Pottery Barn 2013 Annual Report Download - page 65

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 25,760,000 shares. As of February 2, 2014, there were approximately 6,164,000
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. 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. Option awards
and stock awards granted to employees generally vest over a period of four years. 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 stockholders
(so long as they continue to serve as a non-employee Board member). Shares issued as a result of award
exercises or releases will be primarily funded with the issuance of new shares.
Stock-Based Compensation Expense
We measure and record stock-based compensation expense for all employee stock-based awards using a fair value
method. During fiscal 2013, fiscal 2012 and fiscal 2011, we recognized total stock-based compensation expense, as a
component of selling, general and administrative expenses, of $38,788,000 (including stock-based compensation
expense of $1,341,000 associated with the retirement of one of our former brand presidents), $31,042,000 (including
stock-based compensation expense of $3,019,000 associated with the retirement of our former Executive Vice
President, Chief Operating and Chief Financial Officer), and $24,336,000, respectively. As of February 2, 2014, there
was $45,663,000 of unrecognized stock-based compensation expense (net of estimated forfeitures), which we expect to
recognize on a straight-line basis over a weighted average remaining service period of approximately two years. At
each reporting period, all compensation expense attributable to vested awards has been fully recognized.
Stock Options
The following table summarizes our stock option activity during fiscal 2013:
Shares
Weighted
Average
Exercise
Price
Weighted Average
Contractual Term
Remaining (Years)
Intrinsic
Value1
Balance at February 3, 2013 (100% vested) 428,930 $35.07
Granted 0 0
Exercised (201,442) 32.83
Cancelled (5,000) 34.94
Balance at February 2, 2014 (100% vested) 222,488 $37.11 1.39 $3,874,000
1Intrinsic value for outstanding and vested options is based on the excess, if any, of the market value of our common stock
on the last business day of the fiscal year (or $54.52) over the exercise price.
No stock options were granted in fiscal 2013, fiscal 2012 or fiscal 2011. The total intrinsic value of stock options
exercised was $3,834,000 for fiscal 2013, $5,497,000 for fiscal 2012, and $7,343,000 for fiscal 2011. Intrinsic
value for options exercised is based on the excess of the market value over the exercise price on the date of
exercise.
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Form 10-K