Pottery Barn 2010 Annual Report Download - page 73

Note I: 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). The Plan
permits eligible employees to make salary deferral contributions up to 75% of their eligible compensation each
pay period (5% for certain higher paid individuals through December 31, 2010, 7% for highly-compensated
employees thereafter). 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.
Our matching contribution is equal to 50% of each participant’s salary deferral contribution, 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 through December 31, 2010 and 6% thereafter). Each participant’s matching contribution
is 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. Once an associate
becomes eligible, each associate must complete one year of 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 a stock bonus plan/employee stock ownership plan
(the “ESOP”). The ESOP portion is the portion that is invested in the Williams-Sonoma Inc. Stock Fund. 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 $4,247,000, $4,477,000 and $5,168,000 in fiscal 2010, fiscal 2009 and fiscal 2008, respectively.
We also 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. As of January 1,
2010, we indefinitely suspended all employee salary and bonus deferrals into the plan. We will continue to
evaluate this benefit program to ensure it is providing the best value to our employees and to us. 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 January 30, 2011 and January 31, 2010, $13,996,000 and
$13,900,000, 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 $12,939,000 and $11,345,000 as of January 30, 2011 and January 31, 2010,
respectively, and was included in other assets.
Note J: 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.
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.
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Form 10-K