Bed, Bath and Beyond 2004 Annual Report Download - page 20

BED BATH & BEYOND ANNUAL REPORT 2004
18
Y. Stock-Based Compensation
As permitted under SFAS No. 148, “Accounting for Stock Based Compensation - Transition and Disclosure - an amend-
ment of FASB Statement No. 123,” the Company has elected not to adopt the fair value based method of accounting
for its stock-based compensation plans, but continues to apply the provisions of Accounting Principles Board Opinion
(“APB”) No. 25, “Accounting for Stock Issued to Employees.” The Company has complied with the disclosure require-
ments of SFAS No. 148.
Accordingly, no compensation cost has been recognized in connection with the Company’s stock option plans. Set
forth below are the Company’s net earnings and net earnings per share “as reported,” and as if compensation cost
had been recognized (“pro forma”) in accordance with the fair value provisions of SFAS No. 148:
FISCAL YEAR
(in thousands) 2004 2003 2002
NET EARNINGS:
As reported $504,964)$399,470)$302,179)
Deduct: Total stock-based employee compensation expense determined
under fair value based method, net of related tax effects (34,686) (29,372) (25,443)
Pro forma $470,278)$370,098)$276,736)
NET EARNINGS PER SHARE:
Basic:
As reported $ 1.68)$ 1.35)$1.03)
Pro forma $ 1.56)$ 1.25)$0.94)
Diluted:
As reported $ 1.65)$ 1.31)$1.00)
Pro forma $ 1.55)$ 1.23)$0.92)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions:
FISCAL YEAR
2004 2003 2002
Expected lives (years) 6.1 5.9 7.0
Expected volatility 42.00% 45.00% 45.00%
Risk free interest rates 3.89% 2.96% 4.72%
Dividend yield ———
Weighted average fair value of options granted during the year $17.16 $16.29 $17.15
On December 16, 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004),
“Share-Based Payment” (“SFAS No. 123R”). SFAS No. 123R will require companies to measure all employee stock-
based compensation awards using a fair value method and record such expense in its consolidated financial state-
ments. In addition, the adoption of SFAS No. 123R requires additional accounting and disclosure related to income
tax and cash flow effects resulting from share-based payment arrangements.
On April 14, 2005, the Securities and Exchange Commission delayed the effective date of adoption of SFAS No. 123R
to the beginning of the first annual period after June 15, 2005. The Company is currently evaluating the impact of
the delayed effective date in determining the timing of adopting SFAS No. 123R.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)