Share-Based Compensation

9 Months Ended

Oct. 06, 2012

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

Note 6 – Share-Based Compensation

The Company is required to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model.  The value of the portion of the awards ultimately expected to vest is recognized as expense over the requisite service period.  We recognize share-based compensation expense as a component of selling, general and administrative expense in our Consolidated Statements of Income.  During the third quarter 2012, we recognized a $2.9 million net credit related to share-based compensation versus expense of $1.8 million during the third quarter 2011.  During year-to-date 2012 we recorded a $1.3 million net credit related to share-based compensation as compared to expense of $4.3 million during year-to-date 2011.  The net credit during 2012 related to share-based compensation is due to reductions in estimated payouts for unvested performance units outstanding under the Company’s Long-Term Incentive Plan (“LTIP”).

We have four equity compensation plans under which incentive stock options, non-qualified stock options and other forms of share-based compensation have been, or may be, granted primarily to key employees and non-employee members of the Board of Directors.  These plans include the Amended 2009 Incentive Award Plan (“2009 Plan”), the Amended 2000 Stock Incentive Plan (“2000 Plan”), the Director Deferred Compensation Plan, and the 1997 Non-Employee Director Stock Compensation Plan.  These plans are more fully described in Part II, Item 8 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 under the caption “Footnote 10 – Share-based Compensation Plans” and in our Definitive Proxy Statement on Schedule 14A filed on April 4, 2012.

Since 2005, awards have taken the form of performance units (including share units pursuant to our LTIP, restricted stock units (“RSUs”) and Stock Appreciation Rights (“SARs”)). 

Performance units have been granted during each of fiscal years 2005 through 2012 pursuant to our LTIP.  These units vest at the end of a three-year performance period upon achievement of certain performance measures.  On December 31, 2011, the 90,670 units outstanding from the LTIP grants made during fiscal 2009 vested and were cancelled without conversion to shares of common stock because the Company did not achieve the performance metrics of the LTIP for the related performance period.

During year-to-date 2012, a total of 209,693 units were granted pursuant to our LTIP.  Depending on a comparison of the Company’s three-year compound annual growth rate of Consolidated EBITDA results to the Company’s peer group and the Company’s ranking on a blend of  1) absolute return on net assets and 2) compound annual growth rate for return on net assets as compared to the companies in the peer group, a participant could receive a number of shares ranging from zero to 200% of the number of performance units granted.   Compensation expense equal to the grant date fair value (for shares expected to vest) is recorded over the three-year performance period.

During fiscal 2006 through 2010, RSUs were awarded to certain executives of the Company.  Awards vest in increments over the term of the grant or cliff vest on the fifth anniversary of the grant date, as designated in the award documents.  In addition to the time vesting criteria, awards granted in 2008 and 2009 to two of the Company’s executives include performance vesting conditions.  The Company records expense for such awards over the service vesting period if the Company anticipates the performance vesting conditions will be satisfied.

On December 17, 2008, in connection with the Company’s announcement of its planned acquisition of certain military distribution assets of GSC Enterprises, Inc., certain key executives of the Company were granted a total of 267,345 SARs with a per share price of $38.44.  As a result of the expiration of the vesting period of the grant on January 31, 2012, all remaining compensation expense to be recorded for this grant was expensed in the first quarter of fiscal 2012.

                As of December 31, 2011, 267,345 SARs with a weighted average base/exercise price per SAR of $38.44 were outstanding and unvested.  No SARs were granted or exercised during fiscal 2012; however, approximately 23,800 SARs were forfeited by a recipient due to termination of employment.  The SARs did not vest because the closing price per share of Nash Finch common stock was below the minimum of $55.00 required for 90 consecutive market days before January 31, 2012.  Therefore, the remaining 243,545 SARs never vested.  The Company wrote-off the related deferred tax asset of approximately $0.8 million with an offsetting entry to paid-in capital during the first quarter of fiscal 2012.

The following table summarizes activity in our share-based compensation plans during year-to-date 2012:

(in thousands, except vesting periods)	Service Based Grants (Board Units and RSUs)	Weighted Average Remaining Restriction/ Vesting Period (Years)	Performance Based Grants (LTIP & Performance RSUs)	Weighted Average Remaining Restriction/ Vesting Period (Years)
Outstanding at December 31, 2011	597.9	0.2	568.2	0.7
Granted	14.7		210.3
Forfeited/cancelled	-		(24.5)
Restrictions lapsed/ units settled	(132.6)		(26.7)
Shares deferred upon vesting/settlement & dividend equivalents on deferred shares(1)	29.3		7.4
Outstanding at October 6, 2012	509.3	0.1	734.7	0.9
Exercisable/unrestricted at December 31, 2011	468.4		319.9
Exercisable/unrestricted at October 6, 2012	459.6		300.6

⁽¹⁾ “Shares deferred upon vesting/settlement” above are net of the performance adjustment factor applied to the “units settled” for the participants that deferred shares as provided in the plan.

The weighted-average grant-date fair value of time vesting equity units and performance vesting units granted during year-to-date 2012 was $23.03 and $29.19, respectively.