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 August 27, 1994
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.
(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
(Address of principal executive offices including zip code)
(817) 878-8000
(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 September 23, 1994
- ---------------------------- -------------------------------------------
Common Stock, $1.00 par value 37,636,671
<PAGE>
Items 1 and 2 of Part I and Item 6 of Part II of the Company's Quarterly
Report on Form 10-Q for the quarter ended August 27, 1994 are amended and
restated as set forth below.
PART I
------
Item 1. Financial Statements.
--------------------
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three Months Ended Six Months Ended
Aug. 27, Aug. 28, Aug. 27, Aug. 28,
1994 1993 1994 1993
-------- -------- -------- --------
(as restated) (as restated)
Net sales $185,403 $181,441 $346,889 $340,034
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 115,170 115,607 211,305 212,510
Selling, general and
administrative expenses 50,436 47,235 100,624 94,333
Depreciation and amortization 3,927 3,932 7,780 7,626
-------- -------- -------- --------
169,533 166,774 319,709 314,469
-------- -------- -------- --------
Operating income 15,870 14,667 27,180 25,565
Nonoperating (income) and expense:
Interest income (419) (706) (724) (1,340)
Interest expense 3,735 5,018 7,339 9,928
Trading losses (Note 1) 4,152 6,227 5,696 10,208
-------- -------- -------- --------
7,468 10,539 12,311 18,796
-------- -------- -------- --------
Income before income taxes 8,402 4,128 14,869 6,769
Provision for income taxes 3,898 3,012 6,374 4,932
-------- -------- -------- --------
Net income $ 4,504 $ 1,116 $ 8,495 $ 1,837
======== ======== ======== ========
Net income per share $.11 $.03 $.21 $.05
======== ======== ======== ========
Average shares outstanding during
period, including common stock
equivalents 39,646 39,403 39,621 39,478
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE> PIER 1 IMPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data)
(Unaudited)
August 27, February 26,
1994 1994
------------ ------------
(as restated)
ASSETS
Current assets:
Cash, including temporary investments of
$2,442 and $7,466, respectively $ 15,133 $ 17,123
Accounts receivable, net 60,101 51,722
Inventories 214,535 219,646
Other current assets 47,552 32,901
-------- --------
Total current assets 337,321 321,392
Properties, net 109,372 111,510
Other assets 30,341 30,400
-------- --------
$477,034 $463,302
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term
debt $ 14,666 $ 2,639
Accounts payable and accrued liabilities 83,905 89,772
-------- --------
Total current liabilities 98,571 92,411
Long-term debt 142,763 145,231
Deferred income taxes 2,827 3,407
Other non-current liabilities 25,655 21,160
Stockholders' equity:
Common stock, $1.00 par, 100,000,000 shares
authorized, 37,709,000 and 37,617,000
issued, respectively 37,709 37,617
Paid-in capital 93,064 92,670
Retained earnings 83,211 76,597
Cumulative currency translation adjustments (958) (964)
Less - 108,000 and 98,000 common shares in
treasury, at cost, respectively (906) (884)
Less - subscriptions receivable and unearned
compensation (1,035) (1,369)
Less - unrealized loss on marketable equity
securities (3,867) (2,574)
-------- --------
207,218 201,093
-------- --------
$477,034 $463,302
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE> PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended
August 27, August 28,
1994 1993
---------- ----------
(as restated)
Cash flow from operating activities:
Net income $ 8,495 $ 1,837
Adjustments to reconcile to net cash provided by
(used in) operating activities:
Depreciation and amortization 7,780 7,626
Deferred taxes and other 5,280 2,222
Changes in cash from:
Inventories 3,916 (20,454)
Accounts receivable and other current assets (12,001) (23,190)
Accounts payable and accrued expenses (2,559) (237)
Store-closing reserve (1,094) --
Other assets, liabilities and other, net (573) 33
------- -------
Net cash provided by (used in) operating
activities 9,244 (32,163)
------- -------
Cash flow from investing activities:
Capital expenditures (8,630) (6,978)
Proceeds from disposition of properties 16 748
Loan to Sunbelt Nursery Group, Inc. (9,600) --
Other investments (1,193) (4,189)
------- -------
Net cash used in investing activities (19,407) (10,419)
------- -------
Cash flow from financing activities:
Cash dividends (1,878) (1,686)
Repayments of long-term debt (2,500) --
Net borrowings (payments) under line of credit
agreements 12,000 (16,000)
Proceeds (payments) from sales (purchases) of
capital stock, treasury stock, and other, net 551 (434)
------- -------
Net cash provided by (used in) financing
activities 8,173 (18,120)
------- -------
Change in cash and cash equivalents (1,990) (60,702)
Cash and cash equivalents at beginning of period 17,123 73,585
------- -------
Cash and cash equivalents at end of period $15,133 $12,883
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE><TABLE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 27, 1994
(In thousands)
(Unaudited)
<CAPTION>
Unrealized
Cumulative Subscriptions Loss on
Currency Receivable Marketable Total
Common Paid-in Retained Translation Treasury and Unearned Equity Stockholders'
Stock Capital Earnings Adjustments Stock Compensation Securities Equity
------- ------- -------- ----------- -------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 26, 1994 $37,617 $92,670 $76,597 $(964) $(884) $(1,369) $(2,574) $201,093
Purchase of treasury stock (743) (743)
Restricted stock grant and amortization (2) (225) 334 107
Stock Purchase Plan, exercise of stock
options and other 92 396 (3) 946 1,431
Currency translation adjustments 6 6
Unrealized loss on marketable equity securities (1,293) (1,293)
Cash dividends, declared or paid (1,878) (1,878)
Net income (as restated) 8,495 8,495
------- ------- ------- ----- ----- ------- ------- --------
Balance, August 27, 1994 (as restated) $37,709 $93,064 $83,211 $(958) $(906) $(1,035) $(3,867) $207,218
======= ======= ======= ===== ===== ======= ======= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE> PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements should be read in
conjunction with the Form 10-K, and Amendment No. 2 to Form 10-K, for the
year ended February 27, 1994. All adjustments that are, in the opinion of
management, necessary for a fair statement of the financial position as of
August 27, 1994, and the results of operations and cash flows for the interim
periods ended August 27, 1994 and August 28, 1993, as restated, 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 and six
months ended August 27, 1994 and August 28, 1993 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
were $16.5 million and $2.8 million, respectively. The Company has restated
its financial statements to record $1.5 million and $4.2 million of net
trading losses in the first and second quarters of fiscal 1995, respectively,
and net trading losses of $4.0 million and $6.2 million in the first and
second quarters of fiscal 1994, respectively. The Company's restatements had
no effect on net income for the full 1994 fiscal year. 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 these net trading losses on net income for the
first and second quarters of fiscal years 1995 and 1994 was a reduction of
$.04 per share and $.11 per share in fiscal 1995, respectively, and a
reduction of $.10 per share and $.16 per share in fiscal 1994, respectively.
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 dilutive 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 and six months ended August
27, 1994 and August 28, 1993 was antidilutive for all periods; therefore, the
amounts reported for primary and fully diluted net income per share are the
same.
<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") recorded net sales of $185.4
million and $346.9 million for the second quarter and six-month period of
fiscal 1995, increases of 2.2% and 2.0%, respectively, compared to the same
periods in fiscal 1994. The percentage change in sales was adversely
affected by the elimination of the sales from 50 stores that are scheduled to
close under the store-closing program, which was established at the end of
fiscal 1994. Same-store sales increased 2.7% during the second quarter of
fiscal 1995 and 3.2% during the first half of fiscal 1995 compared to the
same period in fiscal 1994. The increase in same-store sales during the
first half of fiscal 1995 over the corresponding prior year period resulted
from an increase of 11.4% in hard goods sales such as furniture and
decorative accessories, offset partially by a decline of 20.9% in soft goods
sales that include clothing, jewelry, and accessories. Hard goods and soft
goods sales contributed approximately 90% and 10% of total sales,
respectively, for the current period. The Company closed 16 of the 50 stores
included in the store-closing program and opened 14 stores in the first six
months of fiscal 1995. North American store count totalled 600 at the end of
the second quarter of fiscal 1995 compared to 612 and the end of the same
period a year ago.
Gross profit, after related buying and store occupancy costs, as a
percentage of sales, increased by 1.6% to 37.9% for the second quarter and by
1.6% to 39.1% for the first half of fiscal 1995 compared to the same periods
of the prior year. The increases resulted primarily from lower store
occupancy costs and improved margins in the furniture departments partially
offset by promotional discounts. These occupancy costs as a percentage of
sales improved by 0.7% for the second quarter and by 0.8% for the six-month
period of fiscal 1995 compared to the same periods last year due primarily to
the elimination of the results of underperforming stores in the store-closing
program.
Selling, general and administrative expenses, including marketing,
expressed as a percentage of sales, increased by 1.2% to 27.2% in the second
quarter of fiscal 1995 and by 1.3% to 29.0% in the first half of fiscal 1995
versus fiscal 1994 comparable periods. In dollars, expenses increased $3.2
million during the second quarter and $6.3 million during the six-month
period of fiscal 1995 over the same periods in fiscal 1994. Fiscal 1995
second quarter expenses increased primarily due to higher marketing costs and
increased management bonus accruals. The fiscal 1995 six-month period was
also affected by these increased costs offset partially by lower net credit
card expenses and the elimination of the results of stores in the store-
closing program.
Interest expense declined $1.3 million during the second quarter and
$2.6 million during the first half of fiscal 1995 over the same periods in
fiscal 1994 due to lower effective rates.
In late December 1995, the Company was made aware of 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 deposited by the Company 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 instruction, 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 an manner that provided a high degree of
speculation and leverage to the invested funds. As a result of the
investigations of the trading losses, the Company recorded $16.5 million and
$2.8 million of the net trading losses in fiscal years 1996 and 1995,
respectively. The Company has restated its financial statements to record
net trading losses of $5.7 million and $10.2 million in the first half of
fiscal years 1995 and 1994, respectively. The Company's restatements had no
effect on net income for the full 1994 fiscal year. The Company has not
recorded any tax benefit on these net 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 $19.3 million in the
aggregate.
The Company's effective income tax rate for fiscal 1995 exclusive of
the aforementioned trading losses is estimated at 31.0% compared to 29.0% for
the same period of fiscal 1994 exclusive of trading losses.
Operating income improved $1.2 million to $15.9 million during the
fiscal 1995 second quarter and improved $1.6 million to $27.2 million for the
first half of fiscal 1995 over the same periods in fiscal 1994 due to higher
sales and improved margins. Net income aggregated $4.5 million or $.11 per
share for the second quarter of fiscal 1995 compared to $1.1 million or $.03
per share for the second quarter of fiscal 1994. For the six-month period of
fiscal 1995, net income aggregated $8.5 million or $.21 per share compared to
$1.8 million or $.05 per share for the six-month period of fiscal 1994.
Liquidity and Capital Resources
Cash provided by operating activities was $9.2 million during the
first half of fiscal 1995 compared to a $32.2 million use of cash by
operating activities during the same period in fiscal 1994 after recording
net trading losses in the first six months of fiscal years 1995 and 1994 of
$5.7 million and $10.2 million, respectively, as discussed above. This was
due primarily to slower inventory growth planned in fiscal 1995, a slowing of
the Pier 1 credit card receivable growth in the first half of fiscal 1995
compared to fiscal 1994, and a net earnings improvement in fiscal 1995 over
fiscal 1994. Cash used in investing activities during the first half of
fiscal 1995 was $19.4 million compared to $10.4 million for the same period
in fiscal 1994. The $19.4 million primarily consisted of (i) $9.6 million in
lines of credit for Sunbelt Nursery Group, Inc. ("Sunbelt") which previously
had been guaranteed by the Company, (ii) capital expenditures for planned
growth, and (iii) franchise locations repurchased by the Company. Cash from
financing activities included $12 million of short-term borrowings in fiscal
1995 compared to a pay-down of short-term debt in fiscal 1994 of $16 million.
Additionally, the Company made a $2.5 million sinking fund payment on its
long-term debt in the second quarter of fiscal 1995.
During the first six months of fiscal 1995, the Company paid cash
dividends aggregating $.05 per share. During the second quarter of fiscal
1995, the Board of Directors voted an increase in the quarterly cash dividend
to $.03 per share from the previously paid $.025 per share. This dividend
will be payable on November 16, 1994 to shareholders of record on November 2,
1994.
Cash requirements of the Company's previously announced fiscal 1994
store-closing program are estimated to aggregate $16 million in fiscal 1995
and will be funded through working capital and operations. Through the first
half of fiscal 1995, 16 stores have been closed resulting in $1 million of
cash expenditures for lease terminations and operating losses. The store-
closing reserve balance was $18 million at August 27, 1994, which reflected
$1.1 million of cash expenditures as well as $2 million of inventory and
fixed asset write-offs and is consistent with the Company's expectations for
closings during the first half of fiscal 1995. The majority of the remaining
stores are planned to close after this fiscal year's Christmas selling
season. A total of 50 new stores are planned for the 1995 fiscal year, of
which 14 stores were opened during the first half of fiscal 1995. Financing
for new store land and building costs will be provided by operating leases.
Related inventory and fixtures are estimated to cost approximately $14
million, which will be funded by operations, working capital and bank lines
of credit.
The minimum operating lease commitments for fiscal 1995 are $45
million, and the present value of all existing minimum operating lease
commitments is $352 million.
Working capital requirements will continue to be provided by cash and
$168.5 million in short-term revolving lines of credit. Under these lines of
credit, $12 million was outstanding in the form of short-term borrowings and
an additional $48 million was committed under letters of credit at August 27,
1994. The Company's current ratio at the end of the second quarter of fiscal
1995 was 3.4 to 1 compared to 3.5 to 1 at fiscal year end 1994 and 4.0 to 1
at the end of the second quarter of fiscal 1994.
In connection with the Company's sale of its investment in Sunbelt to
General Host Corporation, the Company has provided Sunbelt lines of credit
amounting to $11.6 million which were originally due April 28, 1994, and were
outstanding at August 27, 1994. To enable Sunbelt to raise funds to
refinance this debt, the Company has granted Sunbelt extensions of the credit
facility until October 15, 1994. In order to meet its repayment obligations,
Sunbelt has stated that it must obtain replacement financing. The Company
will continue to support Sunbelt in its efforts to refinance. The Company is
also committed and has provided Sunbelt $22.8 million of non-revolving store
development financing which expires in stages from October 1994 to October
1995, and the Company guarantees approximately $4.5 million of Sunbelt's
other store lease obligations.
<PAGE>
PART II
-------
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits See Exhibit Index.
(b) Reports on Form 8-K None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amended report to be signed on its behalf
by the undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC. (Registrant)
Date: May 24, 1996 By: /s/ Clark A. Johnson
------------ ---------------------------------------
Clark A. Johnson, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: May 24, 1996 /s/ Susan E. Barley
------------ ---------------------------------------
Susan E. Barley, Vice President and
Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3(ii) Bylaws of Registrant, Restated as of September 19, 1994,
previously filed October 11, 1994.
10.11.3 Fourth Amendment to Revolving Credit Loan Agreement dated as of
August 14, 1992, among Registrant, Pier 1 Imports (U.S.), Inc.,
and Bank One, Texas, N.A., previously filed October 11, 1994.
10.13.1 Third Amendment to Lease Guarantee dated as of December 20, 1992
between Registrant and Pier Group, Inc., previously filed
October 11, 1994.
10.14.1 Third Amendment to Lease Guarantee dated as of December 30, 1992
between Registrant, Pier 1 Imports (U.S.), Inc. and Pier Group,
Inc., previously filed October 11, 1994.
10.15.4 Third Extension Agreement dated September 21, 1994 between
Registrant, Pier-SNG, Inc. and Sunbelt, previously filed October
11, 1994.
27 Financial Data Schedule for Six-Month Period ended August 27,
1994, as restated.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-25-1995
<PERIOD-END> AUG-27-1994
<CASH> 15,133
<SECURITIES> 0
<RECEIVABLES> 62,190
<ALLOWANCES> 2,089
<INVENTORY> 214,535
<CURRENT-ASSETS> 337,321
<PP&E> 214,435
<DEPRECIATION> 105,063
<TOTAL-ASSETS> 477,034
<CURRENT-LIABILITIES> 98,571
<BONDS> 142,763
<COMMON> 37,709
0
0
<OTHER-SE> 169,509
<TOTAL-LIABILITY-AND-EQUITY> 477,034
<SALES> 346,889
<TOTAL-REVENUES> 346,889
<CGS> 211,305
<TOTAL-COSTS> 319,709
<OTHER-EXPENSES> 5,696
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,339
<INCOME-PRETAX> 14,869
<INCOME-TAX> 6,374
<INCOME-CONTINUING> 8,495
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,495
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
