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 29, 2016, 18,556,241 of such shares are available for future grants.

Since May 2011, most of the share-based awards issued by the Company have been in the form of stock options, restricted stock, restricted stock units and performance share units. With limited exceptions, stock options and restricted stock units granted to employees generally vest ratably on an annual basis over four-year and three-year periods, respectively. Awards granted to board members generally vest ratably over a one or 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 payable in 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 a combination of 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") (collectively, the "MSA Options"). MSA Options generally vest ratably on an annual basis over a period of approximately five years, with limited exceptions. The MSA Options are subject to various provisions set forth in a management stockholder's agreement ("MSA") entered into with each option holder. The MSA 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 29, 2016, January 30, 2015, and January 31, 2014, and a summary of the methodology applied to develop each assumption, are as follows:

	January 29, 2016			January 30, 2015			January 31, 2014
Expected dividend yield		1.2	%		0	%		0	%
Expected stock price volatility		25.3	%		25.6	%		26.2	%
Weighted average risk-free interest rate		1.8	%		1.9	%		1.2	%
Expected term of options (years)		6.4			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 29, 2016 is as follows:

(Intrinsic value amounts reflected in thousands)	Options Issued			Average Exercise Price		Remaining Contractual Term in Years		Intrinsic Value
Balance, January 30, 2015		2,399,124		$	49.69
Granted		1,247,557			74.73
Exercised		(703,956	)		45.66
Canceled		(512,760	)		61.67

Balance, January 29, 2016		2,429,965		$	61.19		8.1	$	33,701


Exercisable at January 29, 2016		517,375		$	47.31		6.7	$	14,355

The weighted average grant date fair value per share of non-MSA options granted was $18.48, $17.26 and $13.86 during 2015, 2014 and 2013, respectively. The intrinsic value of non-MSA options exercised during 2015, 2014, and 2013 was $20.8 million, $2.5 million and $0.8 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 29, 2016 is as follows:

(Intrinsic value amounts reflected in thousands)	Units Issued			Intrinsic Value
Balance, January 30, 2015		212,583
Granted		103,666
Converted to common stock		(120,417	)
Canceled		(51,735	)

Balance, January 29, 2016		144,097		$	10,816

The weighted average grant date fair value per share of performance share units granted was $74.72, $57.91 and $48.11 during 2015, 2014, and 2013, respectively.

A summary of restricted stock unit award activity during the year ended January 29, 2016 is as follows:

(Intrinsic value amounts reflected in thousands)	Units Issued			Intrinsic Value
Balance, January 30, 2015		714,858
Granted		383,134
Converted to common stock		(326,383	)
Canceled		(130,699	)

Balance, January 29, 2016		640,910		$	48,107

The weighted average grant date fair value per share of restricted stock units granted was $74.67, $57.87 and $48.20 during 2015, 2014 and 2013, respectively.

At January 29, 2016, 173,091 MSA Time Options were outstanding, all of which were exercisable, with an average exercise price of $20.36, an average remaining contractual term of 3.8 years, and an aggregate intrinsic value of $9.5 million. The intrinsic value of MSA Time Options exercised during 2015, 2014 and 2013 was $6.6 million, $6.8 million and $39.4 million, respectively.

At January 29, 2016, 151,097 MSA Performance Options were outstanding, all of which were exercisable, with an average exercise price of $21.23, an average remaining contractual term of 3.9 years, and an aggregate intrinsic value of $8.1 million. The intrinsic value of MSA Performance Options exercised during 2015, 2014 and 2013 was $4.9 million, $4.9 million and $39.1 million, respectively.

In March 2012, the Company issued a performance-based award of 326,037 shares of restricted stock to its former Chairman and Chief Executive Officer. The restricted stock award had a fair value on the grant date of $45.25 per share, with the award scheduled to vest in one-half increments contingent upon, among other things, meeting certain specified earnings per share targets for 2014 and 2015. The target for 2014 was met and the applicable shares vested. Certain conditions relating to the 2015 tranche of the award were not satisfied and therefore the applicable shares did not vest.

At January 29, 2016, the total unrecognized compensation cost related to nonvested stock-based awards was $48.2 million with an expected weighted average expense recognition period of 1.7 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 29, 2016
Pre-tax	$	11,113	$	4,856	$	22,578	$	—	$	38,547
Net of tax	$	6,779	$	2,962	$	13,772	$	—	$	23,513
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