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 28, 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 September 27, 1993
- ----------------------------- -------------------------------------------
Common Stock, $1.00 par value 37,412,533
<PAGE>
Items 1 and 2 of Part I of the Company's Quarterly Report on Form 10-Q for
the quarter ended August 28, 1993 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. 28, Aug. 29, Aug. 28, Aug. 29,
1993 1992 1993 1992
-------- -------- -------- --------
(as restated) (as restated)
Net sales $181,441 $166,416 $340,034 $318,499
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 115,607 104,868 212,510 197,218
Selling, general and
administrative expenses 47,235 44,708 94,333 88,081
Depreciation and amortization 3,932 3,484 7,626 7,209
-------- -------- -------- --------
166,774 153,060 314,469 292,508
-------- -------- -------- --------
Operating income 14,667 13,356 25,565 25,991
Nonoperating (income) and expense:
Interest income (706) (1,243) (1,340) (2,136)
Interest expense 5,018 5,298 9,928 9,803
Trading losses (Note 1) 6,227 -- 10,208 --
-------- -------- -------- --------
10,539 4,055 18,796 7,667
-------- -------- -------- --------
Income before income taxes and
equity in net income of
subsidiary 4,128 9,301 6,769 18,324
Provision for income taxes 3,012 1,871 4,932 4,399
-------- -------- -------- --------
Income before equity in net
income of subsidiary 1,116 7,430 1,837 13,925
Equity in net income of
subsidiary -- 23 -- 1,583
-------- -------- -------- --------
Net income $ 1,116 $ 7,453 $ 1,837 $ 15,508
======== ======== ======== ========
Net income per share:
Primary $.03 $.19 $.05 $.40
======== ======== ======== ========
Fully diluted $.03 $.18 $.05 $.38
======== ======== ======== ========
Average shares outstanding during
period, including common stock
equivalents:
Primary 39,403 39,043 39,478 39,081
======== ======== ======== ========
Fully diluted 45,979 45,628 46,047 44,542
======== ======== ======== ========
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)
August 28, February 27,
1993 1993
------------ ------------
(as restated)
ASSETS
Current assets:
Cash, including temporary investments of $538
and $66,823, respectively $ 12,883 $ 73,585
Accounts receivable, net 53,400 34,920
Inventories 210,047 189,593
Other current assets 26,749 20,038
-------- --------
Total current assets 303,079 318,136
Properties, net 106,109 108,011
Other assets 34,204 34,350
-------- --------
$443,392 $460,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term
debt $ 17,139 $ 33,139
Accounts payable and accrued liabilities 58,182 59,791
-------- --------
Total current liabilities 75,321 92,930
Long-term debt 147,385 147,246
Deferred income taxes 412 514
Other non-current liabilities 20,149 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 93,010 93,184
Retained earnings 74,375 74,413
Cumulative currency translation adjustments (699) (433)
Less - 229,000 and 263,000 common shares in
treasury, at cost, respectively (2,325) (2,599)
Less - subscriptions receivable and unearned
compensation (1,853) (1,678)
-------- --------
200,125 200,494
-------- --------
$443,392 $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)
Six Months Ended
August 28, August 29,
1993 1992
---------- ----------
(as restated)
Cash flow from operating activities:
Net income $ 1,837 $15,508
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization 7,626 7,209
Deferred taxes and other 2,222 1,914
Equity in undistributed earnings of
subsidiary -- (1,583)
Changes in cash from:
Inventories (20,454) 13,180
Accounts receivable and other current assets (23,190) (5,816)
Accounts payable and accrued expenses (237) (1,028)
Other assets, liabilities and other, net 33 675
Net cash (used in) provided by operating ------- -------
activities (32,163) 30,059
------- -------
Cash flow from investing activities:
Capital expenditures (6,978) (5,392)
Proceeds from disposition of properties 748 809
Other investing activities (4,189) (1,709)
------- -------
Net cash used in investing activities (10,419) (6,292)
------- -------
Cash flow from financing activities:
Cash dividends (1,686) (1,107)
Net (payments) borrowings under line of credit
agreements (16,000) 9,983
Proceeds from issuance of long-term debt -- 72,432
Repayments of long-term debt -- (35,235)
(Payments) proceeds from (purchases) sales of
capital stock, treasury stock, and other, net (434) 1,806
Net cash (used in) provided by financing ------- -------
activities (18,120) 47,879
------- -------
Change in cash and cash equivalents (60,702) 71,646
Cash and cash equivalents at beginning of period 73,585 9,001
------- -------
Cash and cash equivalents at end of period $12,883 $80,647
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE><TABLE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED AUGUST 28, 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 (66) 376 (175) 135
Stock Purchase Plan, exercise
of stock options and other 10 (108) (189) (102) (389)
Currency translation adjustments (266) (266)
Cash dividends, declared or paid (1,686) (1,686)
Net income, as restated 1,837 1,837
------- ------- ------- ----- ------- ------- --------
Balance August 28, 1993, as
restated $37,617 $93,010 $74,375 $(699) $(2,325) $(1,853) $200,125
======= ======= ======= ===== ======= ======= ========
<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 AND SIX MONTHS ENDED AUGUST 28, 1993 AND AUGUST 29, 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
August 28, 1993 and the results of operations and cash flows for the interim
periods ended August 28, 1993, as restated, and August 29, 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 and six
months ended August 28, 1993, as restated, and August 29, 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 first and second quarters of fiscal
1994 to record net trading losses of $4.0 million for the quarter ended May
29, 1993 and $6.2 million for the quarter ended August 28, 1993. 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 three and six months ended August 28, 1993 was a reduction
of $0.16 per share and $0.26 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 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 and six months ended August
28, 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 Six Months Ended
Aug. 28, Aug. 29, Aug. 28, Aug. 29,
1993 1992 1993 1992
-------- -------- -------- --------
(as restated) (as restated)
(in thousands except per share amounts)
Net income $1,116 $7,453 $1,837 $15,508
Assumed conversion of 6 7/8%
subordinated notes as of date of
issuance, April 1992:
Plus interest and debt issue
costs, net of tax 812 812 1,624 1,353
------ ------ ------ -------
Fully diluted net income $1,928 $8,265 $3,461 $16,861
====== ====== ====== =======
Average shares outstanding during
period, including common stock
equivalents:
Primary 39,403 39,043 39,478 39,081
Plus assumed exercise of
stock options 14 23 7 16
Plus assumed conversion of
6 7/8% subordinated notes
to common stock as of date
of issuance, April 1992 6,562 6,562 6,562 5,445
------ ------ ------ ------
Fully diluted 45,979 45,628 46,047 44,542
====== ====== ====== ======
Net income per share:
Primary $.03 $.19 $.05 $.40
==== ==== ==== ====
Fully diluted $.03 $.18 $.05 $.38
==== ==== ==== ====
<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 9.0% to
$181.4 million and 6.8% to $340.0 million for the second quarter and six-
month periods of the 1994 fiscal year compared to the same periods last year.
Comparable store sales improved 6.2% during the second quarter and 3.7% for
the first half of fiscal 1994. The Company has grown to a total of 612 North
American retail locations as of the end of the second fiscal quarter compared
to 597 a year earlier.
Gross profit, after related buying and store occupancy costs, as a
percentage of sales, declined 0.7% to 36.3% for the second quarter and 0.6%
to 37.5% for the six-month period ended August 28, 1993 compared to the same
periods last year. Strong sales promotions in June and July generated sales
increases but caused a slight deterioration in gross profit as a percent of
sales. In addition, clothing sales lowered gross margins due to clearance
markdowns taken in the spring and summer lines. Store occupancy costs, as a
percentage of sales, improved 0.6% for the second quarter and 0.4% for the
first six months of fiscal 1994 versus last year's comparable periods.
Selling, general, and administrative expenses, as a percentage of sales,
for the second quarter of fiscal 1994 improved 0.9% to 26.0% from 26.9%
during the same period last year. In total dollars, selling, general and
administrative expenses during the second fiscal quarter increased $2.5
million compared to a year ago. These increased expenses were primarily due
to higher payroll and other store-related costs associated with new store
growth (15 net new North American stores), and new point-of-sale equipment
leased for the stores, offset partially by improved experience on the
Company's proprietary credit card bad debts. Selling, general and
administrative expenses for the first six months of the fiscal year were up
$6.3 million but flat as a percentage of sales compared to the same period
last year.
Net interest expense of $4.3 million for the second quarter and $8.6
million for the six-month period ended August 28, 1993 increased $0.3 million
and $0.9 million, respectively, compared to the same periods last year. The
increases resulted from lower interest income earned on reduced cash and
temporary investment balances this year compared to last 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
General Host's 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 results.
The Company's effective tax rate for the interim periods of fiscal 1994
exclusive of the aforementioned trading losses increased to 29% compared to
24% for fiscal 1993, primarily due to an increase in the state tax effective
rate.
Operating income improved $1.3 million to $14.7 million during the
second quarter of fiscal 1994 compared to the same period in fiscal 1993.
The Company recorded net income of $1.1 million or $0.03 per primary share in
the second quarter of fiscal 1994 compared to last year's second quarter of
$7.5 million or $0.19 per primary share. Operating income for the first six
months of fiscal 1994 was $25.6 million versus $26.0 million for the same
period last year. Net income for the first six months of fiscal 1994 was
$1.8 million or $0.05 per primary share compared to $15.5 million or $0.40
per primary share for the first six months of fiscal 1993.
Liquidity and Capital Resources
The Company's cash decreased $60.7 million during the first six months
of fiscal 1994 compared to an increase of $71.6 million for the same period
in the prior year. Operational working capital uses of cash during the first
half of fiscal 1994 consisted of a $20.5 million increase in inventory due to
anticipated sales gains in the third and fourth quarters, the arrival of
seasonal goods for Christmas, and an additional $23.2 million increase in
accounts receivable primarily as a result of strong credit sales utilizing
the Company's proprietary credit card. In addition, $10.2 million of trading
losses was recognized for the six months ended August 28, 1993 that
negatively impacted operating cash. Other uses of cash include net capital
expenditures and other investing activities of $10.4 million, net payments on
short-term borrowings of $16.0 million and cash dividend payments of $1.7
million. These uses of cash were offset partially by net income adjusted for
non-cash expenses totalling $11.7 million. To fund these expenditures, the
Company's debt (net of cash balances) increased $44.8 million since fiscal
1993 year-end and $52.2 million since August 29, 1992. The current ratio of
4.0 to 1 at August 28, 1993 improved over the 3.4 to 1 ratio at February 27,
1993 and at August 29, 1992. The total debt to equity ratio was 0.82 to 1 at
August 28, 1993, an improvement over the 0.90 to 1 ratio at fiscal 1993 year-
end and the 0.93 to 1 ratio at August 29, 1992.
For the first six months of fiscal 1994, the Company paid cash dividends
aggregating $.045 per share, and has subsequently declared a cash dividend of
$.025 per share payable on November 17, 1993. During the second quarter of
fiscal 1994, the Board of Directors voted an increase in the quarterly cash
dividend to $.025 per share from the previously paid $.02 per share.
The Company opened 14 new North American stores and closed seven stores
during the first six months of fiscal 1994. A total of approximately 45 new
North American stores are planned for this fiscal year. Inventory and
fixtures for the new store development in fiscal 1994 are anticipated to cost
$11 million, which will be funded by working capital, operations, and bank
lines of credit. 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 $91 million with total minimum future
operating lease commitments of approximately $691 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 and bank revolving credit facilities. The Company has two
committed bank revolving lines of credit aggregating to $30 million as well
as other short-term revolving credit and letter of credit facilities
amounting to $98.5 million, for a total of $128.5 million. At August 28,
1993, $17 million was outstanding as short-term borrowings and an additional
$53 million was used to support letters of credit. 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 /s/ Susan E. Barley
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Susan E. Barley, Vice President and
Controller
(Principal Accounting Officer)
