Management Incentive Plan and Stock-Based Compensation

6 Months Ended

Jul. 31, 2021

Share-based Payment Arrangement, Noncash Expense [Abstract]

Management Incentive Plan and Stock-Based Compensation

The Company has incentive compensation programs which provide cash incentive bonuses and performance share awards to key management and employees based on Company and individual performance.

For fiscal 2021, the Compensation Committee of the Board of Directors established the performance measures for determining incentive compensation amounts as based on a combination of profitability-based performance goals and the attainment of specific management priorities related to business challenges from the COVID-19 pandemic, as measured and approved by the Compensation Committee. As of July 31, 2021, the Company has established an accrual for this incentive compensation based on its forecasted attainment of the profitability-based performance goals and the Compensation Committee’s assessment of progress towards achievement of the specific business priorities.

For the fiscal 2020 management incentive bonus plan and performance share awards, the Compensation Committee approved modifications in August 2020 to the performance measurement goals, to be based on the attainment of specific management priorities related to business challenges from the COVID-19 pandemic, as measured and approved by the Compensation Committee, as an alternative to the previously established profitability-based performance goals for 2020.

Stock-based compensation. For the three and six month periods ended July 31, 2021 and August 1, 2020, the Company recognized stock-based compensation expense as follows:


	Three Months Ended				Six Months Ended
($000)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020
Restricted stock	$	16,057	$	17,638	$	34,646	$	34,120
Performance awards	12,385		3,526		21,399		10,822
Employee stock purchase plan	1,142		994		2,213		1,955
Total	$	29,584	$	22,158	$	58,258	$	46,897

Total stock-based compensation expense recognized in the Company’s Condensed Consolidated Statements of Operations for the three and six month periods ended July 31, 2021 and August 1, 2020, is as follows:


	Three Months Ended				Six Months Ended
Statements of Operations Classification ($000)	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020
Cost of goods sold	$	15,088	$	11,849	$	29,760	$	24,515
Selling, general and administrative	14,496		10,309		28,498		22,382
Total	$	29,584	$	22,158	$	58,258	$	46,897

The tax benefits related to stock-based compensation expense for the three and six month periods ended July 31, 2021 were $5.7 million and $11.0 million, respectively. The tax benefits related to stock-based compensation expense for the three and six month periods ended August 1, 2020 were $4.8 million and $10.2 million, respectively.

Restricted stock awards. The Company grants shares of restricted stock or restricted stock units to directors, officers, and key employees. The market value of shares of restricted stock and restricted stock units at the date of grant is amortized to expense over the vesting period of generally three to five years.

During the three and six month periods ended July 31, 2021 and August 1, 2020, shares purchased by the Company for tax withholding totaled 13,627 and 400,593, and 308 and 349,821, respectively, and are considered treasury shares which are available for reissuance.

Performance share awards. The Company has a performance share award program for senior executives. A performance share award represents a right to receive shares of restricted stock on a specified settlement date based on the Company’s attainment of performance goals during the performance period, which is the Company’s fiscal year. If attained, the restricted stock then vests over a service period, generally two to three years from the date the performance award was granted.

As of July 31, 2021, shares related to unvested restricted stock, restricted stock units, and performance share awards totaled 4.1 million shares. A summary of restricted stock, restricted stock units, and performance share award activity for the six month period ended July 31, 2021, is presented below:


(000, except per share data)	Number of shares	Weighted-average grant date fair value
Unvested at January 30, 2021	4,230	$	85.15
Awarded	994	122.36
Released	(1,062)	75.19
Forfeited	(106)	94.62
Unvested at July 31, 2021	4,056	$	96.67

The unamortized compensation expense at July 31, 2021, was $204.9 million, which is expected to be recognized over a weighted-average remaining period of 2.2 years. The unamortized compensation expense at August 1, 2020, was $152.4 million, which was expected to be recognized over a weighted-average remaining period of 2.2 years.

Employee stock purchase plan. Under the Employee Stock Purchase Plan (“ESPP”), eligible employees participating in the quarterly offering period can choose to have up to the lesser of 10% of their annual base earnings or the IRS annual share purchase limit of $25,000 in aggregate market value to purchase the Company’s common stock. The purchase price of the stock is 85% of the closing market price on the date of purchase. Purchases occur on a quarterly basis (on the last trading day of each calendar quarter). The Company recognizes expense for ESPP purchase rights equal to the value of the 15% discount given on the purchase date.