STOCK-BASED COMPENSATION PLANS

9 Months Ended

Nov. 10, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Plans

STOCK-BASED COMPENSATION PLANS

At November 10, 2012, the Company had outstanding awards under various stock-based employee compensation plans, which are described more fully in Note 13 of the Notes to Consolidated Financial Statements in the Company’s 2011 Annual Report on Form 10-K.

On July 17, 2008, the stockholders approved the CPI Corp. Omnibus Incentive Plan (the "Plan").  Total shares of common stock approved for delivery pursuant to awards under the Plan as approved on July 17, 2008, and amended on August 11, 2010, were 1.1 million shares.  The Company has reserved these shares under its authorized, unissued shares.  At November 10, 2012, 539,820 of these shares remained available for future grants.

The Company accounts for stock-based compensation plans in accordance with ASC Topic 718, "Compensation – Stock Compensation" (“ASC Topic 718”), which requires companies to recognize the cost of awards of equity instruments, such as stock options and restricted stock, based on the fair value of those awards at the date of grant.

Stock Option Plans

The following table summarizes the changes in stock options during the 40 weeks ended November 10, 2012:

	Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (1) (in thousands)
Options outstanding, beginning of year	146,666		$	13.02	4.53
Granted	50,000		1.11			$	—
Forfeited	(43,333	)	13.58			$	—
Options outstanding, end of period	153,333		$	8.98	4.99	$	—
Options exercisable at end of period	10,001		$	12.21	0.87	$	—

(1) Intrinsic value for activities other than exercises is defined as the difference between the Company's closing stock price on the last trading day of the fiscal 2012third quarter and the exercise price, multiplied by the number of in-the-money options.  These amounts change based on the quoted market price of the Company's stock.  For exercises, intrinsic value is defined as the difference between the Company's closing stock price on the exercise date and the exercise price, multiplied by the number of options exercised.

There were no share proceeds received from the exercise of stock options for the 40 weeks ended November 10, 2012. On February 13, 2012, the Company granted 50,000 options under the Plan. These service-based options were valued using the Black-Scholes-Merton valuation model.

The Company estimates the fair value of its stock options with market-based performance conditions under the Plan using Monte Carlo simulations.  Weighted-average assumptions used in calculating the fair value of these stock options are included in Note 13 of the Notes to Consolidated Financial Statements in the Company’s 2011 Annual Report on Form 10-K.

The Company recognized stock-based compensation expense of $52,000, resulting in a deferred tax benefit of $19,000, for the 40 weeks ended November 10, 2012, based on the grant-date fair values of stock options granted and the derived service periods.  As of November 10, 2012, total unrecognized compensation cost related to nonvested stock options granted under the Plan was $26,000.  This unrecognized compensation cost will be recognized over a weighted-average period of approximately 1 year.

Restricted Stock Plans

All nonvested stock is valued based on the fair market value of the Company’s common stock on the grant date and the value is recognized as compensation expense over the service period. There were no issuances of nonvested stock in the 40 weeks ended November 10, 2012.

Changes in nonvested stock are as follows:

	40 Weeks Ended
	November 10, 2012
	Shares			Weighted-Average Grant-Date Value
Nonvested stock, beginning of year	79,729			$	14.88
Forfeited	(25,999		)	14.28
Nonvested stock, end of period	53,730			$	16.13
Stock-based compensation expense related to nonvested stock	$	256,000

As of November 10, 2012, total unrecognized compensation cost related to nonvested stock was $252,000.  This unrecognized compensation cost will be recognized over a weighted-average remaining period of approximately 1 year.