Pier 1 2010 Annual Report Download - page 123

In fiscal 2010, the quarterly incentive potential was 11.25% of annual base salary for Pier 1 Imports’ chief
executive officer and 8.75% of annual base salary for the other named executive officers, except Mr. Benkel whose
quarterly incentive potential was 6.25% of his annual base salary. The annual component in fiscal 2010 was 45% of
annual base salary for Pier 1 Imports’ chief executive officer and 35% of annual base salary for the other named
executive officers, except Mr. Benkel whose annual component was 25% of his annual base salary. The plan
required participants to be employed with Pier 1 Imports at the end of each respective quarter and year-end to
receive a cash incentive award, if any, for that performance period. The plan allows Pier 1 Imports’ chief executive
officer to reduce the cash award of a participant as a result of individual performance. Pier 1 Imports believes that
these target percentage levels were competitive when compared to Pier 1 Imports’ peer group as identified at the
beginning of the fiscal year.
The actual quarterly Profit Goals for fiscal 2010 were calculated as negative $13,700,000 for the first quarter,
negative $6,100,000 for the second quarter, $9,500,000 for the third quarter, and $42,200,000 for the fourth quarter.
The calculated quarterly Profit Goals resulted in participants earning 100% of their quarterly cash incentive awards.
The actual annual Profit Goal for fiscal 2010 was calculated as $31,900,000 and the short-term incentive plan
achieved its desired effect of turning Pier 1 Imports toward profitability. The calculated annual Profit Goal resulted
in participants earning 200% of their annual cash incentive award. The quarterly and annual cash incentive awards
had a combined effect equal to 150% of the participant’s cash incentive award potential. In addition, the
compensation committee on March 26, 2010 awarded each named executive officer a discretionary bonus for their
contributions in Pier 1 Imports’ exceeding the fiscal 2010 financial expectations. Those discretionary bonus
amounts are shown in the Summary Compensation Table below.
Long-term Incentives – Pier 1 Imports designs its long-term incentive awards to support Pier 1 Imports’ overall
objectives of long-term company profitability, competitiveness in the retail industry, and retention of executives.
Pier 1 Imports’ long-term incentive plan for fiscal 2010 was comprised of cash performance awards based on three
fiscal year individual and cumulative Profit Goal targets. Pier 1 Imports believes that the design of this cash
performance award provides a long-term incentive opportunity that is both competitive in the retail industry and
serves as a retention tool.
During fiscal 2010 for each named executive officer, other than the chief executive officer, Pier 1 Imports
established a long-term incentive cash award payable if each annual Profit Goal and the cumulative Profit Goal for
fiscal years 2010, 2011 and 2012 are met. Each year during the three-year period, a participant will earn one-third of
the award if Pier 1 Imports attains the annual Profit Goal for the fiscal year. All awards earned under the long-term
incentive are payable at the end of fiscal year 2012 provided the participant is employed on such date. The cash
incentive award payable if Pier 1 Imports attains the cumulative Profit Goal is not dependent on the attainment of
the annual Profit Goals. The long-term cash incentive award potential of an eligible named executive officer was
50% of his or her fiscal 2010 annual base salary if the cumulative three-year Profit Goal were reached, other than
Mr. Turner whose award potential was approximately 55%. As noted above, the Profit Goal for fiscal 2010 was met
and each participant earned one-third of the award, payable at the end of fiscal year 2012 if the participant is
employed at that time. The plan allows Pier 1 Imports’ chief executive officer to reduce the cash award of a
participant as a result of individual performance.
Pier 1 Imports’ chief executive officer, Mr. Smith, did not participate in the fiscal 2010 long-term incentive
cash award given his employment inducement stock option award described below which is based on Pier 1
Imports’ performance for fiscal 2010.
Retirement and Other Plans – Pier 1 Imports offers a supplemental retirement plan which is designed to
provide certain executives with post-employment financial security and to mitigate the effects of deferral limitations
on highly compensated individuals in qualified plans such as Pier 1 Imports’ 401(k) plan. The plan also assists Pier
1 Imports in attracting and retaining executives. The plan is discussed and described below under the caption
“Pension Benefits Table for the Fiscal Year Ended February 27, 2010.”
Pier 1 Imports also offers a non-qualified deferred compensation plan known as the Pier 1 Benefit Restoration
Plan II to its executives and key members of management. This plan is also designed to provide post-employment
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