UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended May 31, 2003
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) 252-8000
------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by 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 by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). 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 July 7, 2003
- --------------------------------- -------------------------------------
Common Stock, $1.00 par value 89,634,953
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
May 31, June 1,
2003 2002
------------ ------------
Net sales $ 402,712 $ 384,429
Operating costs and expenses:
Cost of sales (including buying and store
occupancy costs) 234,515 220,436
Selling, general and administrative expenses 125,778 118,333
Depreciation and amortization 12,161 10,731
------------ ------------
372,454 349,500
------------ ------------
Operating income 30,258 34,929
Nonoperating (income) and expenses:
Interest and investment income (637) (837)
Interest expense 637 558
------------ ------------
-- (279)
------------ ------------
Income before income taxes 30,258 35,208
Provision for income taxes 11,196 13,027
------------ ------------
Net income $ 19,062 $ 22,181
============ ============
Earnings per share:
Basic $ .21 $ .24
============ ============
Diluted $ .21 $ .23
============ ============
Dividends declared per share: $ .06 $ .05
============ ============
Average shares outstanding during period:
Basic 90,145 93,708
============ ============
Diluted 92,198 96,613
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
<Table>
<Caption>
May 31, March 1, June 1,
2003 2003 2002
------------- ------------- -------------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash, including temporary investments of $204,632,
$225,882 and $183,788, respectively $ 219,679 $ 242,114 $ 195,694
Beneficial interest in securitized receivables 42,311 40,538 40,880
Other accounts receivable, net 10,420 11,420 10,478
Inventories 338,508 333,350 303,394
Prepaid expenses and other current assets 44,702 36,179 46,927
------------- ------------- -------------
Total current assets 655,620 663,601 597,373
Properties, net 230,165 254,503 224,295
Other noncurrent assets 50,203 49,383 47,162
------------- ------------- -------------
$ 935,988 $ 967,487 $ 868,830
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,000 $ 393 $ 728
Accounts payable 79,451 76,742 83,305
Gift cards, gift certificates and merchandise credits
outstanding 38,446 37,924 30,418
Accrued income taxes payable 7,141 25,798 13,803
Other accrued liabilities 86,313 102,732 66,069
------------- ------------- -------------
Total current liabilities 217,351 243,589 194,323
Long-term debt 19,000 25,000 25,000
Other noncurrent liabilities 57,044 54,962 44,346
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 144,262 144,247 143,800
Retained earnings 553,434 539,776 447,379
Cumulative other comprehensive loss (278) (2,210) (3,483)
Less -- 10,955,000, 10,045,000 and 7,046,000 common
shares in treasury, at cost, respectively (155,604) (138,656) (83,314)
------------- ------------- -------------
642,593 643,936 605,161
------------- ------------- -------------
$ 935,988 $ 967,487 $ 868,830
============= ============= =============
</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>
Three Months Ended
May 31, June 1,
2003 2002
------------ ------------
Cash flow from operating activities:
Net income $ 19,062 $ 22,181
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization 15,247 12,460
Loss on disposal of fixed assets 219 48
Deferred compensation 1,785 1,500
Tax benefit from options exercised by employees 549 3,892
Other 1,397 574
Changes in cash from:
Inventories (5,158) (27,961)
Other accounts receivable and other current assets (2,534) (8,797)
Accounts payable and accrued expenses (12,962) 1,902
Accrued income taxes payable (18,657) (15,935)
Other noncurrent assets (807) (6)
Other noncurrent liabilities (500) (500)
------------ ------------
Net cash used in operating activities (2,359) (10,642)
------------ ------------
Cash flow from investing activities:
Capital expenditures (17,914) (25,606)
Proceeds from disposition of properties 23,487 380
Beneficial interest in securitized receivables (2,373) 3,740
------------ ------------
Net cash provided by (used in) investing activities 3,200 (21,486)
------------ ------------
Cash flow from financing activities:
Cash dividends (5,404) (4,712)
Purchases of treasury stock (20,490) (12,657)
Proceeds from stock options exercised and
stock purchase plan and other, net 3,008 9,582
Repayments of long-term debt (390) --
------------ ------------
Net cash used in financing activities (23,276) (7,787)
------------ ------------
Change in cash and cash equivalents (22,435) (39,915)
Cash and cash equivalents at beginning of period 242,114 235,609
------------ ------------
Cash and cash equivalents at end of period $ 219,679 $ 195,694
============ ============
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MAY 31, 2003
(in thousands except per share amounts)
(unaudited)
<Table>
<Caption>
Common Stock Cumulative
------------------------ Other Total
Outstanding Paid-in Retained Comprehensive Treasury Shareholders'
Shares Amount Capital Earnings Income (Loss) Stock Equity
----------- ---------- ---------- ---------- ------------- ---------- -------------
Balance March 1, 2003 90,685 $ 100,779 $ 144,247 $ 539,776 $ (2,210) $ (138,656) $ 643,936
Comprehensive income:
Net income -- -- -- 19,062 -- -- 19,062
Other comprehensive
income, net of tax:
Currency translation
adjustments -- -- -- -- 1,932 -- 1,932
----------
Comprehensive income 20,994
----------
Purchases of treasury stock (1,163) -- -- -- -- (20,490) (20,490)
Exercise of stock options, stock
purchase plan and other 222 -- 15 -- -- 3,542 3,557
Cash dividends ($.06 per share) -- -- -- (5,404) -- -- (5,404)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Balance May 31, 2003 89,744 $ 100,779 $ 144,262 $ 553,434 $ (278) $ (155,604) $ 642,593
========== ========== ========== ========== ========== ========== ==========
</Table>
The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MAY 31, 2003 AND JUNE 1, 2002
(unaudited)
The accompanying unaudited financial statements should be read in conjunction
with the Form 10-K for the year ended March 1, 2003. All adjustments that are,
in the opinion of management, necessary for a fair statement of the financial
position as of May 31, 2003, and the results of operations and cash flows for
the three months ended May 31, 2003 and June 1, 2002 have been made and consist
only of normal recurring adjustments. The results of operations for the three
months ended May 31, 2003 and June 1, 2002 are not indicative of results to be
expected for the fiscal year because of, among other things, seasonality factors
in the retail business. The classifications of certain amounts previously
reported in the statement of cash flows for the three months ended June 1, 2002
have been modified to conform to the May 31, 2003 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. Stock options for which the exercise price was greater than the
average market price of common shares were not included in the computation of
diluted earnings per share as the effect would be antidilutive. As of May 31,
2003, there were 2,755,000 stock options outstanding with exercise prices
greater than the average market price of the Company's common shares. As of June
1, 2002, there were no stock options outstanding with exercise prices greater
than the average market price of the Company's common shares. Earnings per share
for the three months ended May 31, 2003 and June 1, 2002 were calculated as
follows (in thousands except per share amounts):
<Table>
<Caption>
Three Months Ended
May 31, June 1,
2003 2002
---------- ----------
Net income (Basic and Diluted) $ 19,062 $ 22,181
========== ==========
Average shares outstanding during period:
Basic 90,145 93,708
Plus assumed exercise of stock options 2,053 2,905
---------- ----------
Diluted 92,198 96,613
========== ==========
Earnings per share:
Basic $ .21 $ .24
========== ==========
Diluted $ .21 $ .23
========== ==========
</Table>
NOTE 2 - COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for the three months
ended May 31, 2003 and June 1, 2002 were as follows (in thousands):
<Table>
<Caption>
Three Months Ended
May 31, June 1,
2003 2002
---------- ----------
Net income $ 19,062 $ 22,181
Currency translation adjustments 1,932 1,219
---------- ----------
Comprehensive income $ 20,994 $ 23,400
========== ==========
</Table>
NOTE 3 - STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees with
stock option exercise prices equal to the fair market value of the shares on the
date of grant. The Company accounts for stock option grants under the intrinsic
value method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and, accordingly, recognizes no
compensation expense for the stock option grants.
The following table illustrates the effect on net income and earnings per share
if the Company had applied the fair value recognition provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," to stock-based employee compensation (in thousands except per
share amounts):
<Table>
<Caption>
Three Months Ended
May 31, June 1,
2003 2002
------------ ------------
Net income, as reported $ 19,062 $ 22,181
Less total stock-based employee compensation expense
determined under fair value-based method,
net of related tax effects (1,934) (1,155)
------------ ------------
Pro forma net income $ 17,128 $ 21,026
============ ============
Pro forma earnings per share:
Basic $ .19 $ .22
============ ============
Diluted $ .19 $ .22
============ ============
</Table>
NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities," which is
generally effective for contracts entered into or modified after June 30, 2003
and for hedging relationships designated after June 30, 2003. SFAS 149 clarifies
under what circumstances a contract with an initial net investment meets the
characteristic of a derivative as discussed in SFAS No. 133, clarifies when a
derivative contains a financing component, amends the definition of an
"underlying" to conform it to the language used in FASB Interpretation No. 45,
"Guarantor Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" and amends certain other existing
pronouncements. The Company has only limited involvement with derivative
financial instruments, does not use them for trading purposes and is not a party
to any leveraged derivatives. However, the Company periodically enters into
forward exchange contracts to hedge some of its foreign currency exposure. The
Company also uses contracts to hedge its exposure associated with the
repatriation of funds from its Canadian operations. For financial accounting
purposes, the Company does not designate such contracts as hedges. The Company
does not anticipate that the adoption of SFAS No. 149 will have an impact on its
consolidated balance sheets or 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. (together with its consolidated subsidiaries, 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 "Cargokids!" ("Cargokids"). In the United
Kingdom, retail locations operate under the name "The Pier." The Company has
over 1,000 retail locations in 50 states, Canada, Puerto Rico, the United
Kingdom and Mexico with merchandise directly imported from over 40 countries
around the world.
RESULTS OF OPERATIONS
Net sales consisted almost entirely of sales to retail customers net of
discounts and returns, but also included wholesale sales and royalties received
from franchise stores and from Sears de Mexico S.A., and delivery service
revenues. Sales by retail concept during the period were as follows (in
thousands):
<Table>
<Caption>
Three Months Ended
May 31, June 1,
2003 2002
---------- ----------
Pier 1 Imports stores $ 384,583 $ 369,564
The Pier stores 11,199 8,995
Cargokids stores 3,881 2,753
Internet 1,715 909
Other (1) 1,334 2,208
---------- ----------
Net sales $ 402,712 $ 384,429
========== ==========
</Table>
(1) Other sales consisted of wholesale sales and royalties received from
franchise stores and from Sears de Mexico S.A., and Cargokids' contract
sales.
Net sales for the first quarter of fiscal 2004 were up 4.8% to $402.7 million
from $384.4 million for the same period last year. Comparable store sales for
the quarter declined 3.6% compared to a 9.5% increase for the first quarter last
year and a 2.8% increase for the first quarter of fiscal 2002. The Company
believes the decrease in comparable store sales was the result of a decline in
consumer confidence caused by overall weakness in the economy, an extended
period of inclement weather conditions throughout various regions of the United
States and geopolitical instability.
During the quarter, the Company continued to execute its accelerated growth
strategy by opening 12 and closing five North American Pier 1 stores, and
opening three and closing one Cargokids stores, which resulted in an overall
increase of 0.9% in total retail square footage during the quarter and an
increase of 10.0% over the same quarter last year. The North American Pier 1
store count totaled 1,007 at the end of the first quarter compared to 925 stores
a year ago. Including Cargokids and all other worldwide locations, the Company's
store count totaled 1,083 at the end of the first quarter of fiscal 2004.
A summary reconciliation of the Company's stores open at the beginning of fiscal
2004 to the number open at the end of the first quarter follows (openings and
closings include relocated stores):
<Table>
<Caption>
Pier 1 North
American International (1) Cargokids Total
------------ ----------------- ------------ ------------
Open at March 1, 2003 1,000 49 25 1,074
Openings 12 -- 3 15
Closings (5) -- (1) (6)
------------ ------------ ------------ ------------
Open at May 31, 2003 1,007 49 27 1,083
============ ============ ============ ============
</Table>
(1) International stores were located in Puerto Rico, the United Kingdom
and Mexico.
Net sales on the Company's proprietary credit card totaled $106.6 million for
the first quarter of fiscal 2004, representing an increase of 5.7% over
proprietary credit card sales of $100.9 million for the same period of fiscal
2003. First quarter proprietary credit card sales comprised 28.9% of U.S. store
sales versus 28.3% in the same period last fiscal year, and average sale per
transaction on the card during the first quarter was $168 versus $166 for last
year's first quarter. The Company continues to grow overall sales on its
proprietary credit card by opening new accounts and developing customer loyalty
through marketing promotions targeted to cardholders, including 90-day deferred
payment options on larger purchases.
Gross profit, after related buying and store occupancy costs, expressed as a
percentage of sales, decreased 90 basis points to 41.8% for the first quarter of
fiscal 2004 from 42.7% last year. Merchandise margins increased 40 basis points
for the quarter as a result of higher initial markups offset somewhat by an
increase in promotional discounts as a percentage of sales. The Company expects
that margin rates for fiscal 2004 may be flat or decline slightly from fiscal
2003 rates. Store occupancy costs for the quarter increased 130 basis points as
a percentage of sales to 14.6% of sales from 13.3% last year as a result of
relatively fixed rental costs spread over a lower sales base and from an
increase in the percentage of total sales from newer stores, for which occupancy
costs as a percentage of sales tend to be higher until the stores reach
maturity.
Selling, general and administrative expenses for the first quarter of fiscal
2004 were $125.8 million, an increase over the same quarter last year of $7.4
million or 40 basis points as a percentage of sales. 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 nearly 55 basis points as a percentage of sales. Store payroll
including bonus increased $2.3 million, yet declined 10 basis points as a
percentage of sales. Marketing expenditures were $21.7 million or 5.4% of sales
for the quarter, a decrease of 30 basis points from the same quarter last year,
primarily as a result of savings from slightly decreased television advertising
that were partially offset by an increase in spending on newspaper inserts.
Although the timing of the Company's marketing expenditures fluctuates between
fiscal quarters, the Company anticipates total expenditures for the year to be
comparable to last year's levels as a percentage of sales at approximately 4.5%
of sales. Other variable expenses, including supplies and equipment rental
decreased $0.3 million or 15 basis points as a percentage of sales, primarily as
a result of continued savings from implementation of a redesigned program for
bags, gift boxes and tissue paper. Non-variable selling, general and
administrative expenses increased $5.6 million, or 100 basis points as a
percentage of sales, primarily from increases in general taxes, workers'
compensation and other types of general insurance and technology costs.
Depreciation and amortization expense for the first quarter was $12.2 million
compared to $10.7 million for the same period last year, representing an
increase of 20 basis points as a percentage of sales. This increase was largely
attributable to an overall increase in the number of stores open at the end of
the first quarter of fiscal 2004 compared to the end of the first quarter of
fiscal 2003 and to depreciation expense on information systems technology and
related software applications that were implemented subsequent to the end of
last year's first quarter.
Operating income for the quarter was $30.3 million, or 7.5% of sales, compared
to $34.9 million, or 9.1% of sales, during last year's first quarter
The Company's effective income tax rate for fiscal 2004 is estimated at 37%,
consistent with fiscal 2003.
Net income for the first quarter of fiscal 2004 was $19.1 million, or $.21 per
diluted share, compared to net income of $22.2 million, or $.23 per diluted
share, for the first quarter of fiscal 2003.
LIQUIDITY AND CAPITAL RESOURCES
The Company ended the first quarter of fiscal 2004 with $219.7 million of cash
compared to $195.7 million a year ago. Operating activities in the first quarter
of fiscal 2004 used $2.4 million of cash versus $10.6 million used during the
same period last year. The decline in cash used in operations was primarily the
result of a decrease in the rate of inventory growth during the first quarter of
fiscal 2004, when inventory increased $5.2 million compared to last year's first
quarter increase of $28.0 million. Inventory levels at the end of the first
quarter of fiscal 2004 were $338.5 million, up $35.1 million, or 11.6%, over
inventory levels at the end of last year's first quarter, primarily as a result
of an increase in total retail square footage of 10%. The Company believes its
current inventory levels are well positioned and in line with net square footage
growth, with North American Pier 1 inventory per retail square foot of $42, an
increase of 1% over the year ago period. The primary usage of operating funds
during the quarter was $31.6 million for the reduction of accounts payable and
accrued liabilities related primarily to the payment of accrued income taxes and
accrued management bonuses.
During the first three months of fiscal 2004, the Company received a net of $3.2
million from investing activities, which included $23.5 million in proceeds
related to the sale-leaseback of the new distribution facility in Savannah,
Georgia. The resulting lease has qualified for operating lease treatment.
Capital expenditures were $17.9 million and consisted primarily of fixtures,
equipment, and leasehold improvements for new and existing Pier 1 and Cargokids
stores and the new Savannah distribution facility, and for information systems'
enhancements and construction costs for the new corporate headquarters. Capital
expenditures for fiscal 2004 are expected to be in the range of $100 to $105
million, net of the $23.5 million proceeds received from the sale-leaseback of
the new Savannah distribution facility. The Company plans to open approximately
115 to 120 new Pier 1 stores in the United States and Canada during fiscal year
2004 and plans to close or relocate 35 to 40 stores over the same period. The
new Pier 1 stores will be located in both existing metropolitan and single-store
markets, and will include two to three large format stores this year. In
addition, the Company will continue with expansion plans for Cargokids and
expects to open 20 to 25 net new Cargokids stores in the southeastern region of
the United States and plans to relocate three to five Cargokids stores during
fiscal year 2004.
Through the first quarter of fiscal 2004, the Company's beneficial interest in
securitized receivables increased $1.8 million to $42.3 million, as a result of
an increase in the total receivables portfolio in the Master Trust from $136.3
million at fiscal 2003 year-end to $139.3 million at the end of the first
quarter of fiscal 2004. These proprietary credit card receivables have increased
as a result of an increase in total credit card sales. The Company has continued
to have $100 million of beneficial interests held by outside parties and all
proprietary credit card receivables are securitized at both fiscal 2003 year-end
and the end of the first quarter of fiscal 2004.
Financing activities for the first three months of fiscal 2004 used a net $23.3
million of the Company's cash resources. During the quarter, the Board of
Directors authorized share repurchases of up to $150 million of the Company's
common stock, replacing the previous authorization in effect for fiscal 2003.
The Company repurchased 1,162,500 shares of its common stock for $20.5 million,
including fees during the first quarter of fiscal 2004, and subsequent to the
first quarter-end, the Company repurchased 250,000 additional shares of its
common stock leaving $128.4 million authorized for repurchase under the current
authorization. Dividend
payments totaled $5.4 million for the first quarter of fiscal 2004, and other
financing activities, primarily the exercise of stock options, provided net cash
of $3.0 million.
At the end of the first quarter, the Company's minimum operating lease
commitments remaining for fiscal 2004 were $147.3 million. The present value of
total existing minimum operating lease commitments discounted at 10% was $866.1
million at fiscal 2004 first 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, all of which was available at the end of the first quarter.
This facility expires in November of 2003 and the Company expects to renew or
replace it with a comparable facility prior to its expiration. The Company also
has other short-term bank facilities totaling $156.6 million, used principally
for the issuance of letters of credit; $41.6 million of these facilities was
available at May 31, 2003. The Company's current ratio was 3.0 to 1 at the end
of the first quarter of fiscal 2004 compared to 2.7 to 1 at the end of fiscal
year 2003.
In June 2003, the Company declared a quarterly cash dividend of $.08 per share
payable on August 20, 2003 to shareholders of record on August 6, 2003. 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, conflicts or war involving the United States or
its allies or trading partners, labor strikes, weather conditions that may
affect sales, volatility of fuel and utility costs, the general strength of the
economy and levels of consumer spending, consumer confidence, 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 availability
and proper functioning of technology and communications systems supporting the
Company's key business processes, 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 source, ship and deliver
items from foreign countries to its U.S. distribution centers at reasonable
prices and rates and in a 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 1, 2003, 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 I
Item 4. Controls and Procedures.
As of May 31, 2003 and within 90 days prior to this filing, pursuant to the
requirements of Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934,
an evaluation was performed under the supervision and with the participation of
the Company's management, including the Chairman of the Board and Chief
Executive Officer ("CEO") and the Executive Vice President, Chief Financial
Officer and Treasurer ("CFO"), of the effectiveness of the design and operation
of the Company's disclosure controls and procedures. Based on that evaluation,
the Company's management, including the CEO and CFO, concluded that the
Company's disclosure controls and procedures were effective as of May 31, 2003.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
May 31, 2003.
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held June 26, 2003 for the
purpose of electing six (6) Directors to hold office until the next Annual
Meeting of Shareholders and to vote on the proposed amendment to the Company's
1999 Stock Plan. The result of the election and vote follows:
Director Election:
<Table>
<Caption>
Director For Withheld
- ------------------- ---------- ----------
Marvin J. Girouard 76,749,660 1,224,192
James M. Hoak, Jr. 77,000,581 973,271
Tom M. Thomas 76,128,011 1,845,841
John H. Burgoyne 76,142,295 1,831,557
Michael R. Ferrari 77,015,823 958,029
Karen W. Katz 77,025,090 948,762
</Table>
Proposed amendment to the Pier 1 Imports, Inc. 1999 Stock Plan:
For Against Abstain
- -------------------- ---------------- ---------------
70,166,052 6,912,950 894,850
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits See Exhibit Index.
(b) Reports on Form 8-K
On June 18, 2003, the Company furnished a Current Report on
Form 8-K containing an earnings release that reported results
of operations for the quarter ended May 31, 2003.
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: July 10, 2003 By: /s/ Marvin J. Girouard
---------------------------------------------
Marvin J. Girouard, Chairman of the Board
and Chief Executive Officer
Date: July 10, 2003 By: /s/ Charles H. Turner
---------------------------------------------
Charles H. Turner, Executive Vice President,
Chief Financial Officer and Treasurer
Date: July 10, 2003 By: /s/ Susan E. Barley
---------------------------------------------
Susan E. Barley, Principal Accounting Officer
EXHIBIT INDEX
<Table>
<Caption>
Exhibit No. Description
- ----------- -----------
10.15.2 The 1999 Stock Plan as Amended June 26, 2003, incorporated
herein by reference to Appendix A, page A-1, of the Company's
Proxy Statement for the fiscal year ended March 1, 2003.
99.1 Management's certifications required pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
99.2 Management's certifications required pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
</Table>