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 29, 1997
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 January 6, 1998
- ----------------------------- ----------------------------------------
Common Stock, $1.00 par value 67,423,592
<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. 29, Nov. 30, Nov. 29, Nov. 30,
1997 1996 1997 1996
-------- -------- -------- --------
Net sales $262,751 $225,598 $750,099 $661,940
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 146,973 130,054 428,502 394,706
Selling, general and
administrative expenses 79,430 70,078 223,379 193,205
Depreciation and amortization 6,226 4,991 17,336 14,664
-------- -------- -------- --------
232,629 205,123 669,217 602,575
-------- -------- -------- --------
Operating income 30,122 20,475 80,882 59,365
Nonoperating (income) and expense:
Interest and investment income (267) (229) (816) (1,973)
Interest expense 2,402 2,991 6,500 10,803
Trading loss (recovery) -- -- (6,355) --
-------- -------- -------- --------
2,135 2,762 (671) 8,830
-------- -------- -------- --------
Income before income taxes and
extraordinary items 27,987 17,713 81,553 50,535
Provision for income taxes 11,192 7,085 30,077 20,214
-------- -------- -------- --------
Income before extraordinary items 16,795 10,628 51,476 30,321
Extraordinary items - losses from early
retirement of debt, net of income tax
benefit of $2,747 -- 4,122 -- 4,122
-------- -------- -------- --------
Net income $ 16,795 $ 6,506 $ 51,476 $ 26,199
======== ======== ======== ========
Primary net income per share:*
Before extraordinary items $.24 $.16 $.75 $.47
Extraordinary items, net of income
tax benefit -- (.06) -- (.06)
-------- -------- -------- --------
Net income $.24 $.10 $.75 $.41
======== ======== ======== ========
Fully diluted net income per share:*
Before extraordinary items $.23 $.15 $.71 $.45
Extraordinary items, net of income
tax benefit -- (.05) -- (.05)
-------- -------- -------- --------
Net income $.23 $.10 $.71 $.40
======== ======== ======== ========
Average shares outstanding during
period, including common stock
equivalents:
Primary 68,773 68,309 68,714 64,617
======== ======== ======== ========
Fully diluted 75,805 73,534 75,758 70,272
======== ======== ======== ========
* Adjusted to reflect the three for two stock split effected in the form of a
stock dividend distributed July 30, 1997.
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 29, March 1,
1997 1997
------------ ----------
ASSETS
Current assets:
Cash, including temporary investments of $19,711
and $22,188, respectively $ 37,807 $ 32,280
Accounts receivable, net 9,102 4,128
Inventories 249,594 220,013
Other current assets 73,860 66,097
-------- --------
Total current assets 370,363 322,518
Properties, net 217,900 216,836
Other assets 31,533 30,914
-------- --------
$619,796 $570,268
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-term
debt $ 1,697 $ 1,641
Accounts payable and accrued liabilities 114,741 105,541
-------- --------
Total current liabilities 116,438 107,182
Long-term debt 115,318 114,454
Other non-current liabilities 23,636 25,584
Stockholders' equity:
Common stock, $1.00 par, 200,000,000 shares
authorized, 67,903,000 and 45,361,000 issued,
respectively 67,903 45,361
Paid-in capital 166,879 166,475
Retained earnings 137,583 118,721
Cumulative currency translation adjustments (1,939) (1,385)
Less - 329,000 and 373,000 common shares in
treasury, at cost, respectively (5,591) (5,437)
Less - unearned compensation (431) (687)
-------- --------
364,404 323,048
-------- --------
$619,796 $570,268
======== ========
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 29, November 30,
1997 1996
------------ ------------
Cash flow from operating activities:
Net income $51,476 $26,199
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 17,336 14,664
Deferred taxes and other 2,503 3,845
Investment gain -- (1,607)
Extraordinary loss on early retirement of debt -- 6,869
Changes in cash from:
Inventories (29,031) (3,769)
Accounts receivable and other current assets (5,308) (12,964)
Accounts payable and accrued expenses 16,243 5,506
Other assets, liabilities and other, net (174) 250
------- -------
Net cash provided by operating activities 53,045 38,993
------- -------
Cash flow from investing activities:
Capital expenditures (38,715) (30,926)
Proceeds from disposition of properties 9,953 296
Reserve for Sunbelt Nursery Group, Inc. defaults (45) (2,215)
Beneficial interest in securitized receivables (7,592) --
Acquisition of national bank charter (1,003) --
Other investing activities -- 4,665
------- -------
Net cash used in investing activities (37,402) (28,180)
------- -------
Cash flow from financing activities:
Cash dividends (6,556) (5,199)
Net borrowings under line of credit agreements -- 19,987
Proceeds from the issuance of long-term debt -- 83,602
Repayments of long-term debt -- (90,639)
Payments for purchases of capital stock,
treasury stock, and other, net (3,560) (6,050)
------- -------
Net cash (used in) provided by financing
activities (10,116) 1,701
------- -------
Change in cash and cash equivalents 5,527 12,514
Cash and cash equivalents at beginning of period 32,280 13,534
------- -------
Cash and cash equivalents at end of period $37,807 $26,048
======= =======
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 29, 1997
(In thousands except per share data)
(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 1, 1997 $45,361 $166,475 $118,721 ($1,385) ($5,437) ($687) $323,048
Purchases of treasury stock (8,222) (8,222)
Restricted stock grant and amortization 65 (178) 308 195
Stock purchase plan, exercise of stock
options and other 332 (3,569) 8,246 5,009
Currency translation adjustments (554) (554)
Cash dividends declared or paid ($0.095
per share) (6,556) (6,556)
Three for two stock split 22,541 (22,489) (52) --
Conversion of 5 3/4% convertible
debt 1 7 8
Net income 51,476 51,476
------- -------- -------- ------- ------- ----- --------
Balance November 29, 1997 $67,903 $166,879 $137,583 ($1,939) ($5,591) ($431) $364,404
======= ======== ======== ======= ======= ===== ========
<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 29, 1997
AND NOVEMBER 30, 1996
(Unaudited)
The accompanying unaudited financial statements should be read in
conjunction with the Form 10-K for the year ended March 1, 1997. All
adjustments that are, in the opinion of management, necessary for a fair
statement of the financial position as of November 29, 1997, and the results
of operations and cash flows for the interim periods ended November 29, 1997
and November 30, 1996 have been made and consist only of normal recurring
adjustments, except for the net trading loss recovery recorded for the nine
months ended November 29, 1997 and the extraordinary items for the three and
nine months ended November 30, 1996. The results of operations for the three
and nine months ended November 29, 1997 and November 30, 1996 are not
indicative of results to be expected for the fiscal year because of, among
other things, seasonality factors in the retail business. The classification
of certain amounts previously reported in the statement of financial position
as of March 1, 1997 has been modified to conform with the November 29, 1997
method of presentation.
Note 1 - Net income per share
Primary net income per share was determined by dividing net income by
the 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.
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, as summarized below:
Three Months Ended Nine Months Ended
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
1997 1996* 1997 1996*
-------- -------- -------- --------
(in thousands except per share amounts)
Net income $16,795 $6,506 $51,476 $26,199
Assumed conversion of 6 7/8%
subordinated notes:
Plus interest and debt issue
costs, net of tax -- -- -- 929
Assumed conversion of 5 3/4%
subordinated notes:
Plus interest and debt issue
costs, net of tax 811 603 2,434 603
------- ------ ------- -------
Fully diluted net income $17,606 $7,109 $53,910 $27,731
======= ====== ======= =======
Average shares outstanding during period,
including common stock equivalents:
Primary 68,773 68,309 68,714 64,617
Plus assumed exercise of stock
options 39 -- 51 26
Plus assumed conversion of 6 7/8%
subordinated notes to common stock -- -- -- 3,887
Plus assumed conversion of 5 3/4%
subordinated notes to common stock 6,993 5,225 6,993 1,742
------ ------ ------ ------
Fully diluted 75,805 73,534 75,758 70,272
====== ====== ====== ======
Net income per share:
Primary $.24 $.10 $.75 $.41
====== ====== ====== ======
Fully diluted $.23 $.10 $.71 $.40
====== ====== ====== ======
* Adjusted to reflect a three for two stock split effected in the form of a
stock dividend.
Primary net income per share would have been reduced by $.01 for the
nine months ended November 30, 1996 had the 6 7/8% convertible subordinated
notes been converted at the beginning of the 1997 fiscal year. For the three
months ended November 30, 1996, there would have been no effect on primary
net income per share had the 6 7/8% convertible subordinated notes been
converted at the beginning of the 1997 fiscal year. The 6 7/8% convertible
subordinated notes were converted in July 1996.
Note 2 - Impact of new accounting standards
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share." SFAS No. 128 requires dual presentation of net income
per share on the face of all income statements issued for periods ending
after December 15, 1997 for all entities with complex capital structures. At
that time the Company will be required to change the method currently used to
compute net income per share and to restate net income per share for all
prior periods. The pro forma effect of assuming the adoption of SFAS No. 128
on per share amounts for the three and nine months ended November 29, 1997
and November 30, 1996 is presented below:
Three Months Ended Nine Months Ended
Nov. 29, Nov. 30, Nov. 29, Nov. 30,
1997 1996 1997 1996
-------- -------- -------- --------
Net income per share:
Basic $.25 $.10 $.76 $.41
==== ==== ==== ====
Diluted $.23 $.10 $.71 $.40
==== ==== ==== ====
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information." SFAS No. 130 requires that an enterprise report, by
major component and as a single total, the change in its equity during the
period from nonowner sources, and SFAS No. 131 establishes annual and interim
reporting requirements for an enterprise's operating segments and related
disclosures about its products and services, geographical areas in which it
operates and major customers. Both statements are effective for fiscal years
beginning after December 15, 1997, with earlier application permitted.
Adoption of these statements is not expected to materially impact the
Company's consolidated financial position or statements of operations,
stockholders' equity and cash flows. Effects of the adoption of these
statements will primarily be limited to the form and content of the Company's
disclosures.
<PAGE>
PART I
------
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Pier 1 Imports, Inc. ("the Company") recorded net sales of $262.8
million and $750.1 million for the third quarter and first nine months of
fiscal 1998, resulting in increases of 16.5% and 13.3% over the third quarter
and first nine months of fiscal 1997, respectively. Same-store sales
increased 16.1% and 15.6% for the third quarter and first nine months of
fiscal 1998, respectively, over the prior fiscal year after eliminating
apparel sales for both years. These increases are primarily due to the
continued success of the national television advertising campaign coupled
with the store remodel and remerchandising programs. In conjunction with the
enhanced store layout and design, the Company strengthened its merchandise
mix, especially in the areas of furniture and bed and bath. As a result,
hard goods sales grew 18.7% during the third quarter of fiscal 1998 compared
to the third quarter of fiscal 1997. The Company has experienced continued
growth in its proprietary credit card sales as a result of targeted marketing
promotions. Sales on the Company's proprietary credit card totaled $194.9
million, or 26.0% of total sales, for the first nine months of fiscal 1998
versus proprietary credit card sales of $170.0 million, or 25.7% of total
sales, for the first nine months of fiscal 1997. The Company opened 42 new
North American stores and closed 16 stores during the first nine months of
fiscal 1998, bringing the North American store count to 713 at the end of the
fiscal 1998 third quarter compared to 689 stores at the end of the fiscal
1997 third quarter. Stores worldwide, including North America, Puerto Rico
and international operations in the United Kingdom, Mexico and Japan,
aggregated 760 at the end of the fiscal 1998 third quarter.
Gross profit, after related buying and store occupancy costs,
expressed as a percentage of sales, increased 170 basis points to 44.1% for
the third quarter of fiscal 1998 and increased 250 basis points to 42.9% for
the first nine months of fiscal 1998 compared to the same periods in fiscal
1997. The improvement in gross profit is principally the result of increased
margins on sales of hard goods and a decrease in clearance and promotional
markdowns on soft goods. Offsetting these increases in gross profit is the
approximate $1.6 million in duty refunds that were included in gross profit
for the first nine months of fiscal 1997 due to retroactive legislation
passed in August 1996 compared to the approximate $0.4 million in duty
refunds for the same period of fiscal 1998. Store occupancy costs, as a
percentage of sales, improved 160 basis points to 12.1% for the third quarter
of fiscal 1998 and improved 110 basis points to 12.6% for the first nine
months of fiscal 1998 versus comparable periods of fiscal 1997. These
increases are primarily due to higher sales leveraging relatively fixed
rental rates on store leases, coupled with the Company's purchase (in the
fourth quarter of fiscal 1997) of two entities that had previously leased
store locations to the Company, thus eliminating base rent for those stores.
Selling, general and administrative expenses, including marketing, as
a percentage of sales, decreased 90 basis points to 30.2% for the third
quarter of fiscal 1998 and increased 60 basis points to 29.8% for the first
nine months of fiscal 1998 compared to the same periods in fiscal 1997. In
total dollars, selling, general and administrative expenses increased $9.4
million for the third quarter of fiscal 1998 and increased $30.2 million for
the first nine months of fiscal 1998 versus the comparable periods of fiscal
1997. Expenses that normally vary with sales, such as store salaries and
bonuses, store supplies and marketing expenses increased $6.2 million for the
third quarter of fiscal 1998 compared to the same period last year. However,
these variable expenses, as a percentage of sales, decreased 60 basis points
to 20.6% primarily due to the timing of expenses for the national television
advertising campaign. The remaining $3.2 million increase during the third
quarter of fiscal 1998 is primarily due to a $2.4 million increase in
administrative salaries and bonuses and $1.2 million of other selling,
general and administrative expenses. These increases are partially offset by
a $0.4 million decrease in net proprietary credit card costs.
Operating income increased $9.6 million, or 47.1%, to $30.1 million
during the third quarter of fiscal 1998 from $20.5 million in the third
quarter of fiscal 1997. For the first nine months of fiscal 1998, operating
income increased $21.5 million, or 36.2%, to $80.9 million compared to $59.4
million for the same period a year ago.
Interest and investment income remained relatively unchanged for the
third quarter of fiscal 1998 and decreased $1.2 million during the first nine
months of fiscal 1998 compared to the same periods of fiscal 1997. The
decrease for the first nine months of fiscal 1998 is primarily the result of
the recording of $1.6 million of investment income earned on the investment
in a limited partnership during the early part of fiscal 1997. This
investment in the limited partnership was liquidated in the first quarter of
fiscal 1997.
Interest expense decreased $0.6 million during the third quarter of
fiscal 1998 and $4.3 million during the first nine months of fiscal 1998
versus the same periods in fiscal 1997. These decreases are primarily a
result of the conversion of the 6 7/8% convertible subordinated notes in the
second quarter of fiscal 1997, the exchange of the 8 1/2% exchangeable
debentures, the retirement of the 11 1/2% subordinated debentures due 2003
and the 11% senior notes due 2001 in the third quarter of fiscal 1997 and the
repayment of the $40 million outstanding under the Company's bank revolving
credit facility in the third and fourth quarters of fiscal 1997. This
decrease was partially offset by interest expense on the 5 3/4% convertible
subordinated notes due 2003 issued in the third quarter of fiscal 1997.
During the second quarter of fiscal 1998, the Company received a $7.5
million partial recovery of a trading loss previously reported in December
1995. Of this settlement, $1.1 million was considered a recovery of fiscal
year 1998 legal fees and thus resulted in a net recovery of trading losses of
$6.4 million. The Company did not record any tax benefit on the previously
reported trading loss and thus no tax expense has been provided on the net
recovery.
The Company's effective income tax rate for fiscal 1998, exclusive of
the aforementioned trading loss recovery, is estimated at 40% unchanged from
the 40% recorded during the first nine months of fiscal 1997.
During the third quarter of fiscal 1997, the Company utilized net
proceeds from a public offering of 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 exchange of its $12.5 million of 8 1/2% exchangeable debentures. The
Company recorded an after-tax extraordinary charge of $4.1 million during the
third quarter of fiscal 1997 for the cost related to early retirement of
debt. The pre-tax extraordinary charge aggregated $6.9 million.
Net income for the third quarter of fiscal 1998 aggregated $16.8
million or $.23 per share on a fully diluted basis compared to net income
before extraordinary items of $10.6 million or $.15 per share on a fully
diluted basis for the third quarter of fiscal 1997. Net income after the
extraordinary items for the third quarter of fiscal 1997 aggregated $6.5
million or $.10 per share on a fully diluted basis. Net income before
special credits for the first nine months of fiscal 1998 aggregated $45.1
million or $.63 per share on a fully diluted basis compared to net income
before extraordinary items of $30.3 million or $.45 per share on a fully
diluted basis for the first nine months of fiscal 1997. Net income after
extraordinary items for the first nine months of fiscal 1997 aggregated $26.2
million or $.40 per share on a fully diluted basis. Special credits for the
first nine months of fiscal 1998 were for the aforementioned net trading loss
recovery of $6.4 million, or $.08 per share on a fully diluted basis.
Liquidity and Capital Resources
Cash, including temporary investments, increased $5.5 million to $37.8
million at the end of the third quarter of fiscal 1998 from $32.3 million at
the end of fiscal 1997. This increase is primarily due to cash flow from
operations of $53.0 million and proceeds from disposition of properties of
$10.0 million, which includes $4.0 million received in connection with the
disposition of certain properties leased to Sunbelt Nursery Group Inc.
("Sunbelt"). These cash increases were partially offset by capital
expenditures of $38.7 million, increased beneficial interest in securitized
receivables of $7.6 million, cash dividend payments of $6.6 million, the
acquisition of a bank charter and other bank assets of $1.0 million and
repurchases of the Company's stock in open market transactions of $6.4
million. Other investing and financing activities provided net cash of $2.8
million. Cash flow from operations improved $14.1 million during the first
nine months of fiscal 1998 over the same period of fiscal 1997 primarily
attributable to higher net income (adjusted for non-cash and non-operating
related items) of $71.3 million in fiscal 1998 compared to $50.0 million in
fiscal 1997.
The Company expects to continue to satisfy its working capital needs
through cash flow from operations, sales of proprietary credit card
receivables and a committed three-year, $65 million competitive advance and
revolving credit facility expiring December 1998, all of which was available
at the end of the third quarter of fiscal 1998, other short-term (12-month)
bank facilities principally for the issuance of letters of credit aggregating
$146.9 million, $76.4 million of which was available at the end of the third
quarter of fiscal 1998 and other committed long-term bank facilities of $30.6
million at the fiscal 1998 third quarter-end. The short-term bank facilities
consist of $3.9 million of committed lines of credit and $143.0 million of
uncommitted lines. The Company expects to arrange a new competitive advance
and revolving credit facility under substantially similar terms prior to the
existing facility's expiration date. The Company's current ratio at the end
of the third quarter of fiscal 1998 was 3.2 to 1 compared to 3.0 to 1 at
fiscal year-end 1997. The Company's minimum operating lease commitments
remaining for fiscal 1998 are $24.7 million, and the present value of total
existing minimum operating lease commitments is $358.5 million. The Company
expects to fund these commitments from operating cash flow.
The Company has commitments from unaffiliated parties to make
available up to $25.0 million for the development or acquisition of stores
for lease to the Company. As of the end of the third quarter of fiscal 1998,
the Company had utilized $23.7 million of that availability. This facility
was extended to March 30, 1998, at which time the Company expects to either
refinance under similar terms or purchase the properties covered under the
facility.
During the first nine months of fiscal 1998, approximately $8.3
million was charged against the Company's previously established reserve to
disengage financial support of Sunbelt. This charge reflected the Company's
loss on the sale of the remaining six of 13 store properties leased to
Sunbelt. These six properties were sold at costs consistent with the
previously recorded reserve. The Company continues to guarantee other
Sunbelt store lease commitments through the year 2001 which aggregate $2.4
million and have a present value of approximately $2.1 million at the end of
the third quarter of fiscal 1998. The Company is not aware of any defaults
on these leases.
During the first nine months of fiscal 1998, the Company repurchased
under a Board of Directors approved program 377,200 shares of its common
stock in open market transactions for $6.4 million. In addition,
approximately 86,000 shares of common stock were acquired as payment for the
exercise of employee stock options.
During the first nine months fiscal 1998, the Company paid cash
dividends aggregating $.095 per share (adjusted for the three for two stock
split distributed July 30, 1997) and declared a cash dividend of $.035 per
share payable on February 18, 1998 to shareholders of record on February 4,
1998. The Company currently expects to continue to pay cash dividends in
fiscal 1999, but intends to retain most of its future earnings for expansion
of the Company's business.
The Company's business has historically been subject to seasonal
fluctuations due to holiday buying patterns. Therefore, financial results
for the third quarter and the first nine months of fiscal 1998 are not
necessarily indicative of performance for the balance of the year.
Inflation has not had a significant impact on the operations of the
Company.
<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 13, 1998 By: /s/ Clark A. Johnson
---------------- ---------------------------------------
Clark A. Johnson, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: January 13, 1998 /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
- ------- -----------
10.1 Deferred Compensation Agreement
27 Financial Data Schedule for Nine-month Period Ended November 29,
1997.
EXHIBIT 10.1
DEFERRED COMPENSATION AGREEMENT
DEFERRED COMPENSATION AGREEMENT ("Agreement"), dated as of the
26th day of June, 1997, between Pier 1 Services Company, a Delaware business
trust (the "Company"), and ________________ ("Employee").
WHEREAS, Employee is currently employed by the Company;
WHEREAS, Employee's services will continue to be of substantial
value to the Company; and
WHEREAS, the Company and Employee mutually desire to enter into
an agreement providing for the deferral of payment of certain of Employee's
compensation for services rendered during any fiscal year of the Company.
NOW, THEREFORE, it is agreed as follows:
1. Definitions. The following terms when used in this Agreement shall
have the respective meanings set forth below unless their context clearly
indicates otherwise:
A. "Compensation" means the amount of any compensation (including
taxable benefits) payable by the Company to, or accruing to the
benefit of, Employee for federal income tax purposes, which is
"applicable employee remuneration" to Employee under Section 162(m)
with respect to any tax year of the Company.
B. "Deferral Account" means an appropriate bookkeeping account or
record maintained by the Company for the sole purpose of measuring
and determining the amounts, if any, to be paid to Employee pursuant
to this Agreement with respect to Deferred Amounts. The Deferral
Account shall not constitute or be treated as an escrow or trust
fund of any kind, and Employee shall not be entitled to any amounts
from the Deferred Account except as provided in this Agreement.
C. "Deferral Date" means any date as of which a Deferred Amount of
compensation otherwise payable by the Company to, or accruing to the
benefit of, Employee shall be deferred pursuant to the terms of
this Agreement.
D. "Deferred Amount" means, either:
(i) the amount of Compensation (excluding salary and cash
reimbursements) which, when combined with all
Compensation (excluding salary and cash reimbursements)
previously paid to or accrued to the benefit of Employee
with respect to such tax year, exceeds the difference of
(I) the Section 162(m) Maximum Amount, minus (II) the
lesser of (a) the sum of the annual taxable gross salary
of Employee plus annual taxable cash reimbursements
payable to Employee plus taxable benefits accruable for
the benefit of Employee with respect to such tax year and
(b) the Section 162(m) Maximum Amount, or
(ii) if elected by Employee prior to the first day of a
Company's tax year, the amount of Compensation which,
when combined with all Compensation previously paid to or
accrued to the benefit of Employee with respect to such
tax year, exceeds the Section 162(m) Maximum Amount.
With respect to the Company's 1998 fiscal year, Deferred Amount may
include only Compensation relating to services rendered by, or
accruing to the benefit of, Employee subsequent to June 26, 1997.
E. "Section 162(m)" means Section 162(m) of the Internal Revenue Code
of 1986, as amended, and the Treasury regulations promulgated
thereunder, and any amendments or successor provision thereto.
F. "Section 162(m) Maximum Amount" means $1,000,000 (or such other
amount of remuneration subsequently specified in Section 162(m).
2. Compensation Deferrals. If at any time and from time to time a
Deferred Amount of compensation shall be payable by the Company to, or accrue
to the benefit of, Employee, the Deferred Amount shall, in lieu of being then
paid to Employee, be deferred to later payment by the Company to Employee in
accordance with the terms of this Agreement. As of each Deferral Date
throughout the term of this Agreement, Employee's Deferral Account shall be
credited with an amount equal to the Deferred Amount. In the case of the
lapsing of restrictions relating to restricted stock which constitute a
Deferred Amount, the shares of common stock as to which restrictions lapse
shall be credited to Employee's Deferral Account, and all subsequent
dividends and other distributions with respect to such shares, whether in
cash, securities or other property, shall, in lieu of being distributed to
Employee, be credited to Employee's Deferral Account at the time of any such
distribution.
3. Interest Credit. The Deferral Account shall be credited on the
payment date provided in Paragraph 4 with interest on Deferred Amounts
(consisting of cash) from the respective Deferral Dates to the payment date.
The interest rate(s) to determine such interest shall be the same interest
rate(s) applicable to the relevant periods of time as shall be applicable to
employee contributions under the Company's Benefit Restoration Plan, and if
the Benefit Restoration Plan shall cease to be in effect, then at such
interest rate(s) as shall be established from time to time by the
Compensation Committee of the Board of Directors of the Company. No interest
shall be credited to Deferred Amounts consisting of shares of stock or other
property, as dividends and other distributions, if any, credited to the
Deferred Account with respect to shares of stock or other property shall
constitute the only earnings with respect to such non-cash property.
4. Payment of Amounts Credited to Deferral Amount. The Company shall
distribute to Employee or, if applicable, his estate all amounts previously
credited to his Deferral Account on the first day of the month following the
90th day after the retirement or death of Employee or other termination of
Employee's employment with the Company.
5. Amounts Due Not to be Funded. The Company's liability to pay
deferred compensation pursuant to this Agreement shall constitute an
unfunded, unsecured liability of the Company to make payments in accordance
with the provisions hereof. Neither Employee nor any person claiming under
Employee shall have any security or other interest in any assets of the
Company by virtue of this Agreement. Nothing contained in this Agreement and
no action taken pursuant to the provisions hereof shall create or be
construed to create a trust of any kind.
6. No Assignment. The right of Employee or any other person claiming
under Employee to payments or other benefits under this Agreement may not be
assigned, transferred, pledged, anticipated, commuted or encumbered, nor
shall said benefits or payments be subject to seizure for payment of any
debts or judgment of Employee or any person claiming through or under
Employee or be transferable by operation of law in advance of payment
hereunder.
7. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company, its successor and assigns and Employee and his
heirs, executors, administrators and legal representatives.
8. Not a Contract of Employment. This Agreement shall not be deemed to
constitute a contract of employment between the parties hereto, nor shall any
provision hereof restrict the right of the Company to discharge Employee or
restrict the right of Employee to terminate his employment.
9. Nature of Agreement. The benefits herein provided are in addition
to, and not in lieu of, any other deferred compensation or retirement
arrangement pursuant to which the Company may have made provisions for
Employee, and no such arrangement shall affect or be affected by the
provisions of this Agreement. Nothing contained in this Agreement shall be
construed to alter, abridge or in any manner affect the rights and privileges
of Employee to participate in any pension, thrift, profit sharing, stock
bonus, annuity or similar plan that the Company may now or hereafter
maintain.
10. Modification of Agreement. This Agreement cannot be amended or
modified except by written agreement duly executed by both the Company and
Employee.
11. Termination of Agreement. This Agreement shall automatically
terminate, and no further Deferral Amounts shall thereafter be credited to
Employee's Deferral Account upon the first to occur of (i) the date
Employee's employment with the Company terminates for any reason whatsoever
or (ii) unless otherwise mutually agreed between the Company and Employee,
the first day of the Company's fiscal year next following the date written
notice is delivered by either the Company or Employee to the other, stating
that the party delivering the notice has elected to terminate this Agreement;
provided, however, that any such termination shall in no way affect the
obligation of the Company to pay to Employee the amounts credited to his
Deferral Account in accordance with Paragraph 4 or to credit his Deferral
Account in accordance with paragraph 3.
12. Withholding of Tax. Notwithstanding any provision in this
Agreement to the contrary, the Company is authorized to withhold from any
amounts payable hereunder to Employee any tax required to be withheld by the
federal or any state or local government. For purposes of Paragraph 4
hereof, any amounts so withheld shall be deemed to have been paid to
Employee.
13. Governing Law. This Agreement shall be construed in accordance
with and be governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
PIER 1 SERVICES COMPANY
By: PIER 1 HOLDINGS, INC.,
Managing Trustee
By ____________________
Name:
Title:
EMPLOYEE:
___________________________
<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> 9-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> NOV-29-1997
<CASH> 37,807
<SECURITIES> 0
<RECEIVABLES> 9,335
<ALLOWANCES> 233
<INVENTORY> 249,594
<CURRENT-ASSETS> 370,363
<PP&E> 370,607
<DEPRECIATION> 152,707
<TOTAL-ASSETS> 619,796
<CURRENT-LIABILITIES> 116,438
<BONDS> 115,318
<COMMON> 68,041
0
0
<OTHER-SE> 296,363
<TOTAL-LIABILITY-AND-EQUITY> 619,796
<SALES> 750,099
<TOTAL-REVENUES> 750,099
<CGS> 428,502
<TOTAL-COSTS> 428,502
<OTHER-EXPENSES> 17,336
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,500
<INCOME-PRETAX> 81,553
<INCOME-TAX> 30,077
<INCOME-CONTINUING> 51,476
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 51,476
<EPS-PRIMARY> .75 <F1>
<EPS-DILUTED> .71 <F1>
<FN>
<F1> Shares Outstanding have been adjusted to reflect a 3 for 2 stock split
effected in the form of a stock dividend, distributed July 30, 1997.
Prior financial data schedules have not been restated to reflect the
stock split.
</TABLE>
