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 December 1, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-7832
PIER 1 IMPORTS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 75-1729843
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
301 Commerce Street, Suite 600, Fort Worth, Texas 76102
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(Address of principal executive offices, including zip code)
(817) 252-8000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 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, 2002
----------------------------- ----------------------------------------
Common Stock, $1.00 par value 93,397,446
PART I
Item 1. Financial Statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<Table>
<Caption>
Three Months Ended Nine Months Ended
Dec. 1, Nov. 25, Dec. 1, Nov. 25,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net sales $ 387,360 $ 343,493 $ 1,069,995 $ 981,012
Operating costs and expenses:
Cost of sales (including buying and store
occupancy) 221,952 196,333 632,134 571,590
Selling, general and administrative expenses 115,043 98,228 324,674 284,315
Depreciation and amortization 10,695 10,653 31,782 31,503
------------ ------------ ------------ ------------
347,690 305,214 988,590 887,408
------------ ------------ ------------ ------------
Operating income 39,670 38,279 81,405 93,604
Nonoperating (income) and expenses:
Interest and investment income (659) (226) (1,485) (1,061)
Interest expense 571 1,097 1,627 2,347
------------ ------------ ------------ ------------
(88) 871 142 1,286
------------ ------------ ------------ ------------
Income before income taxes 39,758 37,408 81,263 92,318
Provision for income taxes 14,712 13,839 30,070 34,157
------------ ------------ ------------ ------------
Net income $ 25,046 $ 23,569 $ 51,193 $ 58,161
============ ============ ============ ============
Earnings per share:
Basic $ .27 $ .25 $ .54 $ .60
============ ============ ============ ============
Diluted $ .26 $ .24 $ .53 $ .59
============ ============ ============ ============
Dividends declared per share: $ .04 $ .04 $ .12 $ .11
============ ============ ============ ============
Average shares outstanding during period:
Basic 93,421 95,977 94,774 96,461
============ ============ ============ ============
Diluted 94,976 97,560 96,218 98,250
============ ============ ============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amounts)
<Table>
<Caption>
December 1, March 3, November 25,
2001 2001 2000
------------ ------------ ------------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash, including temporary investments of $98,992,
$31,142 and $2,952, respectively $ 124,978 $ 46,841 $ 19,452
Beneficial interest in securitized receivables 48,606 75,403 74,262
Other accounts receivable, net 8,594 8,370 8,058
Inventories 302,781 310,704 340,523
Prepaid expenses and other current assets 34,122 35,748 37,030
------------ ------------ ------------
Total current assets 519,081 477,066 479,325
Properties, net 213,736 212,066 212,081
Other assets 48,886 46,578 37,803
------------ ------------ ------------
$ 781,703 $ 735,710 $ 729,209
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 356 $ -- $ --
Accounts payable and accrued liabilities 172,670 144,110 147,061
------------ ------------ ------------
Total current liabilities 173,026 144,110 147,061
Long-term debt 25,356 25,000 55,000
Other noncurrent liabilities 41,563 34,721 31,159
Shareholders' equity:
Common stock, $1.00 par, 500,000,000 shares
authorized, 100,779,000 issued 100,779 100,779 100,779
Paid-in capital 139,362 139,424 140,075
Retained earnings 384,614 344,809 312,187
Cumulative other comprehensive income (4,077) (3,115) (4,387)
Less -- 7,577,000, 4,619,000 and 4,861,000
common shares in treasury, at cost, respectively (78,912) (49,933) (52,543)
Less -- unearned compensation (8) (85) (122)
------------ ------------ ------------
541,758 531,879 495,989
------------ ------------ ------------
$ 781,703 $ 735,710 $ 729,209
============ ============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<Table>
<Caption>
Nine Months Ended
December 1, November 25,
2001 2000
------------ ------------
Cash flow from operating activities:
Net income $ 51,193 $ 58,161
Adjustments to reconcile to net cash provided by
operating activities:
Depreciation and amortization 31,782 31,503
Loss on fixed assets 2,337 5,753
Deferred compensation 3,529 2,064
Other (1,212) (2,552)
Changes in cash from:
Inventories 7,456 (71,617)
Other accounts receivable and other current assets 1,280 (4,623)
Accounts payable and accrued expenses 30,818 13,181
Other assets (2,823) (444)
Other liabilities 2,276 (390)
------------ ------------
Net cash provided by operating activities 126,636 31,036
------------ ------------
Cash flow from investing activities:
Capital expenditures (47,209) (31,159)
Proceeds from disposition of properties 12,482 294
Beneficial interest in securitized receivables 26,797 (20,442)
------------ ------------
Net cash used in investing activities (7,930) (51,307)
------------ ------------
Cash flow from financing activities:
Cash dividends (11,388) (10,652)
Purchases of treasury stock (34,639) (34,028)
Proceeds from stock options exercised
and stock purchase plan 4,746 4,042
Current notes payable 356 --
Repayments of long-term debt -- (40,015)
Borrowings under long-term debt 356 70,000
------------ ------------
Net cash used in financing activities (40,569) (10,653)
------------ ------------
Change in cash and cash equivalents 78,137 (30,924)
Cash and cash equivalents at beginning of period 46,841 50,376
------------ ------------
Cash and cash equivalents at end of period $ 124,978 $ 19,452
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 1, 2001
(in thousands except per share amounts)
(unaudited)
<Table>
<Caption>
Cumulative
Common Stock Other
----------------------------- Paid-in Retained Comprehensive
Shares Amount Capital Earnings Income
------------ ------------ ------------ ------------ -------------
Balance March 3, 2001 96,141 $ 100,779 $ 139,424 $ 344,809 $ (3,115)
Comprehensive income:
Net income -- -- -- 51,193 --
Other comprehensive income,
net of tax:
Currency translation
adjustments -- -- -- -- (962)
Comprehensive income
Purchases of treasury shares (3,485) -- -- -- --
Restricted stock amortization -- -- -- -- --
Exercise of stock options, stock
purchase plan and other 528 -- (62) -- --
Cash dividends, declared or paid
($.12 per share) -- -- -- (11,388) --
------------ ------------ ------------ ------------ ------------
Balance December 1, 2001 93,184 $ 100,779 $ 139,362 $ 384,614 $ (4,077)
============ ============ ============ ============ ============
<Caption>
Total
Treasury Unearned Shareholders'
Stock Compensation Equity
------------ ------------ -------------
Balance March 3, 2001 $ (49,933) $ (85) $ 531,879
Comprehensive income:
Net income -- -- 51,193
Other comprehensive income,
net of tax:
Currency translation
adjustments -- -- (962)
------------
Comprehensive income 50,231
------------
Purchases of treasury shares (34,639) -- (34,639)
Restricted stock amortization -- 77 77
Exercise of stock options, stock
purchase plan and other 5,660 -- 5,598
Cash dividends, declared or paid
($.12 per share) -- -- (11,388)
------------ ------------ ------------
Balance December 1, 2001 $ (78,912) $ (8) $ 541,758
============ ============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 1, 2001
AND NOVEMBER 25, 2000
(unaudited)
The accompanying unaudited financial statements should be read in conjunction
with the Form 10-K for the year ended March 3, 2001. All adjustments that are,
in the opinion of management, necessary for a fair statement of the financial
position as of December 1, 2001, and the results of operations and cash flows
for the three and nine months ended December 1, 2001 and November 25, 2000 have
been made and consist only of normal recurring adjustments. The results of
operations for the three and nine months ended December 1, 2001 and November 25,
2000 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 cash
flows for the nine months ended November 25, 2000 and in the consolidated
balance sheets for March 3, 2001 and November 25, 2000 have been modified to
conform to the December 1, 2001 method of presentation.
NOTE 1 - EARNINGS PER SHARE
Basic earnings per share amounts were determined by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share amounts were similarly computed, but included the effect,
when dilutive, of the Company's weighted average number of stock options
outstanding and the average number of common shares that would be issuable upon
conversion of the Company's convertible securities.
The following earnings per share calculations reflect the effect of the
Company's conversion of its 5 3/4% convertible subordinated notes, which were
primarily converted, without interest, on or before March 23, 2000.
See Note 3 of the Notes to Consolidated Financial Statements. Earnings per share
for the three and nine months ended December 1, 2001 and November 25, 2000 were
calculated as follows (in thousands except per share amounts):
<Table>
<Caption>
Three Months Ended Nine Months Ended
Dec. 1, Nov. 25, Dec. 1, Nov. 25,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net income (Basic and Diluted) $ 25,046 $ 23,569 $ 51,193 $ 58,161
========== ========== ========== ==========
Average shares outstanding during period:
Basic 93,421 95,977 94,774 96,461
Plus assumed exercise of stock options 1,555 1,583 1,444 1,353
Plus assumed conversion of 5 3/4%
subordinated notes to common stock -- -- -- 436
---------- ---------- ---------- ----------
Diluted 94,976 97,560 96,218 98,250
========== ========== ========== ==========
Earnings per share:
Basic $ .27 $ .25 $ .54 $ .60
========== ========== ========== ==========
Diluted $ .26 $ .24 $ .53 $ .59
========== ========== ========== ==========
</Table>
NOTE 2 - COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for the three and
nine months ended December 1, 2001 and November 25, 2000 are as follows (in
thousands):
<Table>
<Caption>
Three Months Ended Nine Months Ended
Dec. 1, Nov. 25, Dec. 1, Nov. 25,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net income $ 25,046 $ 23,569 $ 51,193 $ 58,161
Currency translation adjustments (560) (2,170) (962) (2,851)
---------- ---------- ---------- ----------
Comprehensive income $ 24,486 $ 21,399 $ 50,231 $ 55,310
========== ========== ========== ==========
</Table>
NOTE 3 - SUPPLEMENTAL CASH FLOW INFORMATION
During the first quarter ended May 27, 2000 of fiscal 2001, the Company issued
4,764,450 shares of common stock upon the conversion of $39,164,000 principal
amount of 5 3/4% convertible subordinated notes.
NOTE 4 - PROPRIETARY CREDIT CARD SECURITIZATION
During the third quarter of fiscal 2002, the Company completed a new credit card
securitization transaction through its non-consolidated subsidiary, Pier 1
Imports Credit Card Master Trust (the "Master Trust"). The Master Trust arranged
a private placement of $100 million in trust certificates, which bear interest
at a floating rate of approximately one month LIBOR plus 35 basis points. As of
the end of the Company's fiscal third quarter, this rate was 2.5%. In
conjunction with this transaction, the Master Trust retired $50 million in
previously issued certificates, which bore interest at a fixed rate of 6.74% and
matured in May 2002. After the retirement of these certificates, the new
transaction provided the Company with net proceeds of approximately $49 million.
NOTE 5 - IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In the first quarter of fiscal 2002, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which was amended by SFAS No. 137 and SFAS No. 138.
This statement establishes accounting and reporting guidelines for derivatives
and requires the Company to record all derivatives as assets or liabilities on
the balance sheet at fair value. The Company's use of derivatives is primarily
limited to forward foreign exchange contracts, which the Company uses to
mitigate exposures to changes in foreign currency exchange rates. Upon adoption
of SFAS No. 133, the Company did not designate such derivatives as hedging
instruments; thus, the changes in the fair value of the derivatives will be
included in the consolidated statement of operations. Prior to adoption, the
Company deferred all gains and losses on its derivative contracts and recognized
such gains and losses as an adjustment to the transaction price. The adoption of
SFAS No. 133 has not had a material impact on the Company's consolidated balance
sheets or its statements of operations, shareholders' equity and cash flows.
The Company adopted SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities" in the first quarter of
fiscal 2002. This statement established new conditions for a securitization to
be accounted for as a sale of receivables, changed the requirements for an
entity to be a qualifying special-purpose entity and modified the conditions for
determining whether a
transferor has retained effective control over transferred assets. SFAS No. 140
also requires additional disclosures related to securitized financial assets and
retained interests in securitized financial assets, which the Company reported
in its fiscal 2001 Annual Report. The Company has made the necessary amendments
to its securitization agreements and continues to receive sale treatment for its
securitized proprietary credit card receivables. The implementation of SFAS No.
140 did not have a material impact on the Company's consolidated balance sheets
or its statements of operations, shareholders' equity and cash flows.
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations," which supersedes Accounting Principles Board
("APB") Opinion No. 16, "Business Combinations," and SFAS No. 38, "Accounting
for Preacquisition Contingencies of Purchased Enterprises." Statement No. 141
eliminates the pooling-of-interests method of accounting for business
combinations and requires all such transactions to be accounted for under the
purchase method and also addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business combination. This
statement is effective for all business combinations initiated after June 30,
2001. The Company has analyzed the implementation requirements and does not
anticipate that the adoption of SFAS No. 141 will have a material impact on the
Company's consolidated balance sheets or its statements of operations,
shareholders' equity and cash flows.
In June 2001, the FASB also issued SFAS No. 142, "Goodwill and Other Intangible
Assets," which supersedes APB Opinion No. 17, "Intangible Assets." This
statement addresses the initial recognition and measurement of intangible assets
acquired outside of a business combination and the accounting for goodwill and
other intangible assets subsequent to their acquisition. SFAS No. 142 also
provides that intangible assets with finite useful lives be amortized and that
goodwill and intangible assets with indefinite lives will not be amortized, but
will rather be tested on an annual basis for impairment. The Company is required
to adopt SFAS No. 142 for its fiscal year beginning March 3, 2002. The Company
is analyzing the implementation requirements and does not anticipate that the
adoption of SFAS No. 142 will have a material impact on the Company's
consolidated balance sheets or its statements of operations, shareholders'
equity and cash flows.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," which replaces SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
Statement No. 144 retains the fundamental provisions of SFAS No. 121 with
additional guidance on estimating cash flows when performing a recoverability
test, requires that a long-lived asset to be disposed of other than by sale be
classified as "held and used" until it is disposed of and establishes more
restrictive criteria to classify an asset as "held for sale." SFAS NO. 144 also
supersedes APB Opinion No. 30, "Reporting the Results of Operations-Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions" regarding the disposal of a
segment of a business and would extend the reporting of a discontinued operation
to a "component of an entity" and requires the operating losses thereon to be
recognized in the period in which they occur. The Company is required to adopt
SFAS No. 144 for its fiscal year beginning March 3, 2002. The Company is
currently analyzing the implementation requirements and does not anticipate that
the adoption of SFAS No. 144 will have a material impact on the Company's
consolidated balance sheets or its statements of operations, shareholders'
equity and cash flows.
PART I
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
GENERAL
Pier 1 Imports, Inc. (the "Company") is one of North America's largest specialty
retailers of unique decorative home furnishings, gifts and related items for the
home. The Company through certain subsidiaries operates stores in the United
States and Canada under the names "Pier 1 Imports" and "Cargo." In the United
Kingdom, retail locations operate under the name "The Pier." The Company has
over 900 retail locations in 48 states, Canada, Puerto Rico, the United Kingdom,
Mexico and Japan with merchandise directly imported from over 50 countries
around the world.
RESULTS OF OPERATIONS
Net sales for the third quarter of fiscal 2002 ended December 1, 2001 were
$387.4 million, up 12.8% from last year's net sales of $343.5 million.
Year-to-date sales grew 9.1% to $1,070.0 million from $981.0 million a year ago.
Increased traffic and transaction counts, as a result of the Company's
value-oriented merchandising efforts and national television campaign,
contributed to these sales increases. Also contributing to the sales increases
was the net increase of 80 North American Pier 1 stores at the end of the third
quarter of fiscal 2002 compared to the end of the same period last fiscal year.
During the quarter, the Company continued to execute its expansion plan in North
America by opening 56 stores and closing three locations. The North American
Pier 1 store count totaled 899 at the end of the third quarter compared to 819
stores a year ago. Including Cargo and all other worldwide locations, the
Company's store count totaled 966 at the end of the third quarter of fiscal
2002. Same-store sales for the quarter grew 5.1% and year-to-date same-store
sales were up 2.4% over last year.
Net sales on the Company's proprietary credit card totaled $307.9 million for
the first nine months of fiscal 2002, an increase of $30.0 million, or 10.8%,
over proprietary credit card sales of $277.9 million for the same period of
fiscal 2001. Year-to-date proprietary credit card sales accounted for 31.2% of
total U.S. store sales, an increase from the 30.6% of sales from the year
earlier period. The Company continues to increase sales on its proprietary
credit card by opening new accounts and developing customer loyalty through
marketing promotions specifically targeted to cardholders.
Gross profit, after related buying and store occupancy costs, expressed as a
percentage of sales, declined 10 basis points to 42.7% for the third quarter of
fiscal 2002 and declined 80 basis points to 40.9% for the first nine months of
fiscal 2002. Unlike the first half of fiscal 2002, the Company experienced a
good blend of regular-priced merchandise sales along with promotional sales
during the third quarter. As a percentage of sales, merchandise margins were
down nearly 20 basis points for the quarter and down 50 basis points for the
year-to-date period. Additionally, store occupancy costs, as a percentage of
sales were relatively flat for the quarter at 12.5% of sales for the quarter and
increased 30 basis points to 13.2% of sales year-to-date as a result of lower
than expected sales in the first half of the year.
As a percentage of sales and compared to the same period last year, selling,
general and administrative expenses, including marketing, increased 110 basis
points to 29.7% of sales for the third quarter and increased 130 basis points to
30.3% of sales for the year-to-date period. Expenses that normally grow
proportionately with sales and number of stores, such as store payroll,
marketing, store supplies and equipment rental, were well controlled and
declined as a percentage of sales for the quarter and year-to-date periods.
During the quarter, the Company released new holiday commercials featuring
spokesperson, Kirstie Alley. As a result, marketing expenditures were 4.6% of
sales for the quarter and 5.3% of year-to-date sales. Timing of marketing
expenditures varies slightly between fiscal quarters; however, the Company
expects these expenses to be aligned with last year at approximately 4.5% of
sales for the fiscal year ending March 2, 2002. All other selling, general and
administrative expenses increased 130 basis points to 9.3% of sales for the
quarter and increased 140 basis points to 9.4% of sales for the year-to-date
period. These increases during the third quarter were largely the result of
increases in non-store payroll and general insurance, the impact of Cargo's
expenditures this year with no corresponding expense last year and the effect of
negative leveraging of relatively fixed expenses on same-store sales gains of
5.1% this year compared to 10.6% last year. The increase in non-store payroll
resulted from increased corporate bonus accruals based on higher earnings during
the third quarter, higher medical and benefit costs throughout fiscal 2002 along
with an enhancement to the field management structure in the first quarter of
fiscal 2002 to provide for future growth.
Operating income increased 3.6% to $39.7 million for the third quarter of fiscal
2002 from $38.3 million for the third quarter of fiscal 2001. For the first nine
months of fiscal 2002, operating income decreased 13.0% to $81.4 million
year-to-date from $93.6 million a year ago.
The Company's effective income tax rate for fiscal 2002 is estimated at 37%,
consistent with fiscal 2001.
Net income for the third quarter of fiscal 2002 was $25.0 million, or $.26 per
diluted share, compared to net income of $23.6 million, or $.24 per share, for
the third quarter of fiscal 2001. Net income year-to-date was $51.2 million, or
$.53 per diluted share, compared to net income of $58.2 million, or $.59 per
share, for the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the third quarter of fiscal 2002 with $125.0 million of cash
compared to $19.5 million a year ago. Total cash generated from operations was
$126.6 million compared to $31.0 million a year ago. Net income, adjusted for
non-cash and non-operating related items, was $87.6 million and served as the
Company's primary source of operating cash for the nine months ended December 1,
2001. The Company's year-to-date reduction in inventory levels provided cash of
$7.5 million compared to the prior year's use of cash for inventory increases of
$71.6 million. The Company's ability to better manage inventory resulted in
overall lower inventories this year compared to last year with only a slight
decline in average inventory per store. The Company believes its current
inventory levels are well positioned and the January clearance event is expected
to move remaining seasonal products allowing the Company to prepare for new
spring merchandise. Increases in accounts payable and accrued expenses provided
cash of $30.8 million year-to-date. These increases are primarily attributable
to increases in the Company's gift certificates outstanding and increases in
federal and state income taxes payable resulting from the timing of tax
payments.
During the first nine months of fiscal 2002, the Company spent a net of $7.9
million in investing activities. Capital expenditures were $47.2 million, a
majority of which was used for new and existing store development and
investments in the Company's information systems. As of December 1, 2001, the
Company's beneficial interest in securitized receivables decreased $26.8
million. During the third quarter of fiscal 2002, the Company completed a new
credit card securitization transaction through its non-consolidated subsidiary,
Pier 1 Imports Credit Card Master Trust (the "Master Trust"). The Master Trust
arranged a private placement of $100 million in trust certificates, which bear
interest at a floating rate of approximately one month LIBOR plus 35 basis
points. As of the end of the Company's fiscal third quarter, this rate was 2.5%.
In conjunction with this transaction, the Master Trust retired $50 million in
previously issued certificates, which bore interest at a fixed rate of 6.74% and
matured in May 2002. After the retirement of these certificates, the new
transaction provided the Company with net proceeds of approximately $49 million.
The securitization of the additional $50 million of Preferred Card receivables
contributed to this decrease in beneficial interest in securitized receivables
but was partially offset by
increases in the receivables due to increased sales on the Company's proprietary
credit card. In addition, the Company has continued to experience comparable
payment rates to last year on its proprietary credit card receivables. Proceeds
from disposition of properties totaled $12.5 million, which included $8.4
million in proceeds from sale-leaseback transactions.
Financing activities for the first nine months of fiscal 2002 used a net $40.6
million of the Company's cash resources. Year-to-date, the Company repurchased
3,485,000 shares of its common stock for $34.6 million. As of the end of the
third quarter of fiscal 2002, 3.3 million shares remained authorized to be
repurchased under the Company's stock repurchase plan. Year-to-date dividend
payments totaled $11.4 million and other financing activities, primarily the
exercise of stock options, provided cash of $4.7 million.
At the end of the third quarter, the Company's minimum operating lease
commitments remaining for fiscal 2002 were $38.4 million. The present value of
total existing minimum operating lease commitments discounted at 10% was $661.8
million at fiscal 2002 third quarter-end. The Company expects to continue to
fund all operating lease commitments from operating cash flow.
Working capital requirements are expected to continue to be funded through cash
flow from operations, bank lines of credit and sales of proprietary credit card
receivables. The Company's bank facilities consist of a $125 million revolving
credit facility, which expires November 2003, all of which was available at the
end of the third quarter of fiscal 2002. Additionally, the Company has other
long-term and short-term bank facilities used principally for the issuance of
letters of credit totaling $148.7 million, of which $63.8 million was available
at December 1, 2001. The Company's current ratio was 3.0 to 1 at the end of the
third quarter of fiscal 2002 compared to 3.3 to 1 at the end of fiscal year
2001.
During fiscal year 2003, the Company expects to open approximately 110 to 120
new Pier 1 stores and 8 to 12 new Cargo locations. During this time, the Company
also plans to close approximately 25 to 30 store locations as their leases
expire or otherwise end. The new store buildings and land will be financed
primarily through operating leases. Additionally, the Company intends to remodel
approximately 12 stores during fiscal 2003. The Company also plans to relocate
and enlarge its Savannah, Georgia distribution center and to dispose of the
existing facility, which will require a net of $13 million in capital funds. The
Company projects total capital expenditures for fiscal 2003 to be approximately
$75 million.
In December 2001, the Company declared a cash dividend of $.04 per share payable
on February 20, 2002 to shareholders of record on February 6, 2002. The Company
currently expects to continue to pay cash dividends but to retain most of its
future earnings for expansion of the Company's business.
The Company believes the funds provided from operations, available lines of
credit and sales of the Company's proprietary credit card receivables will be
sufficient to meet the Company's expected cash requirements for the next fiscal
year.
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this quarterly report, except for historical
information contained herein, may constitute "forward-looking statements" that
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those described in the forward-looking statements. The
Company may also make forward-looking statements in other reports filed with the
Securities and Exchange Commission and in material delivered to the Company's
shareholders. Forward-looking statements provide current expectations of future
events based on certain assumptions. These statements encompass information that
does not directly relate to any historical or current fact and often may be
identified with words such as "anticipates," "believes," "expects," "estimates,"
"intends," "plans," "projects" and other similar expressions. Management's
expectations and assumptions regarding
planned store openings, financing of Company obligations from operations and
other future results are subject to risks, uncertainties and other factors that
could cause actual results to differ materially from the anticipated results or
other expectations expressed in the forward-looking statements. Risks and
uncertainties that may affect Company operations and performance include, among
others, the effects of terrorist attacks or other acts of war, weather
conditions that may affect sales, the general strength of the economy and levels
of consumer spending, the availability of new sites for expansion along with
sufficient labor to facilitate growth, the strength of new home construction and
sales of existing homes, the ability of the Company to import merchandise from
foreign countries without significantly restrictive tariffs, duties or quotas
and the ability of the Company to ship items from foreign countries at
reasonable rates in timely fashion. The foregoing risks and uncertainties are in
addition to others discussed elsewhere in this quarterly report. The Company
assumes no obligation to update or otherwise revise its forward-looking
statements even if experience or future changes make it clear that any projected
results expressed or implied will not be realized. Additional information
concerning these risks and uncertainties is contained in the Company's Annual
Report on Form 10-K for the year ended March 3, 2001, as filed with the
Securities and Exchange Commission.
IMPACT OF INFLATION
Inflation has not had a significant impact on the operations of the Company.
PART II
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits None.
(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 report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC. (Registrant)
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Date: January 3, 2002 By: /s/ Marvin J. Girouard
-------------------- ---------------------------------------------------
Marvin J. Girouard, Chairman of the Board
and Chief Executive Officer
Date: January 3, 2002 By: /s/ Charles H. Turner
-------------------- ---------------------------------------------------
Charles H. Turner, Senior Vice President,
Chief Financial Officer and Treasurer
Date: January 3, 2002 By: /s/ Susan E. Barley
-------------------- ---------------------------------------------------
Susan E. Barley, Principal Accounting Officer
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