FORM 10-Q
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 30, 1996
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 No.)
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 January 7, 1997
- ----------------------------- ----------------------------------------
Common Stock, $1.00 par value 44,912,453
<PAGE>
PART I
------
Item 1. Financial Statements.
--------------------
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Nov. 30, Nov. 25, Nov. 30, Nov. 25,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $225,598 $190,185 $661,940 $566,456
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 130,054 111,614 394,706 343,989
Selling, general and
administrative expenses 70,078 59,252 193,205 163,046
Depreciation and amortization 4,991 4,270 14,664 12,608
-------- -------- -------- --------
205,123 175,136 602,575 519,643
-------- -------- -------- --------
Operating income 20,475 15,049 59,365 46,813
Nonoperating (income) and expenses:
Interest income (229) (14) (1,973) (610)
Interest expense 2,991 3,637 10,803 10,131
Trading (gains) losses -- (95) -- 16,463
Provision for Sunbelt Nursery
Group, Inc. defaults -- -- -- 14,000
-------- -------- -------- --------
2,762 3,528 8,830 39,984
-------- -------- -------- --------
Income before income taxes and
extraordinary items 17,713 11,521 50,535 6,829
Provision for income taxes 7,085 4,572 20,214 9,315
-------- -------- -------- --------
Income (loss) before extraordinary
items 10,628 6,949 30,321 (2,486)
Extraordinary items - losses from
early retirement of debt, net of
income tax benefit of $2,747
(Note 1) 4,122 -- 4,122 --
-------- -------- -------- --------
Net income (loss) $ 6,506 $ 6,949 $ 26,199 ($ 2,486)
======== ======== ======== ========
<PAGE>
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Continued)
(In thousands except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Nov. 30, Nov. 25, Nov. 30, Nov. 25,
1996 1995 1996 1995
-------- -------- -------- --------
Primary net income (loss) per share:
Before extraordinary items $.23 $.18 $.70 ($.06)
Extraordinary items, net of income
tax benefit (.09) -- (.09) --
-------- -------- -------- --------
Net income (loss) $.14 $.18 $.61 ($.06)
======== ======== ======== ========
Fully diluted net income (loss)
per share:
Before extraordinary items $.23 $.17 $.68 ($.06)
Extraordinary items, net of income
tax benefit (.09) -- (.09) --
-------- -------- -------- --------
Net income (loss) $.14 $.17 $.59 ($.06)
======== ======== ======== ========
Average shares outstanding during
period, including common stock
equivalents:
Primary 45,539 39,700 43,078 39,721
======== ======== ======== ========
Fully diluted 49,023 45,224 46,848 45,241
======== ======== ======== ========
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 30, March 2,
1996 1996
------------ ------------
ASSETS
Current assets:
Cash, including temporary investments of $8,868
and $1,588, respectively $ 26,048 $ 13,534
Accounts receivable, net 89,203 77,735
Inventories 231,557 223,166
Other current assets 35,326 33,078
-------- --------
Total current assets 382,134 347,513
Properties, net 161,055 144,627
Other assets 25,898 38,956
-------- --------
$569,087 $531,096
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term
debt $ 26,799 $ 4,454
Accounts payable and accrued liabilities 100,159 96,246
-------- --------
Total current liabilities 126,958 100,700
Long-term debt 111,260 180,100
Other non-current liabilities 25,085 22,373
Stockholders' equity:
Common stock, $1.00 par, 200,000,000 shares
authorized, 45,361,000 and 39,877,000 issued,
respectively 45,361 39,877
Paid-in capital 166,843 110,899
Retained earnings 102,633 81,633
Cumulative currency translation adjustments (1,443) (1,072)
Less - 471,000 and 303,000 common shares in
treasury, at cost, respectively (6,830) (2,545)
Less - unearned compensation (780) (869)
-------- --------
305,784 227,923
-------- --------
$569,087 $531,096
======== ========
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 30, November 25,
1996 1995
------------ ------------
Cash flow from operating activities:
Net income (loss) $26,199 ($ 2,486)
Adjustments to reconcile to net cash provided
by (used in) operating activities:
Depreciation and amortization 14,664 12,608
Deferred taxes and other 3,845 5,912
Investment gain (1,607) --
Provision for Sunbelt Nursery Group, Inc.
defaults -- 14,000
Extraordinary loss on early retirement of debt 6,869 --
Changes in cash from:
Inventories (3,769) (33,945)
Accounts receivable and other current assets (12,964) (10,236)
Accounts payable and accrued expenses 5,506 (5,848)
Store-closing reserve -- (5,914)
Other assets, liabilities and other, net 250 (37)
------- -------
Net cash provided by (used in) operating
activities 38,993 (25,946)
------- -------
Cash flow from investing activities:
Capital expenditures (30,926) (16,417)
Proceeds from disposition of properties 296 255
Reserve for Sunbelt Nursery Group, Inc. defaults (2,215) --
Other investing activities 4,665 (7,785)
------- -------
Net cash used in investing activities (28,180) (23,947)
------- -------
Cash flow from financing activities:
Cash dividends (5,199) (3,576)
Net borrowings under line of credit agreements 19,987 31,100
Proceeds from the issuance of long-term debt 83,602 --
Repayments of long-term debt (90,639) (14,750)
(Payments) proceeds from (purchases) sales of
capital stock, treasury stock, and other, net (6,050) 41
------- -------
Net cash provided by financing activities 1,701 12,815
------- -------
Change in cash and cash equivalents 12,514 (37,078)
Cash and cash equivalents at beginning of period 13,534 50,566
------- -------
Cash and cash equivalents at end of period $26,048 $13,488
======= =======
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 30, 1996
(In thousands)
(Unaudited)
<CAPTION>
Cumulative
Currency Total
Common Paid-in Retained Translation Treasury Unearned Stockholders'
Stock Capital Earnings Adjustments Stock Compensation Equity
------- -------- -------- ----------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 2, 1996 $39,877 $110,899 $ 81,633 ($1,072) ($2,545) ($869) $227,923
Purchase of treasury stock (9,357) (9,357)
Restricted stock grant and amortization 89 89
Stock purchase plan, exercise of stock
options and other (1,171) 5,072 3,901
Currency translation adjustments (371) (371)
Cash dividends ($.12 per share) (5,199) (5,199)
Conversion of 6 7/8% convertible debt 5,484 57,115 62,599
Net income 26,199
------- -------- -------- ------ ------ ---- --------
Balance, November 30, 1996 $45,361 $166,843 $102,633 ($1,443) ($6,830) ($780) $305,784
======= ======== ======== ====== ====== ==== ========
<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 for the year ended March 2, 1996. All
adjustments that are, in the opinion of management, necessary for a fair
statement of the financial position as of November 30, 1996, and the results
of operations and cash flows for the interim periods ended November 30, 1996
and November 25, 1995 have been made and consist only of normal recurring
adjustments except for the extraordinary items for the three and nine months
ended November 30, 1996, the net trading gains and losses for the three and
nine months ended November 25, 1995 and the provision for Sunbelt Nursery
Group, Inc. defaults recorded for the nine months ended November 25, 1995.
The results of operations for the three and nine months ended November 30,
1996 and November 25, 1995 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 - Issuance of long-term debt and extraordinary losses
In September 1996, the Company completed a public offering of $75
million aggregate principal amount of 5 3/4% convertible subordinated notes
due 2003. In October 1996, the underwriter's overallotment option was
exercised bringing the total amount of the offering to $86.25 million.
Interest on the notes will be payable semi-annually on April 1 and October 1
of each year, commencing April 1, 1997. The notes are convertible at any
time prior to maturity, unless previously redeemed or repurchased, into
shares of common stock of the Company at a conversion price of $18.50 per
share. The Company may redeem the notes, in whole or in part, on or after
October 2, 1999.
The Company utilized the net proceeds from the public offering to retire
$17.5 million of 11 1/2% subordinated debentures due 2003 and $25 million of
11% senior notes due 2001. The balance of the net proceeds was used to repay
$20.0 million outstanding under the Company's bank revolving credit facility,
which bore interest at a floating rate of 6.44% per annum. In addition, the
Company induced the conversion of its $12.5 million of 8 1/2% exchangeable
debentures during the third quarter of fiscal 1997. Thus, the Company
recorded pre-tax extraordinary losses aggregating $6.9 million during the
third quarter of fiscal 1997 for the early retirement of the aforementioned
debt. The after-tax extraordinary losses aggregated $4.1 million or $.09
per share.
Note 2 - Supplemental cash flow information
During the second quarter of fiscal 1997, the Company issued 5,483,823
shares of common stock upon the conversion of $62,681,000 principal amount of
6 7/8% convertible subordinated notes.
Note 3 - Net income (loss) per share
Primary net income (loss) per share was determined by dividing net
income (loss) by the applicable average shares outstanding. Fully diluted
net income (loss) 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 (loss), interest and debt issue costs, net
of any applicable taxes, have been added back to net income to reflect
assumed conversions. The computations of fully diluted net income (loss) per
share for the three months ended November 30, 1996 and the nine months ended
November 25, 1995 were antidilutive; therefore, the amounts reported for
primary and fully diluted net income (loss) 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 Nine Months Ended
Nov. 30, Nov. 25, Nov. 30, Nov. 25,
1996 1995 1996 1995
-------- -------- -------- --------
(in thousands except per share amounts)
Net income (loss) $6,506 $6,949 $26,199 ($2,486)
Assumed conversion of 6 7/8%
subordinated notes:
Plus interest and debt issue
costs, net of tax -- 681 929 2,043
Assumed conversion of 5 3/4%
subordinated notes:
Plus interest and debt issue
costs, net of tax 603 -- 603 --
------ ------ ------- ------
Fully diluted net income (loss) $7,109 $7,630 $27,731 ($ 443)
====== ====== ======= ======
Average shares outstanding during
period, including common stock
equivalents:
Primary 45,539 39,700 43,078 39,721
Plus assumed exercise of
stock options -- 33 18 29
Plus assumed conversion of
6 7/8% subordinated notes
to common stock -- 5,491 2,591 5,491
Plus assumed conversion of
5 3/4% subordinated notes
to common stock 3,484 -- 1,161 --
------ ------ ------ ------
Fully diluted 49,023 45,224 46,848 45,241
====== ====== ====== ======
Net income (loss) per share:
Primary $.14 $.18 $.61 ($.06)
====== ====== ====== ======
Fully diluted $.14 $.17 $.59 ($.06)
====== ====== ====== ======
<PAGE>
PART I
------
Part 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 $225.6
million for the third quarter of fiscal 1997 and $661.9 million for the first
nine months of fiscal 1997, increases of 18.6% and 16.9%, respectively, over
the same periods of fiscal 1996. Same-store sales for the third quarter of
fiscal 1997 increased 12.1% over the comparable period of fiscal 1996,
primarily due to increased customer traffic resulting from the national
television advertising campaign commenced during the second quarter of fiscal
1996, the continued focus on company-wide customer service programs and the
Company's store remodel and remerchandising programs which have improved the
layout and design of approximately 40 stores since the third quarter of
fiscal 1996. Same-store sales increased 10.9% for the first nine months of
fiscal 1997 versus the same period of fiscal 1996. Hard goods sales, such as
furniture and decorative accessories, increased 17.6% during the third
quarter of fiscal 1997 compared to the same period of fiscal 1996, while soft
goods sales of apparel, jewelry and accessories declined 19.3% in the third
quarter of fiscal 1997 versus the third quarter of fiscal 1996. The Company
continues to de-emphasize apparel in stores and management expects to
completely discontinue soft goods in all Pier 1 stores by the end of fiscal
1997. Hard goods and soft goods sales contributed approximately 96% and 4%,
respectively, of total merchandise sales for the third quarter of fiscal
1997. Sales on the Company's proprietary credit card totaled $170.0 million,
or 25.7% of total sales, during the first nine months of fiscal 1997 versus
proprietary credit card sales of $138.5 million, or 24.5% of total sales, for
the comparable period of fiscal 1996. The Company opened 40 new North
American stores and closed 13 stores during the first nine months of fiscal
1997, bringing the North American store count to 689 at the end of the third
quarter of fiscal 1997 compared to 665 stores at the end of the third quarter
of fiscal 1996. Stores worldwide, including North America, Puerto Rico and
international operations in the United Kingdom, Mexico and Japan, aggregated
721 at the end of the fiscal 1997 third quarter.
Gross profit, after related buying and store occupancy costs, expressed
as a percentage of sales, increased 1.1% to 42.4% for the third quarter of
fiscal 1997 and increased 1.1% to 40.4% during the first nine months of
fiscal 1997 compared to the same periods of fiscal 1996. The increase in
gross profit for the first nine months of fiscal 1997 is partially due to
approximately $1.6 million in duty refunds owed the Company as a result of
retroactive legislation passed in August 1996. In addition, store occupancy
costs, expressed as a percentage of sales, improved 1.3% to 13.7% for both
the third quarter and first nine months of fiscal 1997 compared to the same
periods of fiscal 1996, primarily due to higher sales leveraging relatively
fixed rates on store leases coupled with the Company's purchase (in the
fourth quarter of fiscal 1996) of the remaining 90% interest in a limited
partnership which owns 33 Pier 1 stores previously leased to the Company,
which eliminated base rent for those stores. However, such increases were
offset slightly by decreases in merchandise margins during the third quarter
and first nine months of fiscal 1997 versus the comparable periods of fiscal
1996 resulting from additional markdowns and promotional discounts required
to begin clearing the discontinued soft goods from the stores.
Selling, general and administrative expenses, including marketing, as a
percentage of sales, declined 0.1% to 31.1% for the third quarter of fiscal
1997 and increased 0.4% to 29.2% for the first nine months of fiscal 1997
versus the third quarter and first nine months of fiscal 1996, respectively.
In total dollars, selling, general and administrative expenses increased
$10.8 million during the third quarter of fiscal 1997 and increased $30.2
million during the first nine months of fiscal 1997 compared to the same
periods of fiscal 1996. The increase in the variable selling, general and
administrative expenses during the third quarter of fiscal 1997 was primarily
due to a $4.0 million increase in store payroll expenses and a $2.0 million
increase in store selling supplies, both of which remained flat as a
percentage of sales. In addition, other selling, general and administrative
expenses increased during the third quarter of fiscal 1997 due to a $1.8
million increase in administrative salaries and bonuses, a $1.8 million
increase in net proprietary credit card costs primarily due to an increase in
bad debt expense, a $0.6 million increase in expenses related to
international ventures, a $0.4 million increase in expenses related to the
investigation of trading losses incurred in prior years and discussed further
below, and a $0.2 million increase in marketing expenses.
Operating income increased $5.4 million, or 36.1%, to $20.5 million
during the third quarter of fiscal 1997 over the same period in fiscal 1996.
For the first nine months of fiscal 1997, operating income increased $12.6
million, or 26.8%, to $59.4 million over the same period of fiscal 1996.
Net interest expense decreased $0.9 million in the third quarter of
fiscal 1997 and decreased $0.7 million for the first nine months of fiscal
1997 compared to the same periods of fiscal 1996. These decreases are
primarily due to higher investment income earned on the investment in
Whiffletree Partners, L.P. ("Whiffletree") in the first quarter of fiscal
1997 coupled with decreases in interest expense related to the redemption of
the 6 7/8% convertible subordinated notes in the second quarter of fiscal
1997 and the retirement of the 8 1/2% exchangeable debentures, the 11 1/2%
subordinated debentures due 2003 and the 11% senior notes due 2001 in the
third quarter of fiscal 1997. These decreases were offset partially by
interest expense related to the issuance of the 5 3/4% convertible
subordinated notes due 2003 in the third quarter of fiscal 1997 and higher
short-term net debt levels.
In late December 1995, the Company was made aware of losses of $19.3
million resulting from trading activities in a discretionary account. 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 1996 and
fiscal 1995, respectively, with $16.0 million and $0.6 million of the net
trading losses recorded in the first and second quarters of fiscal 1996,
respectively, and $0.1 million of net trading gains recorded in the third
quarter of fiscal 1996. 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 1995, Sunbelt Nursery Group, Inc. ("Sunbelt") defaulted on 13
nursery store sublease agreements with the Company comprising $22.8 million
of non-revolving store development financing, and the Company terminated the
subleases. At the same time, Sunbelt defaulted on three nursery store lease
agreements guaranteed by the Company; however, such defaults were
subsequently cured. During the first quarter of fiscal 1996, the Company
recorded a pre-tax charge of $14.0 million which represented the estimated
cost to disengage from its financial support of Sunbelt. The charge reflects
the Company's estimated losses resulting from the lease termination costs
associated with the 13 nursery store subleases and other related costs. As
of December 1996, seven nursery store properties had been sold at costs
consistent with the Company's estimates to record the charge. The Company
believes that it is reasonably possible that a change in this estimate could
occur in the near term; however, no further charge is warranted at this time.
The Company's effective income tax rate for fiscal 1997 is estimated at
40% compared to 40% recorded during the first nine months of fiscal 1996,
exclusive of the aforementioned trading losses.
During the third quarter of fiscal 1997, the Company utilized the net
proceeds from the public offering of the 5 3/4% convertible subordinated
notes due 2003 to retire $17.5 million of 11 1/2% subordinated debentures due
2003 and $25 million of 11% senior notes due 2001. In addition, the Company
induced the conversion of its $12.5 million of 8 1/2% exchangeable
debentures. Thus, the Company recorded an after-tax extraordinary loss of
$4.1 million during the third quarter of fiscal 1997 for the early retirement
of debt.
Net income before the extraordinary items and related income tax benefit
for the third quarter of fiscal 1997 aggregated $10.6 million, or $.23 per
share on a fully diluted basis compared to net income of $6.9 million or $.17
per share on a fully diluted basis for the third quarter of fiscal 1996. Net
income after the extraordinary items, net of income tax benefit, for the
third quarter of fiscal 1997 aggregated $6.5 million or $.14 per share. Net
income before the extraordinary items and related income tax benefit for the
first nine months of fiscal 1997 aggregated $30.3 million or $.68 per share
on a fully diluted basis compared to net income before special charges of
$22.5 million or $.54 per share on a fully diluted basis for the first nine
months of fiscal 1996. Net income after the extraordinary items, net of
income tax benefit, for the first nine months of fiscal 1997 aggregated $26.2
million or $.59 per share on a fully diluted basis. Special charges for the
first nine months of fiscal 1996 included the $16.5 million in trading losses
and the $14.0 million provision for Sunbelt defaults.
Liquidity and Capital Resources
Cash, including temporary investments, increased $12.5 million to $26.0
million at the end of the fiscal 1997 third quarter from $13.5 million at
fiscal 1996 year-end. The increase in cash during the first nine months of
fiscal 1997 was primarily due to cash flow from operations of $39.0 million,
net proceeds from the issuance of the 5 3/4% convertible subordinated notes
of $83.6 million, net borrowings under line of credit agreements of $19.9
million and the net proceeds from the liquidation of the Whiffletree
investment of $4.7 million. These cash increases were partially offset by
repayments of long-term debt of $90.6 million, capital expenditures of $30.9
million, repurchases of the Company's treasury stock in open market
transactions of $7.7 million, cash dividend payments of $5.2 million and
payments on the reserve for Sunbelt defaults of $2.2 million. Other
investing and financing activities provided cash flow of $1.9 million. Cash
flow from operations improved $64.9 million during the first nine months of
fiscal 1997 over the same period of fiscal 1996 primarily due to higher net
income of $26.2 million in fiscal 1997 compared to a net loss of $2.5 million
in fiscal 1996, which included $16.5 million of net trading losses, and a
$30.2 million decrease in cash expended for inventory purchases during the
first nine months of fiscal 1997 as compared to the same period of fiscal
1996.
Working capital requirements will continue to be provided by cash from
operations and a three-year, $65 million competitive advance and revolving
credit facility, of which $45 million was available at the end of the third
quarter of fiscal 1997, and other short-term (12 month) bank facilities
aggregating $149.9 million, of which $15.0 million in committed lines of
credit and $27.0 million in uncommitted lines was available at the end of the
third quarter of fiscal 1997. The short-term bank facilities consist of
$44.7 million of committed lines of credit and $105.2 million of uncommitted
lines at the end of the fiscal 1997 third quarter. The Company's current
ratio was 3.0 to 1 at the end of the third quarter of fiscal 1997 compared to
3.5 to 1 at fiscal 1996 year-end and 3.0 to 1 at the end of the third quarter
of fiscal 1996. The Company's minimum operating lease commitments remaining
for fiscal 1997 are $23 million, and the present value of total existing
minimum operating lease commitments is $345 million.
As discussed in Note 1, the Company completed a public offering of 5
3/4% convertible subordinated notes due 2003 during the third quarter of
fiscal 1997 which yielded $86.25 million in gross proceeds. Proceeds from
the public offering were used to retire high cost, long-term debt and repay
$20.0 million outstanding under the Company's bank revolving credit facility.
Cash costs for the early retirement of debt totaled approximately $5.6
million.
In August 1996, the Company announced its intention to arrange a
securitization of its proprietary credit card receivables through a private
placement of trust certificates representing interests in the proprietary
credit card receivables. If the transaction is completed, the Company
anticipates receiving cash proceeds of approximately $55 million and would
use the proceeds to retire any debt outstanding under the Company's bank
revolving credit facility and provide funds for working capital and general
corporate purposes.
During the first nine months of fiscal 1997, approximately $2.2 million
was expended and charged against the Company's previously established reserve
to disengage financial support of Sunbelt. Cash requirements to fund this
reserve will be funded through working capital and operations. As of
December 1996, seven of the 13 store properties have been sold at costs
consistent with the Company's previously recorded reserve. The Company
guarantees other Sunbelt store lease commitments aggregating $3.6 million
with a present value of approximately $3.0 million at the end of the fiscal
1997 third quarter. The Company is not aware of any defaults on these
leases. The Company believes that it is reasonably possible that a change in
this estimate could occur in the near term; however, no further charge is
warranted at this time.
During the first nine months of fiscal 1997, the Company repurchased
500,000 shares of its common stock in open market transactions under a Board
of Directors approved program for approximately $7.7 million. In addition,
approximately 110,000 shares of common stock were acquired as payment for the
exercise of stock options.
During the first nine months of fiscal 1997, the Company paid cash
dividends aggregating $.12 per share and subsequently declared a cash
dividend of $.04 per share payable on February 19, 1997 to shareholders of
record on February 5, 1997. The Company currently expects to continue cash
dividends in fiscal 1997 and fiscal 1998, but intends to retain most of its
future earnings for expansion of the Company's business.
<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 report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC. (Registrant)
Date: January 14, 1997 By: /s/ Clark A. Johnson
---------------- ----------------------------------------
Clark A. Johnson, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: January 14, 1997 /s/ Stephen F. Mangum
---------------- -----------------------------------------
Stephen F. Mangum, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
4.1 Indenture, dated September 18, 1996 between the Company and
Wells Fargo Bank (Texas), N.A., as Trustee, relating to 5 3/4%
Convertible Subordinated Notes due 2003, incorporated herein by
reference to Exhibit 4.1 to Amendment No. 1 to the Company's
Registration Statement on Form 8-A/A, filed September 18, 1996.
27 Financial Data Schedule for Nine-month Period Ended November 30,
1996.
<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>
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0
0
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</TABLE>
