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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended February 26, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________ to ______________
Commission File No. 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) (Zip Code)
Registrant's telephone number, including area code: (817) 878-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1 par value New York Stock Exchange
11 1/2% Sub. Debentures Due 2003 New York Stock Exchange
6 7/8% Convertible Sub. Notes Due 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether 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 such shorter period that
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec.229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [ ]
As of May 4, 1994, there were 37,547,477 shares of Common Stock, $1.00
par value, outstanding, and the aggregate market value of the Common Stock of
Registrant held by non-affiliates was approximately $311 million.
DOCUMENTS INCORPORATED BY REFERENCE
Location in Form 10-K Incorporated Document
Part III Proxy Statement for 1994 Annual Meeting
PART I
Item 1. Business.
(a) General Development of Business.
From fiscal 1988 through fiscal 1994, Registrant, through its
subsidiary, Pier 1 Imports (U.S.), Inc. ("Pier 1"), expanded its specialty
retail operations from 350 retail stores to 636 stores. In fiscal year 1994,
Registrant continued to execute its expansion plan by opening 48 new Pier 1
Imports stores, including one in Puerto Rico, and closed 17 stores. The rate
of expansion for the fiscal year doubled the previous fiscal year rate when
Registrant opened 26 new Pier 1 Imports stores. Throughout the fiscal year
Registrant continued its focus on cost efficiencies and expense controls.
Subject to changes in the retail environment, availability of suitable store
sites and adequate financing, Registrant plans to open 45 - 50 new Pier 1
Imports stores in fiscal year 1995.
Set forth below is a list by city of Pier 1-operated stores opened in
fiscal 1994:
Billings, MT 1 Lancaster, OH 1
Boulder, CO 1 Las Vegas, NV 1
Camp Hill, PA 1 Lawrenceville, NJ 1
Cary, NC 1 Lima, OH 1
Cedar Rapids, IA 1 Lynchburg, VA 1
Cheyenne, WY 1 Mankato, MN 1
Chula Vista, CA 1 McAllen, TX 1
Clarksville, TN 1 Montgomery, AL 1
Colonial Heights, VA 1 New York, NY 1
Columbus, OH 1 Niles, OH 1
Daytona Beach, FL 1 Pacific Grove, CA 1
Elyria, OH 1 Palm Desert, CA 1
Fairlawn, OH 1 Palmdale, CA 1
Fort Gratiot, MI 1 Pineville, NC 1
Fort Myers, FL 1 Poughkeepsie, NY 1
Fredericksburg, VA 1 Rapid City, SD 1
Grand Forks, ND 1 Raynham, MA 1
Greenville, NC 1 Roanoke, VA 1
Hatillo, PR 1 Salisbury, MD 1
Hickory, NC 1 Vancouver, WA 1
Houston, TX 1 Victor, NY 1
Huntsville, AL 1 Watertown, NY 1
Johnstown, PA 1 Wichita Falls, TX 1
Joplin, MO 1 Wilmington, NC 1
Pier 1 maintains regional distribution center facilities in or near
Baltimore, Maryland; Columbus, Ohio; Chicago, Illinois; Fort Worth, Texas;
Los Angeles, California; Savannah, Georgia; and Montreal, Canada.
Registrant has provided a special after-tax reserve of $16,507,000 to
provide for the closing of approximately 50 unprofitable stores and to adjust
the carrying value of the Registrant's holdings in General Host Corporation
("General Host") common stock. The store closing provision reflects
anticipated costs associated with closing certain under performing stores
including estimated costs relating to leases, fixed assets, relocation,
inventory liquidation and losses from operations during interim period before
closings. The adjustment to the carrying value of General Host common stock
is Registrant's estimate of the portion of the decline in the market value
that is other than temporary.
In fiscal 1993, the Registrant invested in preference stock of The Pier
Retail Group Limited ("The Pier") located in the United Kingdom. As of April
26, 1994, investment in and loans to The Pier aggregated $3.4 million, with
additional debt guarantees of approximately $4 million. The Pier is a ten-
store retail operation that offers decorative home furnishings and related
items in a store setting similar to that operated by Pier 1.
During fiscal 1994, Pier 1 became active in an arrangement to supply
Sears de Mexico with Pier 1 merchandise to be sold in certain Sears stores
throughout Mexico. Presently two Sears stores in Mexico City offer Pier 1
merchandise.
In April 1993, Registrant sold its 49.5% interest in Sunbelt Nursery
Group, Inc. ("Sunbelt") to General Host in exchange for 1,940,000 shares of
General Host common stock. In connection with Registrant's sale, Registrant
agreed to make available up to $25 million of properties for lease (the
"Lease Commitment") to Sunbelt and to provide Sunbelt a $12 million credit
facility (the "Credit Facility") either in guarantees of Sunbelt indebtedness
or direct loans until April 28, 1994. Sunbelt's repayment obligations under
this agreement are secured by General Host's pledge of 4.2 million shares of
Sunbelt common stock. Additionally, Registrant guarantees approximately $4.5
million of Sunbelt's lease obligations. Currently, $12 million in loans are
outstanding under the Credit Facility and $23 million of properties have been
leased to Sunbelt under the Lease Commitment. These leases are required to
be refinanced by Sunbelt from September 1994 to October 1995. If Sunbelt
defaults on refinancing these leases as the terms expire, Registrant will be
required to obtain other financing for such leases.
During April 1994, Sunbelt sought an extension for repayment of loans
under the Credit Facility, and on April 25, 1994, Registrant and Sunbelt
entered into an Extension Agreement to extend the maturity of the Credit
Facility from April 28, 1994, to June 30, 1994. Registrant granted the
extension to allow Sunbelt additional time to obtain new financing to replace
the Credit Facility. If Sunbelt is unable to refinance the debt prior to
June 30, 1994, Sunbelt has reported that it would be unable to repay the debt
at maturity. In such event, Sunbelt would be in default under the Credit
Facility as well as the Lease Commitment. Sunbelt has also reported that
such a default could force it to consider legal proceedings to restructure
its obligations.
In May 1994, Registrant waived Sunbelt's breach of certain covenants
relating to Sunbelt's failure to (i) timely deliver its annual report to
Registrant, (ii) satisfy the required current ratio, and (iii) timely provide
notice of such breaches. The waiver expires on June 30, 1994. In connection
with such waiver, Sunbelt agreed to not borrow additional funds under the
Credit Facility or Lease Commitment in excess of the amount outstanding at
the time the waiver was consummated.
(b) Financial Information About Industry Segments.
Registrant operates in one business segment consisting of the retail
sale of decorative home furnishings and related items.
Financial information with respect to Registrant's business is found in
Registrant's Consolidated Financial Statements which are set forth in Item 8
herein.
(c) Narrative Description of Business.
The specialty retail operations of Pier 1 consist of a chain of retail
stores operating in the United States, Canada, and Puerto Rico under the name
"Pier 1 Imports" and selling a wide variety of furniture, decorative home
furnishings, dining and kitchen goods, accessories and other specialty items
for the home, and distinctive casual clothing and fashion accessories.
On February 26, 1994, Pier 1 operated 606 stores in 46 states of the
United States, the District of Columbia and Puerto Rico, and 30 stores in
four Canadian provinces as well as additional international operations in
England and Mexico. It also had franchised 36 stores in 24 states. The
company-operated Pier 1 stores average approximately 7,000 square feet in
size of retail selling space, and are generally located in strip shopping
centers or are freestanding units and are predominately located near or in
suburbs of metropolitan areas. During fiscal 1994, net sales of Pier 1
totalled $685.4 million. Pier 1 stores have their highest sales volumes
during November and December, reflecting the Christmas selling season.
Pier 1 offers a diverse selection of products consisting of over 5,000
items. While the broad categories of Pier 1's merchandise remain constant,
individual items within these product groupings change frequently in order to
meet the demands of customers. The principal categories of merchandise
include the following:
FURNITURE - This product group consists of furniture sold to be used on
patios and in sun rooms, living, dining and kitchen areas, and constituted
approximately 26.8%, 26.3% and 24.6% of the total retail sales of Pier 1 in
fiscal years 1994, 1993 and 1992, respectively. These goods are mainly
imported from Taiwan, Hong Kong, China, the Philippines and Indonesia, and
are handcrafted from natural materials, including rattan, buri, willow, pine,
beech, rubber, and selected hardwoods and have either natural or painted
finishes. This product group also includes metal furniture.
DECORATIVE HOME FURNISHINGS - This product group constituted the
broadest category of merchandise in Pier 1's sales mix and contributed
approximately 24.4%, 23.7% and 23.9% to Pier 1's total retail sales in fiscal
years 1994, 1993 and 1992, respectively. These items are imported from
approximately 40 countries and include brass, marble, and wood items, as well
as lamps, vases, dried and silk flowers, baskets, wall decorations and
numerous other decorative items, practically all of which are handcrafted
from natural materials.
DINING AND KITCHEN GOODS - This product group is imported from India,
the Far East and Europe and include ceramics, dinnerware and other functional
and decorative items. These goods accounted for approximately 14.1%, 14.1%
and 13.8% of the total retail sales of Pier 1 in fiscal years 1994, 1993 and
1992, respectively.
TEXTILES - This product group consists of linen items, padding, custom
order fabrics as well as window coverings, bedspreads, and pillows of which
the majority of these items are produced from original designs created both
domestically and in India. These goods accounted for approximately 13.5%,
13.9% and 14.9% of the total retail sales of Pier 1 in fiscal years 1994,
1993 and 1992, respectively.
CLOTHING, JEWELRY AND FASHION ACCESSORIES - This product group is
imported from India, Greece and Indonesia and accounted for approximately
12.1%, 14.4% and 15.4% of the total retail sales of Pier 1 in fiscal years
1994, 1993 and 1992 respectively.
Merchandise offered for sale in Pier 1's stores largely consists of
items which require a significant degree of handcraftsmanship. A majority of
the items is imported directly by Pier 1 from foreign suppliers. Although
Pier 1 is not dependent on any particular supplier, it has enjoyed
long-standing relationships with many vendors. During fiscal 1994, Pier 1
imported approximately 29% of its purchases from China, 19% from India, and
another 31% was imported from Indonesia, Japan, Thailand, the Philippines,
and Italy. The remaining 21% was imported from various Asian, European,
Central American, South American and African countries or obtained from
United States manufacturers, wholesalers or importers. In selecting the
source of a product, Pier 1 considers quality, dependability of delivery and
cost. For the most part, the imported merchandise is handcrafted in cottage
industries and small factories.
Pier 1 currently operates 7 regional distribution centers located in or
near Baltimore, Maryland; Los Angeles, California; Fort Worth, Texas;
Chicago, Illinois; Savannah, Georgia; Columbus, Ohio, and Montreal, Canada.
Imported merchandise and a portion of domestic purchases are delivered to the
distribution centers, unpacked, and made available for shipment to the
various stores in the center's region. The merchandise is then distributed
to the retail stores by company-operated trucks and contract carriers. Due
to the time delays involved in procuring merchandise from foreign suppliers,
Pier 1 is required to maintain a significant amount of inventory in order to
be assured of a sufficient supply of products to its customers. A stock of
regularly reordered items and temporary inventory surpluses have, from time
to time, been carried at the distribution centers.
Pier 1 stores have no direct national competitors. The major
competition arises at a local level from other retailers offering similar
lines of merchandise, such as small specialty sections of large department
stores, home furnishing stores, small specialty import stores and discount
stores. Registrant believes Pier 1 enjoys a competitive edge over these
stores, due to its greater name awareness and the extent and variety of the
merchandise offered at Pier 1 stores. While other competing stores may offer
a few items that change somewhat infrequently, Pier 1 offers over 5,000 items
of which approximately forty percent (40%), change each year.
As a retailer of imported merchandise, Pier 1 is subject to certain
risks which typically do not affect retailers of domestically produced
merchandise, including the need to order merchandise from four to twelve
months in advance of delivery and to pay for such merchandise at such time as
it is loaded for transport to designated U.S. or Canadian destinations.
Additionally, dock strikes, fluctuations in currency values and monetary
exchange rates, restrictions on the convertibility of the dollar and other
currencies, duties, taxes and other charges on imports, import quota systems
and other restrictions generally placed on foreign trade can affect the
price, delivery and availability of ordered merchandise. The inability to
import products from certain countries or the imposition of significant
tariffs could have a material adverse effect on the results of operations of
Pier 1.
In 1988, the Omnibus Trade and Competitiveness Act was signed into law.
This legislation was enacted in response to a perceived decline in U.S.
global competitiveness and the continuing presence of unfair trade practices
that limit U.S. exporters' access to foreign markets. Under the law, unfair
trade practices of countries around the world may be investigated by the
United States Trade Representative and such investigations may lead to
sanctions which could take the form of quotas or increased duties on imports
into the U.S.
On March 3, 1994, President Clinton signed an executive order re-
instituting a trade provision known as Super 301 which is designed to allow
negotiations before countries are designated as priority foreign countries.
Priority foreign countries are the nations whose trade practices, if
corrected, would provide the greatest potential for expansion of U.S.
exports. The announcement did not designate any country or any practice. The
current renewal of Super 301 will expire after two years. The United States
may employ other measures to implement its international trade policies and
objectives, such as the withdrawal, selectively or entirely, of most favored
nation status ("MFN") to countries around the world which would cause import
duties to increase. Presently, the President is considering the MFN status
of the Peoples Republic of China, which, if lost entirely, would cause
Registrant to source affected goods from other countries. Any type of
sanction is likely to increase Registrant's import costs or limit the
availability of products purchased from sanctioned countries. In such event,
Registrant will seek similar products from other countries.
On April 14, 1994, the United States and more than 100 other countries
reached an agreement to reduce, over time, tariff and non-tariff barriers to
world trade in goods and services and to establish a new world trade
organization to replace the General Agreement on Tariffs and Trade next year.
The United States must have congressional approval to be bound by the terms
of the agreement which was the culmination of seven years of negotiations.
Any agreement which may reduce tariff and non-tariff barriers in
international trade is considered beneficial to Registrant's business in the
United States and around the world.
Pier 1 owns three federally registered service marks under which its
company-operated and franchised stores do business. These registrations are
numbered 948,076 and 1,620,518 for the mark PIER 1 IMPORTS and 1,104,059 for
the mark PIER 1.
On May 3, 1994, Pier 1 employed approximately 7,850 persons: 500 were
full time employees at Pier 1's home office, 3,900 were part time employees
in its retail stores and distribution centers and 3,450 were full time
employees in the stores and distribution centers.
Registrant maintains one wholly owned foreign subsidiary, which is
incorporated under the laws of Hong Kong. The foreign subsidiary manages
certain merchandise procurement, export and financial service functions for
Pier 1.
Item 2. Properties.
(a) Properties of Registrant.
As a holding company, Registrant does not own any physical property
materially important to the conduct of its business operations. Registrant's
home office in Fort Worth, Texas is leased by Pier 1.
(b) Properties of Pier 1.
Pier 1 leases certain properties consisting principally of retail
stores, warehouses and office space. In July 1985, Pier 1 entered into a
lease agreement which currently provides 128,770 square feet of office space
in downtown Fort Worth for Registrant's home office. Most of Pier 1's retail
store operations are conducted pursuant to leases which are classified as
operating leases, and at February 26, 1994, Pier 1's minimum operating lease
commitments for various stores and warehouses aggregated approximately $574
million.
Pier 1 currently owns and leases distribution space of
approximately 3 million square feet. Additional space requirements could be
accommodated, if necessary, by leasing additional space.
The following table shows the distribution by state of Pier 1 stores
operated by Pier 1 as of February 26, 1994, prior to the fiscal 1994
provision to close 50 unprofitable stores:
United States and Puerto Rico
Alabama 4 Nebraska 3
Arizona 8 Nevada 3
Arkansas 2 New Hampshire 3
California 88 New Jersey 17
Colorado 14 New Mexico 2
Connecticut 11 New York 36
Delaware 2 North Carolina 11
District of Columbia 1 North Dakota 3
Florida 37 Ohio 34
Georgia 17 Oklahoma 6
Idaho 1 Oregon 5
Illinois 38 Pennsylvania 21
Indiana 9 Puerto Rico 1
Iowa 3 Rhode Island 2
Kansas 4 South Carolina 5
Kentucky 6 South Dakota 1
Louisiana 9 Tennessee 11
Maryland 16 Texas 49
Massachusetts 19 Utah 4
Michigan 22 Virginia 21
Minnesota 14 Washington 14
Mississippi 2 West Virginia 1
Missouri 12 Wisconsin 12
Montana 1 Wyoming 1
Canada
New Brunswick 1
Nova Scotia 2
Ontario 18
Quebec 9
Warehouse properties that are owned or leased by Pier 1 are as follows:
Owned/Leased
Location Approx. Sq. Ft. Facility
Baltimore, Maryland 634,186 sq. ft. Leased
Columbus, Ohio 527,127 sq. ft. Leased
Chicago, Illinois 297,552 sq. ft. Owned
Fort Worth, Texas 454,868 sq. ft. Owned
Rancho Cucamonga, California 515,990 sq. ft. Leased
Savannah, Georgia 393,216 sq. ft. Owned
Montreal, Quebec, Canada 105,489 sq. ft. Leased
Pier 1 participates in a limited partnership to provide for financing
and construction of Pier 1 retail stores. As of May 1, 1994, the partnership
owned 33 retail store sites that are currently open and operating. The
investment by the partnership in land and building approximated $44.3 million
as of the end of April 1994.
Registrant has agreements with unaffiliated groups to lease certain
stores and distribution center space. These unaffiliated groups are
committed to make available up to $101.8 million for development or
acquisition of stores leased by Pier 1. Presently, Registrant has used $99.5
million of that availability. Agreements with these groups mature over the
next five years, and Registrant is continuously monitoring financial markets
to optimize renewal terms. In connection with the financing of 38 stores by
these unaffiliated groups, Registrant has guaranteed the residual value of
these buildings at approximately $25 million at the end of the lease terms.
Item 3. Legal Proceedings.
There are various claims, lawsuits, investigations and pending actions
against Registrant and its subsidiaries incident to the operation of their
businesses. Liability, if any, associated with these matters is not
determinable at February 26, 1994. While a certain number of the lawsuits
involve substantial amounts, it is the opinion of management, after
consultation with counsel, that the ultimate resolutions of such litigation
will not have a material adverse effect on Registrant's financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of Registrant's security
holders during the fourth quarter of Registrant's fiscal year.
Executive Officers of Registrant
CLARK A. JOHNSON, age 63, is Chairman and Chief Executive Officer of
Registrant, is a member of the Executive Committee and since March 1983 has
been a Director of Registrant. From May 1985 to August 1988, Mr. Johnson was
President and Chief Executive Officer of Registrant. He currently serves as
a Director of Albertson's, Inc., InterTAN, Inc., The Actava Group Inc.,
Anacomp, Inc. and Heritage Media Corporation.
MARVIN J. GIROUARD, age 54, is President and Chief Operating Officer of
Registrant and has been a Director since August 1988. From May 1985 until
August 1988, he served as Senior Vice President - Merchandising of Pier 1
Imports (U.S.), Inc., a wholly owned subsidiary of Registrant. Additionally,
he serves as a Director of ENSERCH Corporation.
ROBERT G. HERNDON, age 60, has been Executive Vice President of
Registrant since August 1988 and Chief Financial Officer of Registrant since
November 1985. He served as Senior Vice President from November 1985 to
August 1988. He currently serves as a director of The Leather Factory.
J. RODNEY LAWRENCE, age 48, has been Senior Vice President of Legal
Affairs and Secretary of Registrant and Pier 1 since June 1992, and served as
Vice President of Legal Affairs and Secretary of Registrant from November
1985 to June 1992.
E. MITCHELL WEATHERLY, age 46, has been Senior Vice President of Human
Resources of Registrant since June 1992 and served as Vice President of Human
Resources of Registrant from June 1989 and of Pier 1 from August 1985 to June
1992.
JAMES R. TENER, age 45, has been Senior Vice President of Operations of
Registrant and Pier 1 since June 1992 and served as Vice President of
Operations of Pier 1 from December 1989 to June 1992.
ADRIAN G. LONG, age 54, has been Senior Vice President of Merchandising
of Registrant and Pier 1 since June 1992 and served as Vice President of
Merchandising of Pier 1 from August 1988 to June 1992.
PHIL E. SCHNEIDER, age 43, has been Senior Vice President of Marketing
of Registrant and Pier 1 since May 1993 and served as Vice President of
Advertising of Pier 1 from January 1988 to May 1993.
The officers of Registrant, who are appointed by the Board of Directors,
hold office until their successors are elected and qualified, or until their
earlier death, resignation or removal.
None of the above executive officers has any family relationship with
any other of such officers. None of such officers was selected pursuant to
any arrangement or understanding between him and any other person.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
MARKET PRICE AND DIVIDEND INFORMATION
Market Price Cash Dividends
Fiscal 1994 High Low Per Share
- - ----------- ------ ------ --------------
First Quarter 12 1/2 8 3/8 $0.020
Second Quarter 10 1/8 8 1/4 0.025
Third Quarter 11 1/4 8 1/8 0.025
Fourth Quarter 10 7/8 8 3/8 0.025
Fiscal 1993
- - -----------
First Quarter 11 5/8 8 5/8 $0.015
Second Quarter 9 5/8 6 5/8 0.015
Third Quarter 11 1/2 7 1/8 0.015
Fourth Quarter 13 1/8 10 0.020
Registrant's common stock is traded on the New York Stock Exchange. As
of May 4, 1994, there were approximately 16,000 shareholders of Registrant's
common stock.
Certain of Registrant's existing loan agreements limit specific payments
and distributions, including cash dividends, loans to shareholders and
purchases of treasury stock. Generally Registrant may make "restricted
payments", as defined in the loan agreements, which include the payment of
cash dividends, up to an aggregate maximum of $10 million as of February 26,
1994. Additionally, Registrant is required to maintain various other
financial ratios. Registrant's Board of Directors currently expects to pay
modest cash dividends in fiscal 1995, but intends to retain most of the
future earnings for the expansion of Registrant's business. A cash dividend
of $.025 per share was paid May 18, 1994. Registrant's dividend policy will
depend upon the earnings, financial condition and capital needs of Registrant
and other factors deemed relevant by Registrant's Board of Directors.
Item 6. Selected Financial Data.
Pier 1 Imports, Inc.
FINANCIAL SUMMARY (See Notes)
($ in millions except per share amounts)
10-Year
Compound
Annual Year Ended
Growth ---------------------------------------------------------------------------------------
Rate 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Summary of operations:
Net sales 16.6% $685.4 629.2 586.7 562.7 516.9 414.6 327.2 262.3 203.9 173.5 147.3
Gross profit 15.7% $259.6 246.2 228.4 210.5 210.1 169.7 135.2 109.0 81.6 68.1 60.2
Selling, general and
administrative
expenses 16.2% $195.4 180.2 172.4 169.9 148.8 117.8 96.0 78.6 59.3 51.4 43.6
Depreciation and
amortization 18.9% $15.8 15.1 15.0 14.3 13.1 10.0 7.9 5.5 3.5 2.8 2.8
Store-closing pro-
vision and other $23.3 - - - - - - - - - -
Interest expense, net 19.2% $16.8 15..0 16.3 12.3 9.7 10.0 8.1 3.6 3.6 3.0 2.9
Income before income
taxes and equity in
net income (loss)
of subsidiary (2.6)% $8.4 35.9 30.5 14.0 38.5 31.9 23.2 21.3 15.2 10.9 10.9
Equity in net income
(loss) of subsidiary $ - (3.6) 4.5 (2.4) - - - - - - -
Net income for common
stockholders 2.1% $5.9 23.0 26.3 6.3 25.3 21.6 15.8 12.0 8.6 5.9 4.8
Per common share data
(adjusted for stock
splits and dividends):
Net income for common
stockholders (1.7)% $0.16 0.62 0.71 0.17 0.67 0.67 0.49 0.39 0.32 0.23 0.19
Cash dividends declared $0.10 0.07 - 0.15 0.12 0.08 0.06 0.02 0.01 - -
Stockholders' equity 16.4% $5.34 5.37 4.78 4.28 4.82 3.60 2.92 2.45 1.81 1.35 1.17
Other financial data:
Working capital 19.5% $229.0 225.2 160.0 126.7 144.3 117.2 87.2 96.8 43.4 38.6 38.5
Current ratio 3.5 3.4 3.0 2.1 3.2 2.9 2.3 3.3 2.4 3.5 4.4
Total assets 21.3% $463.3 460.5 386.4 428.9 350.5 299.9 257.9 218.3 106.6 76.5 67.4
Long-term debt 18.4% $145.2 147.2 106.8 140.6 92.6 121.3 96.5 101.5 26.7 26.7 26.9
Stockholders' equity 21.2% $201.1 200.5 177.1 156.3 181.4 115.8 94.1 74.4 48.5 34.3 29.3
Weighted average number
of shares outstanding
and common share
equivalents (millions) 4.2% 37.6 37.4 37.0 36.5 37.6 32.2 32.2 30.4 26.8 25.4 25.0
Effective tax rate 29.0% 25.9 28.3 35.8 33.7 31.5 30.8 43.7 43.2 46.0 51.2
Return on common
stockholders'
average equity 3.0% 12.2 15.8 3.7 17.0 20.6 18.8 19.5 20.8 18.6 22.5
Return on average
total assets 1.3% 5.4 6.5 1.6 7.8 7.7 6.6 7.4 9.4 8.2 7.8
Pre-tax return on sales 1.2% 5.7 5.2 2.5 7.4 7.7 7.1 8.1 7.5 6.3 7.4
Note (1)--This financial summary is prepared on the basis of continuing operations after the distribution of the common shares
of two subsidiaries to shareholders in December 1985, and before the tax benefits of operating loss carryforwards fully
utilized in fiscal 1986.
Note (2)--In fiscal 1994, the following calculations were without the impact of the store-closing provision and other:
--10-year compound annual growth rate:
Income before income taxes and equity in net income (loss) of subsidiary 11.2%
Net income for common stockholders 16.7%
Net income for common stockholders per common share 12.2%
--Ratios on results from operations:
Return on common stockholders' average equity 10.8%
Pre-tax return on sales 4.6%
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Pier 1 Imports, Inc.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Pier 1 Imports, Inc. is North America's largest specialty retailer of
decorative home furnishings, gifts and related items, with stores in 47
states, Puerto Rico and Canada, and additional international operations in
England and Mexico. Registrant reported record sales of $685,393,000 for
fiscal 1994 and net income of $5,933,000, or $.16 per share, after providing
an after-tax special charge of $16,507,000 in the fourth quarter for closing
approximately 50 unprofitable stores and adjusting the carrying value of
General Host common stock. If the special charge had not been provided, net
income for the year would have totalled $22,440,000, or $.60 per share,
compared to $23,017,000, or $.62 per share, last year. Stores in operation
at fiscal year-end aggregated 586 after removing stores to be closed. In
early fiscal 1994, Registrant sold its interest in Sunbelt to General Host.
Fiscal Years Ended February 26, 1994 and February 27, 1993
Net sales in fiscal 1994 grew $56.2 million or 8.9% over the prior year
with same-store sales growth of 4.8%. Last year net total sales grew 7.3%
and same-store sales grew 3.7%. Forty-eight (48) new stores opened during
the year and 17 stores closed, before giving effect to the provision for the
closing of 50 stores.
Gross profit, after related buying and store occupancy costs, expressed
as a percentage of net sales, declined 1.2% from 39.1% in fiscal 1993 to
37.9% in fiscal 1994. Store occupancy costs, expressed as a percentage of
net sales, improved slightly due to higher sales volumes. The sales mix of
furniture and decorative goods remained unchanged as a percentage of sales;
however, promotional markdowns and other discounts caused reduced margins on
these goods. Sales from clothing, jewelry and accessories compared to total
sales declined, as did the gross profit rate due to additional promotional
markdowns taken in fiscal 1994 compared with fiscal 1993.
Selling, general and administrative expenses, including advertising,
improved 0.1% to 28.5% as a percentage of sales in fiscal 1994 compared to
28.6% in fiscal 1993. In total dollars, expenses for fiscal 1994 increased
$15.2 million over the prior year primarily due to 31 net new stores opened
during the year (before giving effect to the provision for the closing of 50
stores), new point-of-sale register equipment installed in all stores, new
selling programs introduced in stores, losses related to the earthquake in
California and severe weather during fiscal 1994.
The store-closing provision of $21.3 million and the $2.0 million
adjustment to the carrying value of General Host common stock were special
charges in fiscal 1994. The store-closing provision reflected the
anticipated costs associated with closing certain underperforming stores.
This provision includes estimated costs related to leases, fixed assets,
relocation, inventory liquidation and losses from operations during the
interim period before closings. The adjustment to the carrying value of
General Host common stock is management's estimate of the portion of the
decline in the market value that is other than temporary.
Operating income declined $25.8 million to $25.1 million in fiscal 1994
from $50.9 million in the prior year, due to the special charges in fiscal
1994 and the gross profit rate decline from fiscal 1993.
During fiscal 1994, cash was utilized to reduce short-term debt, fund
inventory and fixtures for new store development, expand the Pier 1 credit
card program, and pay dividends to shareholders. Due to lower interest
income on declining cash balances, net interest expense increased $1.8
million in fiscal 1994 over the prior year.
Registrant's effective income tax rate for fiscal 1994 increased to 29%
compared to 25.9% in fiscal 1993, primarily due to an increase in the state
tax effective rate.
Registrant's equity in losses from Sunbelt was $3.6 million in fiscal
1993. In April 1993, Registrant completed the sale of its 49.5% interest in
Sunbelt. Sunbelt's results were not included in Registrant's earnings during
fiscal 1994.
Net income for fiscal 1994 aggregated $5.9 million, or $.16 per share,
compared to income of $23.0 million, or $.62 per share last year.
Fiscal Years Ended February 27, 1993 and February 29, 1992
During fiscal 1993, net sales grew $42.6 million or 7.3% with same-store
sales contributing 3.7% over fiscal 1992. Sales from stores opened in fiscal
years 1993 and 1992 increased fiscal 1993 sales levels by 3.6% when compared
to fiscal 1992. Twenty-six new stores (net 20) were opened during fiscal
1993.
Gross profit, after related buying and store occupancy costs, expressed
as a percentage of net sales, increased to 39.1% during fiscal 1993 from
38.9% in fiscal 1992. The improvement was the result of store occupancy
costs which, as a percentage of sales, improved due to higher sales volumes.
Merchandise gross margin in fiscal 1993 remained unchanged as a percentage of
sales from fiscal 1992 due to a similar merchandise mix in both years, and,
although promotional sales discounts increased in fiscal 1993 from a year
ago, there was a reduction in the amount of clearance markdowns and shrinkage
in fiscal 1993 versus fiscal 1992.
Selling, general and administrative expenses, including advertising,
improved 0.8% to 28.6% as a percentage of sales in fiscal 1993 compared to
29.4% in fiscal 1992. In total dollars, expenses for fiscal 1993 increased
$7.7 million over the prior year, principally due to 20 net new stores in
operation by the end of fiscal 1993. This increase resulted in higher
payroll and store-related costs as well as increased catalog and other
promotional advertising. These increased costs from fiscal 1992 were
partially offset by expense control, favorable medical insurance claim
experience, lower Pier 1 credit card expenses, the reduction in scope of the
mid-year physical inventory counts, and decreased litigation costs.
Operating income increased $9.9 million to $50.9 million in fiscal 1993
from $41 million a year earlier, mainly due to revenue growth from both new
store openings and existing store sales and the reductions in controllable
expenses.
Net interest expense decreased $1.4 million during fiscal 1993 from
fiscal 1992 due to a decline in Registrant's debt (net of cash) position and
a slight decrease in Registrant's effective interest rate.
During fiscal 1992, Registrant recorded a one-time gain of $5.9 million
related to the sale of 50.5% of Sunbelt's common stock.
Registrant's effective income tax rate for fiscal 1993 decreased to
25.9% from 28.3% due to the benefit of lower tax rates on income from foreign
subsidiaries and tax-favored investment income.
Registrant recorded equity in losses of Sunbelt during fiscal 1993 of
$3.6 million compared to income of $4.5 million in fiscal 1992. During
fiscal 1993, Registrant included only 49.5% of Sunbelt's earnings during an
unprofitable year, compared to 100% in fiscal 1992 when Sunbelt experienced
greater profits.
Net income for fiscal 1993 of $23.0 million, or $.62 per share, was
below last year's $26.3 million, or $.71 per share, as a result of Sunbelt's
losses in fiscal 1993 and the gain on sale of Sunbelt stock in fiscal 1992.
Liquidity and Capital Resources
The sources of liquidity during the past three years have been earnings
from operations, working capital changes, long-term borrowings, and the sale
of 50.5% of Sunbelt stock in fiscal 1992. Primarily, these funds were
utilized to reduce short-term debt, acquire property and equipment, finance
the expansion of inventories and the Pier 1 credit card program, and pay
dividends.
During fiscal 1994, increases in inventory and capital expenditures were
required to support the opening 48 new stores. Financing for new store land
and building costs is provided by operating leases. Registrant's new store
development plan for fiscal 1995 is approximately 50 stores. Inventory and
fixtures for the development plan are estimated to cost approximately $15
million, which will be funded by operations, working capital and bank lines
of credit. Cash requirements to close 50 stores in fiscal 1995 through the
store-closing program are estimated to aggregate $16 million and will be
funded through working capital and operations.
New store construction funding is expected to be provided by operating
leases. Registrant is expanding existing lease facilities and exploring
additional financing opportunities currently available in the capital
markets. In connection with leases for 38 stores executed in prior years,
Registrant has guaranteed the residual building values at approximately $25
million. Minimum future operating lease commitments expected for fiscal 1995
aggregate to $86 million, and the present value of total existing operating
lease commitments is $372 million. These commitments will be funded from
operating cash flow.
Working capital requirements are currently provided by cash, short-term
revolving lines of credit, including bankers' acceptances and working capital
loans, in an aggregate amount of approximately $165 million. Registrant's
current ratio was 3.5 to 1 at the end of fiscal 1994 compared to 3.4 to 1 a
year earlier.
In connection with Registrant's sale of its Sunbelt investment to
General Host, Registrant provided Sunbelt a line of credit aggregating $12
million, all of which was outstanding at February 26, 1994. In order for
Sunbelt to meet repayment obligations under this line, Sunbelt must obtain
replacement financing. To enable Sunbelt to raise these funds, Registrant
has granted Sunbelt a temporary extension of the credit facility until June
30, 1994. Also, Registrant is committed to provide Sunbelt $25 million of
non-revolving store development financing through April 1996. Registrant has
arranged for a bank group to provide financing by which Registrant leases
from an unaffiliated third party and subleases store sites to Sunbelt. Under
this leasing facility, the leases are required to be refinanced by Sunbelt
from September 1994 to October 1995. If Sunbelt defaults on refinancing
these store leases as the terms expire, Registrant will be required to obtain
other financing. Registrant expects financing of Sunbelt's store sites to
remain at same or similar terms and conditions as are currently in place. In
addition to the above, Registrant also guarantees approximately $4.5 million
of Sunbelt store lease commitments. Registrant's line of credit and leasing
commitments are collateralized by 4.2 million shares of Sunbelt's common
stock.
The Board of Directors anticipates a continuation of its current cash
dividends to shareholders.
In fiscal 1993, Registrant invested in preference stock of The Pier
Retail Group Limited ("The Pier") located in the United Kingdom. Currently,
investment in and loans to The Pier aggregate $3.4 million, with additional
debt guarantees of approximately $4 million. The Pier is a ten-store retail
operation that offers decorative home furnishings and related items in a
store setting similar to that operated by Registrant.
Registrant's inventory purchases are made almost entirely in U.S.
dollars. To the extent purchases are made in foreign currencies, Registrant
usually enters into forward exchange contracts when they are available in
order to manage its exposure to foreign currency exchange fluctuations.
Registrant believes the funds provided from operations, coupled with
Registrant's cash position and available lines of credit, are more than
sufficient to meet its foreseeable cash requirements.
Impact of Inflation and Changing Prices
Inflation has not had a significant impact on the operations of
Registrant.
Impact of New Accounting Standards
The adoption of Financial Accounting Standards Board's Statements No.
114 and 115 is expected to have no impact on Registrant's results of
operations.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Financial Statements:
- - --------------------
Report of Independent Accountants
Consolidated Statement of Operations for the
Years ended February 26, 1994, February 27, 1993
and February 29, 1992
Consolidated Balance Sheet at February 26, 1994 and
February 27, 1993
Consolidated Statement of Cash Flows for the years
ended February 26, 1994, February 27, 1993 and
February 29, 1992
Consolidated Statement of Stockholders' Equity for the
years ended February 26, 1994, February 27, 1993 and
February 29, 1992
Notes To Consolidated Financial Statements
Financial Statement Schedules
For the years Ended February 26, 1994, February 27, 1993
and February 29, 1992
II Amounts Receivable From Related Parties and Underwriters,
Promoters and Employees Other Than Related Parties
V Property, Plant and Equipment
VI Accumulated Depreciation and Amortization of Property
Plant and Equipment
VIII Valuation and Qualifying Accounts and Reserves
IX Short-Term Borrowings
X Supplementary Income Statement Information
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
Pier 1 Imports, Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Pier 1 Imports, Inc.
In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Pier 1 Imports, Inc. and its subsidiaries at February 26, 1994
and February 27, 1993, and the results of their operations and their cash
flows for each of the three years in the period ended February 26, 1994, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Registrant's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse
- - --------------------
Fort Worth, Texas
April 14, 1994
Pier 1 Imports, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands except per share amounts)
Year Ended
----------------------------------------
1994 1993 1992
-------- -------- --------
Net sales $685,393 $629,235 $586,659
Operating costs and expenses
Cost of sales (including buying and
store occupancy) 425,801 383,053 358,216
Selling, general and administrative
expenses 195,444 180,218 172,478
Depreciation and amortization 15,771 15,097 15,006
Store-closing provision and other 23,250 -- --
-------- -------- --------
660,266 578,368 545,700
-------- -------- --------
Operating income 25,127 50,867 40,959
Gain on sale of subsidiary stock -- -- 5,886
Interest expense, net 16,771 14,956 16,312
-------- -------- --------
Income before income taxes and equity
in net income (loss) of subsidiary 8,356 35,911 30,533
Provision for income taxes 2,423 9,309 8,656
-------- -------- --------
Income before equity in net income
(loss) of subsidiary 5,933 26,602 21,877
Equity in net income (loss) of
subsidiary -- (3,585) 4,456
-------- -------- --------
Net income 5,933 23,017 26,333
Cumulative dividends on preferred
stock -- -- 11
-------- -------- --------
Net income available to common stock-
holders $ 5,933 $ 23,017 $ 26,322
======== ======== ========
Net income per common share $.16 $.62 $.71
==== ==== ====
The accompanying notes are an integral part of these financial statements.
/TABLE
Pier 1 Imports, Inc.
CONSOLIDATED BALANCE SHEET
(in thousands)
1994 1993
-------- --------
ASSETS
Current assets:
Cash, including temporary investments of $7,466
and $66,823, respectively $ 17,123 $ 73,585
Accounts receivable, net of allowance for doubtful
accounts of $2,072 and $2,404, respectively 51,722 34,920
Inventories 219,646 189,593
Other current assets 32,901 20,038
-------- --------
Total current assets 321,392 318,136
Properties, net 111,510 108,011
Other assets 30,400 34,350
-------- --------
$463,302 $460,497
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 2,639 $ 33,139
Accounts payable and accrued liabilities 89,772 59,791
-------- --------
Total current liabilities 92,411 92,930
Long-term debt 145,231 147,246
Deferred income taxes 3,407 514
Other non-current liabilities 21,160 19,313
Stockholders' equity:
Common stock, $1.00 par, 100,000,000 shares autho-
rized, 37,617,000 and 37,607,000 outstanding,
respectively 37,617 37,607
Paid-in capital 92,670 93,184
Retained earnings 76,597 74,413
Cumulative translation adjustments (964) (433)
Less--98,000 and 263,000 common shares in
treasury, at cost, respectively (884) (2,599)
Less--subscriptions receivable and unearned
compensation (1,369) (1,678)
Less--unrealized loss on marketable equity securities (2,574) --
-------- --------
201,093 200,494
Commitments and contingent liabilities
-------- --------
$463,302 $460,497
======== ========
The accompanying notes are an integral part of these financial statements.
/TABLE
Pier 1 Imports, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended
----------------------------------
1994 1993 1992
------- ------- -------
Cash flow from operating activities:
Net income $ 5,933 $23,017 $26,333
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation and amortization 15,771 15,097 15,006
Deferred taxes and other (3,006) (764) 4,475
Equity in undistributed losses
(earnings) of subsidiary -- 3,585 (4,456)
Gain on sale of subsidiary stock -- -- (5,886)
Store-closing provision and other 23,250 -- --
Change in cash from:
Inventories (30,053) (8,201) 761
Accounts receivable and other
current assets (17,550) (3,670) 1,054
Accounts payable and accrued expenses 10,103 446 7,557
Other assets, liabilities, and
other, net 1,077 1,011 (13)
Net cash provided by operating ------- ------- -------
activities 5,525 30,521 44,831
------- ------- -------
Cash flow from investing activities:
Capital expenditures (24,617) (12,619) (6,169)
Proceeds from disposition of properties 791 159 14,076
Other investments (2,353) -- --
Net cash (used in)/provided by ------- ------- -------
investing activities (26,179) (12,460) 7,907
------- ------- -------
Cash flow from financing activities:
Cash dividends (3,560) (2,409) (11)
Net proceeds/(repayments) from issuance
of long-term debt -- 36,991 (35,394)
Net (payments)/borrowings under line of
credit agreements (33,000) 9,983 (46,000)
Proceeds from subsidiary stock sale -- -- 18,072
Proceeds from sales of capital stock,
treasury stock, and other 752 1,958 3,144
Net cash (used in)/provided by ------- ------- -------
financing activities (35,808) 46,523 (60,189)
------- ------- -------
Change in cash (56,462) 64,584 (7,451)
Cash at beginning of year 73,585 9,001 16,452
------- ------- -------
Cash at end of year $17,123 $73,585 $ 9,001
======= ======= =======
The accompanying notes are an integral part of these financial statements.
/TABLE
Pier 1 Imports, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED FEBRUARY 26, 1994 (in thousands)
Subscriptions
Cumulative Receivable Unrealized Loss Total
Preferred Common Paid-in Retained Translation Treasury and Unearned on Marketable Stockholders'
Stock Stock Capital Earnings Adjustments Stock Compensation Equity Securities Equity
--------- ------ ------- -------- ----------- -------- ------------ ----------------- -------------
Balance March 2,
1991 $1,500 $36,156 $86,916 $41,133 $1,064 ($6,831) ($3,688) $ -- $156,250
Purchase of treasury
stock -- -- -- -- -- (2,187) 893 -- (1,294)
Restricted stock
grant and
amortization -- -- (37) -- -- (255) 535 -- 243
Adjust to Sunbelt
fiscal year-end
date -- -- -- (1,177) -- -- -- -- (1,177)
Exercise of stock
options and
other -- (2) (1,363) (160) -- 4,722 -- -- 3,197
Currency translation
adjustments -- -- -- -- (494) -- -- -- (494)
Cash dividends -- -- -- (11) -- -- -- -- (11)
Three percent stock
dividend -- 1,071 9,098 (10,169) -- -- -- -- --
Retirement of
preferred stock (1,500) -- (2,311) (2,105) -- -- -- -- (5,916)
Net income -- -- -- 26,333 -- -- -- -- 26,333
------ ------- ------- ------- ------ ------- ------ ------- --------
Balance February 29,
1992 -- 37,225 92,303 53,844 570 (4,551) (2,260) -- 177,131
Purchase of treasury
stock -- -- -- -- -- (1,226) -- -- (1,226)
Restricted stock
grant and
amortization -- -- (18) -- -- (511) 582 -- 53
Exercise of stock
options and
other -- 382 899 (39) -- 3,689 -- -- 4,931
Currency translation
adjustments -- -- -- -- (1,003) -- -- -- (1,003)
Cash dividends -- -- -- (2,409) -- -- -- -- (2,409)
Net income -- -- -- 23,017 -- -- -- -- 23,017
------ ------- ------- ------- ----- ------- ------ ------- --------
Balance February 27,
1993 -- 37,607 93,184 74,413 (433) (2,599) (1,678) -- 200,494
Purchase of treasury
stock -- -- -- -- -- (1,545) -- -- (1,545)
Restricted stock
grant and
amortization -- -- (62) -- -- 9 309 -- 256
Exercise of stock
options and
other -- 10 (452) (189) -- 3,251 -- -- 2,620
Currency translation
adjustments -- -- -- -- (531) -- -- -- (531)
Unrealized loss on
marketable equity
securities -- -- -- -- -- -- -- (2,574) (2,574)
Cash dividends -- -- -- (3,560) -- -- -- -- (3,560)
Net income -- -- -- 5,933 -- -- -- -- 5,933
------ ------- ------- ------- ------- ------- ------- ------- --------
Balance February 26,
1994 $ -- $37,617 $92,670 $76,597 ($ 964) ($ 884) ($1,369) ($2,574) $201,093
====== ======= ======= ======= ======= ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
Pier 1 Imports, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Statement of significant accounting policies
Basis of consolidation - The consolidated financial statements of Pier 1
Imports, Inc. and its consolidated subsidiaries include the accounts of all
subsidiary companies. Material intercompany transactions and balances have
been eliminated.
Fiscal periods - Registrant utilizes 5-4-4 quarterly accounting periods
with the fiscal year of 52 weeks ending on the Saturday nearest the last day
of February. Fiscal 1994 ended February 26, 1994, fiscal 1993 ended February
27, 1993, and fiscal 1992 ended February 29, 1992.
Cash and cash equivalents - Registrant considers all highly liquid
investments with an original maturity date of three months or less to be cash
equivalents. The effect of foreign currency exchange rate changes on cash is
not material.
Marketable equity securities - Registrant records marketable equity
securities at the lower of cost or market. Unrealized gains and losses on
non-current marketable equity securities and related income tax effects are
accumulated and included as a separate component of stockholders' equity.
Adjustments for any impairments in the value (based on market conditions)
that are deemed to be other than temporary are included as a loss in the
current year's operations. In fiscal 1994, General Host Corporation
("General Host") common stock was Registrant's only non-current marketable
equity security.
Translation of foreign currencies - Assets and liabilities are
translated to U.S. dollars at fiscal year-end exchange rates. Income and
expense items are translated at average rates of exchange prevailing during
the year. Translation adjustments are accumulated in a separate component of
stockholders' equity.
Inventories - Inventories are comprised primarily of finished
merchandise and are stated at the lower of average cost or market; cost is
determined principally on the first-in, first-out method.
Properties, maintenance and repairs - Buildings, equipment, furniture
and fixtures, and leasehold interests and improvements are carried at cost
less accumulated depreciation. Depreciation is based on the straight-line
method over estimated useful lives or lease terms, if shorter.
Expenditures for maintenance, repairs and renewals which do not
materially prolong the useful lives of the assets are charged to expense as
incurred. In the case of disposals, assets and the related depreciation are
removed from the accounts and the net amount, less proceeds from disposal, is
credited or charged to income.
Deferred costs - Certain costs associated with the acquisition of new
proprietary credit card accounts are capitalized and amortized over the
average life of an account. Preopening costs associated with new stores are
capitalized and expensed over one year.
Advertising costs - All advertising costs are expensed the first time
the advertising takes place.
Income taxes - Income tax expense for fiscal 1994 and 1993 is based on
the liability method under Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). See Note 9 for further
description. SFAS 109 was issued in February 1992 and was adopted by
Registrant in the fourth quarter retroactively to the beginning of the 1993
fiscal year. The adoption had no effect on Registrant's financial position
or results of operations. Deferred federal income taxes, net of applicable
foreign tax credits, are not provided on the undistributed earnings of
foreign subsidiaries to the extent Registrant intends to permanently reinvest
such earnings abroad. At February 26, 1994, such undistributed earnings
aggregated $9.9 million.
Earnings per share - Earnings per share during a period are computed on
the weighted average number of common shares plus common stock equivalents
outstanding and were 37,648,000, 37,359,000 and 37,023,000 for fiscal 1994,
1993 and 1992, respectively. Computation of weighted average shares
outstanding for fiscal 1994, 1993 and 1992 includes common stock equivalents
of 443,000, 595,000 and 590,000, respectively. The computation of weighted
average number of shares for each year gives retroactive effect to the 2%
stock dividend distributed May 15, 1991 and the 3% stock dividend distributed
November 19, 1991. Fully diluted earnings per share is based on the assumed
conversion of all of the 6-7/8% Convertible Subordinated Notes into common
stock, whereby interest expense and debt issue costs, net of tax, on the 6-
7/8% Convertible Subordinated Notes is added back to net earnings. Fully
diluted earnings per share resulted in less than 3% dilution of primary
earnings per share for each of the three fiscal years ended February 26, 1994
and all periods presented with the exception of the first and second quarters
of fiscal years 1994 and 1993.
Note 2 - Proprietary credit card information
Registrant's Preferred Customer Card is managed and administered by an
unrelated third party. Credit card account origination costs of $976,000,
$480,000 and $528,000 were deferred during fiscal years 1994, 1993 and 1992,
respectively. Registrant is amortizing these costs over 36 months, which
Registrant believes is the approximate average active life of an account.
The credit cards have no expiration date and no annual fee for the use of the
card. At February 26, 1994 and February 27, 1993, deferred costs, net of
amortization, totalled $1,135,000 and $759,000, respectively.
Concentrations of credit risk with respect to customer receivables are
limited due to the large number of customers comprising Registrant's base and
their dispersion across may different geographic areas of the country.
Net credit card charges on Registrant's proprietary credit card accounts
are netted against selling, general and administrative expenses. A summary
of Registrant's credit card results for each of the three fiscal years ended
February 26, 1994 follows (in thousands):
1994 1993 1992
------- ------- -------
[S] [C] [C] [C]
Costs:
Processing fees $ 6,114 $ 5,049 $ 4,875
Bad debt expense 2,195 1,855 2,702
------- ------- -------
8,309 6,904 7,577
------- ------- -------
Income:
Finance charges 6,087 4,998 4,751
Insurance and other income 238 165 185
------- ------- -------
6,325 5,163 4,936
------- ------- -------
Net credit card costs $ 1,984 $ 1,741 $ 2,641
======= ======= =======
Pier 1 Preferred Card sales $98,625 $60,661 $48,998
======= ======= =======
Net cost as a percent of
credit sales 2.0% 2.9% 5.4%
==== ==== ====
Note 3 - Properties
Properties are summarized as follows at February 26, 1994 and February
27, 1993 (in thousands):
1994 1993
------ ------
Land $ 7,205 $ 7,204
Buildings 33,063 32,688
Equipment, furniture and fixtures 90,505 85,413
Leasehold interests and improvements 79,022 71,545
Construction in progress 190 214
-------- --------
209,985 197,064
Less accumulated depreciation and
amortization 98,475 89,053
-------- --------
Properties, net $111,510 $108,011
======== ========
Note 4 - Accounts payable and accrued liabilities/Other non-current
liabilities
The following is a summary of accounts payable and accrued liabilities
and other non-current liabilities at February 26, 1994 and February 27, 1993
(in thousands):
1994 1993
------ ------
Trade accounts payable $27,937 $23,603
Accrued payroll and fringes 16,933 17,637
Accrued taxes, other than income 2,913 2,412
Accrued interest 3,397 3,560
Accrued real property tax 4,697 3,830
Store-closing provision 21,250 --
Other accrued liabilities and expenses 12,645 8,749
------- -------
Accounts payable & accrued liabilities $89,772 $59,791
======= =======
Accrued average rent $15,034 $13,531
Other non-current liabilities 6,126 5,782
------- -------
Other non-current liabilities $21,160 $19,313
======= =======
Note 5 - Store-closing provision and other
The store-closing provision of $21.3 million and the $2.0 million
adjustment to the carrying value of General Host common stock were special
charges in fiscal 1994. The store-closing provision reflects the anticipated
costs associated with closing certain underperforming stores. This provision
includes estimated costs related to leases, fixed assets, relocation,
inventory liquidation and losses from operations during the interim period
before closings. The adjustment to the carrying value of General Host common
stock is management's estimate of the portion of the decline in the market
value that is other than temporary.
Note 6 - Current and long-term debt
Registrant has various lines of credit available which aggregate
approximately $165 million. At year-end, approximately $41 million had been
committed under various outstanding letters of credit issued primarily in
conjunction with overseas merchandise procurements, leaving $124 million of
available lines of credit. The lines may be used for borrowings through
working capital loans, bankers' acceptances or letters of credit. The
weighted average interest rate on short-term borrowings outstanding during
the year was 4.0%.
Long-term debt is summarized as follows (in thousands):
1994 1993
-------- --------
11-1/2% subordinated debentures, net
of original issue discount of
$2,812 and $3,179, respectively $ 22,188 $ 21,821
Industrial revenue bonds 25,000 25,000
11% senior notes 25,000 25,000
6-7/8% convertible subordinated notes 75,000 75,000
Capital lease obligations 475 564
Other 207 --
-------- --------
147,870 147,385
Less - portion due within one year 2,639 139
-------- --------
$145,231 $147,246
======== ========
In July 1983, Registrant issued $25 million of 11-1/2% subordinated
debentures. Interest is payable on January 15 and July 15. Mandatory annual
$2.5 million sinking fund payments will commence in July 1994 and will
continue until they mature in July 2003. The debentures are callable at any
time at par plus accrued interest.
In fiscal 1987, Registrant entered into industrial revenue development
bond loan agreements aggregating $25 million which mature in the year 2026.
Proceeds were used to construct three warehouse distribution facilities.
These bonds are 7-day lower floater put bonds and interest rates float with
the market rate for tax-exempt paper. Interest is payable monthly.
In May 1991, Registrant issued $25 million of 11% senior notes due June
1, 2001. Annual principal reductions in the amount of $5 million are due
beginning June 1, 1997. Interest is payable each June 1 and December 1.
In April 1992, Registrant issued $75 million of 6-7/8% Convertible
Subordinated Notes. These notes are convertible into shares of common stock
of Registrant at $12.00 per share at any time at or prior to maturity which
is April 1, 2002. The notes may be redeemed by Registrant at any time on or
after April 1, 1995 in whole or in part, but redemption prior to the year
2000 would be at a premium. Interest on the notes is payable each April 1
and October 1.
As of February 26, 1994, the fair value of long-term debt was $155.0
million compared to its recorded value of $147.9 million. The fair value of
long-term debt was estimated based on the quoted market values for the same
or similar debt issues, or rates currently available for debt with similar
terms. There are no other significant assets or liabilities with a fair
value different from the recorded value.
Registrant has an interest rate hedging agreement on $100 million of
notional principal with a commercial bank intended to limit Registrant's
exposure to interest rate fluctuations on floating rate obligations. This
agreement was designated as a hedge contract; therefore, the differential to
be paid or received is recognized over the life of the agreement. The fair
value of this hedging agreement was $2.2 million at year end and represented
the estimated amount, which was obtained from counterparties, that Registrant
would pay to terminate the agreement at February 26, 1994.
Long-term debt matures as follows (in thousands):
1995 $ 2,639
1996 2,940
1997 2,566
1998 7,537
1999 7,500
Thereafter 124,688
--------
$147,870
========
Registrant's loan agreements require that Registrant maintain certain
financial ratios and limit specific payments and equity distributions
including cash dividends, loans to shareholders and purchases of treasury
stock. At year-end, the most restrictive of the agreements limits the
aggregate of such payments to $10 million.
Note 7 - Employee benefit plans
In 1986, Registrant adopted a qualified, defined contribution employee
retirement plan. Except for the initial enrollment period, all full- and
part-time personnel who are at least 21 years old and who have been employed
for six months are eligible to participate in the plan. Employees
contributing from 1% to 5% of their compensation receive Registrant
contributions of up to 3%. Registrant contributions to the plan were
$1,114,000, $915,000 and $714,000 in fiscal 1994, 1993 and 1992,
respectively.
In addition, a non-qualified retirement savings plan is available for the
purpose of providing deferred compensation for certain employees whose
benefits under the qualified plan are limited under Section 401(k) of the
Internal Revenue Code.
Registrant maintains a Supplemental Executive Retirement Plan for certain
of its executive officers. The plan provides that upon retirement,
disability, death or other termination of employment a participant will
receive annual benefits. Retirement benefits under the plan vest for each
participant at the rate of 10% per year over 10 years of service.
Registrant's accrued contributions to the plan were $765,000, $554,000 and
$443,000 in fiscal 1994, 1993 and 1992, respectively.
Note 8 - Matters concerning stockholders' equity
Stock purchase plan - Substantially all employees and directors are
eligible to participate in the Pier 1 Imports, Inc. Stock Purchase Plan under
which Registrant's common stock is purchased on behalf of employees at market
prices through regular payroll deductions. Each employee participant may
contribute up to 10% of the eligible portions of annual compensation and
directors may contribute a maximum equal to their monthly directors' fees.
Registrant contributes from 10% to 100% of the participants' contributions,
depending upon length of participation and date of entry into the plan.
Approximately 268,000 shares were allocated to Stock Purchase Plan
participants during fiscal 1994, all of which were purchased on the open
market. Registrant's contributions to the Plan were $867,000, $841,000 and
$830,000 in fiscal years 1994, 1993 and 1992, respectively.
Restricted stock grant plans - In 1993 and 1992, Registrant issued 17,414
shares and 19,157 shares, respectively, of its common stock to key officers
pursuant to a Management Restricted Stock Plan which provides for the
issuance of up to 250,000 shares. The shares of restricted stock were
awarded in conjunction with granting of stock options to those officers, with
the number of shares awarded representing 25% of the number of stock options
granted. The restricted stock will vest at the times and to the extent that
25% of such stock options have been exercised and the option shares have been
held for two years.
In 1991 Registrant issued 292,825 shares of its common stock to key
officers pursuant to a Restricted Stock Grant Plan which provides for
issuance of up to 500,000 shares. These shares vest and the cost of these
shares will be expensed over a ten-year period of continued employment.
Unvested shares are returned to the plan if employment is terminated for any
reason.
Stock option plans - In June 1989, Registrant adopted two stock option
plans, the 1989 Employee Stock Option Plan and the 1989 Non-Employee Director
Stock Option Plan. Options have been granted at the fair market value of
shares on date of grant and may be granted to qualify as Incentive Stock
Options under Section 422 of the Internal Revenue Code or as non-qualified
options. Registrant may grant options covering up to 1,500,000 and 150,000
shares of Registrant's common stock under the 1989 Employee Stock Option Plan
and the 1989 Non-Employee Director Stock Option Plan, respectively.
In 1990, the 1980 Stock Option Plan expired subject to outstanding
granted options covering 589,871 shares at fiscal year-end 1994.
A summary of stock option transactions related to the plans, adjusted for
stock dividends, during the years ended February 26, 1994 and February 27,
1993, is as follows:
Shares Option Prices
--------- -------------
Outstanding at February 29, 1992 1,405,980 $3.16 - 12.30
Options granted 96,649 6.75 - 11.13
Options exercised (428,755) 3.20 - 12.30
Options cancelled or expired (157,376) 4.28 - 10.59
--------- -------------
Outstanding at February 27, 1993 916,498 3.16 - 12.30
Options granted 220,277 8.75 - 9.00
Options exercised (72,864) 3.16 - 8.00
Options cancelled or expired (12,189) 4.28 - 10.59
--------- -------------
Outstanding at February 26, 1994 1,051,722 $3.20 - 12.30
========= =============
At February 26, 1994 and February 27, 1993 outstanding options covering
634,111 and 518,530 shares were exercisable and 832,385 and 1,040,473 shares
were available for grant, respectively.
Transactions with Intermark - Prior to June 1991, Intermark, Inc.
("Intermark") was the largest shareholder and exercised voting control of
Registrant. On June 6, 1991, Intermark sold its shares of Registrant's
common stock through a secondary public offering. On June 17, 1991,
Registrant repurchased all shares of Registrant's preferred stock held by
Intermark. In consideration of such repurchase, Registrant delivered to
Intermark all shares of the preferred stock of a wholly owned subsidiary of
Intermark that were owned by Registrant which had a stated value of $5.8
million on Registrant's balance sheet. The difference in the cost of the
shares held by Registrant and the preferred shares held by Intermark reduced
Registrant's capital by $4.4 million.
Common stock dividend - On March 15, 1991 and November 19, 1991,
Registrant announced stock dividends of 2% and 3%. Based on the closing
price of Registrant's common stock at the date of each dividend, the market
values of the shares distributed were approximately $4,005,000 and
$10,169,000, respectively.
Loans to officers - 1991 - In fiscal 1991, the Board of Directors
approved the sale of 210,000 treasury shares of common stock to certain
corporate officers in exchange for promissory notes of $892,500 which
approximated fair market value. These notes were reflected as a reduction to
stockholders' equity in 1991. In fiscal 1992, the Board of Directors
authorized Registrant to accept approximately 77,600 common shares from these
officers, at the current fair market value, in payment for the outstanding
loan balances.
Loans to officers - 1988 - The Board of Directors approved loans to
certain corporate officers in 1988 to enable those officers to acquire Pier 1
common stock through open market purchases. These demand notes were
unsecured, accrued interest at floating rates, and, if not demanded, would
mature in 1997. In fiscal 1992, the Board of Directors authorized Registrant
to accept approximately 112,600 common shares from certain of these officers
at current market value, which together with cash payments, reduced the
principal amount outstanding at February 26, 1994 to $776,000.
Note 9 - Income taxes
In fiscal 1993, Registrant adopted SFAS 109. Under SFAS 109, the
deferred tax provision is determined under the liability method. Under this
method, deferred tax assets and liabilities are recognized based on
differences between financial statement and tax bases of assets and
liabilities using presently enacted tax rates. Adoption of the statement had
no effect on results of operations.
The provision for income taxes consists of (in thousands):
1994 1993 1992
------ ------ ------
Federal:
Current $5,356 $8,875 $7,232
Deferred (4,966) (1,431) (153)
State:
Current 2,598 1,765 1,237
Deferred (1,127) (302) --
Foreign:
Current 562 402 340
------ ------ ------
$2,423 $9,309 $8,656
====== ====== ======
Deferred tax liabilities (assets) at February 26, 1994 and February 27,
1993 are comprised of the following (in thousands):
1994 1993
-------- -------
Deferred tax liabilities:
Depreciation $ 8,117 $ 5,938
Deferred store costs 4,697 3,947
Other 856 495
-------- -------
13,670 10,380
-------- -------
Deferred tax assets:
Inventory $ (24) $(1,087)
Accrued average rent (6,126) (5,118)
Accrued vacation/deferred compensation (2,494) (2,319)
Deferred gain on sale/leaseback (1,493) (1,672)
Bad debts (708) (850)
Store-closing provision (8,454) --
Other (2,998) (817)
-------- -------
(22,297) (11,863)
-------- -------
$( 8,627) $(1,483)
======== =======
The difference between income taxes at the statutory federal income tax
rate of 35 percent in fiscal 1994, 34 percent in fiscal 1993 and fiscal 1992,
and income tax reported in the consolidated statement of operations is as
follows (in thousands):
1994 1993 1992
------ ------- -------
Tax at statutory federal tax rate $2,925 $12,208 $10,381
Tax treatment on sale of subsidiary
stock (282) -- (2,312)
State income taxes, net of federal
benefit 856 966 816
Tax-favored investment income (284) (574) --
Targeted jobs tax credit (395) (332) (229)
Foreign income taxed at lower rates (528) (2,959) --
Other, net 131 -- --
------ -------- -------
$2,423 $ 9,309 $ 8,656
====== ======== =======
Note 10 - Commitments and lease obligations
Registrant leases certain property consisting principally of retail
stores, warehouses and transportation equipment under leases expiring through
the year 2012. Substantially all retail store locations are leased, for
terms varying from 10 to 15 years with varying renewal options. Certain
leases provide for additional rental payments based on a percentage of sales
in excess of a specified base.
Capital leases are recorded in Registrant's balance sheet as assets along
with the related debt obligation. All other lease obligations are operating
leases, and payments are reflected in Registrant's consolidated statement of
operations as rental expense. The composition of capital leases reflected as
assets in the accompanying consolidated balance sheet is as follows (in
thousands):
1994 1993
------ ------
Buildings $ 477 $ 477
Equipment, furniture and fixtures 538 538
------ ------
1,015 1,015
Less accumulated depreciation 827 738
------ ------
$ 188 $ 277
====== ======
At February 26, 1994, Registrant has the following minimum lease
commitments in the years indicated (in thousands):
Capital Operating
Fiscal Year Leases Leases
----------- ------- ---------
1995 $285 $ 86,025
1996 205 83,125
1997 119 75,968
1998 87 69,372
1999 -- 57,618
Thereafter -- 201,629
---- --------
Total lease commitments 696 $573,737
========
Less imputed interest 221
----
Present value of total capital lease
obligations including current
portion of $234 $475
====
Present value of total operating lease
commitments $372,000
========
Rental expense incurred was $89,518,000, $85,511,000 and $81,042,000
including contingent rentals of $788,000, $821,000 and $559,000 based upon a
percentage of sales and net of sublease incomes totalling $1,252,000,
$870,000 and $836,000 in fiscal 1994, 1993 and 1992, respectively.
Registrant has agreements with unaffiliated groups to lease certain
stores and distribution center space. These unaffiliated groups are
presently committed to make available up to $101.8 million for development or
acquisition of stores leased by Registrant. Presently, Registrant has used
$99.5 million of that availability. Agreements with these groups mature over
the next five years, and Registrant's management is continuously monitoring
financial markets to optimize renewal terms. In connection with the
financing of 38 stores by these unaffiliated groups, Registrant has
guaranteed the residual value of these buildings at approximately $25 million
at the end of the lease terms.
In fiscal 1993, Registrant invested in preference stock of The Pier
Retail Group Limited ("The Pier"), located in the United Kingdom. Registrant
guarantees approximately $4 million of debt for The Pier.
Note 11 - Litigation
There are various claims, lawsuits, investigations and pending actions
against Registrant and its subsidiaries incident to the operations of its
business. Liability, if any, associated with these matters is not
determinable at February 26, 1994; however, Registrant considers them to be
ordinary and routine in nature. While certain of the lawsuits involve
substantial amounts, it is the opinion of management that the ultimate
resolution of such litigation will not have a material adverse effect on
Registrant's financial position.
Note 12 - Cash flow information
The following is supplemental cash flow information (in thousands):
1994 1993 1992
------- ------- -------
Cash paid during the year for:
Interest $20,445 $16,835 $14,033
Income taxes $17,732 $17,126 $ 4,439
Note 13 - Investment in Sunbelt Nursery Group, Inc. and subsequent event
At fiscal year-end 1993, Registrant had a 49.5% ownership interest in
Sunbelt. Registrant reported the results of Sunbelt using the equity method
of accounting. Under such method, Registrant's share of net earnings (or
losses) of Sunbelt was included as a separate item in the consolidated
statement of operations.
In April 1993, Registrant completed the sale of its 49.5% ownership
interest in Sunbelt to General Host. Registrant received as compensation for
the Sunbelt shares 1.9 million shares of General Host common stock, which
represented approximately 9.7% of that company's outstanding common stock.
In connection with Registrant's sale of its Sunbelt investment to General
Host, Registrant provided Sunbelt a line of credit aggregating $12 million,
all of which was outstanding at February 26, 1994. In order for Sunbelt to
meet repayment obligations under this line, Sunbelt must obtain replacement
financing. To enable Sunbelt to raise these funds, Registrant has granted
Sunbelt a temporary extension of the credit facility until June 30, 1994.
Also, Registrant is committed to provide Sunbelt $25 million of non-revolving
store development financing through April 1996. Registrant has arranged for
a bank group to provide the current financing by which Registrant leases from
an unaffiliated third party and subleases store sites to Sunbelt. Under this
leasing facility, the leases are required to be refinanced by Sunbelt from
September 1994 to October 1995. If Sunbelt defaults on refinancing these
store leases as the terms expire, Registrant will be required to obtain other
financing. Registrant expects financing of Sunbelt's store sites to remain
at same or similar terms and conditions as are currently in place. In
addition to the above, Registrant also guarantees approximately $4.5 million
of Sunbelt store lease commitments. Registrant's line of credit and leasing
commitments are collateralized by 4.2 million shares of Sunbelt's common
stock.
Note 14 - Selected quarterly financial data (unaudited)
Summarized quarterly financial data (in thousands of dollars except per
share amounts) for the years ended February 26, 1994 and February 27, 1993
are set forth below:
Three Months Ended
-----------------------------------------------
Fiscal 1994 5/29/93 8/28/93 11/27/93 2/26/94
----------- -------- -------- -------- --------
Net sales $158,593 $181,441 $163,457 $181,902
======= ======= ======= =======
Gross profit $61,690 $65,834 $63,022 $69,046
======= ======= ======= =======
Net income (loss) $4,702 $7,343 $4,042 ($10,154)
====== ====== ====== ========
Primary net income (loss)
per common share(2) $.12 $.20 $.11 ($.27)
==== ==== ==== =====
Three Months Ended
-----------------------------------------------
Fiscal 1993 5/30/92 8/29/92 11/28/92 2/27/93
----------- -------- -------- -------- --------
Net sales $152,083 $166,416 $144,923 $165,813
======== ======== ======== ========
Gross profit $59,732 $61,548 $56,655 $68,247
======= ======= ======= =======
Net income(1) $8,055 $7,453 $2,247 $5,262
====== ====== ====== ======
Primary net income per
common share(2) $.22 $.20 $.06 $.14
==== ==== ==== ====
(1) SFAS 109 was issued in February 1992 and was adopted by Registrant in
the fourth quarter retroactively to the beginning of the 1993 fiscal year.
The adoption had no effect on Registrant's financial position or results of
operations.
(2) Fully diluted earnings per share resulted in less than 3% dilution of
primary earnings per share for both years and for all periods presented with
the exception of a $.01 dilution in the first and second quarters of fiscal
years 1994 and 1993.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of Registrant.
Information required by this Item is incorporated herein by reference to
the Sections entitled "Election of Directors" and "Certain Relationships and
Related Transactions" set forth in Registrant's Proxy Statement for its 1994
Annual Meeting of Shareholders.
The information regarding compliance with Section 16(a) of the
Securities Exchange Act of 1934 is incorporated herein by reference to the
Section entitled "Certain Relationships and Related Transactions" set forth
in Registrant's Proxy Statement for its 1994 Annual Meeting of Shareholders.
Item 11. Executive Compensation.
The information required by this Item is incorporated herein by
reference to the Section entitled "Executive Compensation" set forth in
Registrant's Proxy Statement for its 1994 Annual Meeting of Shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this Item is incorporated herein by
reference to the Sections entitled "Security Ownership of Management" set
forth in Registrant's Proxy Statement for its 1994 Annual Meeting of
Shareholders.
Item 13. Certain Relationships and Related Transactions.
The information required by this Item is incorporated herein by
reference to the Section entitled "Certain Relationships and Related
Transactions" set forth in Registrant's Proxy Statement for its 1994 Annual
Meeting of Shareholders.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following consolidated financial statements, schedules and
exhibits are filed as part of this report.
1. Financial Statements
* Report of Independent Accountants
* Consolidated Statement of Operations for the years ended
February 26, 1994, February 27, 1993 and February 29, 1992
* Consolidated Balance Sheet at February 26, 1994 and February
27, 1993
* Consolidated Statement of Cash Flows for the years ended
February 26, 1994, February 27, 1993 and February 29, 1992
* Consolidated Statement of Stockholders' Equity for the years
ended February 26, 1994, February 27, 1993 and February 29,
1992
2. Financial Statement Schedules
Report of Independent Accountants
II - Amounts Receivable From Related Parties and
Underwriters, Promoters and Employees Other Than
Related Parties
V - Property, Plant and Equipment
VI - Accumulated Depreciation and Amortization of Property,
Plant and Equipment
VIII - Valuation and Qualifying Accounts and Reserves
IX - Short-Term Borrowings
X - Supplementary Income Statement Information
Schedules other than those referred to above have been omitted because
they are not required or are not applicable or because the information
required to be set forth therein either is not material or is included in the
financial statements or notes thereto.
(b) Reports on Form 8-K
Not applicable
(c) Exhibits
See Exhibit Index.
(d) Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: PIER 1 IMPORTS, INC.
May 23, 1994 By: /s/ Clark A. Johnson
Clark A. Johnson, Chairman
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities on May 23, 1994.
Signature Title
/s/ Robert G. Herndon Chief Financial Officer
Robert G. Herndon
/s/ Charles H. Turner Controller and
Charles H. Turner Principal Accounting Officer
/s/ Clark A. Johnson Chairman of the Board
Clark A. Johnson of Directors
/s/ Marvin J. Girouard Director
Marvin J. Girouard
/s/ Charles R. Scott Director
Charles R. Scott
/s/ Sally F. McKenzie Director
Sally F. McKenzie
/s/ James M. Hoak, Jr. Director
James M. Hoak, Jr.
/s/ Kenneth N. Pontikes Director
Kenneth N. Pontikes
SCHEDULE II
PIER 1 IMPORTS, INC. AND CONSOLIDATED SUBSIDIARIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(in thousands)
Deductions
Balance at ----------------------- Balance at End of Period
Beginning of Amounts Amounts ------------------------
Name of Debtor Period Additions Collected Written Off Current Noncurrent
-------------- ------------ --------- --------- ----------- ------- ----------
Year ended February 26, 1994:
- - ----------------------------
Clark A. Johnson $ 758 $ 18 $ -- $ -- $ -- $776(1)
Triton Group, Ltd. 161 9 -- (170) -- --(2)
Mellon/Pier 1 Properties, LP 6 38 (37) -- 7 --(5)
Sunbelt Nursery Group, Inc. 3,105 1,576 (2,681) -- 2,000 --(7)
Year ended February 27, 1993:
- - ----------------------------
Clark A. Johnson $ 758 $ -- $ -- $ -- $ 758 $ --(1)
Triton Group, Ltd. 128 108 (75) -- 161 --(3)
Mellon/Pier 1 Properties, LP 156 84 (234) -- 6 --(5)
Sunbelt Nursery Group, Inc. 1,039 3,884 (1,818) -- 3,105 --(6)
Year ended February 29, 1992:
- - ----------------------------
Clark A. Johnson $1,714 $ -- ($ 956) $ -- $ -- $758(1)(4)
Marvin J. Girouard 1,110 -- (1,110) -- -- --(1)(4)
J. Rodney Lawrence 103 -- (103) -- -- --(1)
Robert G. Herndon 684 -- (684) -- -- --(1)
E. Mitchell Weatherly 119 -- (119) -- -- --(1)
Triton Group, Ltd. 155 -- (27) -- 27 101(3)
Mellon/Pier 1 Properties, LP 311 478 (633) -- 156 --(5)
Sunbelt Nursery Group, Inc. -- 1,039 -- -- 1,039 --(5)
(1) Note is payable on demand, matures 12/31/97, and the interest is variable and calculated at 1/2% plus a variable short-term
debt rate. Maturity date for fiscal 1993 and 1992 was January 8, 1994.
(2) Due to bankruptcy filing, Triton receivables were written off in May 1993.
(3) Principal and interest were payable in quarterly installments and interest accruals were based on the lesser of (a) 10% per
annum or (b) the maximum lawful rate which may be contracted for, charged, taken, received by Payee in accordance with
applicable law.
(4) Unsecured promissory notes with a maturity date of 11/5/96 and interest rate of 9% were paid off early during fiscal 1992.
(5) Non-interest bearing short-term receivable.
(6) $3,000,000 of 1993 addition is portion of an unsecured promissory note due March 31, 1993. Interest is payable monthly and
accrues at the lesser of (a) 8.5% per annum or (b) the maximum lawful rate which may be contracted for, charged, taken, received
or reserved by Payee in accordance with applicable law.
(7) Maturity date of the $2,000,000 was April 28, 1994; however, Registrant granted Sunbelt a temporary extension until June
30, 1994 in order for Sunbelt to obtain financing. Subsequent to February 26, 1994, Registrant purchased $10 million of
Sunbelt's bank debt that was previously guaranteed by Registrant. These amounts are due and payable to Registrant on June 30,
1994.
SCHEDULE V
PIER 1 IMPORTS, INC. AND CONSOLIDATED SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
(in thousands)
Balance at Retirements, Balance at
Beginning of Sales and End of
Period Additions, at Cost Other Period
------------ ------------------ ------------ ----------
Year ended February 26, 1994:
- - ----------------------------
Land $ 7,204 $ 1 $ -- $ 7,205
Buildings 32,688 477 (102) 33,063
Equipment, furniture and fixtures 85,413 12,958 (7,866) 90,505
Leasehold interest and
improvements 71,545 8,277 (800) 79,022
Construction in progress 214 -- (24) 190
-------- ------- -------- --------
$197,064 $21,713 ($ 8,792) $209,985
======== ======= ======== ========
Year ended February 27, 1993:
- - ----------------------------
Land $ 7,841 $ -- ($ 637) $ 7,204
Buildings 33,027 94 (433) 32,688
Equipment, furniture and fixtures 79,965 8,045 (2,597) 85,413
Leasehold interest and
improvements 67,462 4,572 (489) 71,545
Construction in progress 259 -- (45) 214
-------- ------- ------- --------
$188,554 $12,711 ($4,201) $197,064
======== ======= ======= ========
Year ended February 29, 1992:
- - ----------------------------
Land $ 9,829 $ 1 ($ 1,989) $ 7,841
Buildings 39,909 384 (7,266) 33,027
Equipment, furniture and fixtures 79,397 4,948 (4,380) 79,965
Leasehold interest and
improvements 65,548 2,684 (770) 67,462
Construction in progress 2,107 -- (1,848) 259
-------- ------- -------- --------
$196,790 $ 8,017 ($16,253)(1) $188,554
======== ======= ======== ========
(1) Includes sale/leaseback of a distribution center which had a cost of $9,225.
/TABLE
SCHEDULE VI
PIER 1 IMPORTS, INC. AND CONSOLIDATED SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PROPERTY, PLANT AND EQUIPMENT
(in thousands)
Balance at Retirements, Balance at
Beginning of Additions Charged Sales and End of
Period to Profit and Loss Other Period
------------ ------------------ ------------ ----------
Year ended February 26, 1994:
- - ----------------------------
Buildings $ 5,565 $ 1,112 $ -- $ 6,677
Equipment, furniture and fixtures 54,021 10,792 (7,460) 57,353
Leasehold interest and
improvements 29,467 5,655 (677) 34,445
------- ------- ------ -------
$89,053 $17,559 ($8,137) $98,475
======= ======= ====== =======
Year ended February 27, 1993:
- - ----------------------------
Buildings $ 4,546 $ 1,109 ($ 90) $ 5,565
Equipment, furniture and fixtures 44,544 11,174 (1,697) 54,021
Leasehold interest and
improvements 24,952 4,911 (396) 29,467
------- ------- ------- -------
$74,042 $17,194 ($2,183) $89,053
======= ======= ======= =======
Year ended February 29, 1992:
- - ----------------------------
Buildings $ 4,080 $ 1,216 ($ 750) $ 4,546
Equipment, furniture and fixtures 35,030 10,857 (1,343) 44,544
Leasehold interest and
improvements 20,287 5,320 (655) 24,952
------- ------- ------ -------
$59,397 $17,393 ($2,748)(1) $74,042
======= ======= ====== =======
(1) Includes sale/leaseback of a distribution center which has accumulated depreciation of $750 thousand at the date
of sale.
Note: Refer to Note 1 of the Notes to Consolidated Financial Statements for a description of Registrant's depreciation
methods.
/TABLE
SCHEDULE VIII
PIER 1 IMPORTS, INC. AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(in thousands)
RESERVE FOR DOUBTFUL ACCOUNTS
-----------------------------
Year Ended
-----------------------------------------------------
February 26, February 27, February 29,
1994 1993 1992
------------ ------------ ------------
Balance at beginning of year $ 2,404 $ 3,185 $ 3,090
Additions charged to income 2,097 2,327 2,785
Balances written off, net of recoveries (2,429) (3,108) (2,690)
------- ------- -------
Balance at end of year $ 2,072 $ 2,404 $ 3,185
======= ======= =======
SCHEDULE IX
PIER 1 IMPORTS, INC. AND CONSOLIDATED SUBSIDIARIES
SHORT-TERM BORROWINGS
(in thousands)
Maximum Average Weighted
Weighted Amount Amount Average
Description Balance at Average Outstanding Outstanding Interest Rate
of End of Interest During the During the During the
Borrowings Period Rate Period Period Period
(A) (B) (C)
----------- ---------- -------- ----------- ----------- -------------
February 26, 1994:
- - -----------------
Banks $ -- -- $47,000 $23,242 4.01%
February 27, 1993:
- - -----------------
Banks $33,000 3.97% $36,000 $28,631 4.39%
February 29, 1992:
- - -----------------
Banks $23,000 4.82% $78,500 $48,714 6.69%
(A) The weighted average interest rate on the ending balance is computed by dividing the actual interest expense on the year-
end short-term debt by the short-term debt outstanding at year-end.
(B) The average amount outstanding during the period is computed by dividing the total of daily outstanding balances by the
number of days in the year.
(C) The weighted average interest rate during the period is computed by dividing the actual short-term interest expense by the
average short-term debt outstanding.
/TABLE
SCHEDULE X
PIER 1 IMPORTS, INC. AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
(in thousands)
Year Ended
------------------------------------------------
February 26, February 27, February 29,
1994 1993 1992
------------ ------------ ------------
Taxes, other than payroll and income taxes $14,070 $13,012 $10,865
Advertising costs 29,385 28,661 25,447
Registrant has no material royalties, depreciation and amortization of intangible assets, preoperating
costs and similar deferrals; maintenance and repairs are immaterial.
EXHIBIT INDEX
Exhibit
No. Description Page No.
2.1 Stock Purchase Agreement (filed as Exhibit 1 to
dated as of April 2, 1993 by Registrant's Statement on
and between General Host Schedule 13-D dated April 2,
Corporation and Registrant 1993 and incorporated
herein by reference)
3.(i) Certificate of Incorporation (filed as Exhibit 3(a) to
and Amendments thereto Registrant's Form 10-K for the
fiscal year ended March 3, 1990
and incorporated herein by
reference)
3.(ii) Bylaws of Registrant, (filed as Exhibit 3(b) to
Restated as of September 16, Registrant's Form 10-K for
1991 the fiscal year ended February
28, 1993 and incorporated
herein by reference)
4.1 Indenture, dated April 9, (filed as Exhibit 4(a) to
1992, between the Registrant Registrant's Form 10-K for
and Ameritrust Texas the fiscal year ended
National Association, as February 29, 1992 and
Trustee, relating to 6- incorporated herein by
7/8% Convertible reference)
Subordinated Notes Due
2002.
As permitted by Item 601(b)(4)(iii) of Regulation S-K, Exhibit
Number 4 omits instruments relating to issues of long-term debt of
the Registrant and its subsidiaries, the total authorized principal
amount of which for each issue does not exceed 10% of the
consolidated total assets of the Registrant and its subsidiaries.
The Registrant agrees to furnish a copy of any such instrument to
the Securities and Exchange Commission upon request.
10.1* Registrant's Amended and (filed as Exhibit 10(a) to
Restated Stock Purchase Plan Registrant's Form 10-K for
as of March 25, 1987 the fiscal year ended February
28, 1993 and incorporated
herein by reference)
10.2.1 Lease Contract dated July 19, (filed as Exhibit 10(b) to
1985, between Pier 1 and Registrant's Form 10-K for
City Center Development the fiscal year ended
Co., together with the February 28, 1993 and
First through Seventh incorporated herein by
Amendments reference)
10.2.2 Eighth Amendment to Lease Contract
dated as of September 1, 1993,
between Pier 1 and City Center
Development Co.
10.3* Form of Indemnity Agreement (filed as Exhibit 10(l) to
between the Registrant and Registrant's Form 10-K for
the directors and executive the fiscal year ended
officers of the Registrant. February 29, 1992 and
incorporated herein by
reference)
10.4* Registrant's Supplemental (filed as Exhibit 10(d) to
Executive Retirement Plan Registrant's Form 10-K for
effective May 1, 1986, as the fiscal year ended
amended February 28, 1993 and
incorporated herein by
reference)
10.5* Registrant's Benefit (filed as Exhibit 10(y) to
Restoration Plan, effective Registrant's Form 10-K for
April 1, 1990 the fiscal year ended March
2, 1991 and incorporated
herein by reference)
10.6* Registrant's Restricted Stock (filed as Exhibit 10(p) to
Plan effective March 5, 1990 the fiscal year ended March
3, 1990 and incorporated herein
by reference)
10.7* Registrant's Management Restricted
Stock Plan effective June 24, 1993
10.8* Registrant's 1989 Employee (filed as Exhibit 10(q) to
Stock Option Plan, effective Registrant's Form 10-K for
June 29, 1989 the fiscal year ended March
3, 1990 and incorporated
herein by reference)
10.9* Registrant's 1989 (filed as Exhibit 10(r) to
Non-Employee Director Stock Registrant's Form 10-K for
Option Plan effective June the fiscal year ended March
29, 1989 3, 1990 and incorporated
herein by reference)
10.10* Form of Post-Employment (filed as Exhibit 10(r) to
Consulting Agreement between Registrant's Form 10-K for
the Registrant and its the fiscal year ended
executive officers February 29, 1992 and
incorporated herein by
reference)
10.11.1 Revolving Credit Loan (filed as Exhibit 10(j) to
Agreement dated as of August Registrant's Form 10-K for
14, 1992, among Registrant, the fiscal year ended
Pier 1 Imports (U.S.), Inc. February 28, 1993 and
and Bank One, Texas, N.A. incorporated herein by
reference)
10.11.2 First, Second and Third Amendments
to Revolving Credit Loan Agreement
dated as of August 14, 1992, among
Registrant, Pier 1 Imports (U.S.),
Inc. and Bank One, Texas, N.A.
10.12 Lease Guarantee dated as of December
30, 1992 among Registrant, Pier 1
Licensing, Inc. (successor in interest
to CMEI, Inc.), and Pier Set, Inc.,
together with Supplements and First,
Second and Third Amendments
10.13 Lease Guarantee dated as of December
30, 1992 between Registrant and Pier
Group, Inc., together with First and
Second Amendments
10.14 Lease Guarantee dated as of December
30, 1992 among Registrant, Pier 1
Imports (U.S.), Inc. and Pier Group,
Inc., together with First and Second
Amendments
10.15.1 Sunbelt Credit Facilities (filed as Exhibit 10.12 to
Agreement dated as of April Sunbelt Nursery Group, Inc.'s
28, 1993 between Registrant Form 10-K for the fiscal year
and Sunbelt ended January 31, 1993 and
incorporated herein by
reference)
10.15.2 Extension Agreement dated April
25, 1994, and Waiver Agreement
dated May 12, 1994, among
Registrant, Sunbelt and Pier-SNG, Inc.
10.16* Registrant's Senior Management
Annual Bonus Plan
10.17* Registrant's Executive Bonus Plan
10.18* Registrant's Management Medical and
Tax Benefit Plans
21 Roster of Subsidiaries of Registrant
23 Consent of independent accountants
to the incorporation by reference of
their reports regarding the financial
statements filed herewith into (i)
Registration Statement on Form S-8
(Reg. No. 33-9970) relating to
Registrant's 1980 Stock Option Plan,
(ii) Registration Statement on Form
S-8 (Reg. No. 33-32166) relating to
Registrant's 1989 Employee Stock Option
Plan and 1989 Non-Employee Director
Stock Option Plan and (iii) Registration
Statement on Form S-8 (Reg. No. 33-50278)
relating to Registrant's Employee Stock
Purchase Plan.
__________________
* Management Contracts and Compensatory Plans