Pier 1 2013 Annual Report Download - page 48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Earnings per share amounts were calculated as follows (in thousands except per share amounts):
2013 2012 2011
Net Income $ 129,444 $ 168,938 $ 100,125
Weighted average shares outstanding:
Basic 106,222 112,534 116,466
Effect of dilutive stock options 1,337 1,214 454
Effect of dilutive restricted stock 700 642 564
Diluted 108,259 114,390 117,484
Earnings per share:
Basic $ 1.22 $ 1.50 $ 0.86
Diluted $ 1.20 $ 1.48 $ 0.85
A total of 961,575, 2,968,250 and 3,903,875 outstanding stock options and shares of unvested restricted
stock were excluded from the computation of the fiscal 2013, 2012 and 2011 earnings per share, respectively, 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 time-based and certain performance-based 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. A portion of the performance-based shares
vests upon the Company satisfying certain performance targets. The Company records compensation expense for
these 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 remaining performance-
based shares are based on a market condition and will vest if certain annual equivalent returns of total
shareholder return targets are achieved in comparison to a peer group. The fair value for these performance-based
shares was determined using a lattice valuation model in accordance with accounting guidelines.
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 (“ASU”) 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.The Company adopted ASU 2011-05 in the first quarter of fiscal
2013 and included two separate but consecutive statements.
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