Pier 1 2016 Annual Report Download - page 111

COMPENSATION
Approximately 50% of the shares granted at target in fiscal 2016 were based on achievement of a cumulative three-year Profit Goal,
approximately 10% were based on a cumulative three-year relative TSR, and approximately 40% were time-based. The performance-
based grants are referred to as “Profit Goal performance-based shares” and “TSR performance-based shares.”
The Profit Goal performance-based shares cliff vest 100% upon Pier 1 Imports satisfying the cumulative Profit Goal established by the
compensation committee for fiscal 2016-2018. Vesting is also conditioned upon the NEO being employed on the date of filing of Pier 1
Imports’ Annual Report on Form 10-K with the SEC for fiscal 2018. The Profit Goal performance-based shares vest within a range of
50% to 200% (with interpolation between the levels).
None of the outstanding performance-based shares issued under prior fiscal year grants that were eligible to vest based on fiscal 2016
Realized Profit vested, however shares granted in fiscal 2015 are eligible to vest at the end of fiscal 2017 under the “catch-up” provision
in those grants. In order to vest under the “catch-up” provision, any Profit Goal (at 100%) not realized in fiscal 2015 and fiscal 2016
would have to be realized in fiscal 2017 in addition to the Profit Goal (at 100%) for fiscal 2017. Use of a “catch-up” provision for the
fiscal 2016 grants to all of the NEOs, other than Mr. Smith, was eliminated when the Profit Goal performance-based shares described
above were granted.
In addition to the Profit Goal performance-based shares, cumulative three-year (fiscal 2016-2018) TSR performance-based shares were
granted in fiscal 2016 to further align performance of Pier 1 Imports common stock with executive pay. The TSR performance-based
shares cliff vest as shown in Table 6 below within thirty days of the end of fiscal 2018, provided the NEO is employed on the vesting date
and at least a threshold level of performance is achieved. Vesting is based on Pier 1 Imports’ ranking within the percentile rankings of
the annual equivalent return of the TSR of Pier 1 Imports and a peer group using the average closing stock price of Pier 1 Imports and
the peer group companies during the twenty trading days at the beginning of fiscal 2016 and the average closing stock price during the
twenty trading days at the end of fiscal 2018. The peer group is comprised of all of the companies in the Russell 1000 Specialty Retail
Index as of the beginning of fiscal 2016 plus any other specialty retailers in Pier 1 Imports’ fiscal 2016 peer group.
Table 6
PIER 1 IMPORTS’ PERCENTILE RANK
WITHIN TSR PEER GROUP
PERCENT OF TARGET PERFORMANCE-BASED
SHARES VESTED
81% and above 200%
76% - 80% 180%
71% - 75% 160%
66% - 70% 140%
61% - 65% 120%
56% - 60% 110%
50% - 55% 100%
41% - 49% 50%
40% and Below 0%
A similar TSR performance-based share grant was made in fiscal 2014. Those shares became eligible to vest at the end of fiscal 2016
based on TSR performance over fiscal years 2014-2016. The TSR performance over those fiscal years was below threshold levels and
those shares did not vest.
The remaining shares granted in fiscal 2016 were time-based shares with a three-year vesting period. Those shares vested 33% on
April 10, 2016, and will vest 33% on April 10, 2017 and 34% on April 10, 2018 provided that the NEO is employed on the applicable
vesting date.
Chief Executive Officer Compensation
Pier 1 Imports believes it is important to understand not only the potential value of short- and long-term incentive awards at the time
they are granted, but also the value of the awards that are actually realized during the fiscal year. To better understand how pay aligns
with performance for Mr. Smith, Pier 1 Imports’ chief executive officer, Table 7 presents Mr. Smith’s summary compensation table
information for fiscal 2016, less changes in pension value, and compares that to his realized pay.
PIER 1 IMPORTS, INC. | 2016 Proxy Statement 29