Bed, Bath and Beyond 2013 Annual Report Download - page 35

The 2012 Plan is a flexible compensation plan that enables the Company to offer incentive compensation through stock
options (whether nonqualified stock options or incentive stock options), restricted stock awards, stock appreciation rights,
performance awards and other stock based awards, including cash awards. Under the 2012 Plan, grants are determined by the
Compensation Committee for those awards granted to executive officers and by an appropriate committee for all other
awards granted. Awards of stock options and restricted stock generally vest in five equal annual installments beginning one to
three years from the date of grant.
The Company generally issues new shares for stock option exercises and restricted stock awards. As of March 1, 2014,
unrecognized compensation expense related to the unvested portion of the Company’s stock options and restricted stock
awards was $25.4 million and $130.3 million, respectively, which is expected to be recognized over a weighted average period
of 2.7 years and 3.5 years, respectively.
Stock Options
Stock option grants are issued at fair market value on the date of grant and generally become exercisable in either three or
five equal annual installments beginning one year from the date of grant for options issued since May 10, 2010, and beginning
one to three years from the date of grant for options issued prior to May 10, 2010, in each case, subject, in general to the
recipient remaining in the Company’s employ or service on specified vesting dates. Option grants expire eight years after the
date of grant for stock options issued since May 10, 2004, and expire ten years after the date of grant for stock options issued
prior to May 10, 2004. All option grants are nonqualified.
The fair value of the stock options granted was estimated on the date of the grant using a Black-Scholes option-pricing model
that uses the assumptions noted in the following table.
FISCAL YEAR ENDED
Black-Scholes Valuation Assumptions
(1)
March 1,
2014
March 2,
2013
February 25,
2012
Weighted Average Expected Life (in years)
(2)
6.6 6.5 6.2
Weighted Average Expected Volatility
(3)
29.27% 31.07% 30.59%
Weighted Average Risk Free Interest Rates
(4)
1.11% 1.14% 2.34%
Expected Dividend Yield ———
(1)
Forfeitures are estimated based on historical experience.
(2)
The expected life of stock options is estimated based on historical experience.
(3)
Expected volatility is based on the average of historical and implied volatility. The historical volatility is determined by observing actual pricesof
the Company’s stock over a period commensurate with the expected life of the awards. The implied volatility represents the implied volatility of
the Company’s call options, which are actively traded on multiple exchanges, had remaining maturities in excess of twelve months, had market
prices close to the exercise prices of the employee stock options and were measured on the stock option grant date.
(4)
Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options.
Changes in the Company’s stock options for the fiscal year ended March 1, 2014 were as follows:
(Shares in thousands)
Number of
Stock Options
Weighted Average
Exercise Price
Options outstanding, beginning of period 5,006 $42.32
Granted 563 69.78
Exercised (1,375) 39.75
Forfeited or expired (2) 39.12
Options outstanding, end of period 4,192 $46.85
Options exercisable, end of period 2,403 $39.11
BED BATH & BEYOND 2013 ANNUAL REPORT
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