Pottery Barn 2014 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 (including those that are performance-based), deferred stock awards
(collectively, “stock awards”) and dividend equivalents up to an aggregate of 25,760,000 shares. As of
February 1, 2015, there were approximately 4,354,000 shares available for future grant. Awards may be granted
under the Plan to officers, employees and non-employee members of the board of directors of the company (the
“Board”) or any parent or subsidiary. Shares issued as a result of award exercises or releases are primarily funded
with the issuance of new shares.
Option Awards
Annual grants of option awards are limited to 1,000,000 shares on a per person basis and 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 granted to employees generally vest over a period of four years for service-based
awards. Certain option awards contain vesting acceleration clauses resulting from events including, but not limited to,
retirement, merger or a similar corporate event.
Stock Awards
Annual grants of stock awards are limited to 400,000 shares on a per person basis. Stock awards granted to employees
generally vest evenly over a period of four years for service-based awards. Certain performance-based awards, which
have variable payout conditions based on predetermined financial targets, vest three years from the date of grant.
Certain stock awards and other agreements contain vesting acceleration clauses resulting from events including, but not
limited to, retirement, merger or a similar corporate event. 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).
Stock-Based Compensation Expense
We measure and record stock-based compensation expense for all employee stock-based awards using a fair value
based method. During fiscal 2014, fiscal 2013 and fiscal 2012, we recognized total stock-based compensation expense,
as a component of selling, general and administrative expenses, of $44,632,000, $38,788,000 and $31,042,000,
respectively. As of February 1, 2015, there was $52,317,000 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 2014:
Shares
Weighted
Average
Exercise
Price
Weighted Average
Contractual Term
Remaining (Years)
Intrinsic
Value1
Balance at February 2, 2014 (100% vested) 222,488 $ 37.11
Granted 0 0
Exercised (115,488) 35.30
Cancelled 0 0
Balance at February 1, 2015 (100% vested) 107,000 $ 39.05 0.81 $4,194,000
1Intrinsic value for outstanding and vested options is based on the excess of the market value of our common stock on the
last business day of the fiscal year (or $78.25) over the exercise price.
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Form 10-K