Share-Based Compensation

6 Months Ended

May 27, 2012

Share-Based Compensation

Share-Based Compensation

Note 3: Share-Based Compensation

        The Company maintains the 1998 Stock Option Plan ("1998 Plan") and the 2004 Stock Option Plan for Key Employees of Sealy Corporation and its Subsidiaries ("2004 Plan") which are collectively referred to as the "Option Plans". The Company accounts for all new share-based awards granted and outstanding using the fair value based method under FASB authoritative guidance surrounding share-based payments. Total share-based compensation recognized during the three and six months ended May 27, 2012 and May 29, 2011 was $2.3 million and $4.8 million, respectively, for fiscal 2012 and $2.9 million and $5.8 million, respectively, for fiscal 2011.

Stock Option Awards

        During the three and six months ended May 27, 2012 and May 29, 2011, the Company granted no new options to purchase shares of its common stock.

        A summary of outstanding options under the 1998 Plan as of May 27, 2012, is presented below:

	Shares Subject to Options			Weighted Average Exercise Price Per Share
Outstanding November 27, 2011		1,508,275		$	0.99
Exercised		(4,647	)		1.43
Forfeited		(3,176	)		3.41
Outstanding May 27, 2012 (all fully vested and exercisable)		1,500,452		$	0.98
Weighted average remaining contractual term		1.9 years
Aggregate intrinsic value of in-the-money options at May 27, 2012 (in thousands)	$	1,201

        A summary of outstanding options under the 2004 Plan as of May 27, 2012, is presented below:

	Shares Subject to Options			Weighted Average Exercise Price Per Share
Outstanding November 27, 2011		5,394,364		$	5.43
Exercised		(24,000	)	$	1.64
Forfeited		(31,881	)	$	5.76
Outstanding May 27, 2012		5,338,483		$	5.45
Weighted average remaining contractual term		3.1 years
Aggregate intrinsic value of in-the-money options (in thousands)	$	105
Exercisable at May 27, 2012		4,486,701
Weighted average remaining contractual term		3.1 years
Aggregate intrinsic value of in-the-money options (in thousands)	$	105

        As of May 27, 2012, the Company had approximately $0.4 million of unrecognized compensation expense related to stock option awards, which is expected to be recognized over a weighted average period of 1.6 years.

        The Company has granted stock options to employees that have accelerated vesting provisions which take effect if certain performance levels are achieved by the Company. If the Company does not meet these performance targets, then the vesting of the options occurs over the remainder of the requisite service period. As of May 27, 2012, the performance targets for certain of these stock options have not been met. As such, the related unrecognized compensation cost is being recognized over the remainder of the requisite service period.

Restricted Share Unit Awards

        During the three and six months ended May 27, 2012 and May 29, 2011, the Company approved the following grants of time-based restricted stock units ("RSUs"):

	Three months				Six months
	May 27, 2012		May 29, 2011		May 27, 2012		May 29, 2011
Number of awards granted		211,456		1,955,056		511,456		2,070,156
Weighted average grant date fair value	$	2.27	$	2.65	$	1.85	$	2.65

        The awards granted in fiscal 2012 and 2011 vest ratably over a requisite service period and do not contain an accretion factor. The fair value of the Company's RSU awards is based on the closing price of the Company's common stock as of the grant date. The Company has outstanding RSU awards of two types: 1) Time-based RSU awards that accrete in the number of RSUs at an annual rate of 8% payable semi-annually until the RSUs are vested or forfeited; and 2) Time-based RSU awards that vest ratably over a requisite service period. Certain of the Company's outstanding RSUs contain dividend participation rights and are considered participating securities for the purposes of calculating the Company's earnings per share.

        A summary of the outstanding unvested RSU awards by type as of May 27, 2012 follows:

	Number of Awards		Unrecognized Compensation Expense (in thousands)
Time-based vesting awards with accretion factor		7,428,975	$	1,697
Time-based vesting awards without accretion factor		3,022,735		3,161
Total		10,451,710	$	4,858

        A summary of restricted share unit award activity for the six months ended May 27, 2012, is presented below:

	Unvested Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding November 27, 2011		10,728,028		$	2.16
Granted		511,456			1.85
Vested		(334,866	)		2.16
Forfeited		(452,908	)		2.03
Outstanding May 27, 2012		10,451,710		$	2.16
Expected to vest, May 27, 2012		10,043,430		$	2.17
Weighted average remaining vesting period		4.5 years