Pier 1 2007 Annual Report Download - page 67

Net periodic benefit cost included the following actuarially determined components during fiscal 2007,
2006 and 2005 (in thousands):
2007 2006 2005
Service cost ........................................... $ 2,405 $2,043 $1,932
Interest cost ........................................... 1,931 1,590 1,442
Amortization of unrecognized prior service cost ................. 804 830 830
Amortization of net actuarial loss ........................... 3,203 3,463 174
Settlement charges ...................................... 5,257 1,008 —
Curtailment charge ...................................... 1,512 — —
Net periodic benefit cost ................................ $15,112 $8,934 $4,378
As of March 3, 2007, accumulated other comprehensive loss included amounts that had not been
recognized as components of net periodic benefit cost related to prior service cost and net actuarial loss of
$2,030,000 and $1,293,000, respectively. The estimated prior service cost and net actuarial loss that will be
amortized from accumulated other comprehensive loss into net periodic cost in fiscal 2008 are $156,000 and
$1,201,000, respectively. Included in the net actuarial loss for fiscal 2008 is an anticipated settlement charge
of $1,056,000.
In September 2006, the FASB issued SFAS 158. SFAS 158 requires companies to recognize the funded
status of postretirement benefit plans as an asset or liability in the financial statements. The Company adopted
the funded status recognition portion of SFAS 158 as of March 3, 2007, and recorded an additional liability
with an offset to other comprehensive income of $1,631,000. In addition, SFAS 158 requires an employer to
measure its postretirement benefit plan assets and benefit obligations as of the date of the employer’s fiscal
year end. This portion of the statement is effective for the Company for fiscal 2009 and is not expected to
have a material impact on the Company’s consolidated financial statements.
NOTE 11 — MATTERS CONCERNING SHAREHOLDERS’ EQUITY
On March 23, 2006, the Board of Directors approved the adoption of the Pier 1 Imports, Inc. 2006 Stock
Incentive Plan (the “2006 Plan”). The 2006 Plan was approved by the shareholders on June 22, 2006. The
aggregate number of shares available for issuance under the 2006 Plan included a new authorization of
1,500,000 shares, plus shares that remained available for grant under the Pier 1 Imports, Inc. 1999 Stock Plan
(the “1999 Stock Plan”) and the Pier 1 Imports, Inc. Management Restricted Stock Plan (not to exceed
560,794 shares), increased by the number of shares (not to exceed 11,186,150 shares) subject to outstanding
awards on March 23, 2006, under the prior plans that cease to be subject to such awards. As of March 3,
2007, there was a total of 1,326,153 shares available for grant under the 2006 Plan. Subsequent to year end,
the Company’s Board of Directors approved a grant under the 2006 Plan, which resulted in awards of stock
options and restricted stock totaling 1,123,100 shares.
Stock option grants — On January 27, 2007, the Board of Directors approved an employment agreement
for the Company’s new President and Chief Executive Officer (the “CEO”). The employment agreement set
forth that on February 19, 2007, the CEO would be granted two options to purchase an aggregate of
3,000,000 shares of the Company’s common stock. The exercise price per share would be the fair market
value of the Company’s common stock on the day following the grant date, or $6.69. The options were
granted as an employment inducement award, and not under any stock option or other equity incentive plan
adopted by the Company. The first option for 1,000,000 shares will vest on the first anniversary of the date of
grant if, subject to certain terms of the employment agreement, the CEO is employed on that date.
Additionally, if the CEO fails to be employed between February 19, 2008 and February 28, 2009 due to
certain reasons, he forfeits 50% of the grant. The second option for 2,000,000 shares will vest up to
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Pier 1 Imports, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)