EX-99.1 2 a5375589ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Pier 1 Imports, Inc. Reports Fourth Quarter and Fiscal 2007 Financial Results FORT WORTH, Texas--(BUSINESS WIRE)--April 12, 2007--Pier 1 Imports, Inc. (NYSE:PIR) today announced results for the fourth quarter and fiscal year ended March 3, 2007. For the fourth quarter, the Company reported a net loss from continuing operations of $58,696,000, or $0.67 per share. For the fiscal year, the Company reported a net loss from continuing operations of $227,238,000, or $2.59 per share. Results for both periods included unusual charges and the effects of adopting a new accounting pronouncement, which are detailed below. Excluding these charges, the Company's net loss from continuing operations on a non-GAAP basis for the quarter would have been $12,937,000 or $0.14 per share and $113,121,000, or $1.28 per share for the fiscal year. Fourth Quarter Results Fourth quarter sales were $473,712,000, down 6.4% from last year's sales of $506,022,000, and comparable store sales declined 11.0%. For the fourth quarter, merchandise margins decreased 610 basis points from the year-ago period related primarily to an inventory valuation charge of approximately $32.5 million, or 690 basis points. This inventory charge was required to value certain excess inventory at the lower of cost or market based on a strategic decision to expedite the process to clear out the inventory by the end of the first quarter. This merchandise is comprised primarily of modern craftsman style items. Gross profit, after store occupancy costs, declined 740 basis points versus last year. Selling, general and administrative costs increased 4.5% from the same period last year primarily as a result of increased marketing expenses and the effects of unusual and other one-time charges. During the quarter, the Company incurred settlement and curtailment charges of $6.8 million in connection with its retirement plans. The charges were incurred as a result of write-offs of prior service cost and unamortized actuarial gains and losses in a defined benefit pension plan that was left with no active participants after the retirement of two senior executives whose obligations were settled in fiscal 2007. The Company's reported net loss of $58.7 million or $0.67 per share for the fourth quarter included $45.8 million in unusual and other one-time charges. The charges consisted of the following: a non-cash charge of $32.5 million or $0.37 per share for excess inventory write-down; one-time charges of $6.8 million or $0.08 per share in settlement and curtailment charges incurred in connection with retirement plans; a non-cash charge of $4.1 million or $0.05 per share in connection with goodwill impairment of Pier 1 Kids; and a non-cash charge of $2.4 million or $0.03 per share for store-level asset impairment charges. Reconciliation of 4th Quarter GAAP to Non-GAAP Loss per Share from Continuing Operations Fourth Quarter FY07 FY06 ------- ------- Loss per Share from Continuing Operations, less impact of: ($0.67) ($0.08) Write-down of excess inventory (0.37) - Settlement and curtailment charges, retirement plan (0.08) - Goodwill impairment for Pier 1 Kids (0.05) - Store-level asset impairments (0.03) (0.04) ------- ------- Non-GAAP Loss per Share from Continuing Operations ($0.14) ($0.04) ======= ======= Full Year Fiscal 2007 Results Total fiscal 2007 sales were $1,623,216,000, a decrease of 8.6% from last year's sales of $1,776,701,000, and comparable store sales declined 11.3%. Merchandise margins decreased 230 basis points from the prior year and gross profit, after store occupancy costs, declined 470 basis points versus last year. Selling, general and administrative costs increased 10.3% primarily due to increases in marketing expenses, impairment charges and other one-time or unusual charges. Federal income tax benefit recorded for the year was related only to losses that can be carried back to offset income in prior years. Although any additional losses may be carried forward for several years to offset future income, no tax benefit will be provided until such future earnings are realized. The Company's reported fiscal 2007 net loss from continuing operations of $227.2 million or $2.59 per share included the effects of $114.1 million in unusual charges. These charges recorded during the year included the following: a non-cash charge of $32.5 million or $0.37 per share for excess inventory write-downs; a non-cash charge of $32.3 million or $0.37 per share for store-level asset impairment charges; a non-cash charge of $24.6 million or $0.28 per share to establish a valuation allowance against the Company's net deferred income tax assets that arose in prior years; one-time charges of $6.8 million or $0.08 per share in settlement and curtailment charges incurred in connection with retirement plans; a charge of $4.9 million or $0.06 per share attributable to litigation settlements and related costs; a non-cash charge of $4.5 million or $0.05 per share for stock option expense in compliance with SFAS 123R; a $4.5 million or $0.05 per share charge for relocation and integration of the Pier 1 Kids' headquarters and warehouse into Pier 1 facilities; and a non-cash charge of $4.1 million or $0.05 per share in connection with goodwill impairment of Pier 1 Kids. Reconciliation of Full Year GAAP to Non-GAAP Loss per Share from Continuing Operations Full Year FY07 FY06 ------- ------- Loss per Share from Continuing Operations, less impact of: ($2.59) ($0.32) Write-down of excess inventory (0.37) - Store-level asset impairments (0.37) (0.04) Deferred tax asset valuation allowance (0.28) - Settlement and curtailment charges, retirement plan (0.08) - Litigation settlements and legal fees (0.06) - SFAS 123R stock option expense (0.05) - Pier 1 Kids relocation and integration (0.05) - Goodwill impairment for Pier 1 Kids (0.05) - ------- ------- Non-GAAP Loss per Share from Continuing Operations ($1.28) ($0.28) ======= ======= The Company ended the year with cash and cash equivalents of $167.2 million and no cash borrowings under its line of credit. Inventories at the end of the year were $360.1 million, down $8.9 million, or 2.4% from last year's $369.0 million. Returning to Profitability and Beyond The Company will host a conference call to discuss the fourth quarter and fiscal year 2007 results, at 10:00 a.m. Central Time today. During the call, President and CEO, Alex Smith intends to outline the Company's business priorities and initiatives for fiscal 2008. Board of Directors At this year's annual shareholders' meeting, the number of seats on the Company's Board of Directors will increase from seven to eight. In addition to each current director, other than James M. Hoak, Jr., the Company's Board of Directors has nominated Cece Smith and Robert B. Holland, III, to stand for election to the Board of Directors. On March 21, 2007, James M. Hoak, Jr. announced his desire to not stand for re-election. The Company's annual meeting for shareholders of record as of April 30, 2007 will be held in Fort Worth, Texas on June 28, 2007. More information about the meeting will be provided in the Company's notice and proxy statement for its annual meeting of shareholders which the Company plans to mail to shareholders of record on or about May 24, 2007. Sales Reporting Schedule Changes Going forward, the Company will no longer release sales information on a monthly basis and will shift to a quarterly reporting schedule. The Company believes that a quarterly reporting schedule will be more beneficial to its shareholders during this transition period by allowing more meaningful comparisons of sales results within the context of merchandise margins, selling, general and administrative expenses, and other performance criteria. Additionally, this move will reduce confusion in comparative reporting caused this year by the shift in the fiscal calendar. Conference Call Information Today's conference call is available on our website at www.pier1.com by linking through to the "Investor Relations" page and the "Events" page. You can dial into the conference at 1-800-498-7872 or, if international, dial 1-706-643-0435 and the conference ID number is 4249632. The teleconference will be held in a "listen-only" mode for all participants other than the Company's current sell-side analysts and buy-side investors. The replay will be available at about 12:00 p.m. (Central) for 24 hours and replay access can be dialed at 800-642-1687 or if international dial 706-645-9291 and reference the conference ID number 4249632. This release references non-GAAP loss per share information that includes 1) the write-down of excess inventory, 2) impairment charges on store-level assets, 3) the deferred tax valuation allowance, 4) settlement and curtailment charges related to retirement plans, 5) charges for litigation settlements and legal fees, 6) SFAS 123R stock option expense, 7) the relocation and integration of Pier 1 Kids, and 8) the impairment of Pier 1 Kids' goodwill. The Company believes that the non-GAAP financial measures allow management and investors to understand and compare the Company's operating results in a more consistent manner for the fourth quarter and full year of fiscal 2007. These non-GAAP measures should be considered supplemental and not a substitute for the Company's financial results that are recorded in accordance with generally accepted accounting principles for the periods presented. Any forward-looking projections or statements made in this press release should be considered in conjunction with the cautionary statements contained in the Company's most recently filed quarterly report on Form 10-Q. Management's expectations and assumptions regarding planned store openings, financing of Company obligations from operations, results from its new marketing, merchandising and store operations strategies, and other future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Risks and uncertainties that may affect Company operations and performance include, among others, the effects of terrorist attacks or other acts of war, conflicts or war involving the United States or its allies or trading partners, labor strikes, weather conditions or natural disasters that may affect sales, volatility of fuel and utility costs, the general strength of the economy and levels of consumer spending, consumer confidence, the availability of appropriate sites for locating stores and distribution centers, availability of a qualified labor force and management, the availability and proper functioning of technology and communications systems supporting the Company's key business processes, the ability of the Company to import merchandise from foreign countries without significantly restrictive tariffs, duties or quotas and the ability of the Company to source, ship and deliver items from foreign countries to its U.S. distribution centers at reasonable prices and rates and in a timely fashion. Refer to the Company's most recent SEC filings for discussion of these and other risks and uncertainties that may affect the Company's operations and performance. The Company assumes no obligation to update or revise its forward-looking statements even if experience, or future changes make it clear that any projected results expressed or implied will not be realized. Pier 1 Imports, Inc. is North America's largest specialty retailer of imported decorative home furnishings and gifts with Pier 1 Imports(R) stores in 49 states, Puerto Rico, Canada, and Mexico and Pier 1 Kids(R) stores in the United States. Information about the Company is available on www.pier1.com. (Financial Tables Follow) Pier 1 Imports, Inc. ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) (unaudited) Three Months Ended Twelve Months Ended March 3, February 25, March 3, February 25, 2007 2006 2007 2006 --------- ------------ ----------- ------------ Net sales $473,712 $506,022 $1,623,216 $1,776,701 Operating costs and expenses: Cost of sales (including buying and store occupancy costs) 357,085 344,235 1,149,257 1,175,011 Selling, general and administrative expenses 164,835 157,690 649,005 588,273 Depreciation and amortization 11,846 14,085 51,184 56,229 --------- ------------ ----------- ------------ 533,766 516,010 1,849,446 1,819,513 --------- ------------ ----------- ------------ Operating loss (60,054) (9,988) (226,230) (42,812) Nonoperating (income) and expenses: Interest and investment income (5,801) (1,284) (12,456) (3,510) Interest expense 5,003 947 16,116 2,610 Other income (290) - (1,767) - --------- ------------ ----------- ------------ (1,088) (337) 1,893 (900) --------- ------------ ----------- ------------ Loss from continuing operations before income taxes (58,966) (9,651) (228,123) (41,912) Income tax benefit (270) (2,666) (885) (14,441) --------- ------------ ----------- ------------ Loss from continuing operations (58,696) (6,985) (227,238) (27,471) Discontinued operations: Loss from discontinued operations before income taxes - (8,241) (638) (17,583) Income tax benefit - (5,250) (231) (5,250) --------- ------------ ----------- ------------ Loss from discontinued operations - (2,991) (407) (12,333) Net loss $(58,696) $(9,976) $(227,645) $(39,804) ========= ============ =========== ============ Loss per share from continuing operations: Basic and diluted ($0.67) ($0.08) ($2.59) ($0.32) ========= ============ =========== ============ Loss per share from discontinued operations: Basic and diluted - ($0.03) ($0.01) ($0.14) ========= ============ =========== ============ Loss per share: Basic and diluted ($0.67) ($0.11) ($2.60) ($0.46) ========= ============ =========== ============ Average shares outstanding during period: Basic and diluted 87,654 86,883 87,395 86,629 ========= ============ =========== ============ Pier 1 Imports, Inc. ---------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS (in thousands except per share amounts) (unaudited) March 3, February 25, 2007 2006 --------- ------------ ASSETS Current assets: Cash and cash equivalents, including temporary investments of $160,721 and $238,463, respectively $167,178 $246,115 Beneficial interest in securitized receivables - 50,000 Other accounts receivable, net 21,437 13,916 Inventories 360,063 368,978 Income tax receivable 34,966 18,011 Assets of discontinued operations - 32,359 Prepaid expenses and other current assets 50,324 45,544 --------- ------------ Total current assets 633,968 774,923 Properties, net 239,548 298,922 Other noncurrent assets 42,954 96,016 --------- ------------ $916,470 $1,169,861 ========= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $95,609 $105,916 Gift cards and other deferred revenue 66,130 63,835 Accrued income taxes payable 3,305 4,763 Liabilities related to discontinued operations - 16,841 Other accrued liabilities 119,541 97,493 --------- ------------ Total current liabilities 284,585 288,848 Long-term debt 184,000 184,000 Other noncurrent liabilities 86,768 107,031 Shareholders' equity: Common stock, $1.00 par, 500,000,000 shares authorized, 100,779,000 issued 100,779 100,779 Paid-in capital 130,416 132,075 Retained earnings 337,178 582,221 Cumulative other comprehensive income (loss) 2,408 (583) Less -- 12,981,000 and 13,761,000 common shares in treasury, at cost, respectively (209,664) (222,254) Less unearned compensation - (2,256) --------- ------------ 361,117 589,982 --------- ------------ $916,470 $1,169,861 ========= ============ Pier 1 Imports, Inc. ---------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) March 3, February 25, February 26, 2007 2006 2005 ---------- ------------ ------------ Cash flow from operating activities: Net income (loss) $(227,645) $(39,804) $60,457 Adjustments to reconcile to net cash provided by (used in) operating activities: Depreciation and amortization 63,496 78,781 75,624 Loss on disposal of fixed assets 187 1,781 315 Loss on impairment of fixed assets and long-lived assets 36,369 6,024 741 Write-down of assets held for sale - 7,441 - Stock-based compensation expense 5,464 636 - Deferred compensation 16,915 10,766 7,710 Lease termination expense 4,003 4,176 2,243 Deferred income taxes 24,576 (14,496) 2,035 Other (3,121) 236 3,446 Changes in cash from: Sale of receivables in exchange for beneficial interest in securitized receivables (15,914) (74,550) (91,071) Purchase of proprietary credit card receivables and other (97,740) - - Proceeds from the sale of proprietary credit card operations 144,622 - - Inventories 9,757 882 (6,860) Other accounts receivable, prepaid expenses and other current assets (14,428) (22,778) (11,302) Income tax receivable (16,955) (18,011) - Accounts payable and accrued expenses (5,388) 7,369 21,572 Income taxes payable (1,595) (6,966) (14,116) Other noncurrent assets 566 (2,558) 336 Other noncurrent liabilities (28,074) (3,226) - ---------- ------------ ------------ Net cash provided by (used in) operating activities (104,905) (64,297) 51,130 ---------- ------------ ------------ Cash flow from investing activities: Capital expenditures (28,600) (50,979) (99,239) Proceeds from disposition of properties 173 1,401 3,852 Proceeds from sale of discontinued operation (net of $3,397 cash included in sale of discontinued operation) 11,601 - - Proceeds from sale of Pier 1 National Bank (net of $2,208 cash included in sale of Pier 1 National Bank) 10,754 - - Proceeds from sale of restricted investments 25,707 3,226 - Purchase of restricted investments (9,712) (3,500) (10,807) Collections of principal on beneficial interests in securitized receivables 21,907 60,240 99,712 ---------- ------------ ------------ Net cash provided by (used in) investing activities 31,830 10,388 (6,482) ---------- ------------ ------------ Cash flow from financing activities: Cash dividends (17,398) (34,667) (34,762) Purchases of treasury stock - (4,047) (58,210) Proceeds from stock options exercised, stock purchase plan and other, net 4,719 7,641 12,473 Issuance of long-term debt - 165,000 - Notes payable borrowings 69,000 86,500 - Repayment of notes payable (69,000) (86,500) - Debt issuance costs (283) (6,739) (169) Purchase of call option - (9,145) - ---------- ------------ ------------ Net cash provided by (used in) financing activities (12,962) 118,043 (80,668) ---------- ------------ ------------ Change in cash and cash equivalents (86,037) 64,134 (36,020) Cash and cash equivalents at beginning of period (including cash at discontinued operation of $7,100, $3,359, and $6,148, respectively) 253,215 189,081 225,101 ---------- ------------ ------------ Cash and cash equivalents at end of period (including cash at discontinued operation of $0, $7,100, and $3,359, respectively) $167,178 $253,215 $189,081 ========== ============ ============ CONTACT: Pier 1 Imports, Inc. Cary Turner, 817-252-8400