Pier 1 Imports, Inc. Reports Fiscal 2013 Third Quarter Financial Results

  Pier 1 Imports, Inc. Reports Fiscal 2013 Third Quarter Financial Results

  *Announces Effective Completion of Current $100 Million Share Repurchase
    Program
  *Authorizes New $100 Million Share Repurchase Program
  *Increases Quarterly Cash Dividend 25% to $0.05 Per Share

Business Wire

FORT WORTH, Texas -- December 13, 2012

Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the third
quarter ended November 24, 2012.

Third Quarter Financial Highlights

  *Comparable store sales increased 7.9% versus last year’s increase of 7.0%;
    three-year cumulative comparable store sales increase of 25.1%
  *Gross profit as a percentage of sales up 70 basis points to 43.9%
  *Operating income increased 18%; operating margin expanded to 9.1%
  *Earnings per share of $0.22 (GAAP) and $0.25 (non-GAAP) versus $0.21 last
    year (see reconciliation below of earnings per share to adjusted non-GAAP
    earnings per share)

“Our third quarter results represent the 13^th consecutive period of growth in
comp store sales and earnings per share,” stated Alex W. Smith, President and
Chief Executive Officer. “Our team continues to execute well, bringing the
Pier 1 Imports customer a highly differentiated assortment of merchandise that
keeps her coming back to both our stores and website. This marks the Company’s
first full quarter of e-Commerce sales and we’re pleased with the initial
results, as the level of both new and existing customer visits indicates the
long-term opportunity is significant. Indeed, we saw very strong traffic at
both our stores and Pier1.com during the period, and trends have remained
robust thus far in the holiday selling season.”

Smith continued, “The combination of our sizeable store base and e-Commerce
capabilities provides us with a powerful platform for growth. We are
continuing to build out our multi-channel functionality and believe the
business is ideally positioned to achieve the goals laid out in our Three-Year
Growth Plan. Our Board of Directors and management greatly appreciate the
support of Pier 1 Imports’ shareholders and remain committed to returning
value to them. Today, we are announcing our third $100 million share
repurchase program, reflecting our confidence in the underlying strength of
the business and the significant potential ahead of us. Additionally, we have
increased our quarterly cash dividend by 25% to $0.05 per share.”

Third Quarter Results

For the third quarter ended November 24, 2012, the Company reported net income
of $23.7 million, or $0.22 per share. Third quarter adjusted net income on a
non-GAAP basis, which excludes the estimated impact of Hurricane Sandy and
utilizes an estimated 35.6% annual effective tax rate for fiscal 2013 (as
described below under Financial Disclosure Advisory), was $27.1 million, or
$0.25 per share. For the third quarter ended November 26, 2011, the Company
reported net income of $23.0 million, or $0.21 per share. Total sales for the
third quarter of fiscal 2013 were $424.5 million, an increase of 10.9% versus
$382.7 million in the year-ago quarter. Comparable store sales increased 7.9%
during the third quarter on top of last year’s 7.0% gain. Strong comparable
store sales results for the period were primarily attributable to increases in
store traffic and higher average ticket.

Merchandise margins at the store level for the third quarter were essentially
flat compared to the same period last year. Merchandise margins, including the
direct-to-consumer business (“Pier 1 To-You”), were 60.2% for the third
quarter of this year. Store occupancy costs were $69.4 million, or 16.3% of
sales, compared to $66.2 million, or 17.3% of sales, last year. Gross profit
for the quarter was $186.3 million, or 43.9% of sales, a 70 basis point
improvement from $165.5 million, or 43.2% of sales in the third quarter of
last year.

Third quarter selling, general and administrative expenses were $139.2
million, or 32.8% of sales, compared to $127.5 million, or 33.3% of sales, in
the same period of fiscal 2012. The 50 basis point improvement was primarily
due to the leveraging of store salaries and fixed expenses, and was slightly
offset by increases in marketing expense.

Operating income for the third quarter increased 18% to $38.8 million, or 9.1%
of sales, compared to last year’s third quarter operating income of $32.9
million, or 8.6% of sales.

Year-to-Date Results

For the year-to-date period ended November 24, 2012, the Company reported net
income of $67.7 million, or $0.62 per share, which included the tax benefit
and reduced accrued interest resulting from the reversal of a portion of the
Company’s reserve for uncertain income tax positions in the second quarter of
fiscal 2013. For the first nine months of fiscal 2013, adjusted net income on
a non-GAAP basis was $65.7 million, or $0.60 per share, and excludes the
estimated impact of Hurricane Sandy, utilizes an estimated annual effective
tax rate of 35.6%, and excludes the reversal of accrued interest referenced
above (as described below under Financial Disclosure Advisory). The Company
reported net income of $53.7 million, or $0.47 per share, for the same period
last year. Total sales for the first nine months increased 9.1% to $1.153
billion from $1.057 billion in the year-ago period. Comparable store sales for
the first nine months increased 7.3% versus a comparable store sales increase
of 9.2% in the year-ago period.

Merchandise margins at the store level for the first nine months of fiscal
2013 were 60.3% compared to 59.9% in the same period last year. Merchandise
margins, including the direct-to-consumer business (“Pier 1 To-You”), were
60.2% for the first nine months of this year. Store occupancy costs were
$206.0 million, or 17.9% of sales, compared to $199.3 million, or 18.9% of
sales, last year. Gross profit for the first nine months of fiscal 2013 was
$488.1 million compared to $434.1 million in the prior period, while gross
margin was 42.3% compared to 41.1% in the same period last year, an
improvement of 120 basis points.

Year-to-date selling, general and administrative expenses were $367.6 million,
or 31.9% of sales, compared to $342.4 million, or 32.4% of sales, in the same
period of fiscal 2012.

Operating income for the first nine months of fiscal 2013 increased 29% to
$98.5 million, or 8.5% of sales, compared to $76.5 million, or 7.2% of sales,
for the same period in fiscal 2012.

Balance Sheet and Share Repurchase Programs

As of the end of the third quarter, the Company remained in strong financial
condition with $120.8 million of cash and cash equivalents. Inventory totaled
$417.5 million, up 13.5% versus the end of last year’s third quarter. The
planned increase was primarily due to additional inventory for the Company’s
new e-Commerce business and slightly larger purchases of merchandise in select
categories, including seasonal goods, to support higher sales. Capital
expenditures for the first nine months totaled $57.7 million and were
primarily used for new store openings, existing store fixtures and
improvements, and infrastructure and technology development, including the
Company’s new e-Commerce platform and point-of-sale system.

The Company reported today it has effectively completed its $100 million share
repurchase program, which was announced on October 14, 2011. As of December
12, 2012, the Company had repurchased a total of 5,805,250 shares of its
common stock under this share repurchase program at a weighted average cost of
$17.17 per share for a total cost of approximately $99.7 million. During the
third quarter ended November 24, 2012, the Company repurchased a total of
546,835 shares of its common stock at a weighted average cost of $19.14 per
share for a total cost of approximately $10.5 million. Under this share
repurchase program, the Company repurchased approximately 5.3% of its common
stock outstanding.

The Company today announced its Board of Directors has authorized a new $100
million share repurchase program. The new share repurchase program is
effective immediately and authorizes the repurchase of up to $100 million of
the Company’s common stock in open market or private transactions. The timing
of the repurchases will depend on several factors, including prevailing market
conditions and prices.

Declaration of Quarterly Cash Dividend

The Company today announced that its Board of Directors declared a $0.05 per
share quarterly cash dividend on the Company’s outstanding shares of common
stock, reflecting a 25% increase from the previous quarterly cash dividend.
The $0.05 quarterly cash dividend will be paid on January 30, 2013 to
shareholders of record on January 16, 2013. As of December 13, 2012,
approximately 106.0 million shares of the Company’s common stock were
outstanding.

Financial Guidance

The Company’s fiscal 2013 fourth quarter and fiscal year will include 14 weeks
and 53 weeks, respectively, of operating results. The Company provided the
following financial guidance for the fiscal 2013 fourth quarter on a 13-week
basis:

  *Comparable store sales growth in the mid single-digit range
  *Earnings per share (GAAP) in the range of $0.55 to $0.59, utilizing an
    effective tax rate of 38.5%
  *Earnings per share (non-GAAP) in the range of $0.57 to $0.61, utilizing an
    annual effective tax rate of 35.6%

The Company provided the following updated financial guidance for full fiscal
year 2013 on a 52-week basis:

  *Comparable store sales growth in the mid single-digit range
  *Earnings per share, on both a GAAP and non-GAAP basis, in the range of
    $1.17 to $1.21
  *Capital expenditures of approximately $70 to $75 million

The 14^th and 53^rd week is expected to contribute approximately $25 million
to total sales and approximately $0.02 to earnings per share.

Third Quarter Results Conference Call

The Company will host a conference call to discuss fiscal 2013 third quarter
financial results at 10:00 a.m. Central Time today. The call can be accessed
through the Investor Relations page of the Company’s website at www.pier1.com 
or by dialing 1-800-498-7872, or if international, 1-706-643-0435. The
conference ID number is 59879356.

A replay will be available beginning at approximately 12:00 p.m. Central Time
for a 24-hour period and can be accessed by dialing 1-855-859-2056, or if
international, 1-404-537-3406 using conference ID number 59879356.

Financial Disclosure Advisory

This release references non-GAAP information for the three and nine months
ended November 24, 2012 as shown in the table below.

                                                 
                                Three Months                 Nine Months Ended
                                Ended
                                November 24,                 November 24, 2012
                                2012
                                ($ in millions, except per share amounts)
                                                             
Net Income (GAAP)               $    23.7                    $    67.7
Add back: Income Tax                14.8                        33.6     
Provision (GAAP)
Income Before Income                 38.5                         101.3
Taxes (GAAP)
Interest Expense
Adjustment Related to               -                           (2.8     )
Uncertain Tax Positions
Adjusted Income Before               38.5                         98.5
Income Taxes (non-GAAP)
Less: Adjusted Income Tax
Provision at Estimated               13.7                         35.1
35.6% Annual Effective
Tax Rate
Estimated Impact of
Hurricane Sandy, net of             2.3                         2.3      
tax
Adjusted Net Income             $    27.1                    $    65.7     
(non-GAAP)
                                                             
                                                             
Earnings per Share (GAAP)       $    0.22                    $    0.62
Interest Expense
Adjustment Related to                -                            (0.02    )
Uncertain Tax Positions,
net of tax
Difference of Income Tax
Provision at Estimated               0.01                         (0.02    )
35.6% Annual Effective
Tax Rate
Estimated Impact of
Hurricane Sandy, net of             0.02                        0.02     
tax
Adjusted Earnings per           $    0.25                    $    0.60     
Share (non-GAAP)
                                                             

The Company reports its financial results in accordance with U.S. generally
accepted accounting principles (GAAP). The Company believes that the non-GAAP
financial measures included in this press release allow management and
investors to understand and compare the Company’s earnings per share results
in a more consistent manner for the three and nine months ended November 24,
2012. The non-GAAP measures should be considered supplemental and not a
substitute for the Company’s net income and earnings per share results that
will be recorded in accordance with GAAP for the periods presented.

Management’s expectations and assumptions regarding 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 included in this press release. Any
forward-looking projections or statements should be considered in conjunction
with the cautionary statements and risks contained in the Company’s Annual
Report on Form 10-K. Refer to the Company’s most recent SEC filings for any
updates concerning 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 the original global importer of imported decorative
home furnishings and gifts. Information about the Company is available on
www.pier1.com.

                                                            
Pier 1 Imports, Inc.
                                                                           
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
                                                                           
                     Three Months Ended
                     November          % of              November          % of
                     24,                                 26,
                     2012              Sales             2011              Sales
                                                                           
Net sales            $ 424,527         100.0 %           $ 382,699         100.0 %
                                                                           
Cost of sales         238,268        56.1  %            217,209        56.8  %
                                                                           
Gross Profit           186,259         43.9  %             165,490         43.2  %
                                                                           
Selling,
general and            139,244         32.8  %             127,514         33.3  %
administrative
expenses
Depreciation
and                   8,192          2.0   %            5,104          1.3   %
amortization
                                                                           
Operating              38,823          9.1   %             32,872          8.6   %
income
                                                                           
Nonoperating
(income) and
expenses:
Interest and
investment             (298    )                           (3,238  )
income and
other
Interest              664                              739            
expense
                      366            0.0   %            (2,499  )       -0.6  %
                                                                           
Income before          38,457          9.1   %             35,371          9.2   %
income taxes
Income tax            14,772         3.5   %            12,383         3.2   %
provision
                                                                           
Net income           $ 23,685         5.6   %           $ 22,988         6.0   %
                                                                           
Earnings per
share:
Basic                $ 0.22                             $ 0.21    
                                                                           
Diluted              $ 0.22                             $ 0.21    
                                                                           
Dividends
declared per         $ 0.04                             $ 0.00    
share:
                                                                           
Average shares
outstanding
during period:
Basic                 105,419                           108,713 
                                                                           
Diluted               107,308                           110,306 
                                                                           
                                                                           

                                                                 
Pier 1 Imports, Inc.
                                                                                 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
                                                                                 
                       Nine Months Ended
                       November 24,        % of              November 26,        % of
                       2012                Sales             2011                Sales
                                                                                 
Net sales              $ 1,153,260         100.0 %           $ 1,056,854         100.0 %
                                                                                 
Cost of sales           665,179          57.7  %            622,775          58.9  %
                                                                                 
Gross Profit             488,081           42.3  %             434,079           41.1  %
                                                                                 
Selling,
general and              367,596           31.9  %             342,416           32.4  %
administrative
expenses
Depreciation
and                     21,936           1.9   %            15,171           1.5   %
amortization
                                                                                 
Operating                98,549            8.5   %             76,492            7.2   %
income
                                                                                 
Nonoperating
(income) and
expenses:
Interest and
investment               (2,169    )                           (8,441    )
income and
other
Interest
(income)                (629      )                         2,279            
expense
                        (2,798    )       -0.3  %            (6,162    )       -0.6  %
                                                                                 
Income before            101,347           8.8   %             82,654            7.8   %
income taxes
Income tax              33,607           2.9   %            28,929           2.7   %
provision
                                                                                 
Net income             $ 67,740           5.9   %           $ 53,725           5.1   %
                                                                                 
Earnings per
share:
Basic                  $ 0.64                               $ 0.47      
                                                                                 
Diluted                $ 0.62                               $ 0.47      
                                                                                 
Dividends
declared per           $ 0.12                               $ 0.00      
share:
                                                                                 
Average shares
outstanding
during period:
Basic                   106,601                             113,767   
                                                                                 
Diluted                 108,502                             115,490   
                                                                                 
                                                                                 

                                                        
Pier 1 Imports, Inc.
                                                                  
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
                                                                  
                            November 24,       February 25,       November 26,
                            2012               2012               2011
ASSETS
                                                                  
Current assets:
Cash and cash
equivalents,
including temporary
investments of              $ 120,788          $ 287,868          $ 179,296
$97,064, $248,624 and
$136,765,
respectively
Accounts receivable,          34,979             16,282             26,561
net
Inventories                   417,547            322,482            367,876
Prepaid expenses and         25,417           23,682           21,659   
other current assets
Total current assets          598,731            650,314            595,392
                                                                  
Properties, net               136,736            103,640            87,029
Other noncurrent             71,963           69,409           30,405   
assets
                            $ 807,430         $ 823,363         $ 712,826  
                                                                  
LIABILITIES AND
SHAREHOLDERS' EQUITY
                                                                  
Current liabilities:
Accounts payable            $ 73,923           $ 63,827           $ 68,437
Gift cards and other          47,800             53,123             58,369
deferred revenue
Accrued income taxes          16,689             16,759             11,731
payable
Other accrued                114,628          111,679          115,342  
liabilities
Total current                 253,040            245,388            253,879
liabilities
                                                                  
Long-term debt                9,500              9,500              9,500
Other noncurrent              60,440             74,832             70,666
liabilities
                                                                  
Shareholders' equity:
Common stock, $0.001
par, 500,000,000              125                125                125
shares authorized,
125,232,000 issued
Paid-in capital               231,234            231,919            230,524
Retained earnings             517,732            462,751            347,538
Cumulative other              (3,214   )         (4,473   )         (2,174   )
comprehensive loss
Less -- 18,861,000,
15,512,000 and
15,574,000 common            (261,427 )        (196,679 )        (197,232 )
shares in treasury,
at cost, respectively
                             484,450          493,643          378,781  
                            $ 807,430         $ 823,363         $ 712,826  
                                                                  
                                                                  

                                 
Pier 1 Imports, Inc.
                                                        
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                                  
                                     Nine Months Ended
                                     November 24,                 November 26,
                                     2012                         2011
                                                                  
Cash flow from operating
activities:
  Net income                         $ 67,740                     $ 53,725
  Adjustments to reconcile to
  net cash (used in) provided
  by
  operating activities:
  Depreciation and                     27,537                       23,078
  amortization
  Stock-based compensation             9,141                        4,780
  expense
  Deferred compensation                4,767                        4,342
  Amortization of credit card          (2,914   )                   (15,625  )
  deferred revenue
  Amortization of deferred             (3,284   )                   (9,794   )
  gains
  Change in reserve for                (7,266   )                   152
  uncertain tax positions
  Other                                (1,495   )                   (99      )
  Changes in cash from:
  Inventories                         (95,065  )                   (56,106  )
  Proprietary credit card              (7,653   )                   (1,646   )
  receivables
  Prepaid expenses and other           (16,424  )                   (15,031  )
  assets
  Accounts payable and accrued         8,401                        12,668
  expenses
  Accrued income taxes                (3,716   )                  11,499   
  payable, net of payments
  Net cash (used in) provided         (20,231  )                  11,943   
  by operating activities
                                                                  
Cash flow from investing
activities:
  Capital expenditures                 (57,741  )                   (40,359  )
  Proceeds from disposition of         165                          1,341
  properties
  Proceeds from sale of                1,238                        423
  restricted investments
  Purchase of restricted              (3,178   )                  (1,240   )
  investments
  Net cash used in investing          (59,516  )                  (39,835  )
  activities
                                                                  
Cash flow from financing
activities:
  Cash dividends                       (12,759  )                   -
  Purchases of treasury stock          (89,747  )                   (100,000 )
  Proceeds from stock options
  exercised, stock purchase            15,173                       8,814
  plan and other, net
  Debt issuance costs                 -                          (3,097   )
  Net cash used in financing          (87,333  )                  (94,283  )
  activities
                                                                  
Change in cash and cash                (167,080 )                   (122,175 )
equivalents
                                                                  
Cash and cash equivalents at          287,868                    301,471  
beginning of period
Cash and cash equivalents at         $ 120,788                   $ 179,296  
end of period

Contact:

Pier 1 Imports, Inc.
Cary Turner, 817-252-8400
 
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