Pottery Barn 2010 Annual Report Download - page 70

Note H: Stock-Based Compensation
Equity Award Programs
Our Amended and Restated 2001 Long-Term Incentive Plan (the “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 18,459,903 shares. As of January 30, 2011, there were approximately 4,009,427
shares available for future grant. Awards may be granted under the 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 Plan have a maximum term of seven years. Incentive stock options
that may be issued to 10% shareholders, however, 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 day 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 a period of four to five years. Stock awards granted to
employees generally vest over a period of three to five years for service based awards. Certain option awards,
stock awards and other agreements contain vesting acceleration clauses resulting from events including, but not
limited to, retirement, merger or a similar corporate event. Option and stock awards granted to non-employee
Board members generally vest in one year. Non-employee Board members automatically receive 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
award exercises will be funded with the issuance of new shares.
Stock-Based Compensation Expense
During fiscal 2010, fiscal 2009 and fiscal 2008, we recognized total stock-based compensation expense, as a
component of selling, general and administrative expenses, of $26,630,000, $24,989,000, and $12,131,000
(which includes an $11,023,000 reversal of compensation expense related to performance-based stock awards for
which the performance criteria was no longer deemed probable of being achieved), respectively. As of
January 30, 2011, there was a remaining unamortized expense balance of $32,727,000 (net of estimated
forfeitures), which we expect to be recognized on a straight-line basis over an average remaining service period
of approximately two years.
Stock Options
The following table summarizes our stock option activity during fiscal 2010:
Shares
Weighted
Average
Exercise
Price
Weighted Average
Contractual Term
Remaining (Years)
Intrinsic
Value1
Balance at January 31, 2010 2,613,132 $22.37
Granted 0 $ 0
Exercised (1,212,143) $14.77 $15,788,000
Canceled (33,360) $34.62
Balance at January 30, 2011 (100% vested) 1,367,629 $28.81 2.62 $ 7,148,000
1Intrinsic value for outstanding and vested options is defined as the excess of the market value on the last business day of the
fiscal year (or $32.34) over the exercise price, if any. For exercises, intrinsic value is defined as the excess of the market
value over the exercise price on the date of exercise.
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