Bed, Bath and Beyond 2005 Annual Report Download - page 25

BED BATH& BEYOND ANNUAL REPORT 2005
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The following table details the effect on net earnings and earnings per share “as reported” and as if compensation expense had
been recorded through the end of the second quarter of fiscal 2005, in fiscal 2004 and fiscal 2003, based on the fair value method
under SFAS No. 123, “Accounting for Stock-Based Compensation” (“pro forma”).
FISCAL YEAR ENDED
February 25, February 26, February 28,
(in thousands, except per share data) 2006 2005 2004
Net Earnings:
As reported $ 572,847)$ 504,964)$ 399,470)
Deduct: Total stock-based employee compensation
expense determined under fair value based method,
net of related tax effects (31,415))(34,686) (29,372)
Add: Total stock-based employee compensation
expense included in net earnings,
net of related tax effects 16,008)—)—)
Pro forma $ 557,440)$ 470,278)$ 370,098)
Net Earnings Per Share:
Basic:
As reported $ 1.95)$ 1.68)$ 1.35)
Pro forma $ 1.90)$ 1.56)$ 1.25)
Diluted:
As reported $ 1.92)$ 1.65)$ 1.31)
Pro forma $ 1.87)$ 1.55)$ 1.23)
Stock-based compensation expense for the fiscal year ended February25, 2006, which includes the expense of stock options
beginning in the third quarter of fiscal 2005 and restricted stock awards from the date of grant, was $25.6 million ($16.0 million
after tax or $0.05 per diluted share). The amount of stock-based compensation cost capitalized as of February 25, 2006 was
approximately $0.9 million.
Incentive Compensation Plans
During fiscal 2004, in anticipation of adopting SFAS No. 123R, the Company revised its overall approach to compensation for its
employees, including stock-based compensation, and adopted the Bed Bath & Beyond 2004 Incentive Compensation Plan (the
“2004 Plan”). The 2004 Plan is a flexible compensation plan that enables the Company to offer incentive compensation through
stock options, stock appreciation rights, restricted stock awards and performance awards, including cash awards. As a result,
during fiscal 2005, awards consisting of a combination of stock options and performance-based restricted stock weregranted to
executive officers and other executives and awards consisting of restricted stock were granted to the Company’s other employees
who traditionally have received stock options. Awards of stock options and restricted stock generally vest in five equal annual
installments beginning one to three years from the date of grant.
Prior to fiscal 2004, the Company had adopted various stock option plans (the “Prior Plans”), all of which solely provided for the
granting of stock options. Upon adoption of the 2004 Plan, the common stock available under the Prior Plans became available
for issuance under the 2004 Plan. No further option grants may be made under the Prior Plans, although outstanding awards
under the Prior Plans will continue to be in effect.
Under the 2004 Plan and the Prior Plans, an aggregate of 83.4 million shares of common stock were authorized for issuance.
The Company generally issues new shares for stock option exercises and restricted stock awards. The number of shares and price
per share is determined by the Compensation Committee for those awards granted to executive officers and by an appropriate
committee for all other awards granted.
As of February 25, 2006, unrecognized compensation expense related to the unvested portion of the Company’s stock options
and restricted stock awards was $123.1 million and $33.1 million, respectively, which is expected to be recognized over a weighted
average period of 3.6 years and 5.2 years, respectively.