Pier 1 2012 Annual Report Download - page 111

Profit Goal, and it was selected as the appropriate financial measure because it focuses on factors that an individual
participant’s actions can affect. Pier 1 Imports believes the Profit Goal is a better measure of core operating
performance because it eliminates the effects of financing and tax decisions as well as unusual charges and more
closely reflects cash being generated by Pier 1 Imports’ ongoing core operations. Also, designing the short-term
incentive Profit Goal specifically around Pier 1 Imports’ financial and operational performance leads to increased
profitability over time. Additional information and factors relating to Pier 1 Imports’ fiscal 2012 annual short-term
incentive program are included in Table 1 above.
These factors were discussed with the compensation committee and, as a result, the compensation committee
approved the plan and set quarterly and annual Profit Goal target levels for fiscal 2012. The Profit Goal targets and
the actual Pier 1 Imports’ results are shown in Table 2 below.
Table 2
Pier 1 Imports’ Fiscal 2012 Quarterly and Annual
Profit Goal Short-Term Incentive
Fiscal Year 2012 Target Actual Results
1st Quarter $ 16,300,000 $ 27,300,000
2nd Quarter $ 24,900,000 $ 31,200,000
3rd Quarter $ 32,000,000 $ 41,000,000
4th Quarter $ 74,800,000 $ 86,900,000
Annual Target $148,000,000 $186,500,000
The fiscal 2012 targeted annual Profit Goal of $148,000,000 represented an approximate 15% increase over the
actual results of the annual Profit Goal for fiscal 2011 of $128,700,000. The fiscal 2012 targeted annual Profit Goal
supported our focus on increasing our profitability in fiscal 2012, and no award payout was possible unless we
exceeded the actual results of the previous year’s Profit Goal.
The Pier 1 Imports’ fiscal 2012 short-term incentive program had two primary components, the annual
component and the quarterly component. Each named executive officer’s fiscal 2012 short-term incentive potential
(which was expressed as a percentage of the officer’s base salary) was divided equally between the quarterly and
annual component. Additional information regarding the named executive officers’ fiscal 2012 incentive targets and
the quarterly and annual component details are shown in Table 3 below.
Table 3
Named
Executive
Officer
Fiscal 2012
Short-Term
Incentive
Potential
Quarterly Incentive Component Annual Incentive Component
=Q1Q2Q3Q4+
Threshold
10%
Target
100%
Maximum
400%
CEO 100% 12.5% 12.5% 12.5% 12.5% 5% 50% 200%
CFO &
Other
NEOs 75% 9.375% 9.375% 9.375% 9.375% 3.75% 37.5% 150%
The short-term
incentive opportunity for the
named executive officers
(expressed as a percentage
of base salary) was
comprised of 2 components,
the quarterly incentive
component and the
annual incentive
component.
The quarterly incentive component was based
on the achievement of each fiscal quarter’s
targeted Profit Goal. Each quarter was
measured independently on a pass or fail basis
and was paid out at either 100% upon
successful achievement of the targeted
quarterly Profit Goal, or 0% if the goal was not
met.
The annual incentive component
was based on the achievement of
the targeted annual Profit Goal,
which is the cumulative total for
the quarterly targeted Profit Goals
for the fiscal year. The threshold
Profit Goal that would result in a
10% payout of the annual
component of the short-term
incentive target was $129,000,000.
Achieving the target Profit Goal of
$148,000,000 would result in a
100% payout. A maximum payout
of 400% would occur if the annual
Profit Goal met or exceeded
$178,000,000.
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