Pottery Barn 2013 Annual Report Download - page 66

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Stock-Settled Stock Appreciation Rights
A stock-settled stock appreciation right is an award that allows the recipient to receive common stock equal to
the appreciation in the fair market value of our common stock between the grant date and the conversion date for
the number of shares converted.
The following table summarizes our stock-settled stock appreciation right activity during fiscal 2013:
Shares
Weighted
Average
Conversion
Price1
Weighted Average
Contractual Term
Remaining (Years)
Intrinsic
Value2
Balance at February 3, 2013 2,527,784 $ 28.21
Granted
00
Converted into common stock (613,199) 24.22
Cancelled (54,823) 39.61
Balance at February 2, 2014 1,859,762 $ 29.19 4.37 $47,114,000
Vested at February 2, 2014 1,222,394 $ 23.91 4.37 $37,412,000
Vested plus expected to vest at February 2, 2014 1,639,947 $ 27.72 4.39 $43,958,000
1Conversion price is equal to the market value on the date of grant.
2Intrinsic value for outstanding and vested rights is based on the excess of the market value of our common stock on the last
business day of the fiscal year (or $54.52) over the conversion price.
The following table summarizes additional information about stock-settled stock appreciation rights:
Fiscal 2013 Fiscal 2012 Fiscal 2011
Weighted average grant date fair value per share of awards granted $ 0.00 $ 0.00 $ 14.27
Intrinsic value of awards converted into common stock 1$18,046,000 $31,569,000 $18,969,000
1Intrinsic value for conversions is based on the excess of the market value over the conversion price on the date of the conversion.
The fair value of option awards is estimated on the date of the grant using the Black-Scholes option pricing
model with the following weighted-average assumptions:
•Expected term – The expected term of the option awards represents the period of time between the grant
date of the option awards and the date the option awards are either exercised, converted or cancelled,
including an estimate for those option awards still outstanding.
•Expected volatility – The expected volatility is based on an average of the historical volatility of our
stock price, for a period approximating our expected term, and the implied volatility of externally traded
options of our stock during the period.
•Risk-free interest rate – The risk-free interest rate is based on the U.S. Treasury yield curve in effect at
the time of grant and with a maturity that approximates our expected term.
•Dividend yield – The dividend yield is based on our quarterly cash dividend and the anticipated dividend
payout over our expected term.
No option awards were granted in fiscal 2013 and fiscal 2012. The weighted average assumptions used for fiscal
2011 are as follows:
Fiscal 2011
Expected term (years) 5.0
Expected volatility 46.6%
Risk-free interest rate 2.2%
Dividend yield 2.3%
52