Pottery Barn 2008 Annual Report Download - page 74

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Stock-Settled Stock Appreciation Rights
A stock-settled stock appreciation right is an award that allows the recipient to receive common stock equal to
the appreciation in the fair market value of our common stock between the date the award was granted and the
conversion date for the number of shares vested.
The following table summarizes our stock-settled stock appreciation right activity during fiscal 2008 and fiscal
2007:
Shares
Weighted
Average
Conversion
Price1
Weighted Average
Contractual Term
Remaining (Years)
Intrinsic
Value2
Balance at January 28, 2007 1,978,850 $36.01
Granted (weighted average fair value of $11.56) 1,539,200 34.42
Converted — — —
Canceled (231,580) 36.07
Balance at February 3, 2008 3,286,470 35.27
Granted (weighted average fair value of $3.16) 4,794,300 8.61
Converted — — —
Canceled (469,256) 32.17
Balance at February 1, 2009 7,611,514 $18.67 9.02 $ 0
Vested at February 1, 2009 1,209,628 $35.19 7.76 $ 0
Vested plus expected to vest at February 1, 2009 6,108,126 $19.86 8.93 $ 0
1Conversion price is defined as the price from which stock-settled stock appreciation rights are measured and is equal to the
market value on the date of issuance.
2Intrinsic value for activities other than conversions is defined as the excess of the grant price over the current market value
on the last business day of the fiscal year (or $7.92), if any. For conversions, intrinsic value is defined as the difference
between the grant date price and the market value on the date of the conversion.
The following table summarizes information about stock-settled stock appreciation rights outstanding at
February 1, 2009:
Stock-Settled
Stock Appreciation
Rights Outstanding
Stock-Settled
Stock Appreciation
Rights Vested
Range of Conversion Prices
Number
Outstanding
Weighted
Average
Contractual
Term Remaining
(Years)
Weighted
Average
Conversion
Price
Number
Vested
Weighted
Average
Conversion
Price
$ 8.01 – $ 8.31 70,600 9.89 $ 8.08 — —
$ 8.56 – $ 8.56 4,643,800 9.76 8.56 — —
$ 24.25 – $ 34.89 2,215,854 8.01 33.51 924,140 $33.59
$ 36.70 – $ 41.70 676,260 7.13 40.36 283,488 40.36
$ 42.13 – $ 42.13 5,000 7.24 42.13 2,000 42.13
$ 8.01 – $ 42.13 7,611,514 9.02 $18.67 1,209,628 $35.19
The fair value for both stock options and stock-settled stock appreciation rights is estimated on the date of the
grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
•Expected term – The expected term of the option awards represents the period of time between the grant
date of the option awards and the date the option awards are either exercised or canceled, including an
estimate for those option awards still outstanding.
•Expected volatility – The expected volatility is based on an average of the historical volatility of our
stock price, for a period approximating our expected term, and the implied volatility of externally traded
options of our stock that were entered into during the period.
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