Bed, Bath and Beyond 2006 Annual Report Download - page 27

BED BATH& BEYOND ANNUAL REPORT 2006
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Nonqualified Deferred Compensation Plan
Effective January 1, 2006, the Company adopted a nonqualified deferred compensation plan for the benefit of employees defined
by the Internal Revenue Service as highly compensated. A certain percentage of an employee’s contributions may be matched by
the Company, subject to certain Plan limitations. This match will vest over a specified period of time. The Company did not make
any contributions to the plan during fiscal 2006 and 2005.
Defined Benefit Plan
The Company has a non-contributory defined benefit pension plan for the CTS employees, hired on or before July 31, 2003, who
meet specified age and length-of-service requirements. The benefits are based on years of service and the employee’s compensa-
tion near retirement. The Company utilizes a December 31 measurement date for this plan. In fiscal 2006, the Company adopted
SFAS No. 158 on a prospective basis. SFAS No. 158 requires an employer to recognize the overfunded or underfunded status of a
defined benefit postretirement plan as an asset or liability in its statement of financial position and recognize changes in the
funded status in the year in which the changes occur. For the years ended March 3, 2007 and February 25, 2006, the net periodic
pension cost was not material to the Company’s results of operations. The Company has a $1.1 million and $7.1 million liability,
which is included in deferred rent and other liabilities as of March 3, 2007 and February 25, 2006, respectively. In addition, as of
March 3, 2007, the Company recognized $4.4 million, net of the related tax benefit, within accumulated other comprehensive
income.
10. COMMITMENTS AND CONTINGENCIES
The Company maintains employment agreements with its Co-Chairmen, which extend through June 2007. The agreements pro-
vide for a base salary (which may be increased by the Board of Directors), termination payments, post-retirement benefits and
other terms and conditions of employment. In addition, the Company maintains employment agreements with other executives
which provide for severance pay and, in some instances, certain other supplemental retirement benefits.
The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of manage-
ment, the ultimate disposition of these matters will not have a material adverse effect on the Company’s consolidated financial
position, results of operations or liquidity.
11. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid income taxes of $388.4 million, $338.7 million and $229.0 million in fiscal 2006, 2005 and 2004, respectively.
The Company recorded an accrual for capital expenditures of $53.9 million, $49.6 million and $30.1 million as of March 3, 2007,
February 25, 2006 and February 26, 2005, respectively.
12. STOCK-BASED COMPENSATION
The FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123R”) which requires 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 stock-based compensation. The Company adopted SFAS No. 123R on August 28, 2005 (the “date of
adoption”), the beginning of its third quarter of fiscal 2005, the year ended February 25, 2006. While SFAS No. 123R was not
required to be effective until the first annual reporting period that began after June 15, 2005, early adoption was encouraged
and the Company elected to adopt before the required effective date.
The Company adopted SFAS No. 123R under the modified prospective application. Accordingly, prior period amounts have not
been restated. Under this application, the Company records stock-based compensation expense for all awards granted on or after
the date of adoption and for the portion of previously granted awards that remained unvested at the date of adoption. Currently,
the Company’s stock-based compensation relates to restricted stock awards and stock options. The Company’s restricted stock
awards are considered nonvested share awards as defined under SFAS No. 123R.
Prior to the third quarter of fiscal 2005, the Company applied the provisions of APB No. 25, “Accounting for Stock Issued to
Employees,” as permitted under SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an
amendment of FASB Statement No. 123.” During the first half of fiscal 2005, which ended on August 27, 2005, the Company rec-
ognized compensation expense for restricted stock awards over the service period, but did not recognize compensation expense
for stock options, since the Company historically has treated its stock options as having been granted at fair market value on the
date of grant (however, see “Review of Equity Grants and Procedures and Related Matters” for a discussion of a special committee
review of equity grant matters which resulted in, among other things, the use of revised measurement dates for certain grants).