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 August 30, 2014
OR
[ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 001-07832
PIER 1 IMPORTS, INC. |
(Exact name of registrant as specified in its charter) |
Delaware |
75-1729843 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
100 Pier 1 Place, Fort Worth, Texas 76102 |
(Address of principal executive offices, including zip code) |
(817) 252-8000 |
(Registrants 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 [ ]
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 [ X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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 X |
Accelerated filer | |||
Non-accelerated filer |
(Do not check if a smaller reporting company) | 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 [ ] No [ X ]
As of October 3, 2014, there were outstanding 91,498,189 shares of the registrants common stock, all of one class.
INDEX TO QUARTERLY FORM 10-Q
2
Item 1. | Financial Statements. |
PIER I IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
August 30, | August 31, | August 30, | August 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Net sales |
$ | 418,622 | $ | 395,641 | $ | 837,681 | $ | 790,495 | ||||||||
Cost of sales |
255,985 | 234,342 | 507,330 | 461,598 | ||||||||||||
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Gross profit |
162,637 | 161,299 | 330,351 | 328,897 | ||||||||||||
Selling, general and administrative expenses |
134,817 | 122,609 | 266,283 | 248,079 | ||||||||||||
Depreciation and amortization |
11,291 | 9,629 | 21,709 | 18,542 | ||||||||||||
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Operating income |
16,529 | 29,061 | 42,359 | 62,276 | ||||||||||||
Nonoperating (income) and expenses: |
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Interest, investment income and other |
(362 | ) | (272 | ) | (637 | ) | (624 | ) | ||||||||
Interest expense |
2,161 | 569 | 4,162 | 1,318 | ||||||||||||
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1,799 | 297 | 3,525 | 694 | |||||||||||||
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Income before income taxes |
14,730 | 28,764 | 38,834 | 61,582 | ||||||||||||
Income tax provision |
5,572 | 10,930 | 14,621 | 23,401 | ||||||||||||
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Net income |
$ | 9,158 | $ | 17,834 | $ | 24,213 | $ | 38,181 | ||||||||
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Earnings per share: |
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Basic |
$ | 0.10 | $ | 0.17 | $ | 0.26 | $ | 0.36 | ||||||||
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Diluted |
$ | 0.10 | $ | 0.17 | $ | 0.26 | $ | 0.35 | ||||||||
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Dividends declared per share: |
$ | 0.06 | $ | 0.05 | $ | 0.12 | $ | 0.10 | ||||||||
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Average shares outstanding during period: |
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Basic |
91,503 | 105,745 | 93,080 | 105,867 | ||||||||||||
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Diluted |
92,531 | 107,249 | 94,228 | 107,819 | ||||||||||||
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The accompanying notes are an integral part of these financial statements.
3
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
August 30,
2014 |
August 31,
2013 |
August 30,
2014 |
August 31,
2013 |
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Net income |
$ | 9,158 | $ | 17,834 | $ | 24,213 | $ | 38,181 | ||||||||
Other comprehensive income (loss) |
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Foreign currency translation adjustments |
(231 | ) | (637 | ) | 589 | (1,087 | ) | |||||||||
Pension adjustments |
460 | 464 | 921 | 929 | ||||||||||||
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Other comprehensive income (loss) |
229 | (173 | ) | 1,510 | (158 | ) | ||||||||||
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Comprehensive income, net of tax |
$ | 9,387 | $ | 17,661 | $ | 25,723 | $ | 38,023 | ||||||||
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The accompanying notes are an integral part of these financial statements.
4
PIER 1 IMPORTS, INC.
(in thousands except share amounts)
(unaudited)
The accompanying notes are an integral part of these financial statements.
5
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended | ||||||||
August 30, | August 31, | |||||||
2014 | 2013 | |||||||
Cash flows from operating activities: |
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Net income |
$ | 24,213 | $ | 38,181 | ||||
Adjustments to reconcile to net cash used in operating activities: |
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Depreciation and amortization |
25,147 | 21,944 | ||||||
Stock-based compensation expense |
5,500 | 7,271 | ||||||
Deferred compensation |
2,973 | 3,840 | ||||||
Deferred income taxes |
958 | 1,746 | ||||||
Amortization of deferred gains |
(1,787 | ) | (1,464 | ) | ||||
Other |
(1,036 | ) | (302 | ) | ||||
Changes in cash from: |
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Inventories |
(136,102 | ) | (88,608 | ) | ||||
Proprietary credit card receivables |
(315 | ) | (2,039 | ) | ||||
Prepaid expenses and other assets |
(11,027 | ) | (7,054 | ) | ||||
Accounts payable and accrued expenses |
31,991 | 34,479 | ||||||
Accrued income taxes payable, net of payments |
(11,084 | ) | (18,435 | ) | ||||
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Net cash used in operating activities |
(70,569 | ) | (10,441 | ) | ||||
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Cash flows from investing activities: |
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Capital expenditures |
(42,570 | ) | (42,022 | ) | ||||
Proceeds from disposition of properties |
36 | 4,298 | ||||||
Proceeds from sale of restricted investments |
1,037 | 425 | ||||||
Purchase of restricted investments |
(1,791 | ) | (2,154 | ) | ||||
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Net cash used in investing activities |
(43,288 | ) | (39,453 | ) | ||||
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Cash flows from financing activities: |
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Cash dividends |
(10,986 | ) | (10,521 | ) | ||||
Purchases of treasury stock |
(155,375 | ) | (59,639 | ) | ||||
Stock options exercised, stock purchase plan and other, net |
1,691 | 14,485 | ||||||
Issuance of long-term debt, net of discount |
198,000 | - | ||||||
Debt issuance costs |
(3,584 | ) | (1,134 | ) | ||||
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Net cash provided by (used in) financing activities |
29,746 | (56,809 | ) | |||||
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Change in cash and cash equivalents |
(84,111 | ) | (106,703 | ) | ||||
Cash and cash equivalents at beginning of period |
126,695 | 231,556 | ||||||
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Cash and cash equivalents at end of period |
$ | 42,584 | $ | 124,853 | ||||
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The accompanying notes are an integral part of these financial statements.
6
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE SIX MONTHS ENDED AUGUST 30, 2014
(in thousands)
(unaudited)
Cumulative
Other Comprehensive Income (Loss) |
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Common Stock |
Paid-in
Capital |
Retained
Earnings |
Treasury
Stock |
Total
Shareholders Equity |
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Outstanding
Stock |
Amount | |||||||||||||||||||||||||||
Balance March 1, 2014 |
98,715 | $ | 125 | $ | 235,637 | $ | 660,040 | $ | (6,114 | ) | $ | (440,256 | ) | $ | 449,432 | |||||||||||||
Net income |
- | - | - | 24,213 | - | - | 24,213 | |||||||||||||||||||||
Other comprehensive income |
- | - | - | - | 1,510 | - | 1,510 | |||||||||||||||||||||
Purchases of treasury stock |
(8,055 | ) | - | - | - | - | (144,562 | ) | (144,562 | ) | ||||||||||||||||||
Stock-based compensation |
866 | - | (9,061 | ) | - | - | 14,561 | 5,500 | ||||||||||||||||||||
Exercise of stock options, stock purchase plan, and other |
488 | - | (6,444 | ) | - | - | 8,135 | 1,691 | ||||||||||||||||||||
Cash dividends ($0.12 per share) |
- | - | - | (10,986 | ) | - | - | (10,986 | ) | |||||||||||||||||||
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Balance August 30, 2014 |
92,014 | $ | 125 | $ | 220,132 | $ | 673,267 | $ | (4,604 | ) | $ | (562,122 | ) | $ | 326,798 | |||||||||||||
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The accompanying notes are an integral part of these financial statements.
7
PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED AUGUST 30, 2014
AND AUGUST 31, 2013
(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 Companys Form 10-K for the year ended March 1, 2014. All adjustments that are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements contained in this report have been made and consist only of normal recurring adjustments, except as otherwise described herein. In the first quarter of fiscal 2015 Consolidated Statement of Cash Flows, the overall change in cash was properly stated; however, $11,608,000 of share repurchases related to fiscal 2014 purchases that were settled in the first quarter of fiscal 2015 were incorrectly presented as changes in cash from Accounts payable and accrued expenses instead of Purchases of treasury stock. If presented correctly in the first quarter of fiscal 2015, changes in cash from Accounts payable and accrued expenses would have been $56,432,000, Net cash provided by operating activities would have been $38,741,000, Purchases from treasury stock would have been ($117,404,000) and Net cash provided by financing activities would have been $70,792,000. The Consolidated Statement of Cash Flows for the six months ended August 30, 2014 properly reflects these repurchases as Purchases of treasury stock. There was no effect on any other Consolidated Financial Statement as a result of this immaterial adjustment. The results of operations for the three and six months ended August 30, 2014 and August 31, 2013, 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 Companys products have occurred during the holiday season beginning in November and continuing through December. The Company conducts business as one operating segment. As of August 30, 2014, the Company had no financial instruments with fair market values that were materially different from their carrying values.
NOTE 1 EARNINGS PER SHARE
Basic earnings per share amounts were determined by dividing net income by the weighted average number of common shares outstanding for the period. Diluted earnings per share amounts were similarly computed, but included the dilutive effect of the Companys weighted average number of stock options outstanding and shares of unvested restricted stock. A total of 154,000 and 92,000 outstanding stock options and shares of unvested restricted stock were excluded from the computation of earnings per share, as the effect would be antidilutive for the three and six months ended August 30, 2014, respectively. There were no antidilutive stock options or shares of unvested restricted stock outstanding for the three and six months ended August 31, 2013, respectively.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Earnings per share for the three and six months ended August 30, 2014 and August 31, 2013, were calculated as follows (in thousands except per share amounts):
Three Months Ended | Six Months Ended | |||||||||||||||
August 30,
2014 |
August 31,
2013 |
August 30,
2014 |
August 31,
2013 |
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Net income, basic and diluted |
$ | 9,158 | $ | 17,834 | $ | 24,213 | $ | 38,181 | ||||||||
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Weighted average shares outstanding during period: |
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Basic |
91,503 | 105,745 | 93,080 | 105,867 | ||||||||||||
Effect of dilutive stock options |
713 | 913 | 765 | 1,138 | ||||||||||||
Effect of dilutive restricted stock |
315 | 591 | 383 | 814 | ||||||||||||
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Diluted |
92,531 | 107,249 | 94,228 | 107,819 | ||||||||||||
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Earnings per share: |
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Basic |
$ | 0.10 | $ | 0.17 | $ | 0.26 | $ | 0.36 | ||||||||
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Diluted |
$ | 0.10 | $ | 0.17 | $ | 0.26 | $ | 0.35 | ||||||||
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NOTE 2 MATTERS CONCERNING SHAREHOLDERS EQUITY
Restricted stock compensation For the three and six months ended August 30, 2014, the Company recorded compensation expense related to restricted stock of $2,250,000 and $5,450,000, respectively. For the three and six months ended August 31, 2013, the Company recorded compensation expense related to restricted stock of $3,201,000 and $7,217,000, respectively. As of August 30, 2014, there was approximately $19,671,000 of total unrecognized compensation expense related to unvested restricted stock that may be recognized over a weighted average period of 1.8 years if certain performance targets are achieved.
Share repurchase program During the first six months of fiscal 2015, the Company repurchased 8,055,012 shares of its common stock at a weighted average cost of $17.95 per share for a total cost of $144,562,000. Of this amount, the Company utilized $96,108,000 to repurchase 5,071,812 shares of the Companys common stock at a weighted average cost of $18.95 under the $200,000,000 October 2013 share repurchase program, which completed the program. The remaining $48,454,000 was utilized to repurchase 2,983,200 shares of the Companys common stock at a weighted average cost of $16.24 under the $200,000,000 April 2014 share repurchase program. In fiscal 2015, the Company had cash outflows of $155,375,000 related to share repurchases which included $144,562,000 for shares repurchased in the first half of fiscal 2015, included $11,608,000 for shares repurchased in fiscal 2014 that settled in fiscal 2015, and excluded $795,000 of share repurchases that were settled subsequent to the end of the second quarter of fiscal 2015. Shares repurchased during the period but settled subsequent to the period end are considered non-cash financing activities and are excluded from the Consolidated Statements of Cash Flows. Subsequent to quarter end, through October 3, 2014, the Company utilized a total of $7,308,000 to repurchase 540,000 shares of the Companys common stock under the April 2014 program at a weighted average cost of $13.53 and $144,238,000 remained available for further repurchases under that program.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 3 LONG-TERM DEBT AND AVAILABLE CREDIT
Revolving Credit Facility The Company completed a second amendment to its secured revolving credit facility (Revolving Credit Facility) on April 30, 2014, in order to allow additional borrowings under a new senior secured term loan facility (the Term Loan Facility) that closed on the same day. Substantially all other material terms and conditions applicable under the Revolving Credit Facility remain unchanged. The Revolving Credit Facility is secured primarily by merchandise inventory and third-party credit card receivables and certain related assets on a first priority basis and, following the incurrence of the Term Loan Facility indebtedness discussed below, is secured on a second lien basis by substantially all other assets of certain of the Companys subsidiaries, subject to certain exceptions. Credit extensions under the Revolving Credit Facility are limited to the lesser of $350,000,000 or the amount of the calculated borrowing base, which was $414,982,000 as of August 30, 2014. Under the Revolving Credit Facility the Company had no cash borrowings and approximately $42,388,000 in letters of credit and bankers acceptances outstanding, with $307,612,000 remaining available for cash borrowings, all as of August 30, 2014.
Subsequent to quarter end, the Company borrowed $25,000,000 under its Revolving Credit Facility to supplement working capital and facilitate share repurchases. Due to the seasonal nature of the business, a significant increase in merchandise payments occurs in September and October and the Companys annual cash low-point falls within these months, which is in advance of the peak selling months of November and December.
Term Loan Facility The Company entered into the Term Loan Facility on April 30, 2014. The Term Loan Facility matures on April 30, 2021, and is secured by a second lien on all assets subject to a first lien under the Revolving Credit Facility and a first lien on substantially all other assets of certain of the Companys subsidiaries, subject to certain exceptions. At the Companys option, borrowings under the Term Loan Facility will bear interest, payable quarterly or, if earlier, at the end of each interest period, at either (a) the LIBOR rate (as defined in the Term Loan Facility) subject to a 1% floor plus 350 basis points per year or (b) the base rate (as defined in the Term Loan Facility) subject to a 2% floor plus 250 basis points per year. As of August 30, 2014, the Company had $200,000,000 outstanding under the Term Loan Facility with a carrying value of $198,099,000 net of any unamortized discounts. The proceeds of the loan were used for general corporate purposes, including working capital needs, capital expenditures, and share repurchases and dividends permitted under the Term Loan Facility. The Term Loan Facility is subject to quarterly amortization of principal equal to 0.25% of the original aggregate principal amount of the loans, with the balance due at final maturity. The Company is subject to an annual excess cash flow repayment requirement, as defined in the Term Loan Facility, beginning with the fiscal year ending February 2015. At the Companys option, and subject to the requirements and provisions of the Term Loan Facility, the Company can prepay the Term Loan Facility at any time prior to twelve months after closing subject to a 1% penalty in certain cases, and without penalty thereafter. The fair value of the Term Loan Facility was approximately $200,000,000 as of August 30, 2014, using Level 2 inputs which include quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
The Term Loan Facility includes restrictions on the Companys ability to, among other things, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase shares of the Companys capital stock, make certain acquisitions or investments, materially change the business of the Company, incur or permit to exist certain liens, enter into transactions with affiliates or sell the Companys assets to, or merge or consolidate with or into, another company, in each case subject to certain exceptions. The Term Loan Facility does not require the Company to comply with any financial maintenance covenants, but contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default. The Term Loan Facility provides for incremental facilities, subject to certain conditions, including the meeting of certain leverage ratio requirements as defined therein, to the extent such facilities exceed an incremental $200,000,000.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 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 or 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 cost for the three and six months ended August 30, 2014 and August 31, 2013, are shown in the table below (in thousands). The amortization of amounts related to unrecognized prior service cost and net actuarial loss was reclassified out of other comprehensive income as a component of net periodic benefit cost.
Three Months Ended | Six Months Ended | |||||||||||||||
August 30,
2014 |
August 31,
2013 |
August 30,
2014 |
August 31,
2013 |
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Components of net periodic benefit cost: |
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Service cost |
$ | 350 | $ | 364 | $ | 701 | $ | 728 | ||||||||
Interest cost |
205 | 191 | 411 | 382 | ||||||||||||
Amortization of unrecognized prior service cost |
103 | 103 | 205 | 205 | ||||||||||||
Amortization of net actuarial loss |
333 | 348 | 665 | 696 | ||||||||||||
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Net periodic benefit cost |
$ | 991 | $ | 1,006 | $ | 1,982 | $ | 2,011 | ||||||||
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NOTE 5 NEW ACCOUNTING PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which creates a new Topic, Accounting Standards Codification Topic 606. The standard is principle-based and provides a five-step model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This standard is effective for the Company beginning in fiscal 2018 and allows for either full retrospective adoption or modified retrospective adoption. The Company is currently evaluating the impact of the adoption of Topic 606 on its financial statements.
In June 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period . The standard states that a performance target in a share-based payment that affects vesting and that could be achieved after the requisite service period should be accounted for as a performance condition. This standard is effective for the Company beginning in fiscal 2017 and early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its financial statements.
11
PART I
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources should be read in conjunction with the Companys Consolidated Financial Statements as of March 1, 2014, and for the fiscal year then ended, and related Notes to Consolidated Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations, all contained in the Companys Annual Report on Form 10-K for the fiscal year ended March 1, 2014.
Management Overview
Pier 1 Imports, Inc. (together with its consolidated subsidiaries, the Company) is the original global importer of home décor and furniture. The Company directly imports merchandise from many countries, and sells a wide variety of decorative accessories, furniture, candles, housewares, gifts and seasonal products in its stores and through the Companys website, Pier1.com. The results of operations for the three and six months ended August 30, 2014 and August 31, 2013, 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 Companys products have occurred during the holiday season beginning in November and continuing through December. The Company conducts business as one operating segment under the name Pier 1 Imports. As of August 30, 2014, the Company operated 1,073 stores in the United States and Canada.
The Company has continued to focus on the execution of its 1 Pier 1 strategy, which is the Companys plan to evolve from a store-only business model to one with full omni-channel capabilities. Through the 1 Pier 1 strategy the Company expects to maximize selling opportunities, extend brand reach and capture greater market share. The Companys focus is to ensure that customers have an extraordinary experience, regardless of how they shop.
The Company has set out operational and financial goals supporting its omni-channel evolution. This includes six key guideposts to monitor the transformation of the Company to a mature omni-channel retailing business. These guideposts include Brand Traffic, Conversion and Average Ticket; Stores as Sales and Customer Experience Centers; Merchandise Margin and Gross Profit; Fulfillment and Home Delivery; Selling General and Administrative Expenses; and Capital Allocation.
During the second quarter of fiscal 2015, the Company continued to focus on the quality, not the quantity, of its real estate, in order to strengthen its real estate portfolio. The Company views its stores and e-Commerce website as an integrated business. The stores are becoming sales and customer experience centers and are positioned to serve as a gateway to the Companys e-Commerce website and the e-Commerce website serves as a gateway to the stores.
Since the launch of Pier1.com during July of fiscal 2013, traffic to the website has increased significantly, and the Company has seen progressive increases in e-Commerce sales as a percentage of total Company sales. This trend continued in the second quarter of fiscal 2015, with e-Commerce sales reaching 9.7% of total Company sales. In response to the early success of its 1 Pier 1 omni-channel strategy, the Company expects to achieve e-Commerce sales of at least $200 million in fiscal 2015, and e-Commerce sales of at least $400 million in fiscal 2016. This compares to previous expectations for e-Commerce sales to comprise 10% of total sales by the end of fiscal 2016.
The 1 Pier 1 strategy has required investment in systems, fulfillment centers, call centers, distribution networks and store development. To support growth, the Company built greater flexibility and capacity into the distribution network during the prior fiscal year, through the introduction of in-home delivery and Express Request, the Companys special order program. The Company is also executing its strategy to utilize all distribution centers as fulfillment centers for large items, further leveraging its single inventory. During the current quarter, the Company continued implementation of a number of strategic projects and opened the Companys new fulfillment center in
12
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Columbus, Ohio. The Company believes these projects provide the foundation for long-term success. The Companys strategy also includes returning value to shareholders through quarterly cash dividends and share repurchases.
For the second quarter of fiscal 2015, net sales increased 5.8% and company comparable sales increased 4.5% compared to the same period of fiscal 2014. The company comparable sales increases were attributable to increases in total brand traffic, in-store conversion, online conversion, and average ticket. Management believes that the Companys sales will continue to improve as a result of its unique and special merchandise assortments, superior in-store experience and enhanced e-Commerce experience. For the second quarter of fiscal 2015, gross profit was 38.9% of sales, compared to 40.8% during the same period last year, a decline of 190 basis points. Operating income for the second quarter of fiscal 2015 was $16.5 million, or 3.9% of sales, compared to $29.1 million, or 7.3% of sales, for the same period in the prior year.
The Company entered into a new $200 million senior secured term loan facility in April 2014 which matures in 2021. This further strengthens the Companys capital structure and provides added flexibility to invest for future profitable growth and continues return of value to shareholders. As of August 30, 2014, the Company had $200 million outstanding under this facility. See Liquidity and Capital Resources Revolving Credit Facility and Term Loan Facility below for more information.
During the first six months of fiscal 2015, the Company utilized $42.6 million for capital expenditures, which was deployed toward the opening of 17 new stores, new merchandise fixtures and lighting for existing stores, other leasehold improvements, and technology and infrastructure initiatives, including the completion of the Companys fulfillment center in Columbus, Ohio and enhancements to the Companys e-Commerce platform. Total capital expenditures for fiscal 2015 are expected to be at similar levels to fiscal 2014.
During the first six months of fiscal 2015, the Company repurchased 8,055,012 shares of its common stock at a weighted average cost of $17.95 per share for a total cost of $144.6 million. Of this amount, the Company utilized $96.1 million to repurchase 5,071,812 shares of the Companys common stock at a weighted average cost of $18.95 under the $200 million October 2013 share repurchase program, which completed the program. The remaining $48.5 million was utilized to repurchase 2,983,200 shares of the Companys common stock at a weighted average cost of $16.24 under the $200 million April 2014 share repurchase program. Subsequent to quarter end, through October 3, 2014, the Company utilized a total of $7.3 million to repurchase 540,000 shares of the Companys common stock under the April 2014 program at a weighted average cost of $13.53 and $144.2 million remained available for further repurchases under that program. During the first six months of fiscal 2015, the Company paid quarterly cash dividends totaling approximately $11.0 million. In addition, on September 26, 2014, the Company announced a $0.06 per share quarterly cash dividend payable on November 5, 2014, to shareholders of record on October 22, 2014.
13
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Results of Operations
Management reviews a number of key performance indicators to evaluate the Companys financial performance. The following table summarizes those key performance indicators for the three and six months ended August 30, 2014 and August 31, 2013:
Three Months Ended | Six Months Ended | |||||||||||||||
August 30, | August 31, | August 30, | August 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Key Performance Indicators |
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Total sales growth |
5.8 | % | 7.6 | % | 6.0 | % | 8.5 | % | ||||||||
Company comparable sales growth |
4.5 | % | 3.5 | % | 5.4 | % | 4.7 | % | ||||||||
Gross profit as a % of sales |
38.9 | % | 40.8 | % | 39.4 | % | 41.6 | % | ||||||||
Selling, general and administrative expenses as a % of sales |
32.2 | % | 31.0 | % | 31.8 | % | 31.4 | % | ||||||||
EBITDA (1) |
$28.1 | $38.8 | $64.5 | $81.1 | ||||||||||||
Operating income as a % of sales |
3.9 | % | 7.3 | % | 5.1 | % | 7.9 | % | ||||||||
Net income as a % of sales |
2.2 | % | 4.5 | % | 2.9 | % | 4.8 | % | ||||||||
For the period ended | ||||||||||||||||
August 30, | August 31, | |||||||||||||||
2014 | 2013 | |||||||||||||||
Sales per average retail square foot (2) |
$ | 207 | $ | 202 | ||||||||||||
Total retail square footage (in thousands) |
8,463 | 8,392 |
(1) |
See reconciliation of Net Income to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) in Reconciliation of Non-GAAP Financial Measures . |
(2) |
Sales per average retail square foot is calculated using a rolling 12-month total of retail sales over a 13-month retail square footage weighted average (includes all retail sales except direct-to-customer orders placed outside of a store). |
Company Comparable Sales Calculation For the fiscal 2015 over fiscal 2014 comparison, the company comparable sales calculation included sales that were fulfilled, ordered or sold in a store, provided that the store was open prior to the beginning of the preceding fiscal year and was still open at period end. In addition, orders placed online as direct-to-customer sales were included in the calculation as a result of direct-to-customer sales being active prior to the beginning of the preceding fiscal year. Remodeled or relocated stores are included if they meet specific criteria. Those criteria include the following: the new store is within a specified distance serving the same market, no significant change in store size, and no significant overlap or gap between the store closing and reopening. Such stores are included in the company comparable sales calculation in the first full month after the re-opening. If a relocated or remodeled store does not meet the above criteria, it is excluded from the calculation until it meets the Companys established definition of a comparable store.
For the fiscal 2014 over fiscal 2013 comparison, the sales included in the company comparable sales calculation were determined in the same manner as above. Direct-to-customer sales were excluded because those sales did not meet the criteria for inclusion at that time.
14
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Net Sales Net sales consisted almost entirely of sales to retail customers, net of discounts and returns, but also included wholesale sales and royalties. Sales by retail concept during the period were as follows (in thousands):
Three Months Ended | Six Months Ended | |||||||||||||||
August 30, | August 31, | August 30, | August 31, | |||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Retail sales |
$ | 414,740 | $ | 391,603 | $ | 829,983 | $ | 781,858 | ||||||||
Other (1) |
3,882 | 4,038 | 7,698 | 8,637 | ||||||||||||
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Net sales |
$ | 418,622 | $ | 395,641 | $ | 837,681 | $ | 790,495 | ||||||||
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(1) |
Other sales consisted primarily of wholesale sales and royalties received from Grupo Sanborns and gift card breakage. The Company supplies merchandise and licenses the Pier 1 Imports name to Grupo Sanborns, which sells Pier 1 Imports merchandise primarily in a store within a store format. |
Net sales for the second quarter of fiscal 2015 were $418.6 million, an increase of 5.8%, over last years second quarter net sales of $395.6 million. Company comparable sales for the quarter increased 4.5%, which was the result of an increase in total brand traffic, store conversion, online conversion, and average ticket over the same period last year. Net sales during the year-to-date period increased $47.2 million, or 6.0%, to $837.7 million when compared to the same period last year. Company comparable sales increased 5.4% for the first six months of fiscal 2015 as a result of an increase in total brand traffic, store conversion, online conversion, and average ticket. The Companys e-Commerce sales accounted for 9.7% and 3.7% of net sales for the three month periods ended August 30, 2014 and August 31, 2013, respectively. The Companys e-Commerce year-to-date sales accounted for 9.3% and 3.2% of net sales for the six months ended August 30, 2014 and August 31, 2013, respectively. E-Commerce sales are comprised of both customer orders placed online which were shipped directly to the customer (direct-to-customer) and those picked up by the customer at a store location (store pick-up). The Companys net sales from Canadian stores were subject to fluctuation in currency conversion rates. These fluctuations offset the increase in company comparable sales by approximately 20 basis points for the current quarter and 40 basis points for the year-to-date period. The Companys proprietary credit card program provides both economic and strategic benefits. Sales on the Pier 1 credit card comprised 31.7% of U.S. store sales for the trailing twelve months ended August 30, 2014, compared to 30.4% at the end of fiscal 2014.
The increase in sales for the six-month period was comprised of the following incremental components (in thousands):
Net Sales | ||||
Net sales for the six months ended August 31, 2013 |
$ | 790,495 | ||
Incremental sales growth (decline) from: |
||||
New stores opened during fiscal 2015 |
6,007 | |||
Stores opened during fiscal 2014 |
14,247 | |||
Company comparable sales |
41,153 | |||
Closed stores and other |
(14,221 | ) | ||
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Net sales for the six months ended August 30, 2014 |
$ | 837,681 | ||
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15
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
A summary reconciliation of the Companys stores open at the beginning of fiscal 2015 to the number open at the end of the second quarter is as follows:
United States | Canada | Total | ||||||||||
Open at March 1, 2014 |
991 | 81 | 1,072 | |||||||||
Openings |
16 | 1 | 17 | |||||||||
Closings |
(15 | ) | (1 | ) | (16 | ) | ||||||
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Open at August 30, 2014 (1) |
992 | 81 | 1,073 | |||||||||
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(1) |
The Company supplies merchandise and licenses the Pier 1 Imports name to Grupo Sanborns, which sells Pier 1 Imports merchandise primarily in a store within a store format. At August 30, 2014, there were 62 locations in Mexico and one in El Salvador. These locations were excluded from the table above. |
Cost of Sales and Gross Profit In the second quarter of fiscal 2015, cost of sales was 61.1% of sales compared to 59.2% of sales for the same period last year and gross profit was 38.9% of sales compared to 40.8% of sales for the same period a year ago, a decline of 190 basis points. Of the decline in gross profit as a percentage of sales, 100 basis points were attributable to the shift in channel mix, including fulfillment costs, which more than doubled versus a year ago. Another 130 basis points of the decline primarily resulted from increased promotional activity, which was partially offset by leveraging store occupancy costs by 40 basis points.
For the first six months of fiscal 2015, cost of sales was 60.6% compared to 58.4% of sales for the same period last year and gross profit was 39.4% of sales compared to 41.6% last year, a decline of 220 basis points. Of the decline in gross profit as a percentage of sales, 80 basis points were attributable to the shift in channel mix, including fulfillment costs, which more than doubled versus a year ago. Another 170 basis points of the decline primarily resulted from increased promotional activity, which was partially offset by leveraging store occupancy costs by 30 basis points.
Operating Expenses Second quarter selling, general and administrative expenses were $134.8 million, compared to $122.6 million for the same period in fiscal 2014, an increase of $12.2 million. As a percentage of sales, selling, general and administrative expenses were 32.2% in the second quarter of fiscal 2015 compared to 31.0% of sales for the same period in fiscal 2014. Year-to-date selling, general and administrative expenses were $266.3 million, or 31.8% of sales, compared to $248.1 million, or 31.4% of sales, in the same period of fiscal 2014. The increase in variable costs both in dollars and as a percentage of sales was primarily due to increases in marketing expenses associated with increased digital marketing activities and higher circulation of retail mailers and inserts during the quarter and year-to-date periods. In addition, relatively fixed expenses increased primarily due to planned growth in headcount to scale e-Commerce and to expand organizational capabilities to support the 1 Pier 1 strategy.
Depreciation and amortization expense for the fiscal 2015 second quarter and year-to-date periods was $11.3 million and $21.7 million, respectively, compared to $9.6 million and $18.5 million in the prior year. The increases during both periods compared to the prior year were primarily the result of additional capital expenditures in recent years coupled with incremental expenditures deployed towards technology, which typically depreciate over a shorter time period compared to other depreciable assets.
Operating income for the second quarter of fiscal 2015 was $16.5 million, or 3.9% of sales, compared to $29.1 million, or 7.3% of sales, for the same period last year. For the first half of fiscal 2015, operating income totaled $42.4 million, or 5.1% of sales, compared to $62.3 million, or 7.9% of sales, for the same period last year.
Nonoperating Income and Expense During the first half of fiscal 2015, nonoperating expense was $3.5 million, compared to $0.7 million for the same period in fiscal 2014. The increase was primarily the result of the new senior secured term loan facility interest and related expenses partially offset by $0.9 million of interest associated with a U.S. federal income tax refund.
16
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Income Taxes The Company had an effective tax rate of 37.8% and recorded an income tax provision of $5.6 million during the second quarter of fiscal 2015, compared to an effective tax rate of 38.0% and an income tax provision of $10.9 million during the second quarter last year. For the first six months of fiscal 2015, the Company had an effective tax rate of 37.6% and recorded an income tax provision of $14.6 million, compared to an effective tax rate of 38.0% and an income tax provision of $23.4 million during the prior year. The decrease in the effective tax rate was primarily related to certain discrete items occurring in the first and second quarters of fiscal 2015. The decrease in income tax expense from the prior year periods was primarily due to the Company reporting lower income before taxes in fiscal 2015.
Net Income For the second quarter of fiscal 2015, the Company reported net income of $9.2 million, or $0.10 per diluted share, compared to $17.8 million, or $0.17 per diluted share for the same period last year. For the first six months of fiscal 2015, the Company reported net income of $24.2 million, or $0.26 per diluted share. For the same period last year, net income was $38.2 million, or $0.35 per diluted share.
Reconciliation of Non-GAAP Financial Measures
The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). This Quarterly Report on Form 10-Q references the non-GAAP financial measure of EBITDA. EBITDA represents earnings before interest, taxes, depreciation and amortization. Management believes EBITDA is a meaningful indicator of the Companys 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 Companys operating performance, to enhance its understanding of core operating performance and to compare the Companys 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 | Six Months Ended | |||||||||||||||
August 30,
2014 |
August 31,
2013 |
August 30,
2014 |
August 31,
2013 |
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Net income (GAAP) |
$ | 9.2 | $ | 17.8 | $ | 24.2 | $ | 38.2 | ||||||||
Add back: Income tax provision |
5.6 | 10.9 | 14.6 | 23.4 | ||||||||||||
Interest expense, net |
2.1 | 0.4 | 4.0 | 1.0 | ||||||||||||
Depreciation and amortization |
11.3 | 9.6 | 21.7 | 18.5 | ||||||||||||
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EBITDA (non-GAAP) |
$ | 28.1 | $ | 38.8 | $ | 64.5 | $ | 81.1 | ||||||||
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Liquidity and Capital Resources
The Company ended the first six months of fiscal 2015 with $42.6 million in cash and temporary investments compared to $126.7 million at the end of fiscal 2014. The decrease was primarily the result of $70.6 million of cash used in operating activities, and the utilization of cash to support the Companys growth plans and return of value to shareholders, including $42.6 million for capital expenditures, $155.4 million to repurchase shares of the Companys common stock and $11.0 million for cash dividends. These cash outflows were partially offset by proceeds of $198.0 million from the closing of the senior secured term loan financing.
17
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Cash Flows from Operating Activities
Operating activities in the first half of fiscal 2015 used $70.6 million of cash, primarily as a result of an increase in inventories, which was partially offset by net income and an increase in accounts payable. Inventory levels at the end of the second quarter of fiscal 2015 were $513.8 million, an increase of $69.1 million, or 15.5%, from the second quarter of fiscal 2014 and in line with the Companys expectations. The increase in inventories primarily resulted from an expanded SKU count in support of Express Request, additional fulfillment center inventories and the receipt of merchandise slightly earlier this year compared to last year.
Cash Flows from Investing Activities
During the first six months of fiscal 2015, investing activities used $43.3 million compared to $39.5 million during the same period last year. Of this amount, the Company utilized $42.6 million for capital expenditures, which was deployed toward the opening of 17 new stores, new merchandise fixtures and lighting for existing stores, other leasehold improvements, and technology and infrastructure initiatives, including the completion of the Companys fulfillment center in Columbus, Ohio and enhancements to the Companys e-Commerce platform. Total capital expenditures for fiscal 2015 are expected to be at similar levels to fiscal 2014.
Cash Flows from Financing Activities
During the first half of fiscal 2015, financing activities provided $29.7 million, primarily resulting from $198.0 million of net proceeds from issuance of long-term debt, partially offset by cash outflows of $155.4 million for repurchases of the Companys common stock and $11.0 million in cash dividends. See Share Repurchase Program below for more information.
Lease Obligations
At the end of the second quarter of fiscal 2015, the Companys minimum operating lease commitments remaining for fiscal 2015 were $119.6 million. The present value of total existing minimum operating lease commitments discounted at 10% was $926.1 million at the fiscal 2015 second quarter end compared to $878.3 million at the end of fiscal 2014. The Company has an operating lease for its corporate headquarters located in Fort Worth, Texas. During the second quarter of fiscal 2015, the Company entered into a lease amendment which extended the term of the lease through June 30, 2027, and provided for additional space in the building.
Revolving Credit Facility and Term Loan Facility
Revolving Credit Facility The Company completed a second amendment to its secured revolving credit facility (Revolving Credit Facility) on April 30, 2014, in order to allow additional borrowings under a new senior secured term loan facility (the Term Loan Facility) that closed on the same day. Substantially all other material terms and conditions applicable under the Revolving Credit Facility remain unchanged. The Revolving Credit Facility is secured primarily by merchandise inventory and third-party credit card receivables and certain related assets on a first priority basis and, following the incurrence of the Term Loan Facility indebtedness discussed below, is secured on a second lien basis by substantially all other assets of certain of the Companys subsidiaries, subject to certain exceptions. Credit extensions under the Revolving Credit Facility are limited to the lesser of $350 million or the amount of the calculated borrowing base, which was $415.0 million as of August 30, 2014. Under the Revolving Credit Facility the Company had no cash borrowings and approximately $42.4 million in letters of credit and bankers acceptances outstanding, with $307.6 million remaining available for cash borrowings, all as of August 30, 2014.
Subsequent to quarter end, the Company borrowed $25.0 million under its Revolving Credit Facility, to supplement working capital and facilitate share repurchases. Due to the seasonal nature of the business, a significant increase in merchandise payments occurs in September and October and the Companys annual cash low-point falls within these months, which is in advance of the peak selling months of November and December.
18
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Term Loan Facility The Company entered into the Term Loan Facility on April 30, 2014. The Term Loan Facility matures on April 30, 2021, and is secured by a second lien on all assets subject to a first lien under the Revolving Credit Facility and a first lien on substantially all other assets of certain of the Companys subsidiaries, subject to certain exceptions. At the Companys option, borrowings under the Term Loan Facility will bear interest, payable quarterly or, if earlier, at the end of each interest period, at either (a) the LIBOR rate (as defined in the Term Loan Facility) subject to a 1% floor plus 350 basis points per year or (b) the base rate (as defined in the Term Loan Facility) subject to a 2% floor plus 250 basis points per year. As of August 30, 2014, the Company had $200 million outstanding under the Term Loan Facility with a carrying value of $198.1 million net of any unamortized discounts. The proceeds of the loan were used for general corporate purposes, including working capital needs, capital expenditures, and share repurchases and dividends permitted under the Term Loan Facility. The Term Loan Facility is subject to quarterly amortization of principal equal to 0.25% of the original aggregate principal amount of the loans, with the balance due at final maturity. The Company is subject to an annual excess cash flow repayment requirement, as defined in the agreement, beginning with the fiscal year ending February 2015. At the Companys option, and subject to the requirements and provisions of the Term Loan Facility, the Company can prepay the Term Loan Facility at any time prior to twelve months after closing subject to a 1% penalty in certain cases, and without penalty thereafter. The fair value of the Term Loan Facility was approximately $200 million as of August 30, 2014, using Level 2 inputs which include quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
The Term Loan Facility includes restrictions on the Companys ability to, among other things, incur or guarantee additional indebtedness, pay dividends on, or redeem or repurchase shares of the Companys capital stock, make certain acquisitions or investments, materially change the business of the Company, incur or permit to exist certain liens, enter into transactions with affiliates or sell the Companys assets to, or merge or consolidate with or into, another company, in each case subject to certain exceptions. The Term Loan Facility does not require the Company to comply with any financial maintenance covenants, but contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default. The Term Loan Facility provides for incremental facilities, subject to certain conditions, including the meeting of certain leverage ratio requirements as defined therein, to the extent such facilities exceed an incremental $200 million.
Share Repurchase Program
During the first six months of fiscal 2015, the Company repurchased 8,055,012 shares of its common stock at a weighted average cost of $17.95 per share for a total cost of $144.6 million. Of this amount, the Company utilized $96.1 million to repurchase 5,071,812 shares of the Companys common stock at a weighted average cost of $18.95 under the $200 million October 2013 share repurchase program, which completed the program. The remaining $48.5 million was utilized to repurchase 2,983,200 shares of the Companys common stock at a weighted average cost of $16.24 under the $200 million April 2014 share repurchase program. In fiscal 2015, the Company had cash outflows of $155.4 million related to share repurchases which included $144.6 million for shares repurchased in the first half of fiscal 2015, included $11.6 million for shares repurchased in fiscal 2014 that settled in fiscal 2015, and excluded $0.8 million of share repurchases that were settled subsequent to the end of the second quarter of fiscal 2015. Shares repurchased during the period but settled subsequent to the period end are considered non-cash financing activities and are excluded from the Consolidated Statements of Cash Flows. Subsequent to quarter end, through October 3, 2014, the Company utilized a total of $7.3 million to repurchase 540,000 shares of the Companys common stock under the April 2014 program at a weighted average cost of $13.53 and $144.2 million remained available for further repurchases under that program.
Dividends Payable
On September 26, 2014, subsequent to quarter end, the Company announced a $0.06 per share quarterly cash dividend on the Companys outstanding shares of common stock. The $0.06 quarterly cash dividend will be paid on November 5, 2014, to shareholders of record on October 22, 2014.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued) |
Sources of Working Capital
Working capital requirements are expected to be funded with cash from operations, available cash balances, and as required, borrowings against the Companys Revolving Credit Facility and Term Loan Facility. Given the Companys cash position and the various liquidity options available, the Company believes it has sufficient liquidity to fund operational obligations, capital expenditure requirements, debt-related payments, share repurchases and cash dividends for the foreseeable future.
Forward-looking Statements
Certain matters discussed in this quarterly report, except for historical information contained herein, may constitute forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The Company may also make forward-looking statements in other reports filed with the SEC and in material delivered to the Companys shareholders. Forward-looking statements provide current expectations and projections of future events based on managements assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. These statements encompass information that does not directly relate to any historical or current fact and often may be identified with the use of words such as may, will, anticipates, believes, expects, estimates, intends, plans, projects and other similar words and phrases. Managements expectations and assumptions regarding the Companys 1 Pier 1 strategy, its omni-channel operations and results, anticipated consumer spending trends, planned store openings and closings, financing of Company obligations from operations and other sources of capital, success of its marketing, merchandising and operational strategies, operational results of its stores and e-Commerce operations, results of promotional activities and other 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. Risks and uncertainties that may affect Company operations and performance include, among others, the inability to anticipate, identify and respond to changing customer trends and preferences; inability to identify and successfully implement strategic initiatives; factors affecting consumer spending; risks related to outsourcing, including disruptions in business and increased costs; the overall health of the United States economy and other global, national, regional or local economies; negative impacts from failure to control merchandise returns; the availability and proper functioning of technology and communications systems supporting the Companys key business processes and its e-Commerce operations; increases in costs, including fuel and transportation costs, interest rates, and labor costs; failure to successfully manage and execute marketing initiatives; potential impairment charges; inability to operate in desirable locations; failure to attract and retain an effective management team or changes in the cost or availability of a suitable workforce; failure to successfully manage omni-channel operations; competition; seasonal variations; adverse weather conditions or natural disasters; global, national, regional or local conflicts; risks related to technology; failure to protect consumer data, personally identifiable information, credit and debit card information, and other sensitive or proprietary information; failure to successfully implement new information technology systems; risks related to cybersecurity; regulatory and legal risks; risks related to imported merchandise including restrictive tariffs, duties or quotas, and the ability of the Company to source, ship and deliver items of acceptable quality to its customer base; disruptions in the global credit and equity markets; and risks related to insufficient cash flows. The foregoing risks and uncertainties are in addition to others that may be discussed elsewhere in this report which may also affect Company operations and performance. The Company assumes no obligation to update or otherwise 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. Additional information concerning these risks and uncertainties is contained in the Companys Annual Report on Form 10-K for the year ended March 1, 2014, as filed with the Securities and Exchange Commission.
Impact of Inflation
Inflation has not had a significant impact on the operations of the Company. However, the Companys management cannot be certain of the effect inflation may have on the Companys operations in the future.
20
PART I
Item 3. | Quantitative and Qualitative Disclosures about Market Risk. |
There are no material changes to the Companys market risk as disclosed in its Annual Report on Form 10-K for the fiscal year ended March 1, 2014.
Item 4. | Controls and Procedures. |
The Company maintains disclosure controls and procedures, as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), that are designed to ensure that information required to be disclosed by the Company in its reports filed or furnished under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is (b) accumulated and communicated to the Companys management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding the required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, an evaluation was conducted under the supervision and with the participation of the Companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of August 30, 2014. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded, with reasonable assurance, that the Companys disclosure controls and procedures were effective as of such date.
There has not been any change in the Companys internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Item 1. | Legal Proceedings. |
The Company is a party to various legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations or liquidity.
Item 1A. | Risk Factors. |
There are no material changes to the risk factors previously disclosed in the Companys Annual Report on Form 10-K for the fiscal year ended March 1, 2014.
21
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
The following table provides information with respect to purchases of common stock of the Company made during the three months ended August 30, 2014, by the Company or any affiliated purchaser of the Company as defined in Rule 10b-18(a)(3) under the Exchange Act:
Period |
Total
Number of Shares Purchased |
Average
Price Paid per Share (including fees) |
Total
Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Approximate
Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs |
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Jun 1, 2014 through Jul 5, 2014 |
1,152,000 | $ | 16.15 | 1,152,000 | $ | 170,107,186 | ||||||||||
Jul 6, 2014 through Aug 2, 2014 |
835,300 | 15.40 | 835,300 | 157,239,829 | ||||||||||||
Aug 3, 2014 through Aug 30, 2014 |
365,900 | 15.56 | 365,900 | 151,545,664 | ||||||||||||
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2,353,200 | $ | 15.79 | 2,353,200 | $ | 151,545,664 | |||||||||||
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All shares in the table above were repurchased under the $200 million April 2014 share repurchase program and as of August 30, 2014, $151.5 million remained available for repurchase under the program.
From the end of the quarter through October 3, 2014, the Company has utilized a total of $7.3 million to repurchase 540,000 shares of the Companys common stock at a weighted average cost of $13.53 and $144.2 million remained available for repurchase of the Companys common stock under the April 2014 program.
During the second quarter of fiscal 2015, the Company did not acquire any shares of the Companys common stock from employees to satisfy obligations that arose through equity compensation awards pursuant to approved plans.
Item 3. | Defaults upon Senior Securities. |
None.
Item 4. | Mine Safety Disclosures. |
Not applicable.
Item 5. | Other information. |
None.
Item 6. | Exhibits. |
The Exhibit Index following the signature page to this Quarterly Report on Form 10-Q lists the exhibits filed with this quarterly report as required by Item 601 of Regulation S-K and is incorporated herein by reference.
22
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC. | ||||
Date: October 8, 2014 | By: |
/s/ Alexander W. Smith |
||
Alexander W. Smith, President and Chief Executive Officer |
||||
Date: October 8, 2014 | By: |
/s/ Charles H. Turner |
||
Charles H. Turner, Senior Executive Vice President and Chief Financial Officer |
||||
Date: October 8, 2014 | By: |
/s/ Darla D. Ramirez |
||
Darla D. Ramirez, Principal Accounting Officer |
EXHIBIT INDEX
Exhibit No. |
Description |
|
3(i) | Restated Certificate of Incorporation of Pier 1 Imports, Inc. as filed with the Delaware Secretary of State on October 12, 2009, incorporated herein by reference to Exhibit 3(i) to the Companys Form 10-Q for the quarter ended November 28, 2009 (File No. 001-07832). | |
3(ii) | Amended and Restated Bylaws of Pier 1 Imports, Inc. (as amended through June 20, 2014), incorporated herein by reference to Exhibit 3.1 to the Companys Form 8-K filed on June 24, 2014, (File No. 001-07832). | |
10.1* | Fifth Amendment to Office Lease between Hines VAV III Energy Way LLC and Pier 1 Services Company, dated July 14, 2014. | |
31.1* | Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a). | |
31.2* | Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a). | |
32.1** | Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
* | Filed herewith |
** | Furnished herewith |
Exhibit 10.1
EXECUTION COPY
FIFTH AMENDMENT TO OFFICE LEASE
THIS FIFTH AMENDMENT TO OFFICE LEASE ( Fifth Amendment ) is executed this 14 th day of July, 2014, to be effective as of the Fifth Amendment Effective Date (hereinafter defined), by and between Hines VAV III Energy Way LLC, a Delaware limited liability company ( Landlord ) and Pier 1 Services Company, a Delaware statutory trust ( Tenant ).
WITNESSETH:
WHEREAS, Chesapeake Plaza, L.L.C., an Oklahoma limited liability company ( Original Landlord ) and Tenant entered into that certain Office Lease dated effective June 9, 2008 (the Original Lease ) for certain space (the Premises ) in the office building currently known as Chesapeake Plaza located at 100 Energy Way, Fort Worth, Tarrant County, Texas (the Building ); and
WHEREAS, the Original Lease has been amended by (i) that certain First Amendment to Office Lease dated June 20, 2008 (the First Amendment ); that certain Second Amendment to Office Lease dated July 1, 2011 (the Second Amendment ); (iii) that certain Third Amendment to Office Lease dated January 28, 2013 (the Third Amendment ) and (iv) that certain Fourth Amendment to Office Lease dated May 1, 2013 (the Fourth Amendment ; the Original Lease, as so amended, the Lease );
WHEREAS, the Premises currently contains 313,391 Rentable Square Feet, located in the Lobby, on the mezzanine and on the 5th, 6th, 7th, 8th, 9th, 10th, 11th, 12th, 14th, 15th and 16th floors of the Building;
WHEREAS, effective as of the Fifth Amendment Effective Date, Landlord has succeeded to all of Original Landlords right, title and interest in and to the Building and as landlord under the Lease; and
WHEREAS, the parties hereto have now agreed to further modify the Lease in certain respects on the terms and conditions as set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants herein set forth, and for such other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree to amend the Lease as follows:
1. Defined Terms . All initially capitalized terms used but not defined herein will have the same meanings as ascribed to them in the Lease.
2. Extension of Term . The Term of the Lease is hereby extended through and including 11:59 p.m. on June 30, 2027, for all purposes under the Lease. Accordingly, as of the Fifth Amendment Effective Date, all references to the length of the Term and/or the Expiration Date shall be modified accordingly. The parties hereby acknowledge that the foregoing extension of the Term constitutes the exercise of the Option to Extend set forth in Section 5 of the Third Amendment and Section 9 of the Fourth Amendment.
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3. | Expansion of Premises . |
3.1 | Subject to Section 3.2, effective as of the dates set forth below, the Premises will be expanded, as follows: |
3.1.1 | Effective as of the Fifth Amendment Effective Date, the Premises is hereby expanded to include (i) the entire 17th floor of the Building, which is comprised of a total of 26,507 Rentable Square Feet, (ii) the entire 18th floor of the Building, which is comprised of a total of 22,930 Rentable Square Feet and (iii) the security control room on the Lobby, which is comprised of a total of 1,380 Rentable Square Feet and is depicted on Exhibit A attached hereto (the Floor 17-18 and Lobby Expansion Space ). Accordingly, as of the Fifth Amendment Effective Date, all references in the Lease to the Rentable Square Footage of the Premises shall for all purposes under the Lease be deemed to be 363,209 Rentable Square Feet, and Tenants Pro Rata Share shall be adjusted accordingly in accordance with the formula set forth in Section 1.E. of the Original Lease. In addition, as of the Fifth Amendment Effective Date, Exhibit A-1 attached to the Lease is hereby deleted in its entirety and replaced with Exhibit A-1 attached hereto. |
3.1.2 | Effective as of March 1, 2015 (the Floor 19 Expansion Date ), the Premises is hereby expanded to include the entire 19th floor of the Building, which is comprised of a total of 22,414 Rentable Square Feet (the Floor 19 Expansion Space ). Accordingly, as of the Floor 19 Expansion Date, all references in the Lease to the Rentable Square Footage of the Premises shall for all purposes under the Lease be deemed to be 385,623 Rentable Square Feet, and Tenants Pro Rata Share shall be adjusted accordingly in accordance with the formula set forth in Section 1.E. of the Original Lease. |
3.1.3 | Effective as of March 1, 2017 (the Floor 20 Expansion Date ), the Premises is hereby expanded to include the entire 20th floor of the Building, which is comprised of a total of 22,414 Rentable Square Feet (the Floor 20 Expansion Space ; and together with the Floor 17-18 and Lobby Expansion Space and the Floor 19 Expansion Space, the Fifth Amendment Expansion Space ). Accordingly, as of the Floor 20 Expansion Date, all references in the Lease to the Rentable Square Footage of the Premises shall for all purposes under the Lease be deemed to be 408,037 Rentable Square Feet, and Tenants Pro Rata Share shall be adjusted accordingly in accordance with the formula set forth in Section 1.E. of the Original Lease. |
3.2 |
Tenant acknowledges that, prior to the Fifth Amendment Effective Date, the Fifth Amendment Expansion Space has been leased to another tenant and that such tenant is obligated to surrender such space to Landlord prior to the applicable delivery dates set forth above. Tenant agrees that Landlord shall not be liable for failure to give possession of any Fifth Amendment Expansion Space on the applicable delivery date set forth above by reason of any holding over or retention of possession by such tenant or its subtenants, nor shall such failure impair the validity of the Lease or if |
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this Fifth Amendment. However, Landlord agrees to use reasonable diligence to deliver possession of the Fifth Amendment Expansion Space in accordance with Section 3.1 above. In addition, in no event shall Landlord, without Tenants prior written approval, consent to any holding over by such tenant in any of the Fifth Amendment Expansion Space beyond the applicable delivery date set forth above. In the event Landlord fails to deliver any Fifth Amendment Expansion Space to Tenant on the applicable date set forth above, then the term of the Lease (and, for the avoidance of doubt, Tenants obligation to pay Rent) as to such Fifth Amendment Expansion Space shall commence on the date that Landlord actually delivers such space to Tenant (and the monthly Base Rent amounts set forth in Section 5 below shall be deemed adjusted accordingly). |
3.3 | The term of the Lease as to the Floor 17-18 and Lobby Expansion Space, the Floor 19 Expansion Space, and the Floor 20 Expansion Space shall commence on the applicable date set forth above and shall be coterminous with the Term of the Lease (as extended herein) as to the remainder of the Premises. Except as expressly provided herein to the contrary, the Fifth Amendment Expansion Space shall be leased by Tenant upon and subject to all of the terms and provisions of the Lease, as amended hereby, including the obligation to pay Rent in accordance with Section 4 of the Lease. |
3.4 |
The Fifth Amendment Expansion Space shall be delivered to Tenant on the applicable date set forth above in broom-clean condition, with the Building systems and the restrooms located in such Fifth Amendment Expansion Space in good repair and working order, and with the restrooms in a condition as of the applicable date of delivery in compliance with the requirements of the ADA in effect as of such delivery date, and otherwise in its then-existing AS-IS, WHERE-IS condition and configuration, subject to the remaining provisions of this paragraph. Landlord shall make any repairs in accordance with Section 9.B. of the Lease to the Building systems or restrooms located within such Fifth Amendment Expansion Space as may be required to obtain a Certificate of Occupancy from the City; provided, however, Landlord shall not be obligated to make any repairs that are required as a result of any changes, alterations or improvements to such Fifth Amendment Expansion Space to be constructed by Tenant after the Fifth Amendment Effective Date. By occupying the Floor 17-18 and Lobby Expansion Space on the Fifth Amendment Effective Date, the Floor 19 Expansion Space on the Floor 19 Expansion Date and the Floor 20 Expansion Space on the Floor 20 Expansion Date, Tenant shall be deemed to have accepted such Fifth Amendment Expansion Space in its existing AS-IS, WHERE-IS condition and configuration and TENANT HEREBY AGREES THAT AS OF THE APPLICABLE DELIVERY DATE SET FORTH ABOVE, SUCH FIFTH AMENDMENT EXPANSION SPACE IS OR WILL BE IN GOOD ORDER AND SATISFACTORY CONDITION AND THAT THERE ARE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, BY LANDLORD REGARDING SUCH FIFTH AMENDMENT EXPANSION SPACE. Without limiting the foregoing, Landlord shall have no obligation to provide any improvements, additions or alterations within the Fifth Amendment Expansion Space, nor provide any credits or allowances therefor (but, |
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for the avoidance of doubt, the provisions of this paragraph shall not limit Landlords obligations under Section 12 below). Landlord expressly disclaims any and all warranties of any nature, express or implied, in fact or by law with respect to the Fifth Amendment Expansion Space, including without limitation, the implied warranties of habitability, suitability, merchantability and fitness for any particular purpose. |
4. Surrender of Certain Lobby Space . Effective as of the Fifth Amendment Effective Date, the Premises shall be reduced by, and the Lease shall be terminated as to, a portion of the space leased by Tenant in the Lobby comprising 999 Rentable Square Feet as shown on Exhibit B attached hereto (the Lobby Reduction Space ). From and after the Fifth Amendment Effective Date, Tenant shall no longer have any rights (including the right of possession) in the Lobby Reduction Space, and Landlord and Tenant shall be released of all further obligations, covenants and agreements accruing under the Lease with respect to such Lobby Reduction Space from and after the Fifth Amendment Effective Date. Notwithstanding the foregoing, in no event shall Tenant be released from (x) any of its obligations, covenants and agreements relating to the Lobby Reduction Space which accrue under the Lease prior to the Fifth Amendment Effective Date or (y) any other provisions of the Lease which by their terms survive the termination or expiration of the Lease. Tenant shall vacate the Lobby Reduction Space and surrender the same to Landlord on the Fifth Amendment Effective Date in broom clean condition, with all of Tenants personal property removed therefrom and otherwise in the condition required under the Lease.
5. Increased Base Rent . Commencing on the dates set forth below and continuing for each calendar month thereafter throughout the remainder of the Term, the annual rental rate per Rentable Square Foot of the Premises (the Base Rate ), and accordingly Tenants monthly Base Rent as set forth in Section 1.D of the Lease, is hereby amended and restated to provide as follows:
Period |
Annual Rate Per
Square Foot |
Monthly
Base Rent |
||||||
Fifth Amendment Effective Date through February 28, 2015 |
$ | 25.00 | $ | 756,685.42 | ||||
March 1, 2015 (i.e., the Floor 19 Expansion Date) through June 30, 2015 |
$ | 25.00 | $ | 803,381.25 | ||||
July 1, 2015 through February 28, 2017 |
$ | 26.75 | $ | 859,617.94 | ||||
March 1, 2017 (i.e., the Floor 20 Expansion Date) through June 30, 2018 |
$ | 26.75 | $ | 909,582.48 | ||||
July 1, 2018 through June 30, 2022 |
$ | 27.60 | $ | 938,485.10 | ||||
July 1, 2022 through June 30, 2024 |
$ | 30.00 | $ | 1,020,092.50 | ||||
July 1, 2024 through June 30, 2027 |
$ | 32.50 | $ | 1,105,100.21 |
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6. Renewal Option . Tenant shall have the option to renew the Term of the Lease in accordance with and subject to the terms and conditions set forth in Exhibit C attached hereto and made a part hereof for all purposes.
7. Right of Negotiation on Future Building . Landlord hereby grants to Tenant the Future Development Refusal Right set forth in Exhibit D attached hereto.
8. Alterations . Effective as of the Fifth Amendment Effective Date, the following sentences of Section 9.C.(2) of the Original Lease (as amended by Section 9 of the Second Amendment) shall be deleted in their entirety:
For any Alterations the cost of which exceeds $10,000, Tenant shall pay to Landlord (within 30 days after receipt of an invoice from Landlord) a fee for Landlords oversight and coordination thereof. If Tenant employs a third-party project manager to oversee and coordinate the construction, and if that manager is found by Landlord, before construction of the Alterations begins, to be reasonably acceptable, then the amount of the fee payable to Landlord is equal to 3.5% of the cost of such Alterations in excess of $10,000; otherwise, the amount of the fee payable to Landlord is equal to 5% of the cost of such Alterations in excess of $10,000.
All Alterations constructed in the Premises shall be constructed in accordance with the Lease (including Section 9.C, as amended above). Without limiting Landlords approval rights or Tenants obligations under Section 9.C.(2) of the Original Lease, Tenant acknowledges that Landlord is not obligated to provide construction management or supervision services for Tenant with respect to the construction of any Tenant Alterations within the Premises. However, if requested by Tenant, Landlord will act (or to cause its property manager to act) as Tenants construction manager with respect to any Alterations constructed by Tenant within the Premises costing in excess of $10,000, subject to agreement by Landlord and Tenant on a construction management fee to be paid by Tenant therefor (not to exceed three and one-half percent (3.5%) of the cost of such Alterations) and execution of a separate written agreement for such services in form and substance agreed by Landlord and Tenant.
9. | Name of Building . |
9.1 | Sections 7 and 8 of the Third Amendment are hereby deleted in their entirety and shall be of no further force and effect. |
9.2 | For so long as the Naming Conditions (hereinafter defined) are satisfied, Tenant shall have the right (a) from time to time, to designate the name of the Building as Pier 1 Imports Building or other similar name reasonably acceptable to Landlord that includes the name of Tenant or any Affiliate of Tenant and (b) to change the Buildings address to 100 Pier 1 Place; provided that (i) at any time there shall be only one (1) designated Building name and (ii) all costs, if any, associated with any such renaming of the Building or change in the Building address shall be paid by |
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Tenant. The parties acknowledge that, as of the date of execution of this Fifth Amendment, Tenant designates Pier 1 Imports Building as the name of the Building. |
9.3 | After the Fifth Amendment Effective Date, provided the Naming Conditions are satisfied, Tenant shall have the right, at Tenants sole cost and expense, to modify the existing Building identification signage and flags as provided in Exhibit E attached hereto to reflect the name of the Building designated by Tenant pursuant to Section 9.2. In addition, provided the Naming Conditions are satisfied, Tenant shall have the right, from time to time and at Tenants sole cost and expense, to modify any other Building identification signage and any flags on the Property that identify the Building (including any new such signage or flags installed by Landlord after the Fifth Amendment Effective Date) to reflect the name of the Building as designated by Tenant pursuant to Section 9.2, subject to Landlords prior approval of the size, configuration, location, design and appearance of any such modified signage or flag, such approval not to be unreasonably withheld. |
9.4 | Notwithstanding anything to the contrary set forth in the Lease, Tenant shall have the rights to designate the name of the Building and to modify Building signage to reflect such name only if and for as long as the following conditions (the Naming Conditions ) are satisfied: (a) Tenant leases and occupies at least seventy-five percent (75%) of the Rentable Square Footage of the Building, and (b) no Monetary Default and no default described in Section 18.D by Tenant has occurred under the Lease. For purposes of this Section 9.4, Tenant shall not be deemed to be occupying the applicable portion of the Premises unless such occupancy is by Tenant or an Affiliate of Tenant. In the event Tenant at any time fails to satisfy the Naming Conditions, the rights of Tenant described in Sections 9.2 and 9.3 above shall lapse permanently, and Tenant shall have no right to reinstate such rights, even if Tenant subsequently satisfies the Naming Conditions; and Landlord shall thereafter have the right to rename the Building or to grant such rights to other tenants of the Building. If Landlord elects to move, remove or modify any sign (or the Building name) based on the lapsing of Tenants rights, Tenant shall pay the costs and expenses incurred by Landlord in connection with such removal or modification. |
10. Parking . Landlord and Tenant acknowledge that, prior to the Fifth Amendment Effective Date, Original Landlord designated approximately fifty (50) parking spaces in the Parking Facilities as reserved spaces for use by Original Landlords fleet of vehicles (the Fleet Spaces ) pursuant to Paragraph 1 of Exhibit C to the Original Lease. Landlord and Tenant agree that, notwithstanding anything to the contrary set forth in Exhibit C to the Original Lease, as of the Fifth Amendment Effective Date, the number of Fleet Spaces shall be reduced to six (6) reserved parking spaces, with the remaining forty-four (44) spaces previously designated as Fleet Spaces to be converted to unreserved spaces reasonably promptly after the Fifth Amendment Effective Date. Such six (6) remaining Fleet Spaces shall be for the use of Chesapeake Operating, Inc. and its Affiliates and shall be in a location designated by Landlord within the area identified on Exhibit C-1 to the Original Lease. Effective as of the Floor 20 Expansion Date, Exhibit C to the Original Lease shall be amended to delete the second sentence of Section 1 in its entirety, and Exhibit C-1 to the Original Lease shall be deleted in its entirety, and reasonably promptly after the Floor 20 Expansion Date, Landlord shall convert such six (6) Fleet Spaces to unreserved spaces.
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11. Cafeteria . During the Term, Landlord shall continue to provide a cafeteria in the Building in accordance with Section 7.A.(11) (as amended by Section 8 of the Second Amendment and Section 6 of the Third Amendment). Landlord and Tenant agree that amounts paid by Landlord to the cafeteria service provider in a given year (the Cafeteria Costs ), up to the Annual Cafeteria Cost Cap (hereinafter defined), shall be borne by Landlord and shall not be included in Operating Expenses. If the Cafeteria Costs for a given year exceed the Annual Cafeteria Cost Cap, then Tenant shall pay the amount of such excess, not to exceed an amount equal to Twenty Thousand Dollars ($20,000) for such year, upon demand as additional Rent, and Landlord shall bear (and shall not include in Operating Expenses) all Cafeteria Costs incurred in such year in excess of such $20,000 cap. As used herein, the term Annual Cafeteria Cost Cap shall mean, as of the date hereof, an amount equal to Seventy-Five Thousand Dollars ($75,000), which amount shall be increased by two percent (2%) on each anniversary of the Fifth Amendment Effective Date. In addition, for purposes of this Section 11 only, a year shall be deemed to be each one-year period commencing on the Fifth Amendment Effective Date or on any anniversary thereof occurring during the Term. If the Term terminates or expires on any day other than the last day of any such year, then the obligations of Landlord and Tenant hereunder shall be appropriately prorated on a daily basis.
12. Furniture . Landlord hereby conveys to Tenant all of Landlords right, title and interest in and to the furniture listed on Exhibit F attached hereto to the extent such furniture remains in the Floor 17-18 and Lobby Expansion Space, the Floor 19 Expansion Space and the Floor 20 Expansion Space on the applicable delivery date. Such furniture is hereby conveyed to Tenant on the applicable delivery date for the Fifth Amendment Expansion Space in which such furniture is located in its then-current AS-IS, WHERE-IS condition, WITHOUT ANY REPRESENTATIONS OR WARRANTIES OF WHATSOEVER NATURE, EXPRESS, IMPLIED OR STATUTORY, IT BEING THE INTENT OF TENANT AND LANDLORD TO EXPRESSLY NEGATE AND EXCLUDE ALL WARRANTIES WHATSOEVER, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE.
13. | Insurance . |
13.1 | Clause (1) of the first sentence of Section 14.A. shall be deleted in its entirety and the following shall be substituted therefor: |
(1) commercial general liability insurance, including contractual liability, applicable to Tenants business activities and the Property, providing, on an occurrence basis, a per occurrence limit of no less than $1,000,000
The second sentence of Section 14.A shall be deleted in its entirety and the following shall be substituted therefor:
All commercial general liability, commercial business automobile liability and umbrella liability insurance policies shall name Landlord (or any successor), Landlords property manager, and Landlords Mortgagee (if any) as additional insureds.
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The following sentence in Section 14.A shall be deleted in its entirety and shall be of no further force and effect:
All policies of Tenants Insurance shall contain endorsements that the insurer(s) shall give Landlord and the Property Manager at least 30 days advance written notice of any change, cancellation, termination or lapse of insurance.
13.2 | Section 14.B. shall be deleted in its entirety and the following shall be substituted therefor: |
B. Landlords Insurance . Landlord shall maintain: (1) commercial general or excess liability insurance, including contractual liability, applicable to the Property which provides, a limit for bodily injury or property damage of $25,000,000 (coverage in excess of $1,000,000 may be provided by way of an umbrella/excess liability policy); and (2) causes of loss-special form (formerly all risk) property insurance on the Building in the amount of the replacement cost thereof, as reasonably estimated by Landlord. The foregoing insurance and any other insurance carried by Landlord may be effected by a policy or policies of blanket insurance and shall be under Landlords sole control. Landlord shall provide Tenant with a certificate of insurance evidencing Landlords Insurance from time to time as reasonably requested by Tenant. All commercial general liability and umbrella policies shall name Tenant (or any successor of Tenant) as additional insured. Landlord shall provide Tenant with a certificate of insurance and all required endorsements evidencing Landlords insurance prior to the Commencement Date and upon renewals on or before the expiration of the insurance coverage. The limits of Landlords insurance shall not limit Landlords liability under this Lease, but Landlords liability under this Lease is limited pursuant to the provisions of Section 20.
14. Janitorial Service . The first sentence of Section 7.A.(4) of the Lease shall be deleted in its entirety and the following shall be substituted therefor:
Janitorial service five days per week (excluding Holidays), in accordance with the specifications set forth on Exhibit G attached hereto.
Exhibit G attached hereto is hereby inserted as a new Exhibit G to the Lease.
15. Critical Systems . To Tenants knowledge, the Critical Systems and Equipment are in good working order and condition as of the Fifth Amendment Effective Date.
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16. Access Control . The first two sentences of Section 7.A.(7) of the Lease shall be deleted in its entirety and the following shall be substituted therefor:
Maintain and manage access control for the Building and the Parking Facilities (as such term is defined in Exhibit C attached hereto) consistent with the access controls implemented by landlords of Comparable Buildings as an Operating Expense, including at a minimum, (a) providing and maintaining a multi-function card-key building access system to the Premises and Parking Facilities and throughout the Building (including the stairwells) and (b) providing at least three access guards on the Property from 7 A.M. to midnight on Business Days and two access guards on the Property at all other times on a twenty-four (24) hours per day, seven (7) days per week basis; provided, however, that (i) the cost of the third access guard from 6 P.M. to midnight on Business Days shall be paid by Tenant and (ii) Tenant may at any time upon thirty (30) days prior written notice to Landlord, elect to discontinue the requirement for a third access guard from 6 P.M. to midnight on Business Days or, after discontinuing such requirement, elect to again require such third access guard during such period. NOTWITHSTANDING ANYTHING IN THE LEASE TO THE CONTRARY, LANDLORD SHALL HAVE NO RESPONSIBILITY TO PREVENT, AND SHALL NOT BE LIABLE FOR LIABILITY OR LOSS TO TENANT, ITS AGENTS, CONTRACTORS, EMPLOYEES, INVITEES, LICENSEES, OR VISITORS ARISING OUT OF LOSSES DUE TO THEFT, BURGLARY OR DAMAGE OR INJURY TO PERSONS OR PROPERTY CAUSED BY UNAUTHORIZED PERSONS GAINING ACCESS TO THE PROPERTY OR THE PREMISES, AND TENANT HEREBY RELEASES LANDLORD FROM ALL LIABILITY RELATING THERETO, REGARDLESS OF WHETHER SUCH LOSSES ARE CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF LANDLORD, PROVIDED LANDLORD ACTUALLY SELECTED AND ENGAGED AN ACCESS GUARD CONTRACTOR, HAS INSTALLED ACCESS CONTROLS FOR THE BUILDING, AND HAS EXERCISED REASONABLE CARE IN THE SELECTION AND OVERSIGHT OF SAID CONTRACTOR AND IN THE SELECTION AND MAINTENANCE OF SUCH ACCESS CONTROLS. SUBJECT TO LANDLORDS COMPLIANCE WITH ITS OBLIGATIONS IN THE PROVISO TO THE PRECEDING SENTENCE, IT IS THE EXPRESS INTENT OF LANDLORD AND TENANT THAT LANDLORD BE RELEASED FROM THE CONSEQUENCES OF LANDLORDS OWN NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) FOR CLAIMS DESCRIBED IN THIS PARAGRAPH. Landlord shall not withhold consent to Tenant installing such access systems within the
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Premises as may be required for Tenant to comply with Payment Card Industry Data Security Standards, such systems to be installed by Tenant at its sole cost (including, if applicable, the cost of rerouting any Building systems necessary to accommodate such access systems), provided (a) such systems (i) do not materially adversely affect any Building systems, including the Building access control and life safety systems, and (ii) are installed in accordance with all applicable Laws and in accordance with the requirements set forth in Section 9.C.(2) of the Lease (as amended) and (b) Tenant provides Landlord with access cards or other reasonable means of accessing that portion of the Premises subject to such access systems.
17. | Program Grants . |
17.1 | Pursuant to the Partial Assignment, Tenant assigned to Original Landlord, and Original Landlord assumed, an undivided interest in the obligations of Tenant under the EDA, including the obligations to comply with the commitments set forth in Section 5.2 and 5.3 of the EDA. Original Landlord subsequently transferred and conveyed to Landlord all rights of Original Landlord and all obligations of Original Landlord, if any, under the EDA. Tenant acknowledges that Landlord does not use the Building as a Corporate Office (as such term is defined in the EDA) and that, therefore, grants may be available under the EDA only if Tenant complies with the applicable terms and provisions of the EDA. Notwithstanding anything in the Lease or the Partial Assignment to the contrary, Tenant agrees that (i) Landlord shall not be obligated to comply with any obligations of Tenant under the EDA, including any obligations that would otherwise require Landlord to meet any specific employment or other commitments or to engage Certified M/WBEs (as defined in the EDA) to perform services with respect to the Building; and (ii) in no event shall Landlord be deemed to be in default under the Lease or otherwise liable to Tenant or any Affiliate of Tenant if, for any reason (other than Landlords failure to pay to the City the real estate taxes payable by Landlord with respect to the Building), the City fails to remit all or any of the grants provided for in the EDA. The foregoing shall not be deemed to release Landlord from the obligation to comply with the terms and provisions of the Lease, including, without limitation, Landlords obligations under Section 4.J. of the Lease. |
17.2 | The following two sentences of Section 4.J.(3): |
After the expiration or earlier termination of this Lease, Landlord shall make application to the City for all of the program grants allowed under the EDA. Tenant agrees to deliver to Landlord prior to January 15 of the following calendar year all information Landlord reasonably requests in order to prepare such application for the calendar year immediately preceding the expiration or termination of this Lease. Tenant, at no cost to Landlord, shall have the right to
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approve the application prior to submission to the City, but such approval shall not be unreasonably withheld, conditioned or delayed.
are hereby deleted in their entirety and the following shall be substituted therefor:
After the expiration or earlier termination of this Lease, Tenant may make application to the City for all of the program grants allowed under the EDA with respect to the calendar year in which this Lease expires or terminates. Landlord agrees to deliver to Tenant prior to January 15 of the following calendar year all information Tenant reasonably requests in order to prepare such application. Landlord, at no cost to Tenant, shall have the right to approve such application prior to submission to the City, but such approval shall not be unreasonably withheld, conditioned or delayed.
18. | Notice Addresses . |
18.1 | Section 1.M. of the Lease shall be amended to delete the notice addresses for Landlord set forth therein and to insert in lieu thereof the following addresses: |
Hines VAV Energy Way LLC
c/o Hines Interests Limited Partnership
2200 Ross Avenue, Suite 4200W
Dallas, TX 75201
Attention: Heath Johnson
Facsimile No.: (214) 777-5308
With copies to:
Hines US Office Value Added Venture III LLC
c/o Hines Interests Limited Partnership
499 Park Avenue, 12th Floor
New York, NY 10022
Attention: Dave Congdon and Beth Demba
Facsimile No.: (212) 230-2276
and
Hines Legal Department
Attn: Corporate Counsel
2800 Post Oak Blvd.
Suite 4800
Houston, Texas 77056
Facsimile: (713) 966-2636
18.2 | Section 1.M. of the Lease is hereby amended to delete the following sentence in its entirety: |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
11 |
Rent (defined in Section 4.A) is payable to the order of Chesapeake Plaza, L.L.C. by electronic transfer to Bank of Oklahoma, ABA# I 03900036 for further credit to Chesapeake Energy Corporation, Account# 814109493, Reference: Pier 1 Services Company /Pier 1 Place.
Tenant acknowledges that, contemporaneously with the execution and delivery of this Fifth Amendment, Landlord has provided Tenant with written notice setting forth instructions for the payment of Rent.
19. Use of First Floor Lobby Common Area . The second sentence of Section 31.O shall be deleted in its entirety and the following shall be substituted therefor:
Any Special Event shall not be more than five (5) consecutive days in duration and Tenant is limited to 6 Special Events per calendar year during the Term (unless Landlord agrees to allow additional Special Events, such agreement not to be unreasonably withheld).
20. Periodic Sale Events . Provided Tenant is not in default under the Lease beyond applicable notice and cure periods, Tenant shall have the right, not more frequently than once per calendar quarter, upon at least forty eight (48) hours prior written notice to Landlord, to utilize a portion of the cafeteria in the Building designated by Landlord free of charge for the purpose of selling Pier 1 Imports samples of furniture and other items of home decor ( Samples ) to Tenants employees at the Building. Any such Sale Event shall not continue for more than three (3) consecutive business days in duration without Landlords prior approval, in its sole discretion. The Sale Event shall be conducted at Tenants sole cost and expense and in accordance with all applicable Law, and Tenant shall be solely responsible for the security and storage of any Samples.
21. HVAC . Notwithstanding anything to the contrary set forth in the Lease, during any period during the Term that Tenant leases and occupies at least 408,037 Rentable Square Feet, Tenant shall not be obligated to pay to Landlord Hourly HVAC Charges pursuant to Section 7.A.(2) of the Original Lease for HVAC service requested by Tenant after Normal Business Hours, but Tenant shall be obligated to pay its Pro Rata Share of the actual cost of such HVAC service, which amount shall be included in, and shall be paid in accordance with, Section 4.H of the Original Lease (notwithstanding anything to the contrary set forth in such section).
22. No Broker . Except for the commission payable to Jones Lang LaSalle ( Tenants Broker ) and to Peloton Real Estate Partners, LLC ( Landlords Broker ), which commissions shall be payable by Landlord pursuant to a separate written agreement between Tenants Broker and Landlord and Landlords Broker and Landlord, respectively, Landlord and Tenant each hereby represent and warrant to the other that no commission is due and payable to any broker or other leasing agent in connection with this Fifth Amendment (other than Tenants Broker and Landlords Broker) as a result of its own dealings with any such broker or leasing agent, and Landlord and Tenant hereby agree to indemnify and hold each other harmless from and against all loss, damage, cost and expense (including reasonable attorneys fees) suffered by the other party as a result of a breach of the foregoing representation and warranty.
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
12 |
23. Entire Agreement; Supercession . This Fifth Amendment shall become effective only upon its full execution and delivery by Landlord and Tenant. This Fifth Amendment contains the parties entire agreement regarding the subject matter covered herein, and supersedes all prior correspondence, negotiations, and agreements, if any, whether oral or written, between the parties concerning such subject matter. There are no contemporaneous oral agreements, and there are no representations or warranties between the parties not contained in this Fifth Amendment. In all respects, except as specifically amended hereby, the terms and conditions of the Lease remain in full force and effect and unabated and the Lease, as amended by this Fifth Amendment, shall be binding upon and shall inure to the benefit of the parties hereto, their successors and permitted assigns.
24. Multiple Counterparts . The parties may execute this Fifth Amendment in counterparts, each of which shall constitute an original and all of which, when taken together, shall constitute one and the same instrument. To facilitate execution of this Fifth Amendment, the parties may execute and exchange, by telephone facsimile or electronic mail PDF, counterparts of the signature pages.
25. Joinder and Approval by Guarantor . By its execution below, Guarantor hereby acknowledges the terms and conditions of this Fifth Amendment and consents to and approves of the modifications set forth herein, including but not limited to the extension of the Term, the expansion and reduction of the Premises and the increase in Base Rent and resultant obligations under the Lease and hereby affirms that all of the terms and conditions in the Guaranty are hereby extended to include the Lease as amended by this Fifth Amendment.
26. Landlord Defaults . Landlord and Tenant acknowledge that Tenant delivered to Original Landlord a letter, dated April 24, 2014, alleging that Original Landlord had defaulted in the performance of certain obligations under the Lease, including obligations that impacted certain Critical Systems and Equipment. Tenant represents and certifies to Landlord that all material defaults alleged by Tenant in such letter, including defaults in the provision of services and building maintenance, have been cured or resolved by Original Landlord. Tenant agrees that Landlord shall not be in default of, or otherwise liable to Tenant under, the Lease from and after the Fifth Amendment Effective Date as a result of any default by Original Landlord prior to the Fifth Amendment Effective Date alleged in such letter, including the failure of Original Landlord to perform the scheduled maintenance and testing of the Critical Systems and Equipment and to provide the records and logs thereof to Tenant; provided, however, for the avoidance of doubt, the foregoing shall not relieve Landlord from the obligation to comply with its obligations under the Lease from and after the Fifth Amendment Effective Date, including the repair and maintenance obligations of Landlord set forth in the Lease.
27. Fifth Amendment Effective Date . As used herein, the Fifth Amendment Effective Date shall be the date of the closing of the acquisition of the Building and Property by Landlord. In the event that the Fifth Amendment Effective Date has not occurred by August 15, 2014, then this Fifth Amendment shall automatically be null and void and of no further force and effect.
(Signature Pages Follow)
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
13 |
SIGNATURE PAGE TO
FIFTH AMENDMENT TO OFFICE LEASE
IN WITNESS WHEREOF, Landlord, Tenant and Guarantor have executed this Fifth Amendment as of the Fifth Amendment Effective Date hereof.
LANDLORD: | ||||||||||
HINES VAV III ENERGY WAY LLC, | ||||||||||
a Delaware limited liability company | ||||||||||
By: | Hines US Office Value Added Venture III LLC, | |||||||||
a Delaware limited liability company | ||||||||||
By: | Hines US VAV III MM LLC, | |||||||||
a Delaware limited liability company, | ||||||||||
its managing member | ||||||||||
By: | Hines Interests Limited Partnership, | |||||||||
a Delaware limited partnership, | ||||||||||
its managing member | ||||||||||
By: | Hines Holdings, Inc., | |||||||||
a Texas corporation, | ||||||||||
its general partner | ||||||||||
By: |
/s/ David J. Congdon |
|||||||||
Name: | David J. Congdon | |||||||||
Title: | Senior Managing Director |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) |
SIGNATURE PAGE TO
FIFTH AMENDMENT TO OFFICE LEASE
IN WITNESS WHEREOF, Landlord, Tenant and Guarantor have executed this Fifth Amendment as of the Fifth Amendment Effective Date hereof.
TENANT: | ||||
PIER 1 SERVICES COMPANY, a Delaware statutory trust |
||||
By: |
Pier 1 Holdings, Inc., a Delaware corporation, its managing trustee |
|||
By: |
/s/ Alexander W. Smith |
|||
Name: | Alexander W. Smith | |||
Title: | President and CEO |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) |
SIGNATURE PAGE TO
FIFTH AMENDMENT TO OFFICE LEASE
IN WITNESS WHEREOF, Landlord, Tenant and Guarantor have executed this Fifth Amendment as of the Fifth Amendment Effective Date hereof.
GUARANTOR: | ||
PIER 1 IMPORTS, INC., | ||
a Delaware corporation | ||
By: |
/s/ Alexander W. Smith |
|
Name: | Alexander W. Smith | |
Title: | President and CEO |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) |
EXHIBIT A
LOBBY EXPANSION SPACE
[See Attached]
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
A-1 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
A-1 |
EXHIBIT A-1
CHART OF RENTABLE SQUARE FOOTAGE ON EACH FLOOR AND COMMON AREAS | ||||||||||||||
Total Gross Area | 460,614 | |||||||||||||
Less Vertical Penetration | 50,637 | |||||||||||||
Total Rentable | 409,977 | |||||||||||||
Common Area | 63,615 | |||||||||||||
Total Useable | 346,362 | |||||||||||||
Total Rentable | 409,977 | |||||||||||||
Ratio of Common Area to Useable | 0.18367 |
SQUARE FOOTAGE BREAKDOWN | ||||||||||||||||||
FLOOR |
TOTAL
RENTABLE |
USEABLE |
COMMON
AREA CHARGE |
RENTABLE
AREA* |
||||||||||||||
Terrace |
42,847 | 795 | 146 | 941 | ||||||||||||||
Lobby |
26,969 | |||||||||||||||||
Pier 1 Mail Room | 3,396 | 623 | 4,019 | |||||||||||||||
Property Management Office | 844 | 155 | 999 | |||||||||||||||
Security Control Room | 1,166 | 214 | 1,380 | |||||||||||||||
Mezz |
13,153 | 13,153 | 2,416 | 15,568 | ||||||||||||||
5 |
22,329 | 22,329 | 4,101 | 26,430 | ||||||||||||||
6 |
22,329 | 22,329 | 4,101 | 26,430 | ||||||||||||||
7 |
22,329 | 22,329 | 4,101 | 26,430 |
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A-1-1 |
8 |
22,329 | 22,329 | 4,101 | 26,430 | ||||||||||||||
9 |
22,610 | 22,610 | 4,153 | 26,763 | ||||||||||||||
10 |
22,610 | 22,610 | 4,153 | 26,763 | ||||||||||||||
11 |
22,610 | 22,610 | 4,153 | 26,763 | ||||||||||||||
12 |
22,610 | 22,610 | 4,153 | 26,763 | ||||||||||||||
14 |
22,610 | 22,610 | 4,153 | 26,763 | ||||||||||||||
15 |
22,610 | 22,610 | 4,153 | 26,763 | ||||||||||||||
16 |
22,394 | 22,394 | 4,113 | 26,507 | ||||||||||||||
17 |
22,394 | 22,394 | 4,113 | 26,507 | ||||||||||||||
18 |
19,372 | 19,372 | 3,558 | 22,930 | ||||||||||||||
19 |
18,936 | 18,936 | 3,478 | 22,414 | ||||||||||||||
20 |
18,936 | 18,936 | 3,478 | 22,414 | ||||||||||||||
409,977 | 346,362 | 63,615 | 409,977 | |||||||||||||||
*Square footage used to calculate rent expense |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
2 |
EXHIBIT B
LOBBY REDUCTION SPACE
[See Attached]
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
B-1 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
C-2 |
EXHIBIT C
RENEWAL OPTION
1. Subject to the terms and provisions of this Exhibit C , Tenant is hereby granted the right and option (the Fifth Amendment Renewal Option ) to extend the Term of this Lease for one (1) renewal period of five (5) years (the Fifth Amendment Renewal Term ), which option shall be exercised by delivery of written notice to Landlord given no more than twelve (12) months and no later than six (6) months prior to the Expiration Date, provided that at the time of such notice and at the commencement of such Fifth Amendment Renewal Term, (i) Tenant remains in occupancy of at least eighty percent (80%) of the Premises, and (ii) no uncured event of default by Tenant exists under the Lease. If Tenant fails to give written notice of exercise of the Fifth Amendment Renewal Option within the time period specified above, the Fifth Amendment Renewal Option shall be deemed waived and of no further force and effect and this Lease shall terminate upon the then-scheduled Expiration Date. If Tenant timely exercises the Fifth Amendment Renewal Option, the extension of the Term for the Fifth Amendment Renewal Term shall apply to the entirety of the Premises, and all of the terms, covenants and conditions provided in this Lease (as the same may have been amended) shall continue to apply during the Fifth Amendment Renewal Term, except that (a) the Base Rent during the Fifth Amendment Renewal Term shall be calculated at the then-prevailing Market Base Rental Rate (as defined and determined below) for the Premises; provided, however, in no event shall the Base Rent during the Fifth Amendment Renewal Term be less than the Base Rent in effect under this Lease immediately prior to the commencement of the Fifth Amendment Renewal Term; (b) the Premises shall be provided in their then existing AS-IS, WHERE-IS condition and configuration at the time the Fifth Amendment Renewal Term commences, without any representation or warranty by Landlord whatsoever, express or implied, including, without limitation, the implied warranties of habitability, suitability, merchantability and fitness for any particular purposes, and without any obligation on the part of Landlord to furnish, install or modify any leasehold improvements or to provide any allowance or credit therefor; (c) Tenant shall have no option to renew the Lease beyond the expiration of the Fifth Amendment Renewal Term; and (d) any terms, covenants and conditions that are expressly or by their nature inapplicable to the Fifth Amendment Renewal Term shall be deemed void and of no further force and effect. Tenants exercise of the Fifth Amendment Renewal Option shall be irrevocable, except as specifically provided below. Notwithstanding anything to the contrary contained in the Lease, Tenant shall not have the right to assign the Fifth Amendment Renewal Option to any subtenant or assignee, other than an assignee of Tenants interest under the Lease that is an Affiliate of Tenant (an Affiliate Assignee ), and no subtenant or assignee other than an Affiliate Assignee may exercise such option.
2. As used herein, the term Market Base Rental Rate means the annual rate per Rentable Square Foot that a willing tenant would pay and a willing landlord would accept in arms length, bona fide negotiations for the Premises at the commencement of the Fifth Amendment Renewal Term, as determined by Landlord taking into account comparable lease transactions (i.e., new leases, renewals, and expansions) made in the Building, if any, and the rental rate then being charged in downtown Fort Worth, Texas for space comparable to the Premises (taking into consideration use, location and/or floor level within the applicable building, definition of usable area, leasehold improvements provided (i.e. whether or not the space is delivered on an as-is
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
C-1 |
basis), quality, age, location and condition thereof and of the applicable building, rental concessions [such as abatements or lease assumptions] and allowances, if any, then being provided in the market area, and the time the particular rate under consideration became effective, the additional rent and other amounts then payable by Tenant under this Lease, whether or not any brokerage commissions are payable, parking rentals or concessions, creditworthiness of Tenant, term of lease, area of leased premises, and whether the lease is gross or net). Bona fide written offers to lease space in the Building, including the Premises, made to Landlord by third parties (at arms-length) that are reflected in a letter of intent or term sheet executed by Landlord and the prospective tenant may be used as an indication of Market Base Rental Rate.
3. Within thirty (30) days after receipt of Tenants notice of exercise of the Fifth Amendment Renewal Option, Landlord will notify Tenant in writing of its determination of the Market Base Rental Rate for the Premises for the Fifth Amendment Renewal Term ( Landlords Determination ).
4. Tenant shall have a period of twenty (20) days following receipt of Landlords Determination to either (i) accept Landlords Determination and confirm Tenants exercise of the Fifth Amendment Renewal Option; (ii) withdraw its exercise of the Fifth Amendment Renewal Option by written notice to Landlord, in which event the Fifth Amendment Renewal Option shall be terminated and of no further force and effect and this Lease shall terminate upon the expiration of the then current Term; or (iii) deliver to Landlord Tenants determination of the Market Base Rental Rate ( Tenants Determination ). If Tenant fails to withdraw its exercise of the Fifth Amendment Renewal Option, then Tenants exercise of the Fifth Amendment Renewal Option shall be irrevocable and the Market Base Rental Rate shall be determined as provided below. If Tenant timely delivers Tenants Determination, then Landlord and Tenant shall thereafter attempt to agree upon the Market Base Rental Rate for a period of twenty (20) days following the date Landlord receives the Tenants Determination (the Negotiation Period ), which agreement shall be deemed to have been made only if set forth in a writing signed by Landlord and Tenant. If Landlord and Tenant fail to agree upon the Market Base Rental Rate by the expiration of such Negotiation Period, then within five (5) business days after the expiration of the Negotiation Period, Landlord and Tenant shall convene a meeting at the Building and during such meeting each shall provide to the other its respective final determination of Market Base Rental Rate (respectively, the Landlords Final Determination and the Tenants Final Determination ). If Landlord fails (i) to attend such meeting or (ii) to timely deliver to Tenant Landlords Final Determination, Landlord shall be deemed to have accepted Tenants Determination. If Tenant fails (i) to attend such meeting or (ii) to timely deliver to Landlord Tenants Final Determination, Tenant shall be deemed to have accepted Landlords Determination. If Tenant attends such meeting and delivers Tenants Final Determination, then within five (5) business days after such meeting, Tenant shall, by the delivery of written notice, either (i) accept Landlords Final Determination, or (ii) elect to have the Market Base Rental Rate determined in accordance with the arbitration procedures set forth in Section 5 below. If Tenant fails to timely deliver written notice of such election by the end of such five (5) business day period, Tenant shall be deemed to have elected to accept Landlords Determination.
5. If Tenant timely elects to implement the procedures set forth in this paragraph, then within five (5) Business Days after implementing these arbitration provisions, Landlord and Tenant shall each appoint a commercial real estate broker, licensed in Texas active in the leasing of Class A office buildings in the Central Business District of Fort Worth, Texas, for a period of not less than
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
C-2 |
five (5) years prior to the date of his or her appointment (each a Qualified Broker ), and provide written notice to the other party specifying the name and address of the Qualified Broker so chosen. No Qualified Broker may be a former or current employee of Landlord or Tenant or an individual who has represented either Landlord or Tenant in connection with this Lease. Each such Qualified Broker shall meet and confer with the other within five (5) days after the second such Qualified Broker is appointed, and shall together appoint a third Qualified Broker whose name and address shall be given to Landlord and Tenant. If the two Qualified Brokers cannot agree on the third Qualified Broker within five (5) days of their initial meeting, then either party, by written notice to the other, may request such appointment by the American Arbitration Association. The three Qualified Brokers shall meet to determine the Market Base Rental Rate within ten (10) days after the third Qualified Broker is appointed. The Qualified Brokers shall, by majority vote, select either Landlords Final Determination or Tenants Final Determination, whichever determination the Qualified Brokers decide most closely resembles the Market Base Rental Rate at the time of such determination. In no event shall the Qualified Brokers have authority to make an independent determination of Market Base Rental Rate or the authority to select any Market Base Rental Rate other than either Landlords Final Determination or Tenants Final Determination. Upon final determination of the Market Base Rental Rate, Tenant and Landlord shall execute a written agreement or acknowledgement confirming such Market Base Rental Rate. Landlord and Tenant shall each bear all costs and expenses incurred in connection with their own Qualified Brokers, and Landlord and Tenant shall each pay fifty percent (50%) of the fees incurred in connection with the third Qualified Broker. In the event of the failure, refusal or inability of any selected broker to act, a new broker shall be appointed in his or her stead by whichever of Landlord or Tenant had selected such broker who fails, refuses or is unable to act. The determination of the Market Base Rental Rate pursuant to this process shall be conclusive and binding on Landlord and Tenant. None of the broker shall have the power to amend or modify the provisions hereof. The parties recognize, however, that performance of the foregoing provisions is, in part, dependent upon broker and others who are not a party hereto. If such brokers have been timely appointed by the parties hereto but thereafter fail to perform their obligations in accordance with the provisions hereof, no such failure shall constitute a breach hereof by either party hereto nor a waiver of Tenants renewal or preferential rights and options.
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
C-3 |
EXHIBIT D
FUTURE DEVELOPMENT RIGHT OF NEGOTIATION
1. Subject to the terms and provisions of this Exhibit D , Tenant is hereby granted a first right of negotiation (the Right of Negotiation ) to enter into negotiations for the lease of space to be contained in any future office building (other than the Building) that Landlord elects to build on the Property (the Future Building ). The Right of First Negotiation shall expire and terminate on the earliest to occur of the following: (a) Tenant fails to lease and occupy at least 80% of the Rentable Square Footage of the Building; or (b) the date that is three (3) years prior to the then-scheduled expiration of the Term (unless Tenant agrees in writing to exercise the Renewal Option or otherwise renew and extend the Term of the Lease); or (c) the date the Lease is terminated (the period from the Fifth Amendment Effective Date through the expiration of the Right of Negotiation being referred to herein as the First Negotiation Period ). Notwithstanding anything herein to the contrary, Tenant expressly acknowledges and agrees that Landlord shall have no obligation to develop a Future Building on the Property. For purposes of this Exhibit D, Tenant shall not be deemed to be occupying the applicable portion of the Premises unless such occupancy is by Tenant or an Affiliate of Tenant.
2. If at any time during the First Negotiation Period, Landlord desires to build a Future Building or to propose to develop (or respond to a request for proposal to develop) a build-to-suit Future Building (a BTS Future Building ) for another tenant (the BTS Tenant ), Landlord will provide written notice (the Negotiation Notice ) to Tenant generally stating the approximate proposed size of the building and other material economic terms for the lease of space therein (the Lease Terms ), including, without limitation, basic rent structure, term, and projected commencement date. Tenant shall notify Landlord in writing (an Election Notice ) whether Tenant elects to lease a portion or all of the proposed development on the terms set forth by Landlord (provided that, as to any such election in the case of a BTS Future Building, Tenant must elect to lease not less than the amount of space to be leased by the BTS Tenant, as set forth in Landlords proposal to the BTS Tenant) within thirty (30) days after Landlord delivers the Negotiation Notice. If Tenant timely delivers the Election Notice, then Landlord and Tenant will thereafter endeavor, in good faith and with due diligence, to agree upon and thereafter execute a lease of space in such Future Building consistent with the Future Building Lease Terms (and, in the case of a BTS Future Building, covering not less than the amount of space to be leased by the BTS Tenant), with such changes thereto as Landlord and Tenant may agree, and containing such other terms and conditions as Landlord and Tenant may each require, each acting in their sole discretion. Notwithstanding anything to the contrary contained in this Exhibit D , Tenant hereby acknowledges and agrees that any failure by Landlord and Tenant to reach agreement on any such lease shall not constitute a default by Landlord or Tenant under this Lease. For the avoidance of doubt, Landlord shall have the right to negotiate with prospective tenants with respect to the lease of space in a BTS Future Building (including by submitting or responding to requests for proposal) prior to delivery of a Negotiation Notice and during the pendency of proceedings under this Paragraph 2.
3. If Tenant fails to deliver the Election Notice within the thirty (30)-day period specified above, or if after delivery of the Election Notice, Landlord and Tenant fail to agree upon a
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
D-1 |
lease for such space within forty-five (45) days following Landlords receipt of the Election Notice, in each case time being of the essence, then Tenant shall be deemed to have elected not to enter into a lease for space in a Future Building, and Landlord shall thereafter be free to lease all or any portion of a Future Building without restriction pursuant to this Exhibit D , except that, if Landlord fails to commence construction of a Future Building within thirty (30) months of the Negotiation Notice, then Landlord will again be required to deliver a Negotiation Notice with respect to any Future Building proposed to be developed by Landlord on the Property.
4. Notwithstanding the foregoing, Landlord shall not be obligated to deliver a Negotiation Notice, and Tenant shall not have the right to deliver an Election Notice, if an uncured Monetary Default and/or default described in Section 18.D of the Original Lease then-exists under the Lease. In addition, if, at any time at or after delivery by Landlord of the Negotiation Notice and prior to the full and final execution of a Future Building Lease, the First Negotiation Period expires pursuant to Paragraph 1 above, Landlord may, at its sole option, elect to terminate Tenants exercise of the Right of Negotiation, in which event Tenant shall be deemed to have elected not to lease space in the Future Building, the Right of Negotiation shall expire and terminate, and Landlord shall be free to develop and lease all or any portion of a Future Building without restriction pursuant to Exhibit D .
5. Notwithstanding anything to the contrary contained in the Lease, Tenant shall not have the right to assign the Future Development Refusal Right to any subtenant or assignee other than an Affiliate Assignee, and no subtenant or assignee other than an Affiliate Assignee may exercise such option.
6. Landlord and Tenant shall execute a memorandum or other instrument in recordable form and otherwise reasonably acceptable to each party acknowledging the Right of Negotiation set forth in this Exhibit D, and the same shall be recorded by Landlord in the Official Public Records of Real Property of Tarrant County, Texas. Upon the expiration of the First Negotiation Period, Tenant shall, upon demand, execute and deliver to Landlord a release or other similar instrument in recordable form and otherwise reasonably acceptable to Landlord and Tenant acknowledging the termination of the Right of First Negotiation.
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D-2 |
EXHIBIT E
BUILDING SIGNAGE
[See Attached]
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
E-1 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
E-2 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
E-3 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
E-4 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
E-5 |
EXHIBIT F
FURNITURE
FURNITUREFLOORS 17-20
Item |
17 th | 18 th | 19 th | 20 th |
Total
Quantity |
|||||||||||||||
Desks |
49 | 37 | 36 | 24 | 146 | |||||||||||||||
Task Chairs |
124 | 58 | 64 | 39 | 285 | |||||||||||||||
Guest Chairs |
111 | 77 | 71 | 77 | 336 | |||||||||||||||
Book Shelves |
52 | 37 | 32 | 21 | 142 | |||||||||||||||
Guest Tables |
4 | 4 | 5 | 11 | 24 | |||||||||||||||
Training Tables |
19 | 40 | 6 | 0 | 65 | |||||||||||||||
Conference Table |
1 | 0 | 1 | 3 | 5 | |||||||||||||||
Training Chairs |
12 | 199 | 0 | 0 | 211 | |||||||||||||||
Conference Chairs |
56 | 0 | 34 | 32 | 122 | |||||||||||||||
Cubicles |
55 | 30 | 46 | 26 | 157 | |||||||||||||||
Refrigerators |
1 | 2 | 1 | 1 | 5 | |||||||||||||||
Microwaves |
1 | 2 | 1 | 1 | 5 | |||||||||||||||
TV |
0 | 0 | 1 | 4 | 5 | |||||||||||||||
Couch |
0 | 0 | 0 | 1 | 1 | |||||||||||||||
Chairs |
0 | 0 | 0 | 2 | 2 |
MISCELLANEOUS FURNITURE
Type |
Quantity | |
18 th Floor: |
||
20002 Trophy Case |
1 | |
20 th Floor: |
||
20076 3 door Armoire |
1 |
APPLIANCES - FLOORS 17-20
Item |
Quantity | |
17 th Floor: |
||
17004-Whirlpool Fridge GR2 SHK XMS01 |
1 | |
17004-Whirlpool Micro |
1 | |
17004-Folleit Ice Maker |
1 | |
18 th Floor: |
||
18004-Whirlpool Fridge GR2 SHK XMS01 |
1 | |
18004-Folleit Ice Maker |
2 | |
18004-Whirlpool Microwave |
2 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
F-1 |
Item |
Quantity | |
18068-Whirlpool Fridge WRT 571 SMY MOO |
1 | |
19 th Floor: |
||
Break Room-Whirlpool Gold Refrigerator GR2SHKXM501 |
1 | |
Break Room- Follett Symphony Series Ice Maker |
1 | |
20 th Floor: |
||
20005-Whirlpool Gold Refrigerator GR23HKXM501 |
1 |
TELEVISIONS
Type |
Quantity | |
19 th Floor: |
||
19002- Panasonic 50 Plasma TV TY-TP50P10S |
1 | |
20 th Floor: |
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20003- AMX MVP-TDS Projector and Shade control |
1 | |
20046-Panasonic 65 Plasma TV TH-65PF11UK |
1 | |
20079- 2 Toshiba TV/VCR/DVD Model No: MW20FP1 |
1 | |
20079- 1 Toshiba TV/VCR/DVD Model No: MW20F52 |
1 |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
2 |
EXHIBIT G
JANITORIAL SPECIFICATIONS
I. | OFFICE AREAS |
A. | Services performed nightly (5 nights per week): |
| Empty and clean all waste receptacles and remove waste paper and rubbish to the designated area. |
| Hand dust or wipe clean with damp or treated cloth all horizontal surfaces, desks, chairs, files, telephones, picture frames, etc. Do not rearrange materials on desks. |
| Clean and sanitize drinking fountains, follow with stainless steel cleaner as needed taking care not to leave any oily residue. |
| Spot clean all windows and partition glass including lobby glass and glass table tops. |
| Vacuum all carpet areas. Broom sweep all oriental antique rugs. (Do not pull vacuum cords around corners.) Edges should either be swept or vacuumed with appropriate edge cleaning tool, as required. |
| Remove all finger marks and smudges from all vertical surfaces taking care not to mark material finishes. |
| Dust mop and spot clean all tiled areas. |
| Damp wash and wipe dry all plastic or Formica desk tops. |
| Sweep internal stairways and vacuum, if carpeted. Dust handrails and vertical surfaces. |
B. | Services performed as necessary or in the frequency stated: |
| Wash waste receptacles. To be done if liquids might have leaked into the receptacle through the plastic liner or in other areas, as required. |
| Damp mop floors where spillage occurred or dirt tracked in. |
| Machine buff all non-carpet floors - not less than monthly. Strip and recoat as necessary. |
| Spot clean carpet areas. Major carpet cleaning will be handled outside this contract. |
| Dust light fixtures - not less than annually. |
| Vacuum/dust all perimeter slot diffusers on an annual basis. |
| Clean all air vent grills. |
| Dust window blinds quarterly. |
| Dust and wash window sills. |
| Dust fire extinguishers/fire extinguisher cabinets. |
| Dust all doors monthly. |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
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II. | RESTROOMS |
A. | Services performed nightly (5 nights per week): |
| Empty and clean all waste receptacles and remove waste paper and rubbish to the designated area. |
| Empty, clean and disinfect all sanitary napkin receptacles. |
| Wash and disinfect all basins, urinals and bowls using nonabrasive cleaners to remove stains and clean undersides of rim on urinals and bowls. Wash both sides of toilet seats. |
| Clean and polish all mirrors, bright work and enameled surfaces. |
| Spot clean all partitions, tile walls, doors and outside surfaces of all dispensers and receptacles. Damp wipe all lavatory tops and remove water spots from wall surfaces next to dispensers/receptacles. Spot clean around light fixtures. |
| Clean and disinfect all flush-o-meters, piping and other metal. |
| Fill toilet tissue, soap, towels and sanitary napkin dispensers. Do not place any extra supplies on top of dispenser or counter top. |
| Sweep, wet mop and thoroughly rinse floor. Clean all corners and edges to prevent dirt buildup. Do not leave standing water on the floor. |
| Dump at least one gallon of water down restroom floor drain and wipe clean drain grill. |
B. | Services performed as necessary or in the frequency stated: |
| Scrub all floors at least monthly - intent is to prevent buildup of dirt in grout. |
| Thoroughly wash all partitions at least monthly. |
| Dust all walls at least quarterly. |
| Wash all walls at least semi-annually. |
| Clean light fixtures at least annually. |
| Clean air vent grills at least quarterly. |
| Clean soap dispensers. |
It is the intention to keep the restrooms thoroughly clean and not to use a fragrance or deodorant to mask odor. Disinfectants must be odorless. Abrasive cleaners or products that may damage any surface are not permitted.
III. | ELEVATORS |
A. | Services performed nightly: |
| Dust light lenses, damp wipe, if necessary. |
| Spot clean walls. |
| Dust or damp wipe finish metal and floor buttons. |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
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| Clean and polish all thresholds and tracks. |
| Carpet floors; clean edges, vacuum and spot. |
| Tile or other floor in service cars; sweep, wash, dress and buff. |
| Spot-clean hall side of doors, frame and hall call button. |
B. | Services performed, as necessary: |
| Dust ceiling. |
| Shampoo carpet. |
| Wash hall side of doors and frame. |
IV. | LOBBY |
A. | Services performed nightly: |
| Sweep and special clean the limestone and granite flooring. |
| Clean all edges and corners. Machine clean, as necessary. |
| Clean glass doors, adjacent glass panels and glass top of revolving doors. |
| Clean and polish all transoms, metal doors, door frames, etc. |
| Dust vases, vase stands and other horizontal surfaces. |
| Empty all trash receptacles, clean and polish. |
| Clean pay phones as required. |
| Spot clean directory board and graphics. |
| Clean security desk and surrounding area. |
| Spot clean all walls. |
B. | Services performed as necessary or in the frequency stated: |
| Dust or wash granite walls. |
| Clean all air diffusers/grills. |
| Clean gold leaf niches. |
| Vacuum mats. |
V. | COMMON AREAS |
A. | Services performed nightly: |
| Sweep/vacuum floor. |
| Spot clean carpet as necessary. |
| Spot clean walls - dust as necessary. |
| Clean and sanitize drinking fountains, follow with stainless steel cleaner as needed, taking care not to leave any oily residue. |
| Spot clean any windows and partition glass. |
| Empty, clean and polish trash receptacles. |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
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B. | Services performed as necessary or in the frequency stated: |
| Dust light fixtures - not less than monthly. |
| Dust/wash air vent grills. |
| Dust all doors monthly. |
| Dust and damp wipe exit signs quarterly. |
VI. | BUILDING STAIRWAYS AND LANDINGS |
Services performed as necessary or in the frequency stated:
| Police for trash, remove gum daily. |
| Sweep/spot mop not less than weekly. |
| Dust handrails and other vertical members, twice per month. |
| Dust light fixtures - not less than quarterly. |
| Dust/wash all vents and painted piping monthly. |
| Clean prints and marks from doors. |
| Clean/wash transoms high and low. |
VII. | SERVICE HALL-FREIGHT ELEVATOR VESTIBULES |
Services performed nightly:
| Sweep, then spot mop or wet mop nightly. |
| Spray buff not less than weekly. |
| Strip and recoat quarterly. |
| Clean/wash transoms high and low. |
| Clean prints and marks from doors. |
| Dust/wash all vents and painted piping. |
| Dust light fixtures-not less than quarterly. |
| Spot clean walls. |
VIII. | MANAGERS OFFICE, STAGING AREA, JANITORIAL ROOMS |
Services performed as necessary or in the frequency stated:
| Maintain all janitorial areas in a clean, neat and orderly condition at all times. |
| Maintain office and staging area in same fashion as tenant office areas. |
IX. | LOADING DOCK |
A. | Services performed nightly: |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
G-4 |
| Place all trash in compactor. |
| Sweep dock and dock area and remove any spots/spills. |
| Spot clean walls by dock office and service elevator. |
| Clean glass, empty trash, sweep/clean floor in dock office. |
| Clean and polish ash urn - replace sand as necessary. |
B. | Services performed as necessary or in the frequency stated: |
| Steam and/or power wash all loading dock base, truck areas and exterior (top and sides) of trash compactor - not less than monthly. |
| Steam and/or power wash all loading dock vertical walls - not less than annually. |
| Maintain floor surface in dock office. |
Upon completion of nightly duties, the floor supervisors will insure that all offices have been cleaned and left in a neat and orderly condition, all lights have been turned off and all areas properly secured. Supervisors will be responsible for completing a Nightly Supervisor Checklist which details any problems encountered during the course of cleaning either the tenant space or public areas.
X. | COURTYARD/SIDEWALK |
A. | Service performed nightly: |
| Police for trash - all areas including planting beds and along curb. |
| Empty trash barrels, clean and polish/wipe off. |
| Straighten and dust off furniture. |
| Remove gum from area. |
B. | Services performed as necessary or in the frequency stated: |
| Steam and/or power wash granite pavers, sidewalks, and stairs. |
| Clean/wash fountains, chairs and trash receptacles. |
XI. | DAY SERVICE (Specific written job descriptions will be developed for each day persons position. The tasks below are meant only to serve as guidelines.) |
1. | At least twice daily check mens and womens washrooms for paper stock replacement. Wipe down and clean all lavatory tops and fixtures. Police restroom to prevent paper/trash on floor. Report to Management Office any problems. |
2. | Vacuuming of elevator cabs will be performed at least three (3) times daily. All smudges, fingerprints to be removed from metal surfaces at same time vacuuming is done. |
3. | There will be a constant surveillance of the lobby, courtyard and sidewalk areas to insure cleanliness. All sand urns will be sifted at least three (3) times daily and sand stamped. Damp mop where necessary all spills/water. Dust mop as required. Remove fingerprints from door glass and metal surfaces at least three (3) times daily. Clean trash from tree grates and planters. |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
G-5 |
4. | The first floor exterior side of all retail glass will be maintained as needed. Retail door glass will be spot cleaned at least once daily. |
5. | The loading dock and service hallway will be policed for trash. |
7. | Perform all special cleaning needs of individual tenants as authorized by the property manager for the Building. |
8. | Perform all specific duties as detailed in the day maid/day porter job description. |
XII. | FITNESS CENTER |
A. | Services performed nightly: |
| Wash both sides of entrance door glass and windows. Polish door frames and thresholds. |
| Spot clean glass, mirrors and reflective surfaces to remove fingerprints and smudges. |
| Spot clean doors, walls and wall switches. |
| Dust horizontal surfaces and ledges. |
| Clean, sanitize and polish drinking fountains & spouts. Remove splash marks from surrounding walls. |
| Wipe clean all exercise equipment and components. Disinfect surfaces where body contact is made. |
| Dust and wet mop floors, using a germicidal detergent approved by Manager. |
| Vacuum all carpeted areas and walk off mats. Spot clean to remove stains. |
| Dust and spot clean all cove base and low horizontal ledges. |
| Clean and sanitize lockers, benches, and reflective surfaces. |
| Clean and inspect shower curtains for cleanliness and condition. Notify Manager of any repairs or defects. |
| Replenish consumable supplies, including toiletries provided by Manager. |
| Report any exercise equipment in need of repair to Manager. |
B. | Services performed as necessary or in the frequency stated: |
| Wash all mirrors. |
| Detail vacuum all carpeted areas, including edges and around equipment. |
| Machine or hand scrub all tiled floors and walls. |
| High and low dust all vertical and horizontal ledges and surfaces, including light fixtures, signage, air diffusers and grilles. |
NOTE: | It is the expectation of Landlord and its property manager to obtain first class janitorial services comparable to or better than Comparable Buildings. Landlords intent is not to create a specification that detailed everything but that demonstrated the high level of cleanliness and quality required for the project. |
FIFTH AMENDMENT TO OFFICE LEASE (PIER 1 SERVICES COMPANY) Active 16013260.14 |
G-6 |
Exhibit 31.1
Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
I, Alexander W. Smith, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Pier 1 Imports, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 8, 2014 | By: |
/s/ Alexander W. Smith |
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Alexander W. Smith, President and Chief Executive Officer |
Exhibit 31.2
Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
I, Charles H. Turner, certify that:
1. | I have reviewed this Quarterly Report on Form 10-Q of Pier 1 Imports, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: October 8, 2014 | By: |
/s/ Charles H. Turner |
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Charles H. Turner, Senior Executive Vice President and Chief Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned officers of Pier 1 Imports, Inc., hereby certifies that:
1. | The Quarterly Report on Form 10-Q of Pier 1 Imports, Inc. for the period ended August 30, 2014 fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the above-mentioned report fairly presents, in all material respects, the financial condition and results of operations of Pier 1 Imports, Inc. for the period covered by the report. |
Date: October 8, 2014 | By: |
/s/ Alexander W. Smith |
||
Alexander W. Smith, President and Chief Executive Officer |
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Date: October 8, 2014 | By: |
/s/ Charles H. Turner |
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Charles H. Turner, Senior Executive Vice President and Chief Financial Officer |