Pier 1 Imports, Inc. Reports Fourth Quarter and Fiscal Year 2014 Financial Results

  Pier 1 Imports, Inc. Reports Fourth Quarter and Fiscal Year 2014 Financial
  Results

 Provides Fiscal 2015 Full Year Financial Outlook; Updates Three Year Growth
                                    Plan;

   Announces the repurchase of 14.6 million shares; New $200 Million Share
                          Repurchase Authorization;

    Commences Transaction to Secure $200 Million Senior Secured Term Loan

Business Wire

FORT WORTH, Texas -- April 10, 2014

Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the
13-week and 52-week periods of fiscal 2014 ended March 1, 2014. The fourth
quarter and full year of fiscal 2013 included 14 weeks and 53 weeks of
results, respectively. Except where indicated, the following comparisons are
of the 13-week and 52-week periods ended March 1, 2014, to the 14-week and
53-week periods ended March 2, 2013.

Fiscal 2014 Financial Highlights

  *Total sales increased 3.9%; Comparable store sales rose 2.4% on a 52-week
    basis
  *E-Commerce sales represented 4% of total sales
  *Gross profit of $745.6 million, or 42.1% of sales
  *Earnings per share of $1.01
  *Repurchased $203.9 million of the Company’s shares in fiscal 2014; $90.3
    million subsequent to year-end
  *Distributed $21.7 million to shareholders through quarterly cash dividends

Fiscal 2014 Operating Highlights

  *Implemented new point-of-sale system
  *Re-branded and re-launched ‘Express Request’ special order program
  *Upgraded information technology and systems in support of ‘1 Pier 1’
  *Enhanced existing store portfolio and opened 27 new locations
  *Named Executive Vice President – Marketing
  *Rolled out in-home delivery

“Fiscal 2014 was a transformational year for Pier 1 Imports,” stated Alex W.
Smith, President and Chief Executive Officer. “Through our ‘1 Pier 1’ strategy
we have evolved our operating model from a broad and productive portfolio of
Pier 1 Imports stores to a true omni-channel retail business. During the year
we added new functionality and services to our e-Commerce capabilities and
began positioning our stores as facilitators and ambassadors for Pier1.com. We
are working hard to improve the Pier 1 Imports brand experience in every way –
strengthening our store portfolio with new and relocated stores and
continually enhancing our ability to provide customers with a seamless
shopping experience. As a testament to the early success of ‘1 Pier 1’,
e-Commerce delivered 4% of total sales in its sophomore year – well on its way
to achieving our targeted sales contribution of 10% by the end of fiscal
2016.”

“As we previously reported, we concluded the year with a difficult fourth
quarter – due to an unusually high number of snowstorms which impacted
approximately two-thirds of our selling days in many of our key markets.
However, our teams executed extremely well through the holidays, and we are
pleased and proud of their hard work and dedication during our most critical
selling period of the year.”

“We have a strong track record of delivering growth and shareholder value,”
added Mr. Smith. “In fiscal 2014, we distributed cash dividends totaling $22
million and repurchased a significant portion of our shares outstanding. We
are highly confident that we have the right plans, infrastructure and talent
to drive sales, improve profitability and capture market share in our new
fiscal year. We are in the best shape strategically we have ever been, and we
are excited to see new and existing customers respond so positively to ‘1 Pier
1’ – which provides them with more product choices and makes their shopping
easier and more enjoyable. Indeed, in fiscal 2015 we’re anticipating a
comparable company sales increase in the high single-digits and earnings per
share growth of 15% to 23%. We expect growth to be driven by our ‘1 Pier 1’
strategy, expanded product assortments and increased customer engagement. With
the spring season officially underway, we are enthusiastic about the strong
customer response to our merchandise – including our latest seasonal offerings
– and believe the business is well positioned to regain momentum.”

Fiscal Year Results

For the fiscal year ended March 1, 2014, net income for the 52-week period was
$107.5 million, or $1.01 per share, compared to $129.4 million, or $1.20 per
share in the 53-week period ended March 2, 2013. The Company estimates that
the 53^rd week of fiscal 2013 contributed $29 million to net sales and
approximately $0.03 to earnings per share. Total sales for the 52-week year
ended March 1, 2014 increased 3.9% to $1.772 billion, from $1.705 billion in
the 53-week period last fiscal year. On a 52-week basis, comparable store
sales for fiscal 2014 increased 2.4% versus an increase of 7.5% for fiscal
2013.

Gross profit increased to $745.6 million, or 42.1% of sales, compared to
$743.1 million, or 43.6% of sales, in fiscal 2013.

Selling, general and administrative expenses were $531.2 million, or 30.0% of
sales, compared to $513.1 million, or 30.1% of sales a year ago.

Full year fiscal 2014 EBITDA (earnings before interest, taxes, depreciation
and amortization) was $215.4 million compared to $232.0 million in the prior
year. Operating income was $175.5 million compared to $199.0 million in fiscal
2013.

Fourth Quarter Results

For the fourth quarter ended March 1, 2014, net income for the 13-week period
was $42.6 million, or $0.41 per share, compared to $61.7 million, or $0.58 per
share in the 14-week period ended March 2, 2013. Non-GAAP adjusted net income
in the fourth quarter of fiscal 2013, which utilized a 35.6% annual effective
tax rate (as described below under Financial Disclosure Advisory) was $64.2
million, or an adjusted $0.60 per share. Total sales for the 13-week quarter
ended March 1, 2014 were $515.8 million compared to $551.6 million in the
14-week period last fiscal year. Comparable store sales for the 13 weeks ended
March 1, 2014 decreased 4.6% compared to the 13-weeks ended February 23, 2013.
Adjusting for the shifted calendar in fiscal 2013, comparable store sales for
the 13 weeks ended March 1, 2014 increased 0.6% over the 13-week period ended
March 2, 2013.

Gross profit in the fourth quarter totaled $214.4 million compared to $255.0
million in the fourth quarter of fiscal 2013. As a percentage of sales, gross
profit totaled 41.6% versus 46.2% last year, reflecting increased promotional
activity during the period, coupled with a deleveraging of occupancy costs
resulting from lower sales.

Fourth quarter selling, general and administrative expenses were $133.9
million, or 26.0% of sales, compared to $145.5 million, or 26.4% of sales a
year ago.

EBITDA for the fourth quarter was $80.8 million compared to $109.8 million in
the prior year. Fourth quarter operating income was $70.1 million compared to
$100.4 million in the fourth quarter of fiscal 2013.

Balance Sheet and Cash Flow Highlights

As of March 1, 2014, the Company remained in strong financial condition with
$126.7 million of cash and cash equivalents. Cash flow from operations was
$159.2 million in fiscal 2014. Inventories at year end totaled $377.7 million,
an increase of 6.1%, which was in line with management’s expectations. Capital
expenditures totaled $80.3 million and were primarily used for new store
openings, existing store improvements and infrastructure and technology
development in support of ‘1 Pier 1’, including the implementation of the
Company’s new point-of-sale system.

Cary H. Turner, Senior Executive Vice President and Chief Financial Officer,
stated, “We are preparing for a year of significant growth in earnings and
cash flow, fueled by the continued evolution of our ‘1 Pier 1’ strategy. The
actions announced today further strengthen the Company’s capital structure and
provide us with added flexibility to invest for future, profitable growth,
while continuing to return value to our shareholders in the coming years. They
are a reflection of the Company’s operating performance and ability to
consistently generate strong cash flow from operations.”

Secured Term Loan B

The Company announced today that it has launched a transaction seeking
commitments for a $200 million senior secured term loan B facility due in
2021. Bank of America Merrill Lynch and Wells Fargo Securities, LLC are
serving as joint lead arrangers for the proposed transaction. The proceeds
from the new term loan are intended to be used for general corporate purposes,
including for working capital needs and capital expenditures, and share
repurchases and dividends permitted under the debt agreement. The Company will
give a presentation to potential investors on Monday, April 14, 2014, at The
St. Regis New York in New York, New York at 10:00 a.m. Eastern Time.

Further details of the proposed transaction will be announced at closing,
which is expected to occur during April 2014. There can be no assurances that
the Company will be successful in completing the proposed transaction, which
is subject to market conditions, negotiation and execution of definitive
documents and satisfaction of customary closing conditions. This press release
is not an offer to sell, or a solicitation of an offer to buy, any securities.

Secured Credit Facility

On April 9, 2014, the Company received the required consents to amend its $350
million secured revolving credit facility to allow senior secured term loan
indebtedness. The amended facility preserves the existing $100 million
accordion feature, which if the Company chose to utilize, would enable it to
increase the line to as much as $450 million under certain circumstances. The
facility is secured by Pier 1 Imports’ merchandise inventory and credit card
receivables on a first priority basis and, following the incurrence of the new
term loan indebtedness, will also be secured on a second lien basis by
substantially all other assets. As of April 9, 2014, the Company had no
borrowings under its revolving credit facility and $43.0 million in
outstanding letters of credit.

Share Repurchase Program

The Company announced today that its Board of Directors has authorized a new
$200 million common stock share repurchase program, effective upon completion
of the Company’s current $200 million share repurchase program, which was
authorized in October 2013.

Under the October 2013 $200 million program, approximately $5.8 million
remains available for share repurchases.

During the fiscal year ended March 1, 2014, the Company repurchased a total of
9.8 million shares of its common stock for approximately $203.9 million.
Subsequent to year-end, the Company repurchased an additional 4.8 million
shares for approximately $90.3 million. Cumulatively during fiscal 2014 and
subsequent to year-end, the Company repurchased a total of 14.6 million shares
of its common stock, or 13.8% of its shares of common stock outstanding as of
the start of fiscal 2014.

As of April 10, 2014, approximately 94.3 million shares of the Company’s
common stock were outstanding.

Fiscal 2015 Financial Guidance

The Company has provided the following guidance for fiscal 2015:

  *Comparable store sales growth in the mid single-digit range;
  *Company comparable sales growth, which includes e-Commerce, in the high
    single digits;
  *Selling, general and administrative expenses relatively flat as a
    percentage of sales compared to fiscal 2014;
  *EBITDA growth in the range of 11% to 17%;
  *Interest expense of approximately $11 million;
  *Earnings per share in the range of $1.16 to $1.24, utilizing a fully
    diluted share count of 96 million shares, representing year-over-year
    growth of 15% to 23%.

Updated Three Year Growth Plan

The Company also announced that due to the challenging fourth quarter and
lower than expected financial results in fiscal 2014, management is updating
its Three Year Growth Plan. The Company now expects to achieve sales per
retail per square foot of $225 and operating margins of approximately 11% to
11.5% by the end of fiscal 2016. This compares to previous expectations for
sales per retail square foot of $225 and operating margins of 12% by the end
of fiscal 2015. The Company remains on track to achieve e-Commerce sales
representing at least 10% of total sales by the end of fiscal 2016.

Fourth Quarter and Fiscal Year Results Conference Call

The Company will host a conference call to discuss fiscal 2014 fourth quarter
and fiscal year financial results at 10:00 a.m. Central Time today. Investors
will be able to connect to the call through the Company’s website at
www.pier1.com. The conference call can be accessed by linking through to the
“Investor Relations” page to the “Events” page, or you can listen to the
conference call by dialing 1-800-498-7872, or if international,
1-706-643-0435. The conference ID number is 4100558.

A replay will be available after 12:00 p.m. Central Time for a 24-hour period
and the replay can be accessed by dialing 1-855-859-2056, or if international,
1-404-537-3406 using conference ID number 4100558.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S. generally
accepted accounting principles (GAAP). This press release references non-GAAP
financial measures, including EBITDA, adjusted net income and adjusted
earnings per share.

The Company believes that the non-GAAP financial measures included in this
press release allow management and investors to understand and compare
earnings per share results in a more consistent manner for the 13-week fourth
quarter and 52-week fiscal year ended March 1, 2014 and the 14-week fourth
quarter and 53-week fiscal year ended March 2, 2013. Adjusted net income and
adjusted earnings per share should be considered supplemental and not a
substitute for the Company’s net income and earnings per share results
reported in accordance with GAAP for the periods presented. A reconciliation
of GAAP to non-GAAP net income and earnings per share is shown below for the
14-week fourth quarter ended March 2, 2013 (in millions except per share
amounts). There were no similar items warranting reconciliation during the
13-week period ended March 1, 2014.

                                                           14 Weeks Ended
                                                             March 2, 2013  
                                                                             
Net Income (GAAP)                                             $61.7
Add back: Income Tax Provision (GAAP)                        37.9           
Adjusted Income Before Income Taxes (non-GAAP)                99.6
Less: Adjusted Income Tax Provision at 35.6% Annual          35.4           
Effective Tax Rate
Adjusted Net Income (non-GAAP)                               $64.2          
                                                                             
Diluted Earnings per Share (GAAP)                             $0.58
Difference of Income Tax Provision at 35.6% Annual           0.02           
Effective Tax Rate
Adjusted Diluted Earnings per Share (non-GAAP)               $0.60          
                                                                             

EBITDA represents earnings before interest, taxes, depreciation and
amortization. Management believes EBITDA is a meaningful indicator of the
Company’s performance that provides useful information to investors regarding
its financial condition and results of operations. Management uses EBITDA,
together with financial measures prepared in accordance with GAAP, to assess
the Company’s operating performance, to enhance its understanding of core
operating performance and to compare the Company’s operating performance to
other retailers. This non-GAAP financial measure should not be considered in
isolation or used as an alternative to GAAP financial measures and does not
purport to be an alternative to net income as a measure of operating
performance. A reconciliation of net income to EBITDA is shown below for the
periods indicated (in millions).

                      13             14              52              53
                   Weeks      Weeks       Weeks       Weeks
                      Ended          Ended           Ended           Ended
                      March          March           March           March
                     1,           2, 2013       1, 2014       2, 2013 
                      2014
                                                                             
Net Income            $42.6          $61.7           $107.5          $129.4
(GAAP)
Add Back:
Income Tax            $27.3          $37.9           $67.1           $71.6
Provision
Interest
Expense               $0.5           $1.1            $1.9            $0.0
(Income), net
Depreciation
and                  $10.4        $9.1          $38.9         $31.0   
Amortization
EBITDA               $80.8        $109.8        $215.4        $232.0  
(non-GAAP)
                                                                             

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, and other filings. 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 home décor and
furniture. 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)
                                                                                     
                     13 Weeks Ended                      14 Weeks Ended
                     March 1,            % of            March 2,            % of
                    2014              Sales         2013              Sales   
                                                                                     
Net sales            $ 515,786           100.0 %         $ 551,625           100.0 %
                                                                                     
Cost of sales        301,350        58.4  %        296,648        53.8  % 
                                                                                     
Gross Profit           214,436           41.6  %           254,977           46.2  %
                                                                                     
Selling,
general and            133,894           26.0  %           145,489           26.4  %
administrative
expenses
Depreciation
and                  10,412         2.0   %        9,053          1.6   % 
amortization
                                                                                     
Operating              70,130            13.6  %           100,435           18.2  %
income
                                                                                     
Nonoperating
(income) and
expenses:
Interest,
investment             (505    )                           (590    )
income and
other
Interest             726                          1,372                 
expense
                     221            0.0   %        782            0.1   % 
                                                                                     
Income before          69,909            13.6  %           99,653            18.1  %
income taxes
Income tax           27,317         5.3   %        37,949         6.9   % 
provision
                                                                                     
Net income          $ 42,592         8.3   %       $ 61,704         11.2  % 
                                                                                     
Earnings per
share:
Basic               $ 0.42                           $ 0.59     
                                                                                     
Diluted             $ 0.41                           $ 0.58     
                                                                                     
Dividends
declared per        $ 0.06                           $ 0.05     
share:
                                                                                     
Average shares
outstanding
during period:
Basic                101,430                         105,168  
                                                                                     
Diluted              103,024                         107,066  
                                                                                     


Pier 1 Imports, Inc.
                                                                 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
                                                                                         
                     52 Weeks Ended                        53 Weeks Ended
                     March 1,              % of            March 2,              % of
                    2014                Sales         2013                Sales   
                                                                                         
Net sales            $ 1,771,743           100.0 %         $ 1,704,885           100.0 %
                                                                                         
Cost of sales        1,026,180        57.9  %        961,826          56.4  % 
                                                                                         
Gross Profit           745,563             42.1  %           743,059             43.6  %
                                                                                         
Selling,
general and            531,190             30.0  %           513,085             30.1  %
administrative
expenses
Depreciation
and                  38,873           2.2   %        30,988           1.8   % 
amortization
                                                                                         
Operating              175,500             9.9   %           198,986             11.7  %
income
                                                                                         
Nonoperating
(income) and
expenses:
Interest,
investment             (1,721    )                           (2,757    )
income and
other
Interest             2,572                          743                     
expense
                     851              0.0   %        (2,014    )       -0.1  % 
                                                                                         
Income before          174,649             9.9   %           201,000             11.8  %
income taxes
Income tax           67,118           3.8   %        71,556           4.2   % 
provision
                                                                                         
Net income          $ 107,531          6.1   %       $ 129,444          7.6   % 
                                                                                         
Earnings per
share:
Basic               $ 1.03                             $ 1.22       
                                                                                         
Diluted             $ 1.01                             $ 1.20       
                                                                                         
Dividends
declared per        $ 0.21                             $ 0.17       
share:
                                                                                         
Average shares
outstanding
during period:
Basic                104,121                           106,222    
                                                                                         
Diluted              106,248                           108,259    


Pier 1 Imports, Inc.
                                                        
CONSOLIDATED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
                                                                             
                                           March 1,             March 2,
                                          2014               2013         
ASSETS
                                                                             
Current assets:
Cash and cash equivalents, including
temporary investments of $121,446          $ 126,695            $ 231,556
and $191,568, respectively
Accounts receivable, net                     24,614               22,309
Inventories                                  377,650              356,053
Prepaid expenses and other current         47,547           49,016    
assets
Total current assets                         576,506              658,934
                                                                             
Properties, net                              183,352              150,615
Other noncurrent assets                    43,765           47,666    
                                          $ 803,623         $ 857,215   
                                                                             
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                                                             
Current liabilities:
Accounts payable                           $ 84,238             $ 58,701
Gift cards and other deferred                57,428               51,740
revenue
Accrued income taxes payable                 14,025               25,249
Other accrued liabilities                  110,278          112,437   
Total current liabilities                    265,969              248,127
                                                                             
Long-term debt                               9,500                9,500
Other noncurrent liabilities                 78,722               62,457
                                                                             
Shareholders’ equity:
Common stock, $0.001 par,
500,000,000 shares authorized,               125                  125
125,232,000 issued
Paid-in capital                              235,637              233,518
Retained earnings                            660,040              574,206
Cumulative other comprehensive loss          (6,114   )           (4,828   )
Less -- 26,517,000 and 18,906,000
common shares in treasury, at cost,        (440,256 )        (265,890 ) 
respectively
                                           449,432          537,131   
                                          $ 803,623         $ 857,215   
                                                                             


Pier 1 Imports, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
                                                   
                              Year Ended
                              March 1,                      March 2,
                             2014                        2013            
                                                                            
Cash flow from
operating
activities:
Net income                    $   107,531                   $  129,444
Adjustments to
reconcile to net
cash provided by
(used in)
operating
activities:
Depreciation and                  45,803                       38,431
amortization
Stock-based
compensation                      11,984                       12,337
expense
Deferred                          6,739                        6,192
compensation
Deferred income                   13,907                       19,928
taxes
Excess tax
benefit from                      (2,265     )                 (4,814    )
stock-based
awards
Amortization of                   (3,180     )                 (6,917    )
deferred gains
Change in reserve
for uncertain tax                 6,241                        (6,252    )
positions
Other                             (3,665     )                 (2,087    )
Changes in cash
from:
Inventories                       (21,597    )                 (33,571   )
Proprietary
credit card                       (1,585     )                 (2,019    )
receivables
Prepaid expenses                  (6,697     )                 (31,620   )
and other assets
Accounts payable
and accrued                       14,034                       (5,516    )
expenses
Accrued income
taxes payable,                  (8,018     )              10,513      
net of payments
Net cash provided
by operating                    159,232                  124,049     
activities
                                                                            
Cash flow from
investing
activities:
Capital                           (80,306    )                 (80,363   )
expenditures
Proceeds from
disposition of                    12,593                       217
properties
Proceeds from
sale of                           758                          1,290
restricted
investments
Purchase of
restricted                      (3,196     )              (3,567    )  
investments
Net cash used in
investing                       (70,151    )              (82,423   )  
activities
                                                                            
Cash flow from
financing
activities:
Cash dividends                    (21,697    )                 (17,989   )
Purchases of                      (192,284   )                 (100,000  )
treasury stock
Proceeds from
stock options
exercised, stock                  18,923                       15,237
purchase plan and
other, net
Excess tax
benefit from                      2,265                        4,814
stock-based
awards
Debt issuance                   (1,149     )              -           
costs
Net cash used in
financing                       (193,942   )              (97,938   )  
activities
                                                                            
Change in cash
and cash                          (104,861   )                 (56,312   )
equivalents
                                                                            
Cash and cash
equivalents at                  231,556                  287,868     
beginning of
period
                                                                            
Cash and cash
equivalents at               $   126,695                $  231,556     
end of period
                                                                            
                                                                            
Supplemental
non-cash
financing
activities:
                                                                            
The Company made total treasury share repurchases of $203,892 during fiscal
2014. Of this amount, $192,284 was settled in fiscal 2014 and $11,608 was
settled in March fiscal 2015. Shares repurchased but settled subsequent to the
end of the fiscal year are considered non-cash financing activities and are
not included above.


Contact:

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