Pottery Barn 2008 Annual Report Download - page 76

Note J: Williams-Sonoma, Inc. 401(k) Plan and Other Employee Benefits
We have a defined contribution retirement plan, the “Williams-Sonoma, Inc. 401(k) Plan” (the “Plan”), which is
intended to be qualified under Internal Revenue Code Sections 401(a), 401(k), 401(m) and 4975(e)(7). Prior to
January 1, 2009, the Plan permitted eligible employees to make salary deferral contributions up to 15% of their
eligible compensation each pay period (5% for certain higher paid individuals). As of January 1, 2009, the Plan
now permits eligible employees to make salary deferral contributions up to 75% of their eligible compensation
each pay period (5% for certain higher paid individuals). Employees designate the funds in which their
contributions are invested. Each participant may choose to have his or her salary deferral contributions and
earnings thereon invested in one or more investment funds, including our company stock fund.
Prior to January 1, 2009, our matching contribution was equal to 50% of each participant’s salary deferral
contribution each pay period, taking into account only those contributions that do not exceed 6% of the
participant’s eligible pay for the pay period (5% for certain higher paid individuals). As of January 1, 2009, each
participant’s matching contribution will be earned on a semi-annual basis with respect to eligible salary deferrals
for those employees that are employed with the company on June 30th or December 31st of the year in which the
deferrals are made. Further, as of January 1, 2009, eligible associates must complete one year of eligibility
service prior to receiving company matching contributions. For the first five years of the participant’s
employment, all matching contributions vest at the rate of 20% per year of service, measuring service from the
participant’s hire date. Thereafter, all matching contributions vest immediately.
The Plan consists of two parts: a profit sharing plan portion and, effective April 21, 2006, a stock bonus plan/
employee stock ownership plan (the “ESOP”). The ESOP portion is the portion that is invested in the company
internal revenue stock fund at any time. The profit sharing and ESOP components of the Plan are considered a
single plan under Code section 414(l). Our contributions to the plan were $5,168,000, $5,336,000 and $3,467,000
in fiscal 2008, fiscal 2007 and fiscal 2006, respectively.
We have a nonqualified executive deferred compensation plan that provides supplemental retirement income
benefits for a select group of management and other certain highly compensated employees. This plan permits
eligible employees to make salary and bonus deferrals that are 100% vested. We have an unsecured obligation to
pay in the future the value of the deferred compensation adjusted to reflect the performance, whether positive or
negative, of selected investment measurement options, chosen by each participant, during the deferral period. As
of February 1, 2009 and February 3, 2008, $11,789,000 and $16,105,000, respectively, was included in other
long-term obligations. Additionally, we have purchased life insurance policies on certain participants to
potentially offset these unsecured obligations. The cash surrender value of these policies was $9,413,000 and
$12,758,000 as of February 1, 2009 and February 3, 2008, respectively, and was included in other assets.
Note K: Financial Guarantees
We are party to a variety of contractual agreements under which we may be obligated to indemnify the other
party for certain matters. These contracts primarily relate to our commercial contracts, operating leases,
trademarks, intellectual property, financial agreements and various other agreements. Under these contracts, we
may provide certain routine indemnifications relating to representations and warranties or personal injury
matters. The terms of these indemnifications range in duration and may not be explicitly defined. Historically, we
have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any
of these matters, the loss would not have a material effect on our financial condition or results of operations.
Note L: Commitments and Contingencies
We are involved in lawsuits, claims and proceedings incident to the ordinary course of our business. These
disputes, which are not currently material, are increasing in number as our business expands and our company
grows larger. Litigation is inherently unpredictable. Any claims against us, whether meritorious or not, could be
time consuming, result in costly litigation, require significant amounts of management time and result in the
diversion of significant operational resources. The results of these lawsuits, claims and proceedings cannot be
predicted with certainty. However, we believe that the ultimate resolution of these current matters will not have a
material adverse effect on our consolidated financial statements taken as a whole.
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