10. Share-based payments

The Company accounts for share-based payments in accordance with applicable accounting standards, under which the fair value of each award is separately estimated and amortized into compensation expense over the service period. The fair value of the Company's stock option grants are estimated on the grant date using the Black-Scholes-Merton valuation model. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense.

On July 6, 2007, the Company's Board of Directors adopted the 2007 Stock Incentive Plan for Key Employees, which plan was subsequently amended (as so amended, the "Plan"). The Plan allows the granting of stock options, stock appreciation rights, and other stock-based awards or dividend equivalent rights to key employees, directors, consultants or other persons having a service relationship with the Company, its subsidiaries and certain of its affiliates. The number of shares of Company common stock authorized for grant under the Plan is 31,142,858. As of January 30, 2015, 19,025,398 of such shares are available for future grants.

Since May 2011, most of share-based awards issued by the Company have been in the form of stock options, restricted stock units and performance share units. The Company has also granted a performance-based restricted stock award discussed in greater detail below. Stock options granted to employees and board members generally vest ratably on an annual basis over a four-year and three-year period, respectively. Restricted stock units generally vest ratably over a three-year period. Performance share units generally vest ratably over a three-year period, provided that certain minimum performance criteria are met in the year of grant. With limited exceptions, the performance share unit and restricted stock unit awards are automatically converted into shares of common stock on the vesting date.

From July 2007 through May 2011, a significant majority of the Company's share-based awards were stock options that vest solely upon the continued employment of the recipient ("MSA Time Options") and options that vest upon the achievement of predetermined annual or cumulative financial-based targets ("MSA Performance Options"). MSA Time Options and MSA Performance Options generally vest ratably on an annual basis over a period of approximately five years, with limited exceptions.

Both the MSA Time Options and the MSA Performance Options are subject to various provisions set forth in a management stockholder's agreement ("MSA") entered into with each option holder. The MSA contains certain put and call rights and other provisions pertaining to both the option holder and the Company which may, in certain scenarios, affect the holder's ability to sell or realize market value for these instruments and any shares acquired thereunder. Vesting of the MSA Performance Options is contingent upon meeting specified annual or cumulative financial targets. The MSA Time Options and MSA Performance Options have a contractual term of 10 years and an exercise price equal to the fair value of the underlying common stock on the date of grant.

The weighted average for key assumptions used in determining the fair value of all stock options granted in the years ended January 30, 2015, January 31, 2014, and February 1, 2013, and a summary of the methodology applied to develop each assumption, are as follows:

	January 30, 2015			January 31, 2014			February 1, 2013
Expected dividend yield		0	%		0	%		0	%
Expected stock price volatility		25.6	%		26.2	%		26.8	%
Weighted average risk-free interest rate		1.9	%		1.2	%		1.5	%
Expected term of options (years)		6.3			6.3			6.3

Expected dividend yield—This is an estimate of the expected dividend yield on the Company's stock. An increase in the dividend yield will decrease compensation expense.

Expected stock price volatility—This is a measure of the amount by which the price of the Company's common stock has fluctuated or is expected to fluctuate. Since November 2011, the expected volatilities for awards have been based on the historical volatility of the Company's publicly traded common stock. An increase in the expected volatility will increase compensation expense.

Weighted average risk-free interest rate—This is the U.S. Treasury rate for the week of the grant having a term approximating the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

Expected term of options—This is the period of time over which the options granted are expected to remain outstanding. The Company has estimated the expected term as the mid-point between the vesting date and the contractual term of the option. An increase in the expected term will increase compensation expense.

A summary of the Company's stock option activity, exclusive of options subject to an MSA, during the year ended January 30, 2015 is as follows:

(Intrinsic value amounts reflected in thousands)	Options Issued			Average Exercise Price		Remaining Contractual Term in Years		Intrinsic Value
Balance, January 31, 2014		1,840,542		$	45.26
Granted		898,817			58.03
Exercised		(159,205	)		44.52
Canceled		(181,030	)		50.55

Balance, January 30, 2015		2,399,124		$	49.69		8.1	$	41,661


Exercisable at January 30, 2015		633,841		$	42.43		7.0	$	15,613

The weighted average grant date fair value of non-MSA options was $17.26, $13.86 and $13.54 during 2014, 2013 and 2012, respectively. The intrinsic value of non-MSA options exercised during 2014, 2013, and 2012 was $2.5 million, $0.8 million and $0.3 million, respectively.

The number of performance share unit awards earned is based upon the Company's annual financial performance in the year of grant as specified in the award agreement. A summary of performance share unit award activity during the year ended January 30, 2015 is as follows:

(Intrinsic value amounts reflected in thousands)	Units Issued			Intrinsic Value
Balance, January 31, 2014		159,419
Granted		143,048
Converted to common stock		(68,187	)
Canceled		(21,697	)

Balance, January 30, 2015		212,583		$	14,256

The weighted average grant date fair value of performance share units granted was $57.91, $48.11 and $45.25 during 2014, 2013, and 2012, respectively.

A summary of restricted stock unit award activity during the year ended January 30, 2015 is as follows:

(Intrinsic value amounts reflected in thousands)	Units Issued			Intrinsic Value
Balance, January 31, 2014		616,527
Granted		420,035
Converted to common stock		(230,907	)
Canceled		(90,797	)

Balance, January 30, 2015		714,858		$	47,938

The weighted average grant date fair value of restricted stock units granted was $57.87, $48.20 and $45.33 during 2014, 2013 and 2012, respectively.

A summary of MSA Time Options activity during the year ended January 30, 2015 is as follows:

(Intrinsic value amounts reflected in thousands)	Options Issued			Average Exercise Price		Remaining Contractual Term in Years		Intrinsic Value
Balance, January 31, 2014		464,563		$	18.15
Granted		—			—
Exercised		(154,866	)		14.95
Canceled		(10,853	)		20.39

Balance, January 30, 2015		298,844		$	19.74		4.7	$	14,142


Exercisable at January 30, 2015		286,848		$	19.30		4.6	$	13,700

The intrinsic value of MSA Time Options exercised during 2014, 2013 and 2012 was $6.8 million, $39.4 million and $117.3 million, respectively.

A summary of MSA Performance Options activity during the year ended January 30, 2015 is as follows:

(Intrinsic value amounts reflected in thousands)	Options Issued			Average Exercise Price		Remaining Contractual Term in Years		Intrinsic Value
Balance, January 31, 2014		376,309		$	19.68
Granted		—			—
Exercised		(118,287	)		17.18
Canceled		(10,151	)		21.47

Balance, January 30, 2015		247,871		$	20.79		4.9	$	11,468


Exercisable at January 30, 2015		246,251		$	20.73		4.9	$	11,409

The intrinsic value of MSA Performance Options exercised during 2014, 2013 and 2012 was $4.9 million, $39.1 million and $106.4 million, respectively.

In March 2012, the Company issued a performance-based award of 326,037 shares of restricted stock to its Chairman and Chief Executive Officer. This restricted stock award had a fair value on the grant date of $45.25 per share, with one-half of the award scheduled to vest in 2014 and the remainder in 2015, contingent upon, among other things, meeting certain specified earnings per share targets in those years. The target for 2014 was met and the applicable shares vested.

At January 30, 2015, the total unrecognized compensation cost related to nonvested stock-based awards was $55.2 million with an expected weighted average expense recognition period of 1.4 years.

The fair value method of accounting for share-based awards resulted in share-based compensation expense (a component of SG&A expenses) and a corresponding reduction in net income before income taxes as follows:

(In thousands)	Stock Options		Performance Share Units		Restricted Stock Units		Restricted Stock		Total
Year ended January 30, 2015
Pre-tax	$	8,533	$	5,461	$	15,968	$	7,376	$	37,338
Net of tax	$	5,206	$	3,332	$	9,742	$	4,500	$	22,780
Year ended January 31, 2014
Pre-tax	$	7,634	$	3,448	$	9,879	$	—	$	20,961
Net of tax	$	4,649	$	2,100	$	6,016	$	—	$	12,765
Year ended February 1, 2013
Pre-tax	$	14,078	$	4,082	$	3,504	$	—	$	21,664
Net of tax	$	8,578	$	2,487	$	2,135	$	—	$	13,200