Pottery Barn 2012 Annual Report Download - page 70

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Note K: Related Party Transactions
On January 25, 2010, the independent members of our Board of Directors (the “Board”) approved our entry into
a Retirement and Consulting Agreement (the “Agreement”) with W. Howard Lester (“Mr. Lester”), our former
Chairman of the Board and Chief Executive Officer. Pursuant to the terms of the Agreement, Mr. Lester retired
as Chairman of the Board and Chief Executive Officer on May 26, 2010. The total expense recorded in fiscal
2010 associated with Mr. Lester’s retirement and consulting services, consisting primarily of stock-based
compensation expense, was approximately $5,935,000. As a result of Mr. Lester’s death in November 2010, the
Agreement terminated.
On May 16, 2008, we entered into an aircraft lease agreement with a limited liability company (the “LLC”)
owned by Mr. Lester for use of a Bombardier Global 5000 aircraft, through May 2011. During fiscal 2011 and
fiscal 2010, we paid a total of $1,319,000 and $4,500,000 to the LLC, respectively.
Note L: Stock Repurchase Programs and Dividends
In January 2012, our Board of Directors authorized a stock repurchase program to purchase up to $225,000,000
of our common stock. During fiscal 2012, we repurchased 3,962,034 shares of our common stock at an average
cost of $39.14 per share and a total cost of approximately $155,080,000. In addition, in March 2013, we
announced that our Board of Directors had authorized a new stock repurchase program to purchase up to
$750,000,000 of our common stock, which we intend to execute over the next three years.
Stock repurchases under these programs may be made through open market and privately negotiated transactions
at times and in such amounts as management deems appropriate. The timing and actual number of shares
repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital
availability and other market conditions. These stock repurchase programs do not have an expiration date and
may be limited or terminated at any time without prior notice.
During fiscal 2011, we repurchased 5,384,036 shares of our common stock at an average cost of $36.11 per share
and a total cost of approximately $194,429,000. During fiscal 2010, we repurchased 4,263,463 shares of our
common stock at an average cost of $29.32 per share and a total cost of approximately $125,000,000.
Dividends
In March 2013, we announced that our Board of Directors had authorized a 41% increase in our quarterly cash
dividend, from $0.22 to $0.31 per common share, subject to capital availability. Total cash dividends declared
were approximately $88,452,000, or $0.88 per common share, $76,308,000, or $0.73 per common share, and
$62,574,000, or $0.58 per common share, in fiscal 2012, fiscal 2011 and fiscal 2010, respectively. Our quarterly
cash dividend may be limited or terminated at any time.
Note M: Segment Reporting
We have two reportable segments, direct-to-customer and retail. The direct-to-customer segment has seven
merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Rejuvenation
and Mark and Graham) which sell our products through our seven e-commerce websites and eight direct-mail
catalogs. Our direct-to-customer merchandising concepts are operating segments, which have been aggregated
into one reportable segment, direct-to-customer. The retail segment has five merchandising concepts (Williams-
Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation) which sell our products through our retail
stores. Our retail merchandising concepts are operating segments, which have been aggregated into one
reportable segment, retail. Management’s expectation is that the overall economic characteristics of each of our
operating segments will be similar over time based on management’s judgment that the operating segments have
had similar historical economic characteristics and are expected to have similar long-term financial performance
in the future.
These reportable segments are strategic business units that offer similar home-centered products. They are
managed separately because the business units utilize two distinct distribution and marketing strategies. Based on
management’s best estimate, our operating segments include allocations of certain expenses, including
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