Pier 1 2011 Annual Report Download - page 50

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Earnings per share amounts were calculated as follows (in thousands except per share amounts):
2011 2010 2009
Net Income (loss), basic and diluted $ 100,125 $ 86,847 $ (129,253)
Average shares outstanding:
Basic 116,466 100,715 88,912
Effect of dilutive stock options 454 - -
Effect of dilutive restricted stock 564 - -
Diluted 117,484 100,715 88,912
Earnings (loss) per share:
Basic $ 0.86 $ 0.86 $ (1.45)
Diluted $ 0.85 $ 0.86 $ (1.45)
A total of 3,903,875, 10,424,035 and 12,302,323 outstanding stock options and shares of unvested
restricted stock were excluded from the computation of the fiscal 2011, 2010 and 2009, respectively, income
(loss) per share as the effect would be antidilutive. In addition, incremental net shares for the conversion feature
of the Company’s 6.375% senior convertible notes due 2036 were not included in the Company’s diluted
earnings per share calculations for those periods as the average common stock price did not exceed the initial
conversion price of $15.19 per share.
Stock-based compensation – The Company’s stock-based compensation relates to stock options,
restricted stock awards and director deferred stock units. Accounting guidance requires all companies to measure
and recognize compensation expense at an amount equal to the fair value of share-based payments granted.
Compensation expense is recognized for any unvested stock option awards and restricted stock awards on a
straight-line basis or ratably over the requisite service period. Stock option exercise prices equal the fair market
value of the shares on the date of the grant. The fair value of stock options is calculated using a Black-Scholes
option pricing model. The Company records compensation expense for stock-based awards with a performance
condition when it is probable that the condition will be achieved. The compensation expense ultimately
recognized, if any, related to these awards will equal the grant date fair value for the number of shares for which
the performance condition has been satisfied.
The Company estimates forfeitures based on its historical forfeiture experience, and adjusts forfeiture
estimates based on actual forfeiture experience for all awards with service conditions. The effect of any forfeiture
adjustments was insignificant.
44