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 25, 1995
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 2, 1996
----------------------------- ----------------------------------------
Common Stock, $1.00 par value 39,533,127
Items 1 and 2 of Part I and Item 6 of Part II of the Company's Quarterly
Report on Form 10-Q for the quarter ended November 25, 1995 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 Nine Months Ended
Nov. 25, Nov. 26, Nov. 25, Nov. 26,
1995 1994 1995 1994
-------- -------- -------- --------
(as restated) (as restated)
Net sales $190,185 $165,761 $566,456 $512,650
Operating costs and expenses:
Cost of sales (including
buying and store occupancy) 111,614 99,664 343,989 310,969
Selling, general and
administrative expenses 59,252 51,146 163,046 151,770
Depreciation and amortization 4,270 4,008 12,608 11,788
-------- -------- -------- --------
175,136 154,818 519,643 474,527
-------- -------- -------- --------
Operating income 15,049 10,943 46,813 38,123
Nonoperating expenses:
Interest income (14) (701) (610) (1,425)
Interest expense 3,637 3,453 10,131 10,792
Trading (gains) losses (Note 1) (95) 5,749 16,463 11,445
Provision for Sunbelt Nursery
Group, Inc. defaults (Note 4) -- -- 14,000 --
Write-down of General Host
securities -- 7,543 -- 7,543
-------- -------- -------- --------
3,528 16,044 39,984 28,355
-------- -------- -------- --------
Income (loss) before income
taxes 11,521 (5,101) 6,829 9,768
Provision for income taxes 4,572 425 9,315 6,799
-------- -------- -------- --------
Net income (loss) $ 6,949 $ (5,526) $ (2,486) $ 2,969
======== ======== ======== ========
Net income (loss) per share:
Primary $.18 $(.14) $(.06) $.07
======== ======== ======== ========
Fully diluted $.17 $(.14) $(.06) $.07
======== ======== ======= ========
Average shares outstanding during
period, including common stock
equivalents:
Primary 39,700 39,683 39,721 39,642
======== ======== ======== ========
Fully diluted 45,224 46,247 45,241 46,208
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except share data)
(Unaudited)
November 25, February 25,
1995 1995
------------ ------------
(as restated)
ASSETS
Current assets:
Cash, including temporary investments of
$475 and $42,536, respectively $ 13,488 $ 50,566
Accounts receivable, net 74,490 64,229
Inventories 234,913 200,968
Other current assets 34,269 34,325
-------- --------
Total current assets 357,160 350,088
Properties, net 104,636 105,618
Other assets 36,900 30,219
-------- --------
$498,696 $485,925
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of
long-term debt $ 35,016 $ 2,638
Accounts payable and accrued liabilities 84,080 82,419
-------- --------
Total current liabilities 119,096 85,057
Long-term debt 139,982 154,432
Deferred income taxes 2,537 2,538
Other non-current liabilities 21,095 21,501
Stockholders' equity:
Common stock, $1.00 par, 200,000,000 shares
authorized, 39,877,000 and 37,826,000
issued, respectively 39,877 37,826
Paid-in capital 110,698 93,833
Retained earnings 70,680 94,516
Cumulative currency translation adjustments (1,214) (1,195)
Less - 373,000 and 162,000 common shares in
treasury, at cost, respectively (3,212) (1,477)
Less - subscriptions receivable and unearned
compensation (843) (1,106)
-------- --------
215,986 222,397
-------- --------
$498,696 $485,925
======== ========
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine Months Ended
November 25, November 26,
1995 1994
------------- ------------
(as restated)
Cash flow from operating activities:
Net income (loss) $(2,486) $ 2,969
Adjustments to reconcile to net cash (used in)
provided by operating activities:
Depreciation and amortization 12,608 11,788
Deferred taxes and other 5,912 5,187
Provision for Sunbelt Nursery Group, Inc.
defaults 14,000 --
Write-down of General Host securities -- 7,543
Changes in cash from:
Inventories (33,945) 7,453
Accounts receivable and other current assets (10,236) (15,568)
Accounts payable and accrued expenses (5,848) (5,652)
Store-closing reserve (5,914) (2,144)
Other assets, liabilities and other, net (37) (923)
------- -------
Net cash (used in) provided by
operating activities (25,946) 10,653
------- -------
Cash flow from investing activities:
Capital expenditures (16,417) (14,004)
Proceeds from disposition of properties 255 238
Loan to Sunbelt Nursery Group, Inc. -- (9,600)
Proceeds from Sunbelt Nursery Group, Inc. -- 11,600
Other investments (7,785) (1,593)
------- -------
Net cash used in investing activities (23,947) (13,359)
------- -------
Cash flow from financing activities:
Cash dividends (3,576) (3,009)
Repayments of long-term debt (14,750) (2,500)
Net borrowings under line of credit agreements 31,100 13,000
Proceeds from sales of capital stock, treasury
stock, and other, net 41 615
------- -------
Net cash provided by financing activities 12,815 8,106
------- -------
Change in cash and cash equivalents (37,078) 5,400
Cash and cash equivalents at beginning of period 50,566 17,123
------- -------
Cash and cash equivalents at end of period $13,488 $22,523
======= =======
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 25, 1995
(In thousands)
(Unaudited)
Cumulative Subscriptions
Currency Receivable and Total
Common Paid-in Retained Translation Treasury Unearned Stockholders'
Stock Capital Earnings Adjustments Stock Compensation Equity
------ ------- -------- ----------- -------- -------------- -------------
Balance February 25, 1995 $37,826 $ 93,833 $94,516 $(1,195) $(1,477) $(1,106) $222,397
Purchase of treasury stock (3,606) (3,606)
Restricted stock grant and amortization 7 44 (129) 263 185
Stock Purchase Plan, exercise of stock
options and other 166 560 365 2,000 3,091
Currency translation adjustments (19) (19)
Cash dividends, declared or paid (3,576) (3,576)
Stock dividend (5%) 1,878 16,261 (18,139) 0
Net income (loss) (as restated) (2,486) (2,486)
------- -------- ------- ------- ------- ------- --------
Balance November 25, 1995 (as restated) $39,877 $110,698 $70,680 $(1,214) $(3,212) $ (843) $215,986
======= ======== ======= ======= ======= ======= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
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, and Amendment No. 1 to Form 10-K for the year
ended February 25, 1995. All adjustments that are, in the opinion of
management, necessary for a fair statement of the financial position as of
November 25, 1995, and the results of operations and cash flows for the
interim periods ended November 25, 1995 and November 26, 1994, as restated,
have been made and consist only of normal recurring adjustments except for
the trading losses described in Note 1 and the provision for Sunbelt Nursery
Group, Inc. defaults described in Note 4. The results of operations for the
three and nine months ended November 25, 1995 and November 26, 1994 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
approximately $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 1996 and fiscal 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 1996 to record net trading losses of
$16.0 million for the quarter ended May 27, 1995 and $0.6 million for the
quarter ended August 26, 1995, respectively. The Company recorded a net
trading gain of $0.1 million for the third quarter ended November 25, 1995.
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.
Note 2 - 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 nine months ended November 25, 1995 and the three and nine
months ended November 26, 1994 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. 25, Nov. 26, Nov. 25, Nov. 26,
1995 1994 1995 1994
-------- -------- -------- --------
(as restated) (as restated)
(in thousands except per share amounts)
Net income (loss) $6,949 $(5,526) $(2,486) $2,969
Assumed conversion of 6 7/8%
subordinated notes as of date of
issuance, April 1992:
Plus interest and debt issue
costs, net of tax 681 866 2,043 2,598
------ ------- ------- ------
Fully diluted net income (loss) $7,630 $(4,660) $ (443) $5,567
====== ======= ======= ======
Average shares outstanding during
period, including common stock
equivalents:
Primary 39,700 39,683 39,721 39,642
Plus assumed exercise of stock
options 33 1 29 3
Plus assumed conversion of
6 7/8% subordinated notes
to common stock as of date
of issuance, April 1992 5,491 6,563 5,491 6,563
------ ------- ------- ------
Fully diluted 45,224 46,247 45,241 46,208
====== ======= ======= ======
Net income (loss) per share:
Primary $.18 $(.14) $(.06) $.07
====== ======= ======= ======
Fully diluted $.17 $(.14) $(.06) $.07
====== ======= ======= ======
Note 3 - New credit facility
In December 1995 the Company obtained a three-year $65 million
competitive advance and revolving credit facility. This agreement contains
certain restrictive covenants requiring, among other things, the maintenance
of certain financial ratios (including debt to net worth, debt to net cash
flow, and current ratio), minimum tangible net worth, the limitation of
maximum levels of capital expenditures, and a limitation on certain
investments. The terms of the competitive advance and revolving credit
facility limit the amount of additional borrowings under the facility and
additional borrowings under other short-term facilities to an aggregate
amount approximating $78 million over the amount outstanding at December 30,
1995.
Note 4 - Provision for Sunbelt Nursery Group, Inc. defaults
The Company recorded a pre-tax charge of $14 million in the first
quarter of fiscal 1996, which represented the estimated cost to disengage
from its financial support of Sunbelt Nursery Group, Inc. ("Sunbelt"). This
charge resulted from Sunbelt's default on 13 nursery store subleases from the
Company in April 1995. Sunbelt has also defaulted on three nursery store
leases guaranteed by the Company. The charge reflected the Company's
estimated losses resulting from terminating the subleases with the 13 nursery
stores and from the Company's guarantees of other Sunbelt store 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.
Note 5 - Litigation
On December 27, 1995, a derivative suit, entitled Harry Lewis v. Clark
A. Johnson et al., was filed by a shareholder on behalf of the Company in the
Delaware Chancery Court against each member of the Company's Board of
Directors. The complaint alleges that the Directors violated their fiduciary
duties to the Company and its shareholders by not adequately supervising the
officers, employees and agents of the Company who were responsible for the
trading activities that resulted in the $19.3 million in losses. The suit
seeks an accounting to the Company for the damages it sustained.
On January 3, 1996, a second derivative suit, entitled John P. McCarthy
Profit Sharing Plan, et al. v. Clark A. Johnson et al., was filed by a
shareholder on behalf of the Company in the District Court of Tarrant County,
Texas against each member of the Board of Directors, two executive officers
of the Company and an outside financial consultant of the Company. The
complaint alleges that the Directors and executives of the Company violated
their duties to the Company and its shareholders by gross mismanagement and
waste of the Company's assets exceeding $34 million and that the defendants
engaged in conspiracy and fraud by concealing and misrepresenting facts to
the Company and its shareholders. The suit seeks an award in the amount of
all damages sustained by the Company.
The Company maintains Directors and Officers liability insurance and, as
such, the Company's directors and officers will seek indemnification against
all of these matters. The ultimate outcome of these complaints cannot
presently be determine.
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 $190.2
million and $566.5 million for the third quarter and nine-month periods of
fiscal 1996, increases of 14.7% and 10.5%, respectively, compared to the same
periods of fiscal 1995. The increase in sales for the third quarter and
nine-month periods of fiscal 1996 is primarily attributable to a same-store
sales increase of 8.5% and 4.3%, respectively, over the same period of fiscal
1995 and an 8.1% increase in weighted average store count (which is
calculated based on the number of days a store is open during any given
period) at the end of the third quarter of fiscal 1996 compared to the same
period of fiscal 1995. The average number of customers per store week
increased approximately 7% in the third quarter of fiscal 1996 over the same
period of fiscal 1995 primarily due to the Company's national television
advertising campaign launched during the second quarter of fiscal 1996. The
increases in same-store sales for fiscal 1996 resulted from a continued
improvement in hard goods merchandise sales which include furniture and
decorative accessories, offset partially by slight decreases in soft goods
merchandise sales such as apparel and jewelry. Hard goods and soft goods
sales contributed approximately 92% and 8%, respectively, of total sales for
the nine-month period of fiscal 1996. Sales on the Company's proprietary
credit card were $138.5 million, or 24.5% of total sales, during the first
nine months of fiscal 1996, an increase of $41.4 million, or 42.6%, over the
same period of fiscal 1995. The Company's North American store count
aggregated 665 at the end of the fiscal 1996 third quarter compared to 624 at
the end of the fiscal 1995 third quarter.
Gross profit, after related buying and store occupancy costs,
expressed as a percentage of sales, increased 1.4% to 41.3% for the third
quarter of fiscal 1996 and was even at 39.3% for the nine-month period of
fiscal 1996 versus the same periods in fiscal 1995. The increase in the
fiscal 1996 third quarter is primarily due to a 0.9% improvement in
merchandise margins as a result of a change in the merchandise sales mix and
a decrease in clearance and promotional markdowns partially due to the new
television advertising campaign's increasing customer traffic in the stores.
Store occupancy costs, as a percentage of sales, decreased 0.5% to 15.0% for
the third quarter of fiscal 1996 and increased 0.2% to 15.0% for the nine-
month period of fiscal 1996 compared to the same periods of fiscal 1995. The
third quarter improvement is primarily due to higher sales leveraging fixed
rental rates partially offset by slightly higher occupancy rates on 50 new
stores opened in the first nine months of fiscal 1996 and incremental
increases in floating rate lease payments linked to LIBOR for approximately
55 store operating leases.
Selling, general and administrative expenses, including marketing,
expressed as a percentage of sales, increased 0.3% to 31.2% in the third
quarter of fiscal 1996 and decreased 0.8% to 28.8% for the first nine months
of fiscal 1996 versus the same periods of fiscal 1995. In total dollars,
expenses increased by $8.1 million during the third quarter of fiscal 1996
and by $11.3 million during the first nine months of fiscal 1996 versus the
comparable periods of fiscal 1995. The increase in expenses for the third
quarter of fiscal 1996 is primarily attributable to a $2.9 million increase
in payroll, which decreased 1.1% as a percentage of sales, and a $1.9 million
increase in marketing expenditures as a result of the timing of the national
television advertising campaign expenses, which shifted expenditures from
earlier in the 1996 fiscal year to the second and third quarters of fiscal
1996. Expenses related to international ventures in the third quarter of
fiscal 1996 increased approximately $2.3 million compared to the same quarter
of fiscal 1995. Other increases in selling, general and administrative
expenses of $1.0 million during the third quarter of fiscal 1996 were a
result of changes in the timing of store physical inventories and increases
in other expenses that normally increase with sales. The increase in
selling, general and administrative expenses for the nine-month period of
fiscal 1996 is primarily due to a $5.4 million increase in payroll, which
decreased 0.9% as a percentage of sales, and a $2.8 million increase in
operating expenses (including supplies and store services) which normally
increase proportionately with sales. In addition, net proprietary credit
card costs increased $0.7 million due to higher processing costs related to
the increase in proprietary credit card sales; however, these processing
costs, as a percentage of proprietary credit card sales, decreased to 3.8%
for the first nine months of fiscal 1996 compared to 5.0% for the same period
of fiscal 1995. All other selling, general and administrative expenses
increased $2.4 million, primarily as a result of increased expenses related
to international ventures.
Net interest expense increased $0.9 million during the third quarter
and declined $0.2 million during the first nine months of fiscal 1996 versus
the same periods in fiscal 1995. The increase in the third quarter of fiscal
1996 is primarily due to higher net debt levels.
In late December 1995, the Company was made aware of losses of
approximately $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 1996 and fiscal 1995 totaled $16.5 million and $2.8
million, respectively. See Note 2 to the Company's 1995 fiscal year
financial statements in Amendment No. 1 to the Company's Form 10-K for the
fiscal year ended February 25, 1995 for additional information regarding the
losses.
In July 1995, the Company entered into a settlement agreement with
Sunbelt Nursery Group, Inc. ("Sunbelt") concerning Sunbelt's default in April
1995 on 13 nursery store subleases and three nursery store leases guaranteed
by the Company. The Company recorded a pre-tax charge of $14 million in the
first quarter of fiscal 1996, 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 stores and from the Company's guarantees of
other Sunbelt store leases.
The Company's income tax provisions for the first three quarters of
fiscal 1995 and fiscal 1996 do not reflect any tax benefit associated with
the investment losses described above. The Company's effective income tax
rate, excluding the effect of the tax treatment of the aforementioned net
trading losses, is estimated to be 40% compared to 31% for fiscal 1995. The
increase is primarily due to the benefit of tax-favored foreign income last
fiscal year and the tax benefit from the sale of Sunbelt common stock
recognized in fiscal 1995.
Operating income increased $4.1 million to $15.0 million during the
third quarter of fiscal 1996 and increased $8.7 million to $46.8 million for
the first nine months of fiscal 1996 versus the comparable periods of fiscal
1995 due to higher sales, improved margins and other cost efficiencies. Net
income aggregated $6.9 million or $0.18 per share (primary) for the third
quarter of fiscal 1996 compared to a net loss of $5.5 million or $0.14 per
share (primary) for the same period of fiscal 1995. Net losses aggregated
$2.5 million or $0.06 per share (primary) for the first nine months of fiscal
1996 compared to net income of $3.0 million or $0.07 per share (primary) for
the same period of fiscal 1995.
Liquidity and Capital Resources
Cash, including temporary investments, aggregated $13.5 million at the
end of the fiscal 1996 third quarter compared to $50.6 million at fiscal 1995
year-end. The Company's current ratio at the end of the fiscal 1996 third
quarter was 3.0 to 1 compared to 4.1 to 1 at fiscal 1995 year-end and 3.6 to
1 at the end of the fiscal 1995 third quarter. Total debt as a percentage of
total capitalization was 44.9% at the end of the fiscal 1996 third quarter,
compared to 41.4% at fiscal 1995 year-end and 43.6% at the end of the fiscal
1995 third quarter. The decrease in cash, including temporary investments,
and the change in ratios resulted primarily from inventory additions in
preparation for the upcoming Christmas selling season coupled with the cash
trading losses recognized during the preceding quarters of fiscal 1996 as
discussed in Note 2. At December 30, 1995, cash, including temporary
investments, aggregated approximately $42 million and is invested in A1P1 or
AAA-rated instruments.
Net cash used in operating activities for the nine-month period of
fiscal 1996 was $25.9 million as compared to cash provided by operations of
$10.7 million in the same period the prior year. The $36.6 million increase
in cash used between periods was primarily a result of trading losses and
timing of inventory purchases. The Company ended fiscal 1994 with a
relatively high inventory of $219.6 million. By the end of November 1994, in
spite of seasonal purchases, the inventory had declined, generating cash of
$7.5 million. From February of 1995 to November of 1995, inventories
increased from $201.0 million to $234.9 million as a result of seasonal
purchases, using cash of $33.9 million. The inventory build-up was in
preparation for expected Christmas sales; the strong Christmas selling season
reduced inventories by approximately $21 million during December 1995.
Net cash used in investing activities aggregated $23.9 million during
the nine-month period of fiscal 1996 compared to $13.4 million in the
corresponding period the prior year. Capital expenditures aggregated $16.4
million, an increase of $2.4 million over the corresponding prior year
period, partially as a result of increased store remodels. Advances to The
Pier Retail Group Limited were $7.8 million, an increase of $6.2 million over
the corresponding prior fiscal period, due to store expansion in the United
Kingdom and higher working capital requirements.
Net cash provided by financing activities amounted to $12.8 million
during the nine-month period of fiscal 1996 compared to $8.1 million in the
corresponding period the prior year as net short-term borrowings increased by
$18.1 million and long-term debt retirements increased by $12.3 million.
At the end of the fiscal 1996 third quarter, $31.1 million was
outstanding in the form of short-term borrowings under lines of credit, and
an additional $59.5 million was committed under letters of credit. In
December 1995, the Company repaid these borrowings, allowed the related
short-term bank facilities to expire and replaced them in part with a $65
million competitive advance and revolving credit facility. As a result of
recognizing the $16.5 million trading losses during fiscal 1996, the Company
requested and received agreement of its lenders to exclude the losses from
calculation of certain restrictive covenants during the current year to date.
Management believes that the Company is in compliance with the provisions of
all loan agreements and lease guarantees.
Working capital requirements are provided by a newly obtained
(December 1995) three-year $65 million competitive advance and revolving
credit facility as well as other short-term (12-month) bank facilities
aggregating $120 million. These agreements contain various restrictive
covenants requiring, among other things, the maintenance of certain financial
ratios (including debt to net worth, debt to net cash flow, and current
ratio), minimum tangible net worth, the limitation of maximum levels of
capital expenditures, and a limitation on certain investments. In December
1995, the Company purchased the 90% ownership interest in a limited
partnership previously held by unrelated third parties and in which the
Company held a 10% ownership interest. The partnership leases 33 Pier 1
stores to the Company. The aggregate purchase price paid by the Company for
the 90% ownership interest was approximately $40 million and was funded
through the competitive advance and revolving credit facility. The $40
million advanced under that credit facility is classified as long-term debt
due to its three-year term. The terms of the competitive advance and
revolving credit facility currently limit the amount of additional borrowings
under the facility and additional borrowings under the other short-term
facilities to an aggregate amount which at December 30, 1995, approximates
$78 million. In the opinion of management, the short-term bank facilities
will be timely renewed under substantially the same amount, terms and
conditions presently existing.
It is expected that these facilities and the Company's current cash
position will be sufficient to provide adequate liquidity to fund the
Company's expected operating needs, planned capital expenditures and
scheduled debt requirements for the remainder of fiscal 1996 and fiscal 1997.
In addition to its bank facilities, the Company had approximately $73
million at November 25, 1995 in unencumbered credit card receivables.
The Company's minimum operating lease commitments remaining for fiscal
1996 are $25 million, and the present value of total existing minimum
operating lease commitments is $364 million. Final cash requirements to fund
the store-closing program instituted in fiscal 1994 are expected to be lease
termination costs of approximately $5.9 million for the remainder of fiscal
1996 and will be funded through working capital and operations. During the
first nine months of fiscal 1996, approximately $5.9 million was expended and
charged against the store closing reserve for lease termination costs.
Cash requirements to fund the Company's previously established reserve
relating to the defaults by Sunbelt on subleases of stores leased by the
Company are being funded through working capital and operations and will not
have a significant impact on the Company's liquidity. As of the end of the
1996 fiscal third quarter, approximately $0.2 million had been expended and
charged against the reserve.
The Company previously announced that, depending upon market
conditions, it may utilize a portion of its surplus cash to purchase up to
$25 million of the Company's 6 7/8% convertible notes. During the nine
months of fiscal 1996, the Company purchased $12.3 million of these notes,
leaving $62.7 million of the Company's convertible notes outstanding at the
end of the 1996 third fiscal quarter. In addition, in October 1995, the
Company announced that its Board of Directors authorized the purchase of up
to three million shares of the Company's common stock in open market or
private transactions from time to time depending on prevailing market
conditions. To date, no significant number of shares has been repurchased.
During the nine months of fiscal 1996, the Company paid cash dividends
aggregating $.09 per share, distributed a 5% stock dividend and declared a
cash dividend of $.04 per share payable on February 26, 1996 to shareholders
of record on February 12, 1996. The Company currently expects to continue to
pay cash dividends in the next fiscal year, but intends to retain most of its
future earnings for expansion of the Company's business.
PART II
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Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits See Exhibit Index.
(b) Reports on Form 8-K None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by
the undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC. (Registrant)
Date: May 17, 1996 By: /s/ Clark A. Johnson
------------ ----------------------------------------
Clark A. Johnson, Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
Date: May 17, 1996 /s/ Susan E. Barley
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Susan E. Barley, Vice President and
Controller
(Principal Accounting Officer)
EXHIBIT INDEX
Exhibit
No. Description
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10.1 Revolving Credit Agreement, dated December 15, 1995, among the
Company, certain of its subsidiaries, First Interstate Bank of
Texas, N.A., Bank One, Texas, N.A., NationsBank of Texas, N.A.,
and Credit Lyonnais New York Branch, previously filed January
16, 1996.
10.12.1 Fourth Amendment to Lease Guarantee dated as of November 1, 1995
between the Company, Pier 1 Licensing, Inc., Pier 1 Assets,
Inc., and Pier Set, Inc., previously filed January 16, 1996.
27 Financial Data Schedule for Nine-month Period Ended November 25,
1995, as restated.