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 November 27, 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 December 20, 1993
- ----------------------------- ------------------------------------------
Common Stock, $1.00 par value 37,530,028
<PAGE>
Items 1 and 2 of Part I of the Company's Quarterly Report on Form 10-Q for
the quarter ended November 27, 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 Nine Months Ended
Nov. 27, Nov. 28, Nov. 27, Nov. 28,
1993 1992 1993 1992
-------- -------- -------- --------
(as restated) (as restated)
Net sales $163,457 $144,923 $503,491 $463,422
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 100,435 88,268 312,945 285,486
Selling, general and
administrative expenses 49,115 43,982 143,448 132,063
Depreciation and amortization 3,980 3,551 11,606 10,760
-------- -------- -------- --------
153,530 135,801 467,999 428,309
-------- -------- -------- --------
Operating income 9,927 9,122 35,492 35,113
Nonoperating (income) and expense:
Interest income (392) (683) (1,732) (2,819)
Interest expense 4,634 5,013 14,562 14,816
Trading losses (Note 1) 4,550 2,419 14,758 2,419
-------- -------- -------- --------
8,792 6,749 27,588 14,416
-------- -------- -------- --------
Income before income taxes
and equity in net income
(loss) of subsidiary 1,135 2,373 7,904 20,697
Provision for income taxes 1,643 1,146 6,575 5,545
-------- -------- -------- --------
Income before equity in net
income (loss) of subsidiary (508) 1,227 1,329 15,152
Equity in net income (loss)
of subsidiary -- (1,399) -- 184
-------- -------- -------- --------
Net income (loss) $ (508) $ (172) $ 1,329 $ 15,336
======== ======== ======== ========
Net income (loss) per share $(.01) $.00 $.03 $.39
======== ======== ======== ========
Average shares outstanding
during period, including
common stock equivalents 39,560 39,232 39,505 39,131
======== ======== ======== ========
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)
November 27, February 27,
1993 1993
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(as restated)
ASSETS
Current assets:
Cash, including temporary investments of
$3,150 and $66,823, respectively $ 17,130 $ 73,585
Accounts receivable, net 51,950 34,920
Inventories 208,638 189,593
Other current assets 29,963 20,038
-------- --------
Total current assets 307,681 318,136
Properties, net 111,819 108,011
Other assets 36,376 34,350
-------- --------
$455,876 $460,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term
debt $ 27,639 $ 33,139
Accounts payable and accrued liabilities 60,130 59,791
-------- --------
Total current liabilities 87,769 92,930
Long-term debt 147,670 147,246
Deferred income taxes 404 514
Other non-current liabilities 20,565 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 92,787 93,184
Retained earnings 72,929 74,413
Cumulative currency translation adjustments (822) (433)
Less - 125,000 and 263,000 common shares in
treasury, at cost, respectively (1,266) (2,599)
Less - subscriptions receivable and unearned
compensation (1,777) (1,678)
-------- --------
199,468 200,494
-------- --------
$455,876 $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)
Nine Months Ended
November 27, November 28,
1993 1992
------------ ------------
(as restated)
Cash flow from operating activities:
Net income $ 1,329 $15,336
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization 11,606 10,760
Deferred taxes and other 2,198 (141)
Equity in undistributed earnings
of subsidiary -- (184)
Changes in cash from:
Inventories (19,045) 3,419
Accounts receivable and other current
assets (24,857) (10,115)
Accounts payable and accrued expenses 1,711 4,425
Other assets, liabilities and other, net 1,171 633
Net cash (used in) provided by operating ------- -------
activities (25,887) 24,133
------- -------
Cash flow from investing activities:
Capital expenditures (20,521) (8,429)
Proceeds from disposition of properties 791 1,077
Loan to Sunbelt Nursery Group, Inc. (1,000) --
Proceeds from Sunbelt Nursery Group, Inc. 2,105 --
Other investing activities (4,259) (1,636)
------- -------
Net cash used in investing activities (22,884) (8,988)
------- -------
Cash flow from financing activities:
Cash dividends (2,624) (1,662)
Proceeds from issuance of long-term debt -- 72,432
Repayments of long-term debt -- (35,331)
Net (payments) borrowings under line of credit
agreements (5,500) 9,983
Proceeds from sales of capital stock, treasury
stock, and other, net 440 2,424
Net cash (used in) provided by financing ------- -------
activities (7,684) 47,846
------- -------
Change in cash and cash equivalents (56,455) 62,991
Cash and cash equivalents at beginning of period 73,585 9,001
------- -------
Cash and cash equivalents at end of period $17,130 $71,992
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE><TABLE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 27, 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 (99) 211
Stock Purchase Plan, exercise
of stock options and other 10 (331) (189) 957 447
Currency translation adjustments (389) (389)
Cash dividends, declared or paid (2,624) (2,624)
Net income, as restated 1,329 1,329
------- ------- ------- ----- ------- ------- --------
Balance November 27, 1993, as
restated $37,617 $92,787 $72,929 $(822) $(1,266) $(1,777) $199,468
======= ======= ======= ===== ======= ======= ========
<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 NINE MONTHS ENDED NOVEMBER 27, 1993 AND NOVEMBER 28, 1992
(Unaudited)
The accompanying unaudited financial statements should be read in con-
junction with the Annual Report on 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 November 27, 1993, as restated, and the results of operations
and cash flows for the interim periods ended November 27, 1993 and November
28, 1992, 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 nine months ended November 27, 1993 and
November 28, 1992, as restated, 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'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 net 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 nine months ended November 27, 1993 was a reduction of $.12
per share and $0.38 per share, respectively.
<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 12.8%
to $163.5 million and 8.6% to $503.5 million for the third quarter and nine-
month periods of the 1994 fiscal year compared to the same periods last year.
Comparable store sales improved 8.6% during the third quarter and 5.1% for
the first nine months of fiscal 1994. At November 27, 1993, the Company
operated 637 North American stores in 47 states, Puerto Rico and Canada, and
has investments in operations in the United Kingdom and Mexico.
Gross profit, after related buying and store occupancy costs, as a
percentage of sales, was 38.6% for the third quarter and 37.8% for the first
nine months in fiscal 1994 compared to 39.1% and 38.4% for the same periods
last year. These 0.5% and 0.6% decreases from last year's third quarter and
the first nine months of fiscal 1993, respectively, were primarily a result
of a change in the sales mix with more furniture and less clothing sales
compared with the prior periods, as well as increases in clearance markdowns
taken on clothing over the prior periods. Store occupancy costs, as a
percentage of sales, improved 0.9% for the quarter and 0.5% for the first
nine months of fiscal 1994 versus last year's comparable periods.
Selling, general, and administrative expenses, as a percentage of sales,
for the third quarter of fiscal 1994 improved slightly to 30.0% from 30.3%
during the same period last year. In total dollars, selling, general and
administrative expenses during the third quarter of fiscal 1994 increased
$5.1 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 (31 net new North American stores since November 28, 1992) and new
point-of-sale equipment leased for the stores, offset partially by lower
marketing expenses. Selling, general and administrative expenses for the
first nine months of the fiscal year were up $11.4 million but unchanged as a
percentage of sales compared to the same period last year.
Net interest expense of $4.2 million for the third quarter and $12.8
million for the nine-month period ended November 27, 1993 decreased $0.1
million and increased $0.8 million, respectively, compared to the same
periods last year. The increase resulted from lower interest income earned
on reduced cash 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 the 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.
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 $0.8 million to $9.9 million during the third
quarter of fiscal 1994 compared to $9.1 million for the same period last
year. The Company recorded net losses of $0.5 million or $.01 per share
during the third quarter of fiscal 1994 compared to net losses of $0.2
million or $.00 per share during the third quarter of fiscal 1993. Net
income for the first nine months of fiscal year 1994 was $1.3 million or
$0.03 per share compared to $15.3 million or $0.39 per share for the same
period last year.
Pursuant to the sale of its 49.5% ownership interest in Sunbelt Nursery
Group, Inc. ("Sunbelt") to General Host Corporation ("General Host")
effective April 2, 1993, the Company agreed to make available up to $25
million of properties for lease to Sunbelt through April 28, 1996 and provide
Sunbelt a $12 million credit facility either in guarantees of Sunbelt
indebtedness or direct loans until April 28, 1994. Sunbelt's repayment
obligations under this agreement are secured by General Host's pledge of 4.2
million shares of Sunbelt common stock. As of November 27, 1993,
approximately $23 million of the properties' facility and $12 million of the
credit facility were outstanding. In its latest Form 10-Q filed with the
Securities and Exchange Commission, Sunbelt reported losses from operations
through the three- and nine-month periods ended October 31, 1993 of $5.4
million and $2.6 million, respectively, and cash flow from operations of $2.2
million for the nine months ended October 31, 1993. Additionally, Sunbelt
reported that in the event additional lines of credit or guarantees are not
obtained from commercial banks, General Host or the Company, Sunbelt may be
required to close stores, liquidate inventories or take other unspecified
measures to meet working capital needs, and there can be no assurance that
these measures would provide sufficient liquidity to satisfy those working
capital needs. The Company and General Host has discussed Sunbelt's future
business prospects and its ability to obtain future financing. Present
discussions with General Host have not progressed sufficiently for the
Company to determine a course of action it may take based on Sunbelt's
financial position or the impact, if any, on the Company's results of
operations.
Liquidity and Capital Resources
The Company's current ratio improved to 3.5 to 1 at November 27, 1993
over the 3.4 to 1 ratio at February 27, 1993 and the 3.3 to 1 ratio at
November 28, 1992. Additionally, the Company's total debt to equity improved
to 0.88 to 1 at November 27, 1993 from 0.90 to 1 ratio at fiscal 1993 year-
end and the 0.94 to 1 ratio at November 28, 1992. The Company's cash flow
from operating activities decreased $25.9 million during the first nine
months of fiscal 1994 compared to an increase of $24.1 million for the same
period of fiscal 1993. Uses of cash included trading losses of $14.8 million
for the first nine months of fiscal 1994 compared to $2.4 million a year ago,
$19.0 million of inventory increases to support new stores and anticipated
sales gains, and a $24.9 million increase in accounts receivable and other
current assets primarily as a result of strong sales on the Pier 1 Preferred
Card, the Company's proprietary credit card. Other uses of cash include
capital expenditures of $20.5 million, which includes expenditures of $3.0
million to purchase six franchise stores, and the net pay-down of short-term
borrowings of $5.5 million
For the first nine months of fiscal 1994, the Company paid cash
dividends aggregating $.07 per share, and has subsequently declared a cash
dividend of $.025 per share payable on February 17, 1994. 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.
The Company opened 42 new North American stores and closed 10 North
American stores during the first nine months of fiscal 1994 and expects to
open 3 additional stores prior to the end of fiscal 1994. New store openings
in fiscal 1994 are funded through operating leases with inventory and
fixtures for the new store development of approximately $11 million funded by
working capital, operations, and bank lines of credit. The minimum future
operating lease commitments for fiscal 1994 are $91 million with total
minimum future operating lease commitments of approximately $712 million.
Current and future operating leases are expected to be funded by cash flow
from operations.
During the last quarter of fiscal 1994 and during fiscal 1995, 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 $134.5 million, for a total of
$164.5 million. At November 27, 1993, $27.5 million was outstanding as
short-term borrowings and an additional $65.3 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)
