Pottery Barn 2007 Annual Report Download - page 65

During fiscal 2007, total cash dividends declared were approximately $50,000,000, or $0.46 per common share,
of which $37,790,000 was paid during the year and $12,210,000 was paid on February 27, 2008 to shareholders
of record as of the close of business on January 25, 2008. Our quarterly cash dividend may be limited or
terminated at any time. In March 2008, our Board of Directors authorized an increase in our quarterly cash
dividend from $0.115 to $0.12 per common share.
Note I: Stock-Based Compensation
Our Amended and Restated 2001 Long-Term Incentive Plan (the “2001 Plan”) provides for grants of incentive
stock options, nonqualified stock options, stock-settled stock appreciation rights (collectively, “option awards”),
restricted stock awards, restricted stock units, deferred stock awards (collectively, “stock awards”) and dividend
equivalents up to an aggregate of 15,959,903 shares. As of February 3, 2008, there were approximately 5,823,000
shares available for future grant. Awards may be granted under the 2001 Plan to officers, employees and
non-employee Board members of the company or any parent or subsidiary. Annual grants are limited to
1,000,000 shares covered by option awards and 400,000 shares covered by stock awards on a per person basis.
All grants of option awards made under the 2001 Plan have a maximum term of ten years, except incentive stock
options that may be issued to 10% shareholders, which have a maximum term of five years. The exercise price of
these option awards is not less than 100% of the closing price of our stock on the date prior to the grant date or
not less than 110% of such closing price for an incentive stock option granted to a 10% shareholder. Option
awards granted to employees generally vest over five years. Stock awards granted to employees vest over a
period of three to five years for service based awards, and four and five years for performance based awards.
Certain option and stock awards contain vesting acceleration clauses in the event of a merger or similar corporate
event. Option and stock awards granted to non-employee Board members generally vest in one year.
Non-employee Board members automatically receive option and stock awards on the date of their initial election
to the Board and annually thereafter on the date of the annual meeting of shareholders (so long as they continue
to serve as a non-employee Board member). Shares issued as a result of option award exercises will be funded
with the issuance of new shares.
We account for stock-based compensation arrangements in accordance with SFAS No. 123R, “Share-Based
Payment,” which requires us to measure and record compensation expense in our consolidated financial
statements for all employee stock-based awards using a fair value method.
Prior to January 30, 2006, we accounted for stock-based compensation arrangements using the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees” and related interpretations. Accordingly, no compensation expense was recognized prior to fiscal 2006
for option awards with an exercise price equal to the fair value on the date of grant. The following table illustrates
the effect on net earnings and earnings per share as if we had applied the fair value recognition provisions of SFAS
No. 123, as amended by SFAS No. 148, to all of our stock-based compensation arrangements during fiscal 2005:
Fiscal Year Ended
Dollars in thousands, except per share amounts
Jan. 29, 2006
(52 Weeks)
Net earnings, as reported $214,866
Add: stock-based employee compensation expense included in reported net earnings, net of related tax effect 273
Less: total stock-based employee compensation expense determined under fair value method for all awards,
net of related tax effect (16,788)
Pro forma net earnings $198,351
Basic earnings per share
As reported $ 1.86
Pro forma 1.72
Diluted earnings per share
As reported $ 1.81
Pro forma 1.69
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Form 10-K