Pier 1 2013 Annual Report Download - page 54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2013, the Company also began expensing performance-based restricted shares awarded in previous fiscal years
that were based on the fiscal 2013 performance target. The performance-based shares expensed during fiscal
2013 had a grant date fair value of $18.29 per share.
On June 13, 2012, upon the recommendation of the Compensation Committee, the Board of Directors
approved a second renewal and extension of the CEO’s employment agreement. The second renewal and
extension provides that a total of 1,125,000 shares of restricted stock will be awarded during fiscal years 2014,
2015, and 2016 provided the CEO is employed by the Company at designated times during the period covered by
the employment agreement. 540,000 of the shares are time-based and the remaining 585,000 share are
performance-based. In accordance with the accounting guidance on equity compensation, all 540,000 shares of
the time-based restricted stock included in the second renewed and extended employment agreement had a grant
date as of the date of the employment agreement, which was June 13, 2012. On the date the employment
agreement was signed, June 13, 2012, both the Company and the CEO had a mutual understanding of all key
terms and conditions related to the time-based restricted stock awards and the Company became obligated to
issue the restricted stock awards to the CEO, subject only to his continued employment. In addition, all necessary
approvals from both the Company’s Compensation Committee and Board of Directors were obtained on June 13,
2012 for the restricted stock awards. Therefore, on June 13, 2012 the Company began expensing these time-
based shares, which had a grant date fair value of $15.58 per share. The Company did not begin expensing any of
the performance-based awards during fiscal 2013 because the performance-based metrics, which are a key term
of the awards, had not been established and, therefore, both parties did not have a mutual understanding of all
key terms of the award. The Company will begin expensing the performance-based awards in fiscal years 2014,
2015, and 2016 when the respective performance metrics are established and communicated to the CEO.
During fiscal 2013, the Company also awarded long-term incentive awards under the 2006 Plan to certain
employees. The fiscal 2013 long-term incentive awards were comprised of restricted stock grants that were
divided between time-based and two different types of performance-based awards. The time-based shares vest
33%, 33% and 34% each year over a three-year period beginning on the first anniversary of the award date
provided that the participant is employed on the vesting date, and in accordance with accounting guidelines, the
Company began expensing the time-based shares during fiscal 2013. The first portion of the performance-based
shares vest 33% upon the Company satisfying a certain targeted level of a performance measure in fiscal 2013,
and will vest 33% and 34% for each of the following two fiscal years, respectively, upon the Company satisfying
a certain targeted level of a performance measure for the respective fiscal year, provided that vesting for each
fiscal year is conditioned upon the participant being employed on the date of filing of the Company’s annual
report on Form 10-K with the SEC for the applicable fiscal year. In accordance with accounting guidelines, one-
third of the fiscal 2013 performance-based shares had a grant date in fiscal 2013 because the targeted
performance measure for future fiscal years, which are a key term of the award, had not been established and,
therefore, both parties did not have a mutual understanding of all key terms of the award. Over each three-year
performance (vesting) period, if a targeted performance measure is not satisfied in any fiscal year, those shares
that do not vest may still vest if the sum of consecutive years’ actual performance measure results equals or
exceeds the sum of the individual consecutive fiscal year performance targets. The second portion of the
performance-based shares awarded in fiscal 2013 are based on a market condition and will vest following the end
of fiscal 2015 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, and the Company began expensing these shares during fiscal
2013.
As of March 2, 2013 and February 25, 2012, the Company had 2,056,357 and 1,681,278 unvested shares
of restricted stock awards outstanding, respectively. During fiscal 2013, 1,183,303 shares of restricted stock were
awarded, 786,932 shares of restricted stock vested, and 21,292 shares of restricted stock were forfeited. During
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