-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DiFi4B4n+8ZG3Oaln/8HN3UB9IQcjGOEJIUkdJTmaFHxnfkE7A6HaDYYZnLlUJYw NkXft8L2Mi626CsbigifYQ== 0000897423-96-000101.txt : 19961016 0000897423-96-000101.hdr.sgml : 19961016 ACCESSION NUMBER: 0000897423-96-000101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIER 1 IMPORTS INC/DE CENTRAL INDEX KEY: 0000278130 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-HOME FURNITURE, FURNISHINGS & EQUIPMENT STORES [5700] IRS NUMBER: 751729843 STATE OF INCORPORATION: DE FISCAL YEAR END: 0227 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07832 FILM NUMBER: 96643317 BUSINESS ADDRESS: STREET 1: 301 COMMERCE ST STE 600 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8178788000 MAIL ADDRESS: STREET 1: 301 COMMERCE STREET STREET 2: SUITE 600 CITY: FORT WORTH STATE: TX ZIP: 76102 FORMER COMPANY: FORMER CONFORMED NAME: PIER 1 INC DATE OF NAME CHANGE: 19860921 FORMER COMPANY: FORMER CONFORMED NAME: PIER 1 IMPORTS INC/GA DATE OF NAME CHANGE: 19840729 FORMER COMPANY: FORMER CONFORMED NAME: NEWCORP INC DATE OF NAME CHANGE: 19800423 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended August 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from [____________] to [____________] Commission File Number 1-7832 PIER 1 IMPORTS, INC. (Exact name of registrant as specified in its charter) Delaware 75-1729843 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 301 Commerce Street, Suite 600, Fort Worth, Texas 76102 (Address of principal executive offices including zip code) (817) 878-8000 (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]. No [ ]. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Shares outstanding as of October 3, 1996 - ----------------------------- ---------------------------------------- Common Stock, $1.00 par value 45,072,115 PART I ------ Item 1. Financial Statements. -------------------- PIER 1 IMPORTS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited) Three Months Ended Six Months Ended Aug. 31, Aug. 26, Aug. 31, Aug. 26, 1996 1995 1996 1995 -------- -------- -------- -------- Net sales $231,050 $199,456 $436,342 $376,271 Operating costs and expenses: Cost of sales (including buying and store occupancy) 141,057 124,698 264,652 232,375 Selling, general and administrative expenses 62,581 51,736 123,127 103,794 Depreciation and amortization 4,898 4,215 9,673 8,338 -------- -------- -------- -------- 208,536 180,649 397,452 344,507 -------- -------- -------- -------- Operating income 22,514 18,807 38,890 31,764 Nonoperating (income) and expense: Interest income (83) (251) (1,744) (596) Interest expense 3,559 3,222 7,812 6,494 Trading losses -- 602 -- 16,558 Provision for Sunbelt Nursery Group, Inc. defaults -- -- -- 14,000 -------- -------- -------- -------- 3,476 3,573 6,068 36,456 -------- -------- -------- -------- Income (loss) before income taxes 19,038 15,234 32,822 (4,692) Provision for income taxes 7,618 6,334 13,129 4,743 -------- -------- -------- -------- Net income (loss) $ 11,420 $ 8,900 $ 19,693 ($ 9,435) ======== ======== ======== ======== Net income (loss) per share: Primary $.26 $.22 $.47 ($.24) ======== ======== ======== ======== Fully diluted $.26 $.21 $.45 ($.24) ======== ======== ======== ======== Average shares outstanding during period, including common stock equivalents: Primary 43,543 39,634 41,848 39,731 ======== ======== ======== ======== Fully diluted 45,913 45,134 45,796 45,249 ======== ======== ======== ======== The accompanying notes are an integral part of these financial statements. PIER 1 IMPORTS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except share data) (Unaudited) August 31, March 2, 1996 1996 ---------- ---------- ASSETS Current assets: Cash, including temporary investments of $1,173 and $1,588, respectively $ 15,548 $ 13,534 Accounts receivable, net 92,737 77,735 Inventories 235,824 223,166 Other current assets 37,020 33,078 -------- -------- Total current assets 381,129 347,513 Properties, net 157,675 144,627 Other assets 34,069 38,956 -------- -------- $572,873 $531,096 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and current portion of long-term debt $ 21,172 $ 4,454 Accounts payable and accrued liabilities 102,773 96,246 -------- -------- Total current liabilities 123,945 100,700 Long-term debt 115,100 180,100 Other non-current liabilities 24,622 22,373 Stockholders' equity: Common stock, $1.00 par, 200,000,000 shares authorized, 45,361,000 and 39,877,000 issued, respectively 45,361 39,877 Paid-in capital 168,605 110,899 Retained earnings 97,929 81,633 Cumulative currency translation adjustments (1,048) (1,072) Less - 106,000 and 303,000 common shares in treasury, at cost, respectively (924) (2,545) Less - subscriptions receivable and unearned compensation (717) (869) -------- -------- 309,206 227,923 -------- -------- $572,873 $531,096 ======== ======== The accompanying notes are an integral part of these financial statements. PIER 1 IMPORTS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended August 31, August 26, 1996 1995 ---------- ---------- Cash flow from operating activities: Net income (loss) $19,693 ($ 9,435) Adjustments to reconcile to net cash provided by (used in) operating activities: Depreciation and amortization 9,673 8,338 Deferred taxes and other 1,984 2,331 Investment gain (1,607) -- Provision for Sunbelt Nursery Group, Inc. defaults -- 14,000 Changes in cash from: Inventories (8,036) (24,518) Accounts receivable and other current assets (18,122) (11,710) Accounts payable and accrued expenses 7,124 10,319 Store-closing reserve -- (4,920) Other assets, liabilities and other, net 957 (89) Net cash provided by (used in) operating ------- ------- activities 11,666 (15,684) ------- ------- Cash flow from investing activities: Capital expenditures (21,199) (7,879) Proceeds from disposition of properties 235 237 Reserve for Sunbelt Nursery Group, Inc. defaults (1,023) -- Proceeds (payments) from investments 4,665 (5,163) ------- ------- Net cash used in investing activities (17,322) (12,805) ------- ------- Cash flow from financing activities: Cash dividends (3,397) (2,390) Repayments of long-term debt (2,500) (14,750) Net borrowings under line of credit agreements 11,853 15,000 Proceeds (payments) from sales (purchases) of capital stock, treasury stock, and other, net 1,714 (1,858) Net cash provided by (used in) financing ------- ------- activities 7,670 (3,998) ------- ------- Change in cash and cash equivalents 2,014 (32,487) Cash and cash equivalents at beginning of period 13,534 50,566 ------- ------- Cash and cash equivalents at end of period $15,548 $18,079 ======= ======= The accompanying notes are an integral part of these financial statements. PIER 1 IMPORTS, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED AUGUST 31, 1996 (In thousands) (Unaudited)
Cumulative Subscriptions Currency Receivable Total Common Paid-in Retained Translation Treasury and Unearned Stockholders' Stock Capital Earnings Adjustments Stock Compensation Equity ------- -------- -------- ----------- --------- ------------- ------------- Balance, March 2, 1996 $39,877 $110,899 $81,633 ($1,072) ($2,545) ($869) $227,923 Purchase of treasury stock (142) (142) Restricted stock grant and amortization 152 152 Stock purchase plan, exercise of stock options and other 591 1,763 2,354 Currency translation adjustments 24 24 Cash dividends ($.08 per share) (3,397) (3,397) Conversion of 6 7/8% convertible debt 5,484 57,115 62,599 Net income 19,693 19,693 ------- -------- ------- ------- ------- ----- -------- Balance, August 31, 1996 $45,361 $168,605 $97,929 ($1,048) ($ 924) ($717) $309,206 ======= ======== ======= ======= ======= ===== ======== The accompanying notes are an integral part of these financial statements.
PIER 1 IMPORTS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED AUGUST 31, 1996 AND AUGUST 26, 1995 (Unaudited) The accompanying unaudited financial statements should be read in conjunction with the Form 10-K for the year ended March 2, 1996. All adjustments that are, in the opinion of management, necessary for a fair statement of the financial position as of August 31, 1996, and the results of operations and cash flows for the interim periods ended August 31, 1996 and August 26, 1995 have been made and consist only of normal recurring adjustments, except for the net trading losses and the provision for Sunbelt Nursery Group, Inc. defaults recorded for the six months ended August 26, 1995. The results of operations for the three and six months ended August 31, 1996 and August 26, 1995 are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business. Note 1 - Net income (loss) per share Primary net income (loss) per share was determined by dividing net income (loss) by applicable average shares outstanding. Fully diluted net income (loss) per share amounts are similarly computed, but include the effect, when dilutive, of the Company's potentially dilutive securities. To determine fully diluted net income (loss), interest and debt issue costs, net of any applicable taxes, have been added back to net income (loss) to reflect assumed conversions. The computation of fully diluted net income (loss) per share for the six months ended August 26, 1995 was antidilutive; therefore, the amounts reported for primary and fully diluted net income (loss) per share are the same. Primary average shares include common shares outstanding and common stock equivalents attributable to outstanding stock options. In addition to common and common equivalent shares, fully diluted average shares include common shares that would be issuable upon conversion of the Company's convertible securities. Net income (loss) per share for the three- and six-months ended August 31, 1996 and August 26, 1995 are calculated as follows: Three Months Ended Six Months Ended Aug. 31, Aug. 26, Aug. 31, Aug. 26, 1996 1995 1996 1995 -------- -------- -------- -------- (in thousands except per share amounts) Net income (loss) $11,420 $8,900 $19,693 ($9,435) Assumed conversion of 6 7/8% subordinated notes: Plus interest and debt issue costs, net of tax 291 683 970 1,366 ------- ------ ------- ------ Fully diluted net income (loss) $11,711 $9,583 $20,663 ($8,069) ======= ====== ======= ====== Average shares outstanding during period, including common stock equivalents: Primary 43,543 39,634 41,848 39,731 Plus assumed exercise of stock options 17 9 26 27 Plus assumed conversion of 6 7/8% subordinated notes to common stock 2,353 5,491 3,922 5,491 ------ ------ ------ ------ Fully diluted 45,913 45,134 45,796 45,249 ====== ====== ====== ====== Net income (loss) per share: Primary $.26 $.22 $.47 ($.24) ==== ==== ==== ==== Fully diluted $.26 $.21 $.45 ($.24) ==== ==== ==== ==== Note 2 - Supplemental cash flow information During the second quarter of fiscal 1997, the Company issued 5,483,823 shares of common stock upon the conversion of $62,681,000 principal amount of 6 7/8% convertible subordinated notes. Note 3 - Subsequent event - Issuance of long-term debt and extraordinary loss In September 1996, the Company completed a public offering of $75 million aggregate principal amount of 5 3/4% convertible subordinated notes due 2003. In October 1996, the underwriter's overallotment option was exercised bringing the total amount of the offering to $86.25 million. Interest on the notes will be payable semi-annually on April 1 and October 1 of each year, commencing April 1, 1997. The notes are convertible at any time prior to maturity, unless previously redeemed or repurchased, into shares of common stock of the Company at a conversion price of $18.50 per share. The Company may redeem the notes, in whole or in part, on or after October 1, 1999. The Company intends to utilize the net proceeds from the public offering to retire $17.5 million of 11 1/2% subordinated debentures due 2003 and $25 million of 11% senior notes due 2001. The balance of the net proceeds will be used to repay $37.7 million outstanding under the Company's bank revolving credit facility, which bears interest at a floating rate, currently 6.44% per annum. The Company will be required to pay an estimated $2.9 million in redemption and other fees to retire the 11 1/2% subordinated debentures and the 11% senior notes and will record an estimated extraordinary loss of $3.2 million, after tax, during the third quarter of fiscal 1997 for the early retirement of debt. PART I ------ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Pier 1 Imports, Inc. ("the Company") recorded net sales of $231.1 million and $436.3 million for the second quarter and first six months of fiscal 1997, increases of 15.8% and 16.0% over the second quarter and first six months of fiscal 1996, respectively. Same-store sales for the second quarter of fiscal 1997 grew 10.0% over the comparable period of fiscal 1996, primarily due to the increased customer traffic resulting from the national television advertising campaign implemented during the second quarter of fiscal 1996, the continued focus on company-wide customer service programs and the Company's store remodel and remerchandising programs which have improved the layout and design of approximately 38 stores since the second quarter of last fiscal year. Same-store sales increased 10.4% for the first half of fiscal 1997 compared to the first half of fiscal 1996. Hard goods sales, such as furniture and decorative accessories, increased 15.8% during the second quarter of fiscal 1997 compared to the second quarter of fiscal 1996, while soft goods sales of apparel, jewelry and accessories declined 24.6% during the second quarter of fiscal 1997 compared to the second quarter of fiscal 1996. Hard goods and soft goods sales contributed approximately 94.0% and 6.0%, respectively, of total merchandise sales for the second quarter of fiscal 1997. The Company continues to de-emphasize apparel in stores and management expects to completely discontinue soft goods in all Pier 1 stores by the end of the first quarter of fiscal 1998. Sales on the Company's proprietary credit card totaled $116.1 million, or 26.6% of total sales, during the first six months of fiscal 1997 versus proprietary credit card sales of $92.7 million, or 24.6% of total sales, for the first six months of fiscal 1996. The Company opened 22 new North American stores and closed seven stores during the first six months of fiscal 1997, bringing the North American store count to 677 at the end of the fiscal 1997 second quarter compared to 647 at the end of the fiscal 1996 second quarter. Stores worldwide, including North America, Puerto Rico and international operations in the United Kingdom, Mexico and Japan, aggregated 707 at the end of the fiscal 1997 second quarter. Gross profit, after related buying and store occupancy costs, expressed as a percentage of sales, increased 1.4% to 38.9% for the second quarter of fiscal 1997 and increased 1.1% to 39.3% for the first six months of fiscal 1997 compared to the same periods of fiscal 1996. These increases are partially the result of stronger merchandise margins on hard goods, offset slightly by a weakening of merchandise margins for soft goods due to clearance and promotional discounts. Fiscal 1997 second quarter gross profit includes approximately $1.1 million in duty refunds owed the Company as a result of retroactive legislation passed in August 1996. Store occupancy costs, as a percentage of sales, improved 1.1% to 13.4% for the second quarter of fiscal 1997 and improved 1.3% to 13.7% for the first six months of fiscal 1997 versus the same periods a year ago, primarily due to higher sales leveraging relatively fixed rates on store leases coupled with the Company's purchase (in the fourth quarter of fiscal 1996) of the remaining 90% interest in a limited partnership which owns 33 Pier 1 stores previously leased to the Company, which eliminated base rent expenses for those stores. Selling, general and administrative expenses, including marketing, as a percentage of sales, increased 1.2% to 27.1% for the second quarter of fiscal 1997 and increased 0.6% to 28.2% for the first half of fiscal 1997 compared to the same periods of fiscal 1996. In total dollars, selling, general and administrative expenses increased $10.8 million for the second quarter of fiscal 1997 and increased $19.3 million for the first six months of fiscal 1997 versus the comparable periods of fiscal 1996. The increase in these expenses for the first six months of fiscal 1997 was primarily due to a $10.3 million increase in payroll expenses, which remained relatively flat as a percentage of sales, a $3.5 million increase in marketing expenses due to the national television advertising campaign that started in July 1995 and a $4.9 million increase in other operating expenses resulting from the increase in the number of net new stores opened since the end of the second quarter of fiscal 1996 coupled with increased costs associated with selling supplies and the timing of mid-year inventory counts. Other selling, general and administrative expenses increased by $2.7 million, which included $0.9 million in expenses related to the investigation of trading losses incurred in prior years and discussed further below. The increase in expenses was partially offset by a $2.1 million decrease in net proprietary credit card costs resulting from an increase in finance charge income and a decrease in bad debt expense. Operating income increased $3.7 million, or 19.7%, to $22.5 million during the second quarter of fiscal 1997 from $18.8 million in the second quarter of fiscal 1996. For the first six months of fiscal 1997, operating income increased $7.1 million, or 22.4%, to $38.9 million compared to $31.8 million for the same period a year ago. Net interest expense increased $0.5 million during the second quarter of fiscal 1997 and $0.2 million during the first six months of fiscal 1997 versus the same periods of fiscal 1996. This increase resulted from higher interest rates on floating rate debt plus additional interest expense on the $40 million debt used in the December 1995 acquisition of the remaining 90% interest in a limited partnership which owns 33 Pier 1 stores. These increases were offset partially by the redemption of the 6 7/8% convertible subordinated notes in the second quarter of fiscal 1997 and higher investment income earned on the investment in Whiffletree Partners, L.P. ("Whiffletree") in the first quarter of fiscal 1997. In late December 1995, the Company was made aware of losses of $19.3 million resulting from trading activities in a discretionary account. As a result of the investigations of the trading losses, the Company recorded $16.5 million and $2.8 million of the net trading losses in fiscal 1996 and fiscal 1995, respectively, with $16.0 million and $0.6 million of the net trading losses recorded in the first and second quarters of fiscal 1996, respectively. The Company has not recorded any tax benefit on these losses since the realization of such benefit is not considered likely based on the information available at this time. The Company and a Special Committee of the Board of Directors investigated the matter and found no evidence to suggest that the Company's net losses from these trading activities will exceed the $19.3 million recorded in fiscal years 1996 and 1995. In April 1995, Sunbelt Nursery Group, Inc. ("Sunbelt") defaulted on 13 nursery store sublease agreements with the Company comprising $22.8 million of non-revolving store development financing, and the Company terminated the subleases. At the same time, Sunbelt defaulted on three nursery store lease agreements guaranteed by the Company; however, such defaults were subsequently cured. During the first quarter of fiscal 1996, the Company recorded a pre-tax charge of $14 million which represented the estimated cost to disengage from its financial support of Sunbelt. The charge reflects the Company's estimated losses resulting from the lease termination costs associated with the 13 nursery store subleases and other related costs. The Company is not aware of any defaults on these leases; however, Sunbelt has notified the Company that it is in default of certain provisions of the loan agreement for its bank debt. As of September 1996, three nursery store properties had been sold at costs consistent with the Company's estimates to record the charge. The Company believes that it is reasonably possible that a change in this estimate could occur in the near term; however, no further charge is warranted at this time. The Company's effective income tax rate for fiscal 1997 is estimated at 40% compared to 40% recorded during the first half of fiscal 1996, exclusive of the aforementioned trading losses. Net income for the second quarter of fiscal 1997 aggregated $11.4 million or $.26 per share on a fully diluted basis compared to net income of $8.9 million or $.21 per share on a fully diluted basis for the second quarter of fiscal 1996. Net income for the first six months of fiscal 1997 aggregated $19.7 million or $.45 per share on a fully diluted basis compared to net income before special charges of $15.7 million or $.38 per share on a fully diluted basis for the first six months of fiscal 1996. Special charges for the first six months of fiscal 1996 included the $16.6 million in trading losses and the $14.0 million provision for Sunbelt defaults. Liquidity and Capital Resources Cash, including temporary investments, increased $2.0 million to $15.5 million at the end of the second quarter of fiscal 1997 from $13.5 million at fiscal 1996 year-end. The increase in cash during the second quarter of fiscal 1997 was primarily due to cash flow from operations of $11.7 million, net borrowings under line of credit agreements of $11.8 million and the net proceeds from the liquidation of the Whiffletree investment of $4.7 million, offset partially by capital expenditures of $21.2 million, cash dividend payments of $3.4 million, repayments of long-term debt of $2.5 million and payments on the reserve for Sunbelt defaults of $1.0 million. Other investing and financing activities provided cash flow of $1.9 million. Cash flow from operations improved $27.4 million during the first six months of fiscal 1997 over the same period of fiscal 1996 primarily due to higher net income and other non-cash related items of $31.4 million for fiscal 1997 compared to $15.2 million for fiscal 1996, which included $16.6 million of net trading losses. Working capital requirements will continue to be provided by cash from operations and a three-year, $65 million competitive advance and revolving credit facility, of which $25 million was available at the end of the second quarter of fiscal 1997, and other short-term (12 month) bank facilities aggregating $140.5 million, $37.0 million of which was available at the end of the second quarter of fiscal 1997. The short-term bank facilities consist of $15 million of committed lines of credit and $125.5 million of uncommitted lines. The Company's current ratio was 3.1 to 1 at the end of the second quarter of fiscal 1997 compared to 3.5 to 1 at fiscal 1996 year-end and 3.0 to 1 at the end of the second quarter of fiscal 1996. The Company's minimum operating lease commitments remaining for fiscal 1997 are $48 million, and the present value of total existing minimum operating lease commitments is $359 million. In September 1996, the Company completed a public offering of $75 million aggregate principal amount of 5 3/4% convertible subordinated notes due 2003. In October 1996, the underwriter's overallotment option was exercised bringing the total amount of the offering to $86.25 million. Interest on the notes will be payable semi-annually on April 1 and October 1 of each year, commencing April 1, 1997. The notes are convertible at any time prior to maturity, unless previously redeemed or repurchased, into shares of common stock of the Company at a conversion price of $18.50 per share. The Company may redeem the notes, in whole or in part, on or after October 1, 1999. Proceeds from the public offering are being used to retire high cost, long-term debt and repay $37.7 million outstanding under the Company's bank revolving credit facility. In August 1996, the Company announced its intention to arrange a securitization of its proprietary credit card receivables through a private placement of trust certificates representing interests in the proprietary credit card receivables. If the transaction is completed, the Company would receive cash proceeds of approximately $70 million and would use the proceeds to retire any debt outstanding under the Company's bank revolving credit facility and provide funds for working capital and other general corporate purposes. The Company called its $62.8 million outstanding principal amount of 6 7/8% convertible subordinated notes due April 1, 2002 for redemption on July 12, 1996. The notes were convertible into common stock of the Company at any time prior to the close of business on July 10, 1996, at a conversion price of $11.43 per share. Prior to redemption, $62,681,000 of the notes were converted into 5,483,823 shares of the Company's common stock and $69,000 of the notes were redeemed for cash. During the first six months of fiscal 1997, approximately $1.0 million was expended and charged against the Company's previously established reserve to disengage financial support of Sunbelt. Cash requirements to fund this reserve will be funded through working capital and operations. As of September 1996, three of the 13 nursery store properties have been sold at costs consistent with the Company's previously recorded reserve. The Company guarantees other Sunbelt store lease commitments aggregating $3.8 million with a present value of approximately $3.2 million at the fiscal 1997 second quarter-end. The Company is not aware of any defaults on these leases; however, Sunbelt has notified the Company that it is in default of certain provisions of the loan agreement for its bank debt. The Company believes that it is reasonably possible that a change in this estimate could occur in the near term; however, no further charge is warranted at this time. During the third quarter of fiscal 1997, the Company repurchased 300,000 shares of its common stock in open market transactions under a Board of Directors approved program for approximately $4.8 million. During the first six months of fiscal 1997, the Company paid cash dividends aggregating $.08 per share and subsequently declared a cash dividend of $.04 per share payable on November 19, 1996 to shareholders of record on November 5, 1996. The Company currently expects to continue cash dividends in fiscal 1997, but intends to retain most of its future earnings for expansion of the Company's business. PART II ------- Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- The Annual Meeting of Shareholders of the Company was held June 27, 1996 for the purposes of electing seven (7) Directors to hold office until the next Annual Meeting of Shareholders, to vote upon a proposal to amend the 1989 Employee Stock Option Plan, to vote upon a stockholder proposal to request the Company to retain an investment banker and to vote upon a stockholder proposal to recommend adoption of confidential voting. Director Election ----------------- Director FOR WITHHELD -------- --- -------- Clark A. Johnson 33,053,878 336,092 Marvin J. Girouard 33,087,833 302,137 Martin L. Berman 33,074,823 315,147 Craig C. Gordon 33,169,311 220,659 James M. Hoak, Jr. 33,085,009 304,961 Sally F. McKenzie 33,156,339 233,631 Charles R. Scott 33,039,244 350,726 Proposal to Amend the 1989 Employee Stock Option Plan ----------------------------------------------------- FOR AGAINST ABSTAINED BROKER NON-VOTES --- ------- --------- ---------------- 23,260,740 5,130,194 248,318 4,749,492 Stockholder Proposal to Request the Company to Retain an Investment Banker ------------------------------------------------------------------- FOR AGAINST ABSTAINED BROKER NON-VOTES --- ------- --------- ---------------- 2,986,275 23,907,470 1,283,384 5,213,366 Stockholder Proposal to Recommend Adoption of Confidential Voting ----------------------------------------------------------------- FOR AGAINST ABSTAINED BROKER NON-VOTES --- ------- --------- ---------------- 11,759,370 14,584,970 643,634 6,401,996 Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits See Exhibit Index. (b) Reports on Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIER 1 IMPORTS, INC. Date: October 15, 1996 By: /s/ Clark A. Johnson ---------------- ---------------------------------------- Clark A. Johnson, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) Date: October 15, 1996 By: /s/ Stephen F. Mangum ---------------- ---------------------------------------- Stephen F. Mangum, Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) EXHIBIT INDEX Exhibit No. Description - ------- ----------- 27 Financial Data Schedule for Six-Month Period Ended August 31, 1996 EX-27 2 FINANCIAL DATA SCHEDULE--2ND QUARTER FORM 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENT OF OPERATIONS AND BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS MAR-01-1997 AUG-31-1996 15,548 0 96,380 3,643 235,824 381,129 292,803 135,128 572,873 123,945 115,100 45,361 0 0 263,845 572,873 436,342 436,342 264,652 264,652 9,673 0 7,812 32,822 13,129 19,693 0 0 0 19,693 .26 .26
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