Pier 1 2015 Annual Report Download - page 55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company began expensing these shares during fiscal 2015. The remaining two-thirds of the performance shares did not have a
grant date in fiscal 2015 because the performance targets for future fiscal years, which are a key term of the award, have not
been established and, therefore, both parties did not have a mutual understanding of all key terms of the award. The CEO must
be employed by the Company on the last day of each respective fiscal year in order for the performance-based shares to vest.
These shares could also vest under certain termination events. During fiscal 2015, the Company also began expensing
performance-based restricted shares awarded in previous fiscal years that were based on the fiscal 2015 performance target.
These performance-based shares expensed during fiscal 2015 had a grant date fair value of $18.69 per share. However, the
fiscal 2015 performance target was not achieved and the related expense was reversed. In addition, the CEO also received an
award of performance-based shares during fiscal 2015 that are based on a market condition and may vest following the end of
fiscal 2017 if certain annual equivalent returns of total shareholder return targets are achieved in comparison to a peer group. The
grant date 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 at $9.94 per share during fiscal 2015.
Restricted stock awarded to certain employees — During fiscal 2015, the Company awarded long-term incentive awards
under the 2006 Plan to certain employees. Fiscal 2015 long-term incentive awards were comprised of restricted stock grants
that were divided between time-based and three 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 at $17.78 per share during fiscal 2015. The first portion of the performance-based shares may vest 33%
upon the Company satisfying a certain targeted level of a performance measure established in fiscal 2015 and has a fair value of
$17.78 per share. The remaining shares may 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 years, 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, only 33% of fiscal 2015
performance-based shares had a grant date in fiscal 2015 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. Shares that do not vest because the performance target is not met during one fiscal year may vest in
future fiscal years if certain aggregate levels of the performance measure are achieved. During fiscal 2015, the Company also
began expensing performance-based restricted shares awarded in previous fiscal years that were based on the fiscal 2015
performance target. These performance-based shares had a grant date fair value of $18.69 per share.
The second portion of the performance-based shares awarded in fiscal 2015 is based on the achievement of both a total sales
threshold and an e-Commerce percent of total sales for fiscal 2017 and may vest on the date of filing of the Company’s fiscal
2017 Annual Report on Form 10-K with the SEC if certain thresholds are met. The fair value of these performance-based shares
was $17.78. The third portion of the performance-based shares awarded in fiscal 2015 is based on a market condition and may
vest following the end of fiscal 2017 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 at $9.04 per share during fiscal
2015.
During fiscal 2015, the Company awarded one-time grants of service-based long-term restricted stock to three of its executive
officers. A total of 122,280 shares was awarded equally among the three officers, which had a grant date fair value of $12.30.
The Company began expensing these shares during fiscal 2015. Each officer’s shares will vest one half on October 16, 2019,
and the remaining shares will vest on October 16, 2020, provided that the officer is employed on each respective vesting date.
As of February 28, 2015 and March 1, 2014, the Company had 1,025,638 and 823,826 unvested shares of restricted stock
awards outstanding, respectively (excluding shares unvested with respect to CEO grants). During fiscal 2015, 633,852 shares of
restricted stock were awarded, 272,041 shares of restricted stock vested, and 159,999 shares of restricted stock were forfeited.
The weighted average fair market value at the date of grant of the restricted stock shares awarded during fiscal 2015 was $16.04
per share and is being expensed over the requisite service period. This amount does not include performance-based restricted
shares that the Company will begin expensing in future fiscal years when the targeted performance measures are set, but does
include performance-based restricted shares awarded in previous fiscal years that were based on a fiscal 2015 targeted
performance measure.
Restricted stock compensation expense — Compensation expense for restricted stock was $7,240,000, $11,890,000 and
$12,167,000 in fiscal 2015, 2014 and 2013, respectively. For performance-based awards, the grant date fair value is based on
the probable outcome of Pier 1 Imports achieving performance targets. However, targets for fiscal 2015 and 2014 were not
achieved, the maximum number of shares did not vest and as a result, compensation expense was lowered by $3,200,000 and
$1,475,000 in fiscal 2015 and 2014, respectively. As of February 28, 2015, there was $15,020,000 of total unrecognized
PIER 1 IMPORTS, INC. 2015 Form 10-K 49