Exhibit 99.1
Pier 1 Imports Reports Fiscal 2007 Second Quarter Results
FORT WORTH, Texas--(BUSINESS WIRE)--Sept. 14, 2006--Pier 1
Imports, Inc. (NYSE:PIR) today announced a net loss from continuing
operations of $73,059,000, or $0.84 per share, for the second quarter
ended August 26, 2006. Excluding unusual charges and the effect of the
adoption of a new accounting pronouncement (see reconciliation table
below), loss per share on a non-GAAP basis for the second quarter of
fiscal year 2007 amounted to $29,256,000 or $0.34 per share versus
$6,373,000 or $0.07 loss per share from continuing operations in the
second quarter of fiscal year 2006. Total sales declined 12.5% for the
second fiscal quarter to $370,698,000, from $423,675,000 in the
year-ago quarter, and comparable store sales declined 14.8%.
For the first six months of fiscal 2007, the Company's net loss
from continuing operations was $95,824,000, or $1.09 per share,
compared to a loss per share of $0.17 for the year-ago period.
Year-to-date sales amounted to $746,790,000, down 8.3% from
$813,989,000 in the year-ago period, and comparable store sales
declined 10.9%.
Reconciliation and Discussion of 2nd Quarter GAAP to Non-GAAP Loss
Per Share from Continuing Operations
Q2 FY07 Q2 FY06
------- -------
Loss Per Share from Continuing Operations, less: ($0.84) ($0.07)
Impact of valuation allowance against prior year
deferred tax asset (0.28) 0.00
Impact of limitation on current year tax benefit (0.11) 0.00
Impact of litigation settlement and legal fees (0.04) 0.00
Impact of store-level asset impairments (0.03) 0.00
Impact of Pier 1 Kids relocation and integration (0.02) 0.00
Impact of new accounting pronouncement SFAS 123R -
stock based compensation (0.02) 0.00
------- -------
Non-GAAP Loss Per Share from Continuing Operations
Excluding Unusual Charges and adoption of SFAS 123R ($0.34) ($0.07)
======= =======
Reported results in the second quarter included a non-cash charge
of $24.6 million or $0.28 per share to establish a valuation allowance
against the Company's net deferred income tax assets that arose in
prior years. In evaluating the likelihood that sufficient earnings
would be available in the near future to realize the deferred tax
assets, the Company considered cumulative losses over three years
including the current year.
The Company concluded that a valuation allowance was necessary
based upon this evaluation and the guidance provided in Statement of
Financial Accounting Standards ("SFAS") No. 109. A tax benefit has
been provided on losses for the current year only to the extent such
losses can be carried back to offset taxable income in a previous
year. This limitation reduced the current tax benefit by $9.6 million
or $0.11 per share. The Company will have the ability to realize the
deferred tax assets should future earnings be sufficient to do so and
the charge will have no impact on current cash flows.
Unusual charges reported during the second quarter included the
following: a pre-tax charge of $4.6 million or $0.04 per share
attributable to a labor litigation settlement and related costs; a
non-cash charge of $3.1 million or $0.03 per share for store-level
asset impairment charges; a $2.7 million or $0.02 per share charge for
relocation and integration of the Pier 1 Kids' headquarters and
warehouse into Pier 1 facilities; and a non-cash charge of $2.7
million or $0.02 per share for stock-based compensation expense in
compliance with SFAS 123R.
Operating Results
Merchandise margins improved to 49.2% from 49.1% in the year-ago
quarter. Store occupancy costs increased $4.0 million to 20.8% of
sales in the second quarter versus 17.2% for the year-ago quarter.
Selling, general and administrative costs were 41.3% of sales compared
to 31.9% of sales in the second quarter last year. Payroll costs as a
percentage of sales were higher during the quarter versus last year,
and marketing costs were 7.5% of sales compared to 5.1% in the
year-ago period.
Marvin J. Girouard, the Company's Chairman and Chief Executive
Officer, said, "Although we are well underway with our turnaround
strategy, we are disappointed to report a significant loss for the
second quarter. We did have a number of one-time charges which
impacted the quarter. Additionally, sales were soft in June and July,
improved slightly in August, but our fixed costs were too much to
overcome. We expect to do better over the next few months through the
critical fall and holiday selling seasons. We have dramatically
changed our stores and our merchandise assortments to present new,
eclectic and differentiated collections that offer better quality
products, compelling visual presentations and a superior shopping
experience in an effort to attract new customers.
"With 100 days remaining until Christmas, we are focused on the
all-important holiday season. We have planned increases in store-level
inventory for decorative accessories, gifts and tabletop collections,
although total inventory is being carefully monitored and is currently
15% below last year. We have an aggressive marketing program scheduled
for the third and fourth quarters of this year and new visual
presentations planned for stores that will feature a broad assortment
of value-priced items."
This release references non-GAAP loss per share information that
includes 1) the tax valuation allowances established against the
Company's net deferred tax assets, 2) a litigation settlement and
legal costs, 3) impairment charges on store-level assets 4)
relocations and integration costs related to Pier 1 Kids, and 5) the
impact of SFAS 123R for recording stock-based compensation.
The Company believes that the non-GAAP financial measures allow
management and investors to understand and compare the Company's
operating results in a more consistent manner for the second quarter
of fiscal year 2007. These non-GAAP measures should be considered
supplemental and not a substitute for the Company's financial results
that are recorded in accordance with generally accepted accounting
principles for the periods presented.
The Company will host a conference call to discuss fiscal 2007
second quarter results at 10:00 a.m. Central Time today. A web cast is
available on our web site at www.pier1.com linking through to the
"Investor Relations" page and the "Events" page, or you can dial into
the conference at 800-498-7872, ID 4640853. The teleconference will be
held in a "listen-only" mode for all participants other than the
Company's current sell-side and buy-side investment professionals.
Any forward-looking projections or statements made in this press
release should be considered in conjunction with the cautionary
statements contained in the Company's most recently filed report on
Form 10-Q. Management's expectations and assumptions regarding planned
store openings, financing of Company obligations from operations,
results from its new marketing, merchandising and store operations
strategies, 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 or natural disasters,
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 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 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.
Pier 1 Imports, Inc. is North America's largest specialty retailer
of imported decorative home furnishings and gifts with Pier 1
Imports(R) stores in 49 states, Puerto Rico, Canada, and Mexico and
Pier 1 kids(R) stores in the United States. Information about the
Company is available on www.pier1.com.
Pier 1 Imports, Inc.
--------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
August 26, August 27, August 26, August 27,
2006 2005 2006 2005
--------- --------- --------- ---------
Net sales $ 370,698 $ 423,675 $ 746,790 $ 813,989
Operating costs and
expenses:
Cost of sales
(including buying and
store occupancy costs) 265,201 288,573 514,041 541,402
Selling, general and
administrative
expenses 153,145 134,964 300,728 275,153
Depreciation and
amortization 13,604 14,140 27,228 28,094
--------- --------- --------- ---------
431,950 437,677 841,997 844,649
--------- --------- --------- ---------
Operating loss (61,252) (14,002) (95,207) (30,660)
Nonoperating (income) and
expenses:
Interest and investment
income (2,795) (640) (5,708) (1,762)
Interest expense 3,444 414 6,895 779
--------- --------- --------- ---------
649 (226) 1,187 (983)
--------- --------- --------- ---------
Loss from continuing
operations before income
taxes (61,901) (13,776) (96,394) (29,677)
Income tax expense (benefit) 11,158 (7,403) (570) (14,848)
--------- --------- --------- ---------
Loss from
continuing
operations (73,059) (6,373) (95,824) (14,829)
Discontinued operations:
Loss from discontinued
operations - (3,812) (638) (7,818)
Income tax benefit - - (231) -
--------- --------- --------- ---------
Loss from
discontinued
operations - (3,812) (407) (7,818)
Net loss ($73,059) ($10,185) ($96,231) ($22,647)
========= ========= ========= =========
Loss per share from
continuing operations:
Basic ($0.84) ($0.07) ($1.09) ($0.17)
========= ========= ========= =========
Diluted ($0.84) ($0.07) ($1.09) ($0.17)
========= ========= ========= =========
Loss per share from
discontinued operations:
Basic - ($0.05) ($0.01) ($0.09)
========= ========= ========= =========
Diluted - ($0.05) ($0.01) ($0.09)
========= ========= ========= =========
Loss per share:
Basic ($0.84) ($0.12) ($1.10) ($0.26)
========= ========= ========= =========
Diluted ($0.84) ($0.12) ($1.10) ($0.26)
========= ========= ========= =========
Average shares outstanding
during period:
Basic 87,307 86,495 87,201 86,443
========= ========= ========= =========
Diluted 87,307 86,495 87,201 86,443
========= ========= ========= =========
Pier 1 Imports, Inc.
--------------------
CONSOLIDATED BALANCE SHEETS
(in thousands except per share amounts)
(unaudited)
August 26, February 25, August 27,
2006 2006 2005
---------- ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents,
including temporary
investments of $140,708,
$238,463 and $31,346,
respectively $ 150,253 $ 246,115 $ 38,764
Beneficial interest in
securitized receivables 44,928 50,000 41,966
Other accounts receivable, net 16,246 13,916 14,650
Inventories 404,117 368,978 474,915
Income tax receivable 43,344 18,011 24,292
Assets of discontinued operations - 32,359 41,405
Prepaid expenses and other
current assets 53,387 45,544 42,934
---------- ---------- ----------
Total current assets 712,275 774,923 678,926
Properties, net 282,938 298,922 314,428
Other noncurrent assets 65,893 96,016 76,513
---------- ---------- ----------
$1,061,106 $1,169,861 $1,069,867
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ - $ - $ 20,000
Accounts payable 125,404 105,916 114,719
Gift cards and other deferred
revenue 63,482 63,835 56,521
Accrued income taxes payable 2,106 4,763 3,126
Liabilities related to
discontinued operations - 16,841 18,365
Other accrued liabilities 94,827 97,493 105,729
---------- ---------- ----------
Total current liabilities 285,819 288,848 318,460
Long-term debt 184,000 184,000 19,000
Other noncurrent liabilities 110,754 107,031 106,910
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 127,276 132,075 139,552
Retained earnings 468,515 582,221 616,758
Cumulative other comprehensive
loss (2,473) (583) (1,940)
Less -- 13,223,000, 13,761,000
and 14,041,000 common shares
in treasury, at cost,
respectively (213,564) (222,254) (226,784)
Less -- unearned compensation - (2,256) (2,868)
---------- ---------- ----------
480,533 589,982 625,497
---------- ---------- ----------
$1,061,106 $1,169,861 $1,069,867
========== ========== ==========
Pier 1 Imports, Inc.
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
August 26, August 27,
2006 2005
--------- ---------
Cash flow from operating activities:
Net loss $ (96,231) $ (22,647)
Adjustments to reconcile to net cash used in
operating activities:
Depreciation and amortization 32,519 37,882
Loss on disposal of fixed assets 200 1,153
Loss on impairment of fixed assets 5,063 225
Stock-based compensation expense 3,270 167
Deferred compensation 3,423 4,525
Lease termination expense 2,005 1,522
Deferred income taxes 24,613 -
Sale of receivables in exchange for
beneficial interest in securitized
receivables (14,900) (40,370)
Other (2,154) 1,001
Changes in cash from:
Inventories (34,297) (108,642)
Other accounts receivable, prepaid
expenses and other current assets (15,701) (14,863)
Income tax receivable (25,237) (24,292)
Accounts payable and accrued expenses 20,751 15,144
Accrued income taxes payable (2,794) (8,599)
Other noncurrent assets 469 (144)
Other noncurrent liabilities (217) -
--------- ---------
Net cash used in operating
activities (99,218) (157,938)
--------- ---------
Cash flow from investing activities:
Capital expenditures (18,711) (28,048)
Proceeds from disposition of properties 58 179
Proceeds from sale of discontinued operations
(net of $3,397 cash included in sale of
discontinued operations) 11,601 -
Proceeds from sale of restricted investments 217 -
Purchase of restricted investments (2,000) -
Collections of principal on beneficial
interest in securitized receivables 19,972 34,094
--------- ---------
Net cash provided by investing
activities 11,137 6,225
--------- ---------
Cash flow from financing activities:
Cash dividends (17,475) (17,287)
Purchases of treasury stock - (4,047)
Proceeds from stock options exercised,
stock purchase plan and other, net 2,877 4,672
Notes payable borrowings - 23,000
Repayments of notes payable - (3,000)
Debt issuance costs (283) (121)
--------- ---------
Net cash (used in) provided by
financing activities (14,881) 3,217
--------- ---------
Change in cash and cash equivalents (102,962) (148,496)
Cash and cash equivalents at beginning of
period (including cash held for sale
of $7,100 and $3,358, respectively) 253,215 189,081
--------- ---------
Cash and cash equivalents at beginning of
period (including
cash held for sale of $0 and $1,821,
respectively) $ 150,253 $ 40,585
========= =========
CONTACT: Pier 1 Imports, Inc.
Cary Turner, 817-252-8400