Pottery Barn 2007 Annual Report Download - page 66

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In accordance with the provisions of SFAS No. 123R, our compensation expense is based on the following:
•Stock Options – Compensation expense related to the remaining unvested portion of all stock options
granted prior to the adoption of SFAS No. 123R is based on the grant date fair value (using the market
value of our stock on the date prior to the grant date), estimated in accordance with the provisions of
SFAS No. 123, as amended by SFAS No. 148. Compensation expense related to all stock options
granted subsequent to the SFAS No. 123R adoption date is based on the grant date fair value estimated
in accordance with the provisions of SFAS No. 123R.
•Stock-Settled Stock Appreciation Rights – Compensation expense is based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123R.
•Restricted Stock Units – For performance-based restricted stock units, compensation expense is based on
the grant date fair value and the probability that the performance metrics will be achieved. For
non-performance-based restricted stock units, compensation expense is based on the grant date fair value.
Stock Options
The following table summarizes our stock option activity during fiscal 2007, fiscal 2006 and fiscal 2005:
Shares
Weighted
Average
Exercise Price
Weighted Average
Contractual Term
Remaining
(Years) Intrinsic Value1
Balance at January 30, 2005 (52 Weeks) 11,100,427 $ 19.08
Granted (weighted average fair value of $23.77) 1,754,990 39.07
Exercised (1,829,082) 15.30 $ 42,844,000
Canceled (716,426) 26.81
Balance at January 29, 2006 (52 Weeks) 10,309,909 22.63
Granted (weighted average fair value of $13.83) 146,700 40.21
Exercised (913,330) 15.26 $ 20,669,000
Canceled (516,990) 33.59
Balance at January 28, 2007 (52 Weeks) 9,026,289 23.04
Granted2——
Exercised (1,979,641) 19.45 $ 28,470,000
Canceled (415,499) 36.60
Balance at February 3, 2008 (53 Weeks) 6,631,149 23.26 4.30 $ 49,732,000
Vested at January 29, 2006 (52 Weeks) 5,704,164 $ 16.00
Vested at January 28, 2007 (52 Weeks) 6,624,338 19.02 4.29 $102,640,000
Vested at February 3, 2008 (53 Weeks) 5,406,241 20.52 3.74 $ 49,105,000
Vested plus expected to vest at February 3, 2008 6,474,977 22.92 4.23 $ 49,718,000
1Intrinsic value for activities other than exercises is defined as the difference between the grant price and the market value on
the last business day of the fiscal year (or $27.52) for those stock options where the market value is greater than the
exercise price. For exercises, intrinsic value is defined as the difference between the grant price and the market value on the
date of exercise.
2In fiscal 2006, we began issuing stock-settled stock appreciation rights in lieu of stock option grants. Therefore, no stock
options were granted during fiscal 2007. See the stock-settled stock appreciation rights table below.
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