Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

x                              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended May 30, 2009

 

OR

 

o                                 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 001-07832

 

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)

 

100 Pier 1 Place, Fort Worth, Texas 76102

(Address of principal executive offices, including zip code)

 

(817) 252-8000

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such 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 o.

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.  Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  o

 

Accelerated filer  x

 

 

 

Non-accelerated filer   o

 

Smaller reporting company  o

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No x

 

As of July 1, 2009, 90,487,070 shares of the registrant’s common stock, $1.00 par value, were outstanding.

 

 

 



Table of Contents

 

PIER 1 IMPORTS, INC.

 

INDEX TO QUARTERLY FORM 10-Q

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

 

 

 

 

Consolidated Statements of Operations for the Three Months Ended May 30, 2009 and May 31, 2008

3

 

 

 

Consolidated Balance Sheets as of May 30, 2009, February 28, 2009 and May 31, 2008

4

 

 

 

Consolidated Statements of Cash Flows for the Three Months Ended May 30, 2009 and May 31, 2008

5

 

 

 

Consolidated Statement of Shareholders’ Equity for the Three Months Ended May 30, 2009

6

 

 

 

Notes to Consolidated Financial Statements

7

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

26

 

 

 

Item 4.

Controls and Procedures

26

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

Item 1.    Legal Proceedings

26

 

 

Item 1A. Risk Factors

26

 

 

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

26

 

 

Item 3.    Defaults upon Senior Securities

26

 

 

Item 4.    Submission of Matters to a Vote of Security Holders

27

 

 

Item 5.    Other Information

28

 

 

Item 6.    Exhibits

28

 

 

Signatures

29

 

2



Table of Contents

 

PART I

 

Item 1.   Financial Statements.

 

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

May 30,

 

May 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Net sales

 

$

281,130

 

$

310,020

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

Cost of sales (including buying and store occupancy costs)

 

196,316

 

222,414

 

Selling, general and administrative expenses

 

105,557

 

109,368

 

Depreciation and amortization

 

5,961

 

8,673

 

 

 

307,834

 

340,455

 

 

 

 

 

 

 

Operating loss

 

(26,704

)

(30,435

)

 

 

 

 

 

 

Nonoperating (income) and expenses:

 

 

 

 

 

Interest and investment income

 

(527

)

(871

)

Interest expense

 

2,937

 

3,605

 

Gain on repurchase of debt

 

(47,832

)

 

Other income

 

(10,409

)

(632

)

 

 

(55,831

)

2,102

 

 

 

 

 

 

 

Income (loss) before income taxes

 

29,127

 

(32,537

)

Income tax (benefit) provision

 

(187

)

287

 

Net income (loss)

 

$

29,314

 

$

(32,824

)

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

Basic and diluted

 

$

0.32

 

$

(0.37

)

 

 

 

 

 

 

Average shares outstanding during period:

 

 

 

 

 

Basic and diluted

 

91,113

 

88,620

 

 

The accompanying notes are an integral part of these financial statements.

 

3



Table of Contents

 

PIER 1 IMPORTS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands except share amounts)

(unaudited)

 

 

 

May 30,

 

February 28,

 

May 31,

 

 

 

2009

 

2009

 

2008

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents, including temporary investments of $124,880, $142,523 and $63,767, respectively

 

$

135,848

 

$

155,798

 

$

80,823

 

Other accounts receivable, net

 

16,169

 

17,566

 

19,341

 

Inventories

 

294,181

 

316,331

 

384,838

 

Income tax receivable

 

2,481

 

2,149

 

3,734

 

Prepaid expenses and other current assets

 

40,867

 

41,883

 

42,508

 

Total current assets

 

489,546

 

533,727

 

531,244

 

 

 

 

 

 

 

 

 

Office building and related assets

 

 

 

79,380

 

Other properties, net of accumulated depreciation of $426,656, $432,412 and $417,180, respectively

 

69,497

 

85,135

 

108,253

 

Other noncurrent assets

 

34,114

 

36,600

 

42,045

 

 

 

 

 

 

 

 

 

 

 

$

593,157

 

$

655,462

 

$

760,922

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

61,083

 

$

80,695

 

$

80,161

 

Gift cards and other deferred revenue

 

45,394

 

47,332

 

58,845

 

Accrued income taxes payable

 

4,500

 

4,434

 

4,878

 

Other accrued liabilities

 

106,834

 

101,350

 

103,712

 

Total current liabilities

 

217,811

 

233,811

 

247,596

 

 

 

 

 

 

 

 

 

Long-term debt

 

103,771

 

184,000

 

184,000

 

Other noncurrent liabilities

 

91,575

 

93,390

 

90,739

 

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

Common stock, $1.00 par, 500,000,000 shares authorized, 100,779,000 issued

 

100,779

 

100,779

 

100,779

 

Paid-in capital

 

107,035

 

113,326

 

123,268

 

Retained earnings

 

136,155

 

106,841

 

203,270

 

Cumulative other comprehensive income (loss)

 

866

 

(1,195

)

517

 

Less – 10,291,000, 10,905,000 and 11,755,000 common shares in treasury, at cost, respectively

 

(164,835

)

(175,490

)

(189,247

)

 

 

180,000

 

144,261

 

238,587

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

593,157

 

$

655,462

 

$

760,922

 

 

The accompanying notes are an integral part of these financial statements.

 

4



Table of Contents

 

PIER 1 IMPORTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

May 30,

 

May 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Cash flow from operating activities:

 

 

 

 

 

Net income (loss)

 

$

29,314

 

$

(32,824

)

Adjustments to reconcile to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

8,399

 

11,676

 

Loss on disposal of fixed assets

 

168

 

39

 

Stock-based compensation expense

 

1,236

 

2,352

 

Deferred compensation

 

1,221

 

987

 

Lease termination expense

 

4,585

 

587

 

Amortization of deferred gains

 

(1,979

)

(835

)

Gain on repurchase of convertible bonds

 

(47,832

)

 

Other

 

2,263

 

389

 

Changes in cash from:

 

 

 

 

 

Inventories

 

22,150

 

26,871

 

Accounts receivable, prepaid expenses and other current assets

 

10,273

 

(432

)

Income tax receivable

 

(332

)

12,897

 

Accounts payable and accrued expenses

 

(21,293

)

(33,593

)

Accrued income taxes payable

 

66

 

(345

)

Defined benefit plan liabilities

 

(1,696

)

(29

)

Other noncurrent assets

 

(470

)

(96

)

Other noncurrent liabilities

 

(19

)

(32

)

Net cash provided by (used in) operating activities

 

6,054

 

(12,388

)

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

Capital expenditures

 

(395

)

(1,894

)

Proceeds from disposition of properties

 

678

 

4

 

Proceeds from sale of restricted assets

 

3,317

 

497

 

Purchase of restricted investments

 

(3,074

)

 

Net cash provided by (used in) investing activities

 

526

 

(1,393

)

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

Proceeds from stock options exercised, stock purchase plan and other, net

 

310

 

1,171

 

Repurchase of convertible bonds

 

(26,840

)

 

 

Net cash (used in) provided by financing activities

 

(26,530

)

1,171

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

(19,950

)

(12,610

)

Cash and cash equivalents at the beginning of the period

 

155,798

 

93,433

 

Cash and cash equivalents at the end of the period

 

$

135,848

 

$

80,823

 

 

The accompanying notes are an integral part of these financial statements.

 

5



Table of Contents

 

PIER 1 IMPORTS, INC.

 

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MAY 30, 2009

(in thousands except per share amounts)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Cumulative

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

Other

 

 

 

Total

 

 

 

Outstanding

 

 

 

Paid-in

 

Retained

 

Comprehensive

 

Treasury

 

Shareholders’

 

 

 

Stock

 

Amount

 

Capital

 

Earnings

 

Income (Loss)

 

Stock

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance February 28, 2009

 

89,874

 

$

100,779

 

$

113,326

 

$

106,841

 

$

(1,195

)

$

(175,490

)

$

144,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

29,314

 

 

 

29,314

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension adjustments

 

 

 

 

 

501

 

 

501

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency translation adjustments

 

 

 

 

 

1,560

 

 

1,560

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

31,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock compensation

 

(65

)

 

1,668

 

 

 

(1,055

)

613

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock option compensation expense

 

 

 

623

 

 

 

 

623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options, stock purchase plan and other

 

679

 

 

(11,400

)

 

 

11,710

 

310

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adoption of FSP on Convertible Debt

 

 

 

2,818

 

 

 

 

2,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance May 30, 2009

 

90,488

 

$

100,779

 

$

107,035

 

$

136,155

 

$

866

 

$

(164,835

)

$

180,000

 

 

The accompanying notes are an integral part of these financial statements.

 

6


 


Table of Contents

 

PIER 1 IMPORTS, INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MAY 30, 2009 AND May 31, 2008

(unaudited)

 

Throughout this report, references to the “Company” include Pier 1 Imports, Inc. and its consolidated subsidiaries.  The accompanying unaudited financial statements should be read in conjunction with the Company’s Form 10-K for the year ended February 28, 2009.  All adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position as of May 30, 2009, and the results of operations and cash flows for the three months ended May 30, 2009 and May 31, 2008 have been made and consist only of normal recurring adjustments, except as otherwise described herein.  The results of operations for the three months ended May 30, 2009 and May 31, 2008 are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business.  Historically, the strongest sales of the Company’s products have occurred during the holiday season beginning in November and continuing through December.  The Company conducts business as one operating segment.  The classification of certain amounts previously reported in the consolidated statements of cash flows for the three months ended May 31, 2008 has been modified to conform to the May 30, 2009 method of presentation.

 

Note 1 — Earnings (loss) per share

 

Basic earnings (loss) per share amounts were determined by dividing net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per share amounts were similarly computed, but would have included the effect, if dilutive, of the Company’s weighted average number of stock options outstanding and shares of unvested restricted stock.  As the effect would have been antidilutive, substantially all 11,823,258 and 13,693,027 stock options outstanding and shares of unvested restricted stock were excluded from the computation of the first quarter earnings (loss) per share for fiscal 2010 and fiscal 2009, respectively.  Earnings (loss) per share for the three months ended May 30, 2009 and May 31, 2008 was calculated as follows (in thousands except per share amounts):

 

 

 

Three Months Ended

 

 

 

May 30,

 

May 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Net income (loss), basic and diluted

 

$

29,314

 

$

(32,824

)

 

 

 

 

 

 

Average shares outstanding:

 

 

 

 

 

Basic and diluted

 

91,113

 

88,620

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

Basic and diluted

 

$

0.32

 

$

(0.37

)

 

7



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Note 2 — Comprehensive income (loss)

 

The components of comprehensive income (loss) for the three months ended May 30, 2009 and May 31, 2008 were as follows (in thousands):

 

 

 

Three Months Ended

 

 

 

May 30,

 

May 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Net income (loss)

 

$

29,314

 

$

(32,824

)

Currency translation adjustments

 

1,560

 

(56

)

Pension adjustments

 

501

 

200

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$

31,375

 

$

(32,680

)

 

Note 3 — Stock-based compensation

 

The Company accounts for share-based compensation in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”).  SFAS 123R requires all companies to measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements.  The fair values for options granted during the respective periods were estimated as of the date of grant using the Black-Scholes option-pricing model and are amortized on a straight-line basis as compensation expense over the vesting periods of the options.  For the three months ended May 30, 2009 and May 31, 2008, the Company recorded stock-based compensation expense related to stock options and restricted stock of $1,236,000, or $0.01 per share, and $2,352,000, or $0.03 per share, respectively.  The Company recognized no net tax benefit related to stock-based compensation during the first quarter of either fiscal 2010 or fiscal 2009 as a result of the Company’s valuation allowance on all deferred tax assets.

 

During the first quarter of fiscal 2010, the Company began expensing a performance-based grant of 1,000,000 stock options to the chief executive officer when the performance targets for fiscal 2010 were set in accordance with his employment agreement. The options have an exercise price of $6.69, a grant date fair value of $0.33 and are expected to be expensed over a one-year vesting period in accordance with SFAS 123R. As of May 30, 2009 there was approximately $2,965,000 of total unrecognized compensation expense related to unvested stock option awards that is expected to be recognized over a weighted average period of 1.7 years and $2,015,000 of total unrecognized compensation expense related to restricted stock that is expected to be recognized over a weighted average period of 1.0 year.

 

Note 4 — Costs associated with exit activities

 

As part of the ordinary course of business, the Company terminates leases prior to their expiration when certain stores or facilities are closed or relocated as deemed necessary by the evaluation of its real estate portfolio.  These decisions are based on lease renewal obligations, relocation space availability, local market conditions and prospects for future profitability. In connection with these lease terminations, the Company has recorded estimated liabilities in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.”  At the time of closure, neither the write-off of fixed assets nor the write-down of inventory related to such stores was material.  Additionally, employee severance costs associated with these closures were not significant.  The estimated liabilities were recorded based upon the Company’s remaining lease obligations less estimated subtenant rental income.  Revisions during the periods presented related to changes in estimated buyout terms or subtenant receipts expected on closed facilities.  Expenses related to lease termination obligations are included in selling, general and administrative expenses in the Company’s consolidated statements of operations.

 

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Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

The following table represents a rollforward of the liability balances for the three months ended May 30, 2009 and May 31, 2008 related to these closures (in thousands):

 

 

 

Three Months Ended

 

 

 

May 30,

 

May 31,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Beginning of period

 

$

4,998

 

$

5,628

 

 

 

 

 

 

 

Original charges

 

3,830

 

200

 

Revisions

 

755

 

387

 

Cash payments

 

(3,276

)

(1,280

)

 

 

 

 

 

 

End of period

 

$

6,307

 

$

4,935

 

 

Note 5 — Long-term debt

 

On March 20, 2009 a foreign subsidiary of the Company purchased $78,941,000 of the Company’s outstanding 6.375% convertible senior notes due 2036 (the “Notes”) at a purchase price of $27,399,000, including accrued interest.  As a result of this transaction, the Company has reduced the principal amount of its outstanding convertible debt by $78,941,000 on a consolidated basis.  The Company recognized a gain of $47,832,000 in connection with this transaction during the first quarter of fiscal 2010.  As a result of the put features of the Notes, the Company anticipates that the remaining Notes will have to be repaid or refinanced on or before February 15, 2011.

 

Effective March 1, 2009, the Company adopted Financial Accounting Standards Board (“FASB”) Staff Position (“FSP”) APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)”, which clarifies that issuers of convertible debt instruments that may be settled wholly or partially in cash upon conversion should separately account for the liability and equity components in a manner that will reflect the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.  In accordance with FSP APB 14-1, the Company estimated the fair value of the debt component of its Notes as of the date of its issuance using an income approach by discounting the present value of future payments associated with the Notes, assuming no conversion features.  The Company has not applied the provisions of FSP APB 14-1 retrospectively as it determined that the effect on prior periods was not material.  The impact of adoption representing the remaining value of the equity component of the notes as of the beginning of the year was $2,818,000, recorded as a reduction in carrying value of the notes and an increase in additional paid-in capital.  This amount will be amortized as interest expense over the remaining life of the Notes, or through February 2011. As a result of the repurchase of a portion of these Notes as discussed above, the Company’s gain on the transaction included the write off of a portion of this unamortized discount.  The Company recognized $219,000 of discount amortization related to the Notes during the three months ended May 30, 2009, and as of May 30, 2009, the unamortized discount related to the Notes totaled $1,288,000.

 

Note 6 — Condensed financial statements

 

The Company’s 6.375% convertible senior notes are fully and unconditionally guaranteed, on a joint and several basis, by all of the Company’s material domestic consolidated subsidiaries (the “Guarantor Subsidiaries”). The subsidiaries that do not guarantee such Notes are comprised of the Company’s foreign subsidiaries and certain other insignificant domestic consolidated subsidiaries (the “Non-Guarantor

 

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Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

Subsidiaries”). Each of the Guarantor Subsidiaries is wholly owned. In lieu of providing separate financial statements for the Guarantor Subsidiaries, condensed consolidating financial information is presented below.

 

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

Three Months Ended May 30, 2009

(in thousands)

(unaudited)

 

 

 

Pier 1
Imports,
Inc.

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

279,988

 

$

2,122

 

$

(980

)

$

281,130

 

Cost of sales (including buying and store occupancy costs)

 

 

195,497

 

1,843

 

(1,024

)

196,316

 

Selling, general and administrative (including depreciation and amortization)

 

440

 

111,033

 

45

 

 

111,518

 

Operating income (loss)

 

(440

)

(26,542

)

234

 

44

 

(26,704

)

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating income

 

(310

)

(6,767

)

(922

)

(47,832

)

(55,831

)

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(130

)

(19,775

)

1,156

 

47,876

 

29,127

 

Provision (benefit) for income taxes

 

 

(210

)

23

 

 

(187

)

Net income (loss) after income taxes

 

(130

)

(19,565

)

1,133

 

47,876

 

29,314

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from subsidiaries

 

(18,432

)

1,133

 

 

17,299

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(18,562

)

$

(18,432

)

$

1,133

 

$

65,175

 

$

29,314

 

 

10



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS

Three Months Ended May 31, 2008

(in thousands)

(unaudited)

 

 

 

Pier 1
Imports,
Inc.

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

 

$

308,019

 

$

4,219

 

$

(2,218

)

$

310,020

 

Cost of sales (including buying and store occupancy costs)

 

 

221,034

 

3,862

 

(2,482

)

222,414

 

Selling, general and administrative (including depreciation and amortization)

 

519

 

117,477

 

45

 

 

118,041

 

Operating income (loss)

 

(519

)

(30,492

)

312

 

264

 

(30,435

)

 

 

 

 

 

 

 

 

 

 

 

 

Nonoperating (income) expenses

 

(906

)

3,103

 

(95

)

 

2,102

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

387

 

(33,595

)

407

 

264

 

(32,537

)

Provision for income taxes

 

 

287

 

 

 

287

 

Net income (loss) after income taxes

 

387

 

(33,882

)

407

 

264

 

(32,824

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from subsidiaries

 

(33,475

)

407

 

 

33,068

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(33,088

)

$

(33,475

)

$

407

 

$

33,332

 

$

(32,824

)

 

11



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

CONSOLIDATING CONDENSED BALANCE SHEET

May 30, 2009

(in thousands)

(unaudited)

 

 

 

Pier 1
Imports, Inc.

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Total

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

60,512

 

$

72,562

 

$

2,774

 

$

 

$

135,848

 

Other accounts receivable, net

 

 

15,220

 

949

 

 

16,169

 

Inventories

 

 

294,099

 

82

 

 

294,181

 

Income tax receivable

 

 

1,999

 

482

 

 

2,481

 

Prepaid expenses and other current assets

 

948

 

39,919

 

 

 

40,867

 

Total current assets

 

61,460

 

423,799

 

4,287

 

 

489,546

 

 

 

 

 

 

 

 

 

 

 

 

 

Other properties, net

 

 

65,786

 

3,711

 

 

69,497

 

Investment in subsidiaries

 

(202

)

46,439

 

 

(46,237

)

 

Other noncurrent assets

 

2,984

 

29,723

 

1,407

 

 

34,114

 

 

 

$

 64,242

 

$

565,747

 

$

9,405

 

$

(46,237

)

$

593,157

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

77

 

$

60,785

 

$

221

 

$

 

$

61,083

 

Intercompany payable (receivable)

 

(229,255

)

239,575

 

(10,320

)

 

 

Gift cards and other deferred revenue

 

 

45,394

 

 

 

45,394

 

Accrued income taxes payable (receivable)

 

48

 

4,618

 

(166

)

 

4,500

 

Other accrued liabilities

 

1,761

 

105,002

 

71

 

 

106,834

 

Total current liabilities

 

(227,369

)

455,374

 

(10,194

)

 

217,811

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

159,443

 

19,000

 

(26,840

)

(47,832

)

103,771

 

Other noncurrent liabilities

 

 

91,575

 

 

 

91,575

 

Shareholders’ equity

 

132,168

 

(202

)

46,439

 

1,595

 

180,000

 

 

 

$

 64,242

 

$

565,747

 

$

9,405

 

$

(46,237

)

$

593,157

 

 

12



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

CONSOLIDATING CONDENSED BALANCE SHEET

February 28, 2009

(in thousands)

 

 

 

Pier 1
Imports, Inc.

 

Guarantor
Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Total

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

61,648

 

$

62,399

 

$

31,751

 

$

 

$

155,798

 

Other accounts receivable, net

 

2

 

15,684

 

1,880

 

 

17,566

 

Inventories

 

 

316,245

 

86

 

 

316,331

 

Income tax receivable

 

 

1,667

 

482

 

 

2,149

 

Prepaid expenses and other current assets

 

100

 

41,783

 

 

 

41,883

 

Total current assets

 

61,750

 

437,778

 

34,199

 

 

533,727

 

 

 

 

 

 

 

 

 

 

 

 

 

Other properties, net

 

 

81,398

 

3,737

 

 

85,135

 

Investment in subsidiaries

 

16,125

 

45,262

 

 

(61,387

)

 

Other noncurrent assets

 

5,525

 

31,075

 

 

 

36,600

 

 

 

$

 83,400

 

$

595,513

 

$

37,936

 

$

(61,387

)

$

655,462

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

116

 

$

80,288

 

$

291

 

$

 

$

80,695

 

Intercompany payable (receivable)

 

(226,635

)

234,163

 

(7,528

)

 

 

Gift cards and other deferred revenue

 

 

47,332

 

 

 

47,332

 

Accrued income taxes payable (receivable)

 

48

 

4,553

 

(167

)

 

4,434

 

Other accrued liabilities

 

610

 

100,662

 

78

 

 

101,350

 

Total current liabilities

 

(225,861

)

466,998

 

(7,326

)

 

233,811

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

165,000

 

19,000

 

 

 

184,000

 

Other noncurrent liabilities

 

 

93,390

 

 

 

93,390

 

Shareholders’ equity

 

144,261

 

16,125

 

45,262

 

(61,387

)

144,261

 

 

 

$

 83,400

 

$

595,513

 

$

37,936

 

$

(61,387

)

$

655,462

 

 

13



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

CONSOLIDATING CONDENSED BALANCE SHEET

May 31, 2008

(in thousands)

(unaudited)

 

 

 

Pier 1
Imports,
Inc.

 

Guarantor
 Subsidiaries

 

Non-
Guarantor
Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

23,868

 

$

44,642

 

$

12,313

 

$

 

$

80,823

 

Accounts receivable, net

 

1

 

17,570

 

1,770

 

 

19,341

 

Inventories

 

 

384,838

 

 

 

384,838

 

Income tax receivable

 

 

3,330

 

404

 

 

3,734

 

Prepaid expenses and other current assets

 

872

 

41,636

 

 

 

42,508

 

Total current assets

 

24,741

 

492,016

 

14,487

 

 

531,244

 

 

 

 

 

 

 

 

 

 

 

 

 

Office building and related assets

 

 

79,380

 

 

 

79,380

 

Other properties, net

 

 

104,439

 

3,814

 

 

108,253

 

Investment in subsidiaries

 

112,488

 

44,025

 

 

(156,513

)

 

Other noncurrent assets

 

6,322

 

35,723

 

 

 

42,045

 

 

 

$

143,551

 

$

755,583

 

$

18,301

 

$

(156,513

)

$

760,922

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

39

 

$

79,834

 

$

288

 

$

 

$

80,161

 

Intercompany payable (receivable)

 

(263,162

)

289,065

 

(25,903

)

 

 

Gift cards and other deferred revenue

 

 

58,845

 

 

 

58,845

 

Accrued income taxes payable (receivable)

 

48

 

4,983

 

(153

)

 

4,878

 

Other accrued liabilities

 

3,039

 

100,629

 

44

 

 

103,712

 

Total current liabilities

 

(260,036

)

533,356

 

(25,724

)

 

247,596

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt

 

165,000

 

19,000

 

 

 

184,000

 

Other noncurrent liabilities

 

 

90,739

 

 

 

90,739

 

Shareholders’ equity

 

238,587

 

112,488

 

44,025

 

(156,513

)

238,587

 

 

 

$

143,551

 

$

755,583

 

$

18,301

 

$

(156,513

)

$

760,922

 

 

14



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

Three Months Ended May 30, 2009

(in thousands)

(unaudited)

 

 

 

Pier 1

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Imports, Inc.

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

1,175

 

$

4,226

 

$

653

 

$

 

$

6,054

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(395

)

 

 

(395

)

Proceeds from disposition of properties

 

 

678

 

 

 

678

 

Proceeds from sale of restricted investments

 

 

3,317

 

 

 

3,317

 

Purchase of restricted investments

 

 

(3,074

)

 

 

(3,074

)

Net cash provided by investing activities

 

 

526

 

 

 

526

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from stock options exercised, stock purchase plan and other, net

 

310

 

 

 

 

310

 

Advances (to) from subsidiaries

 

(2,621

)

5,411

 

(2,790

)

 

 

Repurchase of convertible bonds

 

 

 

(26,840

)

 

(26,840

)

Net cash (used in) provided by financing activities

 

(2,311

)

5,411

 

(29,630

)

 

(26,530

)

 

 

 

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

(1,136

)

10,163

 

(28,977

)

 

(19,950

)

Cash and cash equivalents at beginning of period

 

61,648

 

62,399

 

31,751

 

 

155,798

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

60,512

 

$

72,562

 

$

2,774

 

$

 

$

135,848

 

 

15



Table of Contents

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS

Three Months Ended May 31, 2008

(in thousands)

(unaudited)

 

 

 

Pier 1

 

Guarantor

 

Non-Guarantor

 

 

 

 

 

 

 

Imports, Inc.

 

Subsidiaries

 

Subsidiaries

 

Eliminations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by (used in) operating activities

 

$

4,519

 

$

(16,515

)

$

(392

)

$

 

$

(12,388

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from investing activities:

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,894

)

 

 

(1,894

)

Proceeds from disposition of properties

 

 

4

 

 

 

4

 

Proceeds from sale of restricted investments

 

 

497

 

 

 

497

 

Net cash used in investing activities

 

 

(1,393

)

 

 

(1,393

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow from financing activities:

 

 

 

 

 

 

 

 

 

 

 

Proceeds from stock options exercised, stock purchase plan and other, net

 

1,171

 

 

 

 

1,171

 

Advances (to) from subsidiaries

 

(34,852

)

35,726

 

(874

)

 

 

Net cash provided by (used in) financing activities

 

(33,681

)

35,726

 

(874

)

 

1,171

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in cash and cash equivalents

 

(29,162

)

17,818

 

(1,266

)

 

(12,610

)

Cash and cash equivalents at beginning of period

 

53,030

 

26,824

 

13,579

 

 

93,433

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

23,868

 

$

44,642

 

$

12,313

 

$

 

$

80,823

 

 

Note 7 — Defined benefit plans

 

The Company maintains supplemental retirement plans (the “Plans”) for certain of its executive officers.  The Plans provide that upon death, disability, reaching retirement age, and certain termination events, a participant will receive benefits based on highest compensation, years of service and years of plan participation.  Benefit costs are determined using actuarial cost methods to estimate the total benefits ultimately payable to executive officers and this cost is allocated to the respective service periods.

 

The Plans are not funded and thus have no plan assets.  The actuarial assumptions used to calculate benefit costs are reviewed annually, or in the event of a material change in the Plans or participation in the Plans.  The components of net periodic benefit costs for the three months ended May 30, 2009 and May 31, 2008 were as follows (in thousands):

 

16