Note 10 - Share-based Employee Compensation

12 Months Ended

Jun. 02, 2015

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

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

10. Share-Based Employee Compensation

Preferred Stock

RTI is authorized, under its Certificate of Incorporation, to issue up to 250,000 shares of preferred stock with a par value of $0.01. These shares may be issued from time to time in one or more series. Each series will have dividend rates, rights of conversion and redemption, liquidation prices, and other terms or conditions as determined by the Board of Directors. No preferred shares have been issued as of June 2, 2015 and June 3, 2014.

The Ruby Tuesday, Inc. Stock Incentive Plan and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan

A committee, appointed by the Board of Directors, administers the Ruby Tuesday, Inc. Stock Incentive Plan (“SIP”) and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan (“1996 SIP”), and has full authority in its discretion to determine the key employees, officers, and non-employee directors to whom share-based incentives are granted and the terms and provisions of share-based incentives. Option grants under the SIP and 1996 SIP can have varying vesting provisions and exercise periods as determined by such committee. A majority of currently outstanding service-based stock options granted under the SIP and 1996 SIP vest within three years following the date of grant and expire seven years after the date of grant. All currently outstanding market-based stock options will cliff vest if the Company’s stock price appreciates to $14 per share for a period of 20 consecutive days by December 3, 2015. The SIP and 1996 SIP permit the committee to make awards of shares of common stock, awards of stock options or other derivative securities related to the value of the common stock, and certain cash awards to eligible persons. These discretionary awards may be made on an individual basis or for the benefit of a group of eligible persons. All options awarded under the SIP and 1996 SIP have been awarded with an exercise price equal to the fair market value at the time of grant.

At June 2, 2015, we had reserved a total of 4,327,000 shares of common stock for the SIP and 1996 SIP. Of the reserved shares at June 2, 2015, 2,203,000 were subject to options outstanding. Stock option exercises are settled with the issuance of new shares. Net shares of common stock available for issuance at June 2, 2015 were 2,124,000.

Chief Executive Officer Awards

On December 1, 2012, James J. Buettgen became President and CEO of the Company. In connection with Mr. Buettgen’s appointment as CEO, on December 3, 2012 he received an initial award of approximately 68,000 service-based restricted shares and 102,000 performance-based restricted shares. Pursuant to the terms of Mr. Buettgen’s employment agreement, the Company guaranteed the earning of the performance-based restricted shares as the greater of the target value of the award or based on the Company’s achievement of certain performance conditions related to fiscal 2013. During the first quarter of fiscal year 2014, the Executive Compensation Committee of the Board of Directors determined that the performance conditions were not achieved for 34,000 shares of restricted stock awarded to our President and CEO during fiscal year 2013, and these shares were cancelled and retired accordingly. Both the service-based and performance-based awards cliff vested on June 1, 2015.

In addition to the above, on December 3, 2012, Mr. Buettgen received a one-time make-whole equity award which was comprised of approximately 179,000 service-based restricted shares and 253,000 service-based stock options. The restricted shares also cliff vested on June 1, 2015. The stock options vest in three equal annual installments following the date of grant.

Finally, on that same date, Mr. Buettgen received a one-time high-performance and inducement award which was comprised of approximately 250,000 service-based restricted shares, 250,000 service-based stock options, and 250,000 market-based stock options. Similar to the previously mentioned awards, the restricted shares cliff vested on June 1, 2015 while the service-based stock options vest in three equal annual installments following the date of grant. The market-based stock options will cliff vest if and when the Company’s stock price appreciates to $14 per share for a period of 20 consecutive days within Mr. Buettgen’s first three years of employment.

Stock Options

The following table summarizes our stock option activity under these stock option plans (Stock Options and Aggregate Intrinsic Value are in thousands):

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Service-based vesting:
Balance at June 5, 2012		2,716		$	8.79
Granted		503			7.81
Exercised		(591	)		6.93
Cancellations and forfeitures		(717	)		11.03
Balance at June 4, 2013		1,911		$	8.27
Granted		601			9.34
Exercised		(244	)		6.45
Cancellations and forfeitures		(315	)		9.29
Balance at June 3, 2014		1,953		$	8.66
Granted		875			5.94
Exercised		(90	)		6.20
Cancellations and forfeitures		(297	)		8.65
Balance at June 2, 2015		2,441		$	7.78		4.39	$	223
Exercisable		1,288		$	8.55		3.19	$	2
Market-based vesting:
Balance at June 4, 2013		250		$	7.81
Granted		570			9.34
Cancellations and forfeitures		(85	)		9.34
Balance at June 3, 2014		735		$	8.82
Forfeited		(220	)		9.34
Balance at June 2, 2015		515		$	8.60		4.84	$	$ –
Exercisable		–		$	–		–	$	$ –

The aggregate intrinsic value represents the closing stock price as of June 2, 2015 less the strike price, multiplied by the number of stock options that have a strike price that is less than that closing stock price. The total intrinsic value of stock options exercised during fiscal years 2015, 2014, and 2013 was $0.1 million, $0.7 million, and $1.0 million, respectively.

At June 2, 2015, there was approximately $1.4 million of unrecognized pre-tax compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted average period of 1.3 years. The total fair value at grant date of awards vested during fiscal years 2015, 2014, and 2013 totaled $1.9 million, $1.0 million, and $2.2 million, respectively.

The service-based stock options awarded in fiscal years 2015, 2014, and 2013 vest in equal annual installments over a three-year period following grant of the award, and have a maximum life of seven years. There are no performance-based vesting requirements associated with these stock options. During fiscal 2014, we granted 570,000 market-based stock options to certain employees under the terms of the SIP. The market-based stock options vest if a share of our common stock appreciates to $14 per share or more for a period of 20 consecutive trading days on or before December 3, 2015. The stock options have a maximum life of seven years.

The weighted average Black-Scholes grant date fair value for options awarded during fiscal years 2015, 2014, and 2013 was $2.27, $4.43, and $4.37 per share, respectively. The grant date fair values of unvested stock options are amortized over the respective vesting period of the awards unless a recipient becomes retirement eligible during the vesting period. For retirement eligible individuals, the grant date fair value of the award is amortized from the period of the date of grant through the date upon which the individual becomes retirement eligible. The weighted average assumptions used in our Black-Scholes option-pricing model are as follows:

	2015			2014			2013
Risk-free interest rate		1.48	%		1.17	%		0.62	%
Expected dividend yield		0	%		0	%		0	%
Expected stock price volatility		44.27	%		58.03	%		71.84	%
Expected life (in years)		4.50			4.50			4.50

As previously mentioned, we awarded 570,000 market-based stock options to certain employees during fiscal 2014 and 250,000 market-based stock options to our CEO during fiscal 2013. We estimated the grant date fair value of these awards at $2.42 and $2.14 per share, respectively, using the Monte-Carlo simulation model. The primary assumptions used in our Monte-Carlo simulation model are as follows:

	2014			2013
Risk-free interest rate		0.45	%		0.34	%
Expected dividend yield		0	%		0	%
Expected stock price volatility		42.86	%		46.71	%
Expected life (in years)		2.40			1.52

Restricted Stock

The following table summarizes the status of our restricted stock activity (in thousands, except per-share data):

	2015					2014					2013
	Shares			Weighted Average Fair Value		Shares			Weighted Average Fair Value		Shares			Weighted Average Fair Value
Performance-Based Vesting:
Unvested at beginning of year		68		$	7.81		356		$	7.06		423		$	7.75
Granted		–			–		–			–		344			6.99
Vested		(68	)		7.81		(18	)		7.87		(89	)		7.31
Forfeited		–			–		(270	)		6.81		(322	)		7.82
Unvested at end of year		–		$	–		68		$	7.81		356		$	7.06
Service-Based Vesting:
Unvested at beginning of year		1,008		$	8.11		1,136		$	7.92		797		$	8.37
Granted		629			6.03		423			8.83		795			7.47
Vested		(780	)		7.69		(411	)		8.10		(340	)		7.56
Forfeited		(54	)		6.84		(140	)		8.76		(116	)		8.92
Unvested at end of year		803		$	6.98		1,008		$	8.11		1,136		$	7.92

The fair value of restricted share awards is based on the closing price of our common stock on the date prior to the grant date. The total intrinsic value of restricted shares vesting during fiscal years 2015, 2014, and 2013 was $5.4 million, $3.4 million, and $2.9 million, respectively. At June 2, 2015, unrecognized compensation expense related to restricted stock grants expected to vest totaled $2.5 million and will be recognized over a weighted average vesting period of 1.4 years.

Aside from the previously discussed December 1, 2012 inducement awards to our CEO, during fiscal years 2015, 2014, and 2013, we granted to certain employees under the terms of the SIP and 1996 SIP 402,000, 189,000, and 235,000, respectively, service-based restricted shares which cliff vest 2.5 years following the grant date, and 118,000, 174,000, and zero, respectively, service-based restricted shares which vest in three equal installments over a three-year period following the grant date. Additionally, during fiscal year 2013 we granted 242,000 performance-based restricted shares of our common stock to certain employees under the terms of the SIP and 1996 SIP. Vesting of the performance-based restricted shares was contingent upon the Company’s achievement of certain performance conditions related to fiscal year 2013. The Executive Compensation Committee of the Board of Directors determined during the first quarter of fiscal year 2014 that the performance conditions for the fiscal year 2013 performance-based awards were not achieved, and as a result the 242,000 performance-based shares were cancelled and returned to the pool of shares available for grant under the SIP and 1996 SIP.

During fiscal years 2015, 2014, and 2013, we granted 109,000, 60,000, and 63,000 restricted shares, respectively, to non-employee directors. The shares cliff vest over a one year period following the grant of the award.

Included within Selling, general, and administrative, net in our Consolidated Statements of Operations and Comprehensive Loss is share-based compensation expense of $7.1 million, $7.6 million, and $4.5 million for the fiscal years ended June 2, 2015, June 3, 2014, and June 4, 2013, respectively.

As discussed further in Note 8 to the Consolidated Financial Statements, various management personnel left the Company during fiscal years 2015 and 2014. Several of these individuals held share-based compensation awards at the times of their separations, and these awards were either vested or forfeited in accordance with the terms of the original awards.

Included within share-based compensation expense for fiscal years 2015 and 2014 were charges of $0.2 million and $0.3 million, respectively, representing the incremental costs resulting from accelerated vesting, net of forfeitures, primarily related to departure of certain employees.