Employee Share-Based Plans

Under our shareholder approved ICP, eligible officers and other participants are awarded units that pay out depending upon the level of performance achieved by Piedmont during three-year incentive plan performance periods. Distribution of those awards may be made in the form of shares of common stock and withholdings for payment of applicable taxes on the compensation. These plans require that a minimum threshold performance level be achieved in order for any award to be distributed. For the three months and nine months ended July 31, 2014 and 2013, we recorded compensation expense, and as of July 31, 2014 and October 31, 2013, we accrued a liability for these awards based on the fair market value of our stock at the end of each quarter. The liability is re-measured to market value at the settlement date.

In December 2010, a long-term retention stock unit award under the ICP (where a stock unit equals one share of our common stock upon vesting) was approved for eligible officers and other participants to support our succession planning and retention strategies. This retention stock unit award vested for participants who met the retention requirements at the end of the three-year period ending in December 2013 and settled in the same month with payment in the form of shares of common stock and withholdings for payment of applicable taxes on the compensation. We recorded compensation expense for the three months and nine months ended July 31, 2013 and a liability as of October 31, 2013 with compensation expense recorded in fiscal 2014 until December 2013 when the award was settled. The liability, which we accrued for this award based on the fair market value of our stock at the end of each quarter, was re-measured to market value in December 2013, the settlement date.

Also under our approved ICP, 64,700 unvested retention stock units were granted to our President and Chief Executive Officer in December 2011. During the five-year vesting period, any dividend equivalents will accrue on these stock units and be converted into additional units at the same rate and based on the closing price on the same payment date as dividends on our common stock. The stock units will vest, payable in the form of shares of common stock and withholdings for payment of applicable taxes on the compensation, over a five-year period only if he is an employee on each vesting date. In accordance with the vesting schedule, 20% of the units vest on December 15, 2014, 30% of the units vest on December 15, 2015 and 50% of the units vest on December 15, 2016. For the three months and nine months ended July 31, 2014 and 2013, we recorded compensation expense, and as of July 31, 2014 and October 31, 2013, we accrued a liability for this award based on the fair market value of our stock at the end of the quarter. The liability is re-measured to market value at the settlement date.

At the time of distribution of awards under the ICP, the number of shares issuable is reduced by the withholdings for payment of applicable income taxes for each participant. The participant may elect income tax withholdings at or above the minimum statutory withholding requirements. The maximum withholdings allowed is 50%. To date, shares withheld for payment of applicable income taxes have been immaterial. We present these net shares issued in the Condensed Consolidated Statements of Stockholders’ Equity and in Note 6 to the condensed consolidated financial statements in this Form 10-Q.

The compensation expense related to the incentive compensation plans for the three months and nine months ended July 31, 2014 and 2013, and the amounts recorded as liabilities in “Other noncurrent liabilities” in “Noncurrent Liabilities” with the current portion recorded in “Other current liabilities” in “Current Liabilities” in the Condensed Consolidated Balance Sheets as of July 31, 2014 and October 31, 2013 are presented below.



	Three Months				Nine Months
In thousands	2014		2013		2014		2013
Compensation expense	$	822	$	1,848	$	5,025	$	5,505



	July 31, 2014		October 31, 2013
Liability	$	12,104	$	11,098

On a quarterly basis, we issue shares of common stock under the ESPP and account for the issuance as an equity transaction. The exercise price is calculated as 95% of the fair market value on the purchase date of each quarter where fair market value is determined by calculating the mean average of the high and low trading prices on the purchase date.