Pier 1 2012 Annual Report Download - page 49

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Earnings per share amounts were calculated as follows (in thousands except per share amounts):
2012 2011 2010
Net Income $ 168,938 $ 100,125 $ 86,847
Weighted average shares outstanding:
Basic 112,534 116,466 100,715
Effect of dilutive stock options 1,214 454 -
Effect of dilutive restricted stock 642 564 -
Diluted 114,390 117,484 100,715
Earnings per share:
Basic $ 1.50 $ 0.86 $ 0.86
Diluted $ 1.48 $ 0.85 $ 0.86
A total of 2,968,250, 3,903,875 and 10,424,035 outstanding stock options and shares of unvested
restricted stock were excluded from the computation of the fiscal 2012, 2011 and 2010, respectively, earnings per
share as the effect would be antidilutive.
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. For restricted stock awards, compensation expense is measured and recorded using the
closing price of the Company’s stock on the date of grant. If the date of grant for stock options or restricted stock
awards occurs on a day when the Company’s stock is not traded, the closing price on the last trading day before
the date of grant is used. 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.
Adoption of new accounting standards – In June 2011, the Financial Accounting Standards Board
issued Accounting Standards Update 2011-05, “Comprehensive Income (Topic 220): Presentation of
Comprehensive Income,” which amends current comprehensive income guidance. This accounting update
eliminates the option to present the components of other comprehensive income as part of the statement of
shareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous
statement of comprehensive income which contains two sections, net income and other comprehensive income,
or in two separate but consecutive statements. This guidance will be effective for the Company beginning in
fiscal 2013. The Company does not expect the guidance to impact its consolidated financial statements, as it only
requires a change in the format of presentation.
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