PIR Pier 1 Imports Inc

Pier 1 Imports, Inc. (NYSE:PIR) today reported financial results for the third quarter ended November 29, 2014.

Third Quarter Fiscal 2015 Highlights

• Total sales up 4.1% versus last year’s increase of 9.6%
• Company comparable sales growth of 2.5% (3% on a constant currency basis)
• E-Commerce sales represented 12% of total sales
• Gross profit of 42.3% of sales
• Net income of $17.9 million; EBITDA of $44.3 million
• Fully diluted earnings per share of $0.20

“Our ambitious omni-channel transformation continues to progress well,” said Alex W. Smith, President and Chief Executive Officer. E-Commerce sales have grown three-fold over last year, reaching 12% of total sales in the third quarter. Notably, over 60% of our e-Commerce transactions touched the stores during the period. Importantly, this quarter saw a return to a more balanced mix of full and promotional pricing. We are confident that the value proposition created by our exclusive and unique product remains strong, and our refined promotional strategy -- which benefited this period -- will contribute to gradual improvement in our gross margin rate over the coming quarters. We have in our stores and online business two mutually supportive and interdependent vehicles to drive long-term, profitable growth.”

“We remain focused on consistent cash generation and a balanced capital allocation strategy, which is enabling us to return capital to shareholders by way of share repurchases and an ongoing dividend, while also investing decisively in our ‘1 Pier 1’ vision.”

Mr. Smith concluded, “We had a solid start to our fourth quarter, marked by a successful five-day event surrounding Thanksgiving. We’re pleased about how well the business is positioned this season, with an inspiring merchandise assortment and multiple ways to shop Pier 1 Imports.”

Third Quarter Fiscal 2015 Results

For the third quarter ended November 29, 2014, the Company reported net income of $17.9 million, or $0.20 per share, compared to last year’s third quarter net income of $26.8 million, or $0.26 per share. Total sales for the third quarter were $484.5 million, a 4.1% increase versus $465.5 million in the year-ago quarter. Company comparable sales increased 2.5% (3% on a constant currency basis after adjusting for a 50 basis point impact attributable to the year-over-year devaluation of the Canadian Dollar) and reflect increases in brand traffic, conversion and average ticket.

Gross profit for the third quarter of fiscal 2015 was $204.9 million compared to $202.2 million for the same period last year. As a percentage of sales, gross profit was 42.3%, compared to 43.4% in the third quarter of fiscal 2014. The decline of 110 basis points was in line with management’s expectations and principally reflects a higher mix of e-Commerce sales, including fulfillment costs, partially offset by leverage of store occupancy costs.

Third quarter selling, general and administrative expenses were $160.8 million, or 33.2% of sales, compared to $149.2 million, or 32.1% of sales in the third quarter of last year. The planned, year-over-year increases in both dollars and as a percent of sales are attributable to incremental marketing expense and additional headcount and related costs in support of ‘1 Pier 1’.

Third quarter EBITDA (earnings before interest, taxes, depreciation and amortization) was $44.3 million compared to $53.4 million in the third quarter of last year. Operating income for the third quarter was $31.8 million compared to $43.1 million in the third quarter of fiscal 2014.

Net interest expense for the third quarter was $2.8 million, compared to $0.1 million of interest income during the same period last year. The increase is primarily attributable to the Company’s $200 million term loan, which closed in the first quarter of fiscal 2015.

Balance Sheet and Share Repurchase Program

As of November 29, 2014, the Company remained in strong financial condition with $33.0 million of cash and cash equivalents and $12.0 million of cash borrowings under its $350 million asset-based revolving credit facility. Inventory totaled $535.5 million, an increase of 25% compared to $429.1 million in the year ago period, which reflects a combination of factors – primarily a year-over-year increase in merchandise in-transit due to earlier deliveries in advance of the Chinese New Year, merchandise related to the planned increase in online-only and Express Request assortments, and additional inventory to support higher sales. Capital expenditures totaled $18.9 million for the quarter and were relatively evenly divided between store, distribution, and information technology investments.

The Company repurchased 1,781,900 shares of its common stock during the third quarter at an average cost of $13.06 per share and a total cost of approximately $23.3 million. Subsequent to the end of the third quarter, the Company has repurchased an additional 371,400 shares of common stock at a cost of $5.1 million. To date, the Company has repurchased 5,136,500 shares of common stock under its April 2014 $200 million share repurchase program at a total cost of approximately $76.8 million and $123.2 million remains available for future repurchases under the program.

Declaration of Quarterly Cash Dividend

The Company announced that its Board of Directors declared a $0.06 per share quarterly cash dividend on the Company’s outstanding shares of common stock. The $0.06 per share quarterly cash dividend will be paid on February 4, 2015 to shareholders of record on January 21, 2015. As of December 17, 2014, approximately 90.0 million shares of the Company’s common stock were outstanding.

Fiscal 2015 Financial Guidance

The Company reiterated its financial guidance for fiscal year 2015:

• Company comparable sales growth, which includes e-Commerce, in the mid- to high-single digits;
• Gross profit, as a percentage of sales, of 40.5% to 41.5%;
• Selling, general and administrative expenses relatively flat, as a percentage of sales, compared to fiscal 2014;
• EBITDA, as a percentage of sales, of approximately 11%;
• Net interest expense of approximately $10 million; and
• Earnings per diluted share in the range of $0.95 to $1.05.

Third Quarter Conference Call Information and December Sales Release

The Company will host a live conference call to discuss fiscal 2015 third quarter financial results at 3:30 p.m. Central Time today, December 18, 2014. 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 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 88750368.

A replay will be available today after 6:30 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 88750368.

The Company will announce fiscal 2015 December sales on January 8, 2015.

Financial Disclosure Advisory

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). This press release references a non-GAAP financial measure, EBITDA.

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).

                        Three Months Ended Nine Months Ended   November 29, 2014 November 30, 2013 November 29, 2014 November 30, 2013   Net Income (GAAP) $17.9 $26.8 $42.1 $64.9

Add Back:

Income Tax Provision

11.1 16.4 25.7

39.8

Interest Expense (Income), net 3.0 0.3 6.9

1.3

Depreciation and Amortization 12.3 9.9 34.0

28.5

EBITDA (non-GAAP)

$44.3

$53.4 $108.8 $134.5  

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.

(Financials Attached)

               

Pier 1 Imports, Inc.

  CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) (unaudited)   Three Months Ended November 29, % of November 30, % of   2014   Sales   2013   Sales   Net sales $ 484,501 100.0 % $ 465,462 100.0 %   Cost of sales   279,588   57.7 %   263,232   56.6 %   Gross Profit 204,913 42.3 % 202,230 43.4 %   Selling, general and administrative expenses 160,820 33.2 % 149,217 32.1 % Depreciation and amortization   12,323   2.5 %   9,919   2.0 %   Operating income 31,770 6.6 % 43,094 9.3 %   Nonoperating (income) and expenses: Interest, investment income and other (254 ) (592 ) Interest expense   3,054       528       2,800   0.6 %   (64 ) 0.0 %   Income before income taxes 28,970 6.0 % 43,158 9.3 % Income tax provision   11,110   2.3 %   16,400   3.6 %   Net income $ 17,860   3.7 % $ 26,758   5.7 %   Earnings per share: Basic $ 0.20   $ 0.26     Diluted $ 0.20   $ 0.26     Dividends declared per share: $ 0.06   $ 0.05     Average shares outstanding during period: Basic   89,741     103,319     Diluted   90,635     104,716                

Pier 1 Imports, Inc.

  CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands except per share amounts) (unaudited)   Nine Months Ended November 29, % of November 30, % of 2014 Sales 2013 Sales   Net sales $ 1,322,182 100.0% $ 1,255,957 100.0%   Cost of sales 786,918 59.5% 724,830 57.7%   Gross Profit 535,264 40.5% 531,127 42.3%   Selling, general and administrative expenses 427,103 32.3% 397,296 31.6% Depreciation and amortization 34,032 2.6% 28,461 2.3%   Operating income 74,129 5.6% 105,370 8.4%   Nonoperating (income) and expenses: Interest, investment income and other (891) (1,216) Interest expense 7,216   1,846   6,325 0.5% 630 0.1%   Income before income taxes 67,804 5.1% 104,740 8.3% Income tax provision 25,731 1.9% 39,801 3.1%   Net income $ 42,073 3.2% $ 64,939 5.2%   Earnings per share: Basic $ 0.46 $ 0.62   Diluted $ 0.45 $ 0.61   Dividends declared per share: $ 0.18 $ 0.15   Average shares outstanding during period: Basic 91,967 105,018   Diluted 93,030 106,942            

Pier 1 Imports, Inc.

  CONSOLIDATED BALANCE SHEETS (in thousands except share amounts) (unaudited)     November 29, March 1, November 30,   2014     2014     2013   ASSETS   Current assets:

Cash and cash equivalents, including temporary investments of $26,737, $121,446 and $120,222, respectively

$ 33,044 $ 126,695 $ 128,205 Accounts receivable, net 45,002 24,614 36,557 Inventories 535,532 377,650 429,069 Prepaid expenses and other current assets   53,183     47,547     51,625   Total current assets 666,761 576,506 645,456  

Properties, net of accumulated depreciation of $448,357, $424,246 and $418,167, respectively

208,722 183,352 176,816 Other noncurrent assets   45,900     43,765     50,043   $ 921,383   $ 803,623   $ 872,315     LIABILITIES AND SHAREHOLDERS' EQUITY   Current liabilities: Notes payable $ 12,000 $ - $ - Accounts payable 119,336 84,238 105,143 Gift cards and other deferred revenue 61,284 57,428 55,490 Accrued income taxes payable 6,242 14,025 18,020 Current portion of long-term debt 2,000 - - Other accrued liabilities   121,143     110,278     114,455   Total current liabilities 322,005 265,969 293,108   Long-term debt 205,173 9,500 9,500 Other noncurrent liabilities 77,106 78,722 70,717   Shareholders' equity:

Common stock, $0.001 par, 500,000,000 shares authorized, 125,232,000 issued

125 125 125 Paid-in capital 219,828 235,637 231,316 Retained earnings 685,769 660,040 623,512 Cumulative other comprehensive loss (6,107 ) (6,114 ) (4,883 )

Less -- 34,833,000, 26,517,000 and 21,956,000 common shares in treasury, at cost, respectively

  (582,516 )   (440,256 )   (351,080 )   317,099     449,432     498,990   $ 921,383   $ 803,623   $ 872,315          

Pier 1 Imports, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)     Nine Months Ended November 29, November 30,   2014     2013     Cash flows from operating activities: Net income $ 42,073 $ 64,939

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

Depreciation and amortization 39,458 33,598 Stock-based compensation expense 5,870 10,267 Deferred compensation 4,416 5,372 Deferred income taxes 2,370 1,774 Amortization of deferred gains (2,681 ) (2,286 ) Other (2,819 ) (1,496 ) Changes in cash from: Inventories (157,882 ) (73,016 ) Proprietary credit card receivables (6,934 ) (7,441 ) Prepaid expenses and other assets (24,845 ) (14,829 ) Accounts payable and accrued expenses 60,084 51,671 Accrued income taxes payable, net of payments   (5,319 )   (7,391 ) Net cash (used in) provided by operating activities   (46,209 )   61,162     Cash flows from investing activities: Capital expenditures (61,531 ) (60,590 ) Proceeds from disposition of properties 37 11,055 Proceeds from sale of restricted investments 1,232 507 Purchase of restricted investments   (2,314 )   (2,566 ) Net cash used in investing activities   (62,576 )   (51,594 )   Cash flows from financing activities: Cash dividends (16,344 ) (15,633 ) Purchases of treasury stock (178,289 ) (114,025 ) Stock options exercised, stock purchase plan and other, net 3,888 17,888 Issuance of long-term debt, net of discount 198,000 - Repayments of long-term debt (500 ) - Debt issuance costs (3,621 ) (1,149 ) Borrowing of notes payable 60,000 - Repayments of notes payable   (48,000 )   -   Net cash provided by (used in) financing activities   15,134     (112,919 )   Change in cash and cash equivalents (93,651 ) (103,351 )   Cash and cash equivalents at beginning of period   126,695     231,556     Cash and cash equivalents at end of period $ 33,044   $ 128,205  

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