FORM 10-Q/A
Amendment No. 2
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 28, 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 June 10, 1994
- -------------------- --------------------------------------
Common Stock, $1.00 par value 37,653,580
<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 May 28, 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
May 28, May 29,
1994 1993
-------- --------
(as restated)
Net sales $161,486 $158,593
Operating costs and expenses:
Cost of sales (including buying and
store occupancy) 96,135 96,903
Selling, general and administrative expenses 50,188 47,098
Depreciation and amortization 3,853 3,694
-------- --------
150,176 147,695
-------- --------
Operating income 11,310 10,898
Nonoperating (income) and expense:
Interest income (305) (634)
Interest expense 3,604 4,910
Trading losses (Note 1) 1,544 3,981
-------- --------
4,843 8,257
-------- --------
Income before income taxes 6,467 2,641
Provision for income taxes 2,476 1,920
-------- --------
Net income $ 3,991 $ 721
======== ========
Net income per share $.10 $.02
======== ========
Average shares outstanding during period,
including common stock equivalents 39,595 39,552
======== ========
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 28, February 26,
1994 1994
------------ ------------
(as restated)
ASSETS
Current assets:
Cash, including temporary investments of
$1,514 and $7,466, respectively $ 13,468 $ 17,123
Accounts receivable, net 56,403 51,722
Inventories 217,482 219,646
Other current assets 53,102 32,901
-------- --------
Total current assets 340,455 321,392
Properties, net 110,715 111,510
Other assets 30,636 30,400
-------- --------
$481,806 $463,302
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $ 24,639 $ 2,639
Accounts payable and accrued liabilities 80,361 89,772
-------- --------
Total current liabilities 105,000 92,411
Long-term debt 145,308 145,231
Deferred income taxes 3,029 3,407
Other non-current liabilities 24,731 21,160
Stockholders' equity:
Common stock, $1.00 par, 100,000,000 shares
authorized, 37,617,000 issued 37,617 37,617
Paid-in capital 92,657 92,670
Retained earnings 79,649 76,597
Cumulative currency translation adjustments (1,152) (964)
Less -30,200 and 98,000 common shares in
treasury, at cost, respectively (308) (884)
Less - subscriptions receivable and unearned
compensation (1,307) (1,369)
Less - unrealized loss on marketable equity
securities (3,418) (2,574)
-------- --------
203,738 201,093
-------- --------
$481,806 $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)
Three Months Ended
May 28, May 29,
1994 1993
-------- --------
(as restated)
Cash flow from operating activities:
Net income $ 3,991 $ 721
Adjustments to reconcile to net cash used in
operating activities:
Depreciation and amortization 3,853 3,694
Deferred taxes and other 3,307 1,765
Change in cash from:
Inventories 2,164 (14,930)
Accounts receivable and other current assets (13,785) (7,827)
Accounts payable and accrued expenses (9,065) (3,863)
Store-closing reserve (325) --
Other assets, liabilities, and other, net (563) (1,246)
------- -------
Net cash used in operating activities (10,423) (21,686)
------- -------
Cash flow from investing activities:
Capital expenditures (3,971) (2,634)
Proceeds from disposition of properties 3 720
Loan to Sunbelt Nursery Group, Inc. (9,600) --
Other investments (1,193) (3,000)
------- -------
Net cash used in investing activities (14,761) (4,914)
------- -------
Cash flow from financing activities:
Cash dividends (939) (749)
Net borrowings under line of credit agreements 22,000 14,000
Proceeds from sales of capital stock,
treasury stock, and other, net 468 731
------- -------
Net cash provided by financing activities 21,529 13,982
------- -------
Change in cash and cash equivalents (3,655) (12,618)
Cash and cash equivalents at beginning of period 17,123 73,585
------- -------
Cash and cash equivalents at end of period $13,468 $60,967
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE><TABLE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MAY 28, 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
Restricted stock grant and amortization 62 62
Stock Purchase Plan, exercise of stock
options and other (13) 576 563
Currency translation adjustments (188) (188)
Unrealized loss on marketable (844) (844)
equity securities
Cash dividends, declared or paid (939) (939)
Net income (as restated) 3,991 3,991
------- ------- ------- ------- ----- ------- ------- --------
Balance, May 28,1994 (as restated) $37,617 $92,657 $79,649 $(1,152) $(308) $(1,307) $(3,418) $203,738
======= ======= ======= ======= ===== ======= ======= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
/TABLE
<PAGE>
<PAGE> PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 28, 1994 AND MAY 29, 1993
(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 26, 1994. All adjustments that are, in the opinion of
management, necessary for a fair statement of the financial position as of
May 28, 1994, and the results of operations and cash flows for the three
months ended May 28, 1994 and May 29, 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 months ended
May 28, 1994 and May 29, 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
totalled $16.5 million and $2.8 million, respectively. The Company has
restated its financial statements for the quarter ended May 28, 1994 to
record net trading losses which aggregate $1.5 million. The Company's
restatements had no effect on net income for the full 1994 fiscal year;
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 a net trading gain of $14.8 million in the fourth
quarter. 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 years 1995 and 1994 was
a reduction of $0.04 per share and $.10 per share, 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 months ended May 28, 1994
and May 29, 1993 was antidilutive for both 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") had a net sales increase of $2.9
million to $161.5 million, or 1.8% for the three-month period ended May 28,
1994 over the same period of the prior year. Current year results of the
Company exclude the operations of approximately 50 Pier 1 Imports stores
scheduled for closing during fiscal 1995, as the operating results of these
stores were included in the store-closing provision recorded in fiscal 1994.
Nine stores were closed through the store-closing program during the first
quarter of fiscal 1995. Same-store sales during the quarter increased
approximately 4% over the first quarter of fiscal 1994. This resulted from
an increase in hard goods' sales such as furniture and decorative accessories
of approximately 7% offset partially by a decline of 19% in soft goods' sales
including clothing, jewelry and accessories. Four new stores were opened
during the fiscal 1995 first quarter bringing the total number of North
American stores to 590 compared to 605 at the end of the first quarter of
fiscal 1994.
Gross profit, after related buying and store occupancy costs,
expressed as a percentage of sales, improved 1.6% to 40.5% for the first
quarter of fiscal 1995 from 38.9% for the comparable period in fiscal 1994.
As a percentage of sales, occupancy costs improved 1.0% and merchandise
margins improved 0.6%. Product categories with margin improvements over the
first quarter of fiscal 1994 included furniture and decorative accessories.
Selling, general and administrative expenses, including marketing, as
a percentage of sales, increased 1.4% from 29.7% for the first quarter of
fiscal 1994 to 31.1% for the comparable period in fiscal 1995. In total
dollars, expenses during the first quarter of fiscal 1995 increased $3.1
million compared to the same period of the prior year, primarily due to an
increase in management bonus accruals, last year's recognition of favorable
medical and general liability insurance trends and slightly higher general
and administrative expenses.
Net interest expense during the first quarter of fiscal 1995 declined
$1.0 million over the same period the prior year due to lower short-term
debt, offset slightly by lower interest income on lower cash balances.
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 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 trading losses, the Company recorded $16.5 million and
$2.8 million of net trading losses in fiscal years 1996 and 1995,
respectively. The Company has restated its financial statements to record
$1.5 million and $4.0 million of net trading losses in the first quarters of
fiscal 1995 and 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 losses since the realization of any 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 net trading losses is estimated at 31.0% compared to 29.0%
for the prior fiscal year exclusive of net trading losses.
Operating income increased $0.4 million to $11.3 million during the
first quarter of fiscal 1995 compared to $10.9 million in the first quarter
of fiscal 1994. Net income for the fiscal 1995 first quarter aggregated $4.0
million with net income per share of $.10 compared to fiscal 1994 first
quarter net income of $0.7 million and net income per share of $.02.
Based on market prices at quarter-end, the value of the Company's
holdings of General Host common stock was $3.4 million less than the
Company's cost and $0.8 million less than its market value at February 26,
1994. The Company has identified certain factors that may have contributed
to this decline: poor past earnings performance by General Host and a
general decline in market conditions. In January 1994, General Host
announced a store closing and cost reduction program, the results of which
are intended to improve General Host's earnings performance and stock price.
Accordingly, the Company continues to believe the decline in the price of
General Host common stock to be temporary. The Company reduced the carrying
amount of its holdings of General Host common stock to market value during
the quarter by increasing the valuation allowance by $0.8 million to $3.4
million through a charge to stockholders' equity representing the net
unrealized loss.
Liquidity and Capital Resources
Cash decreased $3.7 million during the first quarter of fiscal 1995
compared to a $12.6 million cash decline during the first quarter of fiscal
1994 after recording the net trading losses discussed above. Cash provided
by operations improved $11.3 million during the first quarter of fiscal 1995
compared to the first quarter of fiscal 1994 due to planned inventory growth
during the first quarter of fiscal 1994 which was not repeated during the
first quarter of fiscal 1995. Additionally, the improvement in cash provided
by operations resulted from higher earnings partially offset by an increase
in accounts receivable related to the Pier 1 preferred card. Cash used in
investing activities includes the purchase from banks of $9.6 million of
Sunbelt Nursery Group, Inc. ("Sunbelt") debt that had been previously
guaranteed by the Company. A total of $11.6 million in working capital loans
due from Sunbelt is included in the balance sheet caption "Other current
assets."
During fiscal 1995, the Company paid a quarterly cash dividend of
$0.025 per share and declared a cash dividend of $0.025 per share payable on
August 16, 1994. The Company currently expects to continue to pay cash
dividends in fiscal 1995, but intends to retain most of its future earnings
for growth of the Company's business.
Cash requirements to close 50 stores in fiscal 1995, previously
announced by the Company in its fiscal 1994 store-closing program, are
estimated to aggregate $16 million and will be funded through working capital
and operations. A total of 50 new stores are planned for the 1995 fiscal
year. Financing for new store land and building costs will be provided by
operating leases, and 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 future operating lease commitments for fiscal 1995 are $65
million and the present value of all existing operating lease commitments is
$357 million.
Working capital requirements will continue to be provided by cash and
$165 million in available short-term revolving lines of credit. Under these
lines of credit, $22 million is outstanding in the form of short-term
borrowings and an additional $60 million is committed under letters of credit
at May 28, 1994. The Company's current ratio at the end of the first quarter
of fiscal 1995 was 3.2 to 1 compared to 3.5 to 1 at 1994 fiscal year end and
3.2 to 1 at the end of the first quarter of fiscal 1994.
In connection with the Company's sale of its investment in Sunbelt to
General Host Corporation, the Company is currently providing Sunbelt a line
of credit aggregating $11.6 million, all of which was outstanding at May 28,
1994. To enable Sunbelt to raise funds to refinance the $11.6 million debt,
the Company has granted Sunbelt an extension of the credit facility until
September 21, 1994. The Company is also committed to provide Sunbelt $22.8
million of non-revolving store development financing which expires in stages
from September 1994 to October 1995 and the Company guarantees approximately
$4.5 million of Sunbelt 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 By: /s/ Susan E. Barley
------------- -------------------------------------------
Susan E. Barley, Vice President and
Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
10.15.3 Second Extension Agreement dated as of June 29, 1994 between
Registrant, Pier-SNG, Inc. and Sunbelt, previously filed July
8, 1994.
27 Financial Data Schedule for Three-Month Period ended May 28,
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> 3-MOS
<FISCAL-YEAR-END> FEB-25-1995
<PERIOD-END> MAY-28-1994
<CASH> 13,468
<SECURITIES> 0
<RECEIVABLES> 58,777
<ALLOWANCES> 2,374
<INVENTORY> 217,482
<CURRENT-ASSETS> 340,455
<PP&E> 212,383
<DEPRECIATION> 101,668
<TOTAL-ASSETS> 481,806
<CURRENT-LIABILITIES> 105,000
<BONDS> 145,308
<COMMON> 37,617
0
0
<OTHER-SE> 166,121
<TOTAL-LIABILITY-AND-EQUITY> 481,806
<SALES> 161,486
<TOTAL-REVENUES> 161,486
<CGS> 96,135
<TOTAL-COSTS> 150,176
<OTHER-EXPENSES> 1,544
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,604
<INCOME-PRETAX> 6,467
<INCOME-TAX> 2,476
<INCOME-CONTINUING> 3,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,991
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
