash and cash equivalents at beginning of period 73,585 9,001
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Cash and cash equivalents at end of period $60,967 $72,713
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE><TABLE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MAY 29, 1993
(In thousands)
(Unaudited)
<CAPTION>
Cumulative Subscriptions
Currency Receivable Total
Common Paid-in Retained Translation Treasury and Unearned Stockholders'
Stock Capital Earnings Adjustments Stock Compensation Equity
------- ------- -------- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance February 27, 1993 $37,607 $93,184 $74,413 $(433) $(2,599) $(1,678) $200,494
Restricted stock grant and
amortization (39) 192 (87) 66
Stock Purchase Plan, exercise
of stock options and other 10 51 693 754
Currency translation adjustments 48 48
Cash dividends, declared or paid (749) (749)
Net income, as restated 721 721
------- ------- ------- ----- ------- ------- --------
Balance May 29, 1993, as restated $37,617 $93,196 $74,385 $(385) $(1,714) $(1,765) $201,334
======= ======= ======= ===== ======= ======= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 29, 1993 AND MAY 30, 1992
(Unaudited)
The accompanying unaudited financial statements should be read in
conjunction with the Form 10-K, and Amendment No. 1 to Form 10-K, for the
year ended February 27, 1993. All adjustments that are, in the opinion of
management, necessary for a fair statement of the financial position as of
May 29, 1993, and the results of operations and cash flows for the three
months ended May 29, 1993, as restated, and May 30, 1992 have been made and
consist only of normal recurring adjustments except for net trading losses
described in Note 1. The results of operations for the three months ended
May 29, 1993, as restated, and May 30, 1992 are not indicative of results to
be expected for the fiscal year because of, among other things, seasonality
factors in the retail business.
Note 1 - Trading losses
In late December 1995, the Company was made aware of losses of $19.3
million resulting from trading activities in a discretionary account by a
financial consultant retained to manage the Company's excess cash and short-
term investments. Net trading losses recorded in fiscal years 1996 and 1995
totalled $16.5 million and $2.8 million, respectively. The Company has
restated its financial statements for the quarter ended May 29, 1993 to
record net trading losses which aggregate $4.0 million. The Company's
restatements had no effect on net income for the full 1994 and 1993 fiscal
years; however, during the first, second and third quarters of fiscal 1994,
the Company incurred net trading losses of $4.0 million, $6.2 million and
$4.6 million, respectively, and attained a net trading gain of $14.8 million
in the fourth quarter. During fiscal 1993, the Company incurred net trading
losses of $2.4 million in the third quarter and attained a net trading gain
of $3.4 million in the fourth quarter. The financial statements for the
first and second quarters of fiscal 1993 do not require restatement. The
Company has not recorded any tax benefit on these trading losses since the
realization of such benefit is not considered likely based on the information
available at this time. The effect of the net trading losses on net income
for the first quarter of fiscal year 1994 was a reduction of $0.10 per share.
Note 2 - Net income per share
Primary net income per share was determined by dividing net income by
applicable average shares outstanding. Fully diluted net income per share
amounts are similarly computed, but include the effect, when dilutive, of the
Company's potentially dilutive securities. To determine fully diluted net
income, interest and debt issue costs, net of any applicable taxes, have been
added back to net income to reflect assumed conversions. The computation of
fully diluted net income per share for the three months ended May 29, 1993
was antidilutive; therefore, the amounts reported for primary and fully
diluted net income per share are the same.
Primary average shares include common shares outstanding and common
stock equivalents attributable to outstanding stock options. In addition to
common and common equivalent shares, fully diluted average shares include
common shares that would be issuable upon conversion of the Company's
convertible securities.
Three Months Ended
May 29, May 30,
1993 1992
------- -------
(as restated)
(in thousands except
per share amounts)
Net income $ 721 $ 8,055
Assumed conversion of 6 7/8%
subordinated notes as of date of
issuance, April 1992:
Plus interest and debt issue
costs, net of tax 813 541
------- -------
Fully diluted net income $ 1,534 $ 8,596
======= =======
Average shares outstanding during
period, including common stock
equivalents:
Primary 39,553 39,118
Plus assumed exercise of stock
options -- 11
Plus assumed conversion of
6 7/8% subordinated notes
to common stock as of date
of issuance, April 1992 6,562 4,327
------ ------
Fully diluted 46,115 43,456
====== ======
Net income per share:
Primary $.02 $.21
==== ====
Fully diluted $.02 $.20
==== ====
<PAGE>
PART I
------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Pier 1 Imports, Inc. ("the Company") had a net sales increase of $6.5
million to $158.6 million, or 4.3% during the three-month period ended May
29, 1993 over the prior year. This sales improvement is the result of a
comparable store sales increase of 1.0% and the opening of 23 new North
American Pier 1 stores, offset partially by the closing of 10 stores since
May 30, 1992, bringing the total number of North American stores to 605 at
May 29, 1993.
Gross profit, after related buying and store occupancy costs, expressed
as a percentage of sales, declined 0.4% to 38.9% for the first quarter of
fiscal 1994 from 39.3% for the comparable period in fiscal 1993. This slight
decrease was primarily a result of more merchandise promotions and the
relative decrease in softlines sales and relative increase in furniture sales
this quarter compared to a year ago. Store occupancy costs, as a percentage
of sales, were relatively unchanged during the first quarter of fiscal 1994
versus last year's comparable period.
Selling, general and administrative expenses, as a percentage of sales,
increased 1.2% during the first quarter of fiscal 1994 to 29.7% from 28.5%
during the same period last year. In total dollars, selling, general and
administrative expenses during the three-month period ended May 29, 1993
increased $3.7 million compared to a year ago, primarily due to an increase
in payroll and other store-related costs associated with new store growth (13
net new stores), a $1.1 million increase in advertising costs, and new point-
of-sale equipment lease expense, offset partially by gains recorded on the
sale of fixed assets.
Net interest expense of $4.3 million for the first quarter ended May 29,
1993 increased $0.7 million from the same period last year. The increase was
partly due to higher short-term borrowings during the first quarter of this
fiscal year.
In late December 1995, the Company was made aware of trading losses of
$19.3 million resulting from trading activities in a discretionary account.
The Company has regularly designated a portion of its excess cash and short-
term investments for management by a financial consultant in the
discretionary account. The amount of funds has varied during each year, and
the funds were generally withdrawn near the end of each fiscal year.
According to statements of the account provided by brokerage firms that
executed trading activity at the financial consultant's instructions, the
funds were invested in treasury bonds, treasury bond futures contracts and
options on treasury bond futures contracts. The futures and options
contracts were often used in a manner that provided a high degree of
speculation and leverage to the invested funds. As a result of the
investigations of the net trading losses, the Company recorded $16.5 million
of the net trading losses in fiscal 1996 and restated its fiscal 1995
financial statements to record $2.8 million of the net trading losses during
that year. Fiscal 1996, 1995 and 1994 financial statements and fiscal 1993
third and fourth quarter interim financial statements have been restated to
reflect the net trading losses and gains during those periods based on
information available to the Company. The restatements of the first, second,
third, and fourth quarters of fiscal 1994 and the third and fourth quarters
of fiscal 1993 have no effect on net income for the full 1994 and 1993 fiscal
years, respectively. The financial statements for the first and second
quarters of fiscal 1993 do not require restatement. To the extent trading
losses are not offset by trading gains, the Company has not recorded any tax
benefit on these losses since the realization of such benefit is not
considered likely based on the information available at this time. The
Company and a Special Committee of the Board of Directors investigated the
matter and found no evidence to suggest that the Company's net losses from
these trading activities will exceed the $19.3 million recorded in fiscal
years 1996 and 1995.
In April 1993, the Company sold its 49.5% ownership interest in Sunbelt
Nursery Group, Inc. ("Sunbelt") to General Host Corporation ("General Host").
The Company received as the purchase price for the Sunbelt shares 1,940,000
shares of common stock of General Host which represents approximately 9.7% of
the outstanding common stock. This transaction resulted in no gain or loss
after taxes. Due to the Company's sale of Sunbelt, the equity in earnings
and losses of Sunbelt are not presented in the Company's current year
financial statements.
The Company's effective tax rate for the interim period of fiscal 1994
exclusive of the aforementioned trading losses increased to 29% compared to
28% for fiscal 1993, primarily due to an increase in the state tax effective
rate.
Operating income decreased $1.7 million to $10.9 million during the
first quarter of fiscal 1994 compared to $12.6 million in the first quarter
of fiscal 1993. Net income for the three-month period ended May 29, 1993
totalled $0.7 million with net income per share of $.02 on a fully diluted
basis compared to net income of $8.1 million or $.20 per share on a fully
diluted basis for the same period last year.
Liquidity and Capital Resources
Cash decreased by $12.6 million during the first quarter of fiscal 1994;
this compared to an increase of $63.7 million for the same period in the
prior year. The change in cash for the first quarter of fiscal 1994 was
comprised of a net of $14.0 million provided by financing activities, offset
by cash used in operating activities of $21.7 million and net capital
expenditures and other investments of $4.9 million. Cash from operations was
affected by inventory increases totalling $14.9 million for fiscal year 1994
to support expected sales increases as well as by an increase in accounts
receivable due primarily to successful promotions in the Company's
proprietary credit card this quarter. In addition, $4.0 million of trading
losses was recognized for the quarter ended May 29, 1993 that negatively
impacted operating cash. The Company's debt (net of cash balances) increased
$26.7 million since fiscal 1993 year-end due primarily to net borrowings on
short-term notes of $14.0 million. The Company intends to utilize its excess
cash in the second quarter of fiscal 1994 to repay most of its short-term
debt. The current ratio was 3.2 to 1 at May 29, 1993 compared to 3.4 to 1 at
February 27, 1993 and 5.2 to 1 at May 30, 1992. The unusually high cash
level and current ratio at the end of the first quarter of fiscal 1993 are
primarily a result of the issuance in April 1992 of $75 million of 6 7/8%
convertible notes.
In fiscal 1994, the Company paid one quarterly cash dividend of $0.02
per share and has subsequently declared a cash dividend of $0.025 per share
payable on August 19, 1993. The Company currently expects to continue to pay
cash dividends in fiscal 1994, but intends to retain most of its future
earnings for expansion of the Company's business.
A total of approximately forty new North American stores are planned for
the 1994 fiscal year along with the closing of approximately 13 stores. The
Company opened six new North American stores and closed six stores during the
first quarter of fiscal 1994. The remaining new stores to be opened in
fiscal 1994 will be funded through operating leases. The minimum future
operating lease commitments for fiscal 1994 are $90 million with total
minimum future operating lease commitments of approximately $674 million.
Current and future operating leases are expected to be funded by cash flow
from operations.
During the remainder of fiscal 1994, the Company's sources of funds will
be operations, bank revolving credit and letter of credit facilities, and
operating leases. Currently, the Company has short-term revolving credit and
letter of credit facilities amounting to $158 million of which $47 million is
outstanding as short-term borrowings and an additional $65 million is
committed under letters of credit at May 29, 1993. In the opinion of Company
management, these facilities will be adequate to provide financial
flexibility for expansion and seasonal working capital requirements for the
foreseeable future.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this amended report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC.
Date: July 24, 1996 By: /s/ Clark A. Johnson
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Clark A. Johnson, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: July 24, 1996 By: /s/ Susan E. Barley
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Susan E. Barley, Vice President and
Controller
(Principal Accounting Officer)
