Equity Compensation

12 Months Ended

Jan. 28, 2023

Equity Compensation

Equity Compensation

Note 8. Equity Compensation

Long-Term Stock Incentive Plan and Equity Compensation Expense

As of January 28, 2023, shares available for issuance under our Long-Term Stock Incentive Plan (the “Long- Term Stock Incentive Plan”) were less than 1 million shares, which includes the additional shares approved for grant under the Long-Term Stock Incentive Plan by shareholders in June 2022. The Long-Term Stock Incentive Plan allows us to grant equity-based awards to employees and non-employee directors in the form of, among other things, stock options, stock appreciation rights, restricted shares and/or restricted share units. No additional shares are available under any predecessor plans.

The specific provisions of restricted share awards are evidenced by agreements with the employee as determined by the compensation committee of our Board of Directors. Restricted shares and restricted share units granted to officers and other key employees in recent years generally vest three years from the date of grant if (1) the performance or market threshold, if any, was met and (2) the employee is still employed by us on the vesting date. The employee generally is restricted from transferring or selling any restricted shares or restricted share units and forfeits the awards upon the termination of employment prior to the end of the vesting period. The restricted share awards granted during Fiscal 2022 include certain clauses related to accelerated vesting upon the occurrence of qualifying retirement, death or disability of the employee prior to the vesting date, while the restricted share awards granted in prior years did not include such clauses.

In recent years, we have granted a combination of service-based restricted share awards and awards based on total shareholder return (“TSR”) to certain of our employees. As of January 28, 2023, there was $15 million of unrecognized compensation expense related to the unvested service-based and TSR-based restricted share awards included in the tables below, which have been granted to employees but have not yet vested. As of January 28, 2023, the weighted average remaining life of the outstanding awards was one year.

Service-Based and Performance-Based Restricted Share Awards

During Fiscal 2022, we granted service-based restricted share unit awards, while in prior years we granted service-based restricted shares. At the time that service-based restricted share unit awards are granted, the employee is generally, subject to the terms of the respective agreement, entitled to dividend equivalents, payable at the time of payment of any dividends paid on our common stock as long as the awards are outstanding, but do not have any voting rights. Whereas, at the time that service-based restricted share awards were issued, the shareholder is generally, subject to the terms of the respective agreement, entitled to the same dividend and voting rights as other holders of our common stock as long as the restricted shares are outstanding. In Fiscal 2019, we granted 42,000 performance-based awards, which were issued to employees as restricted shares in Fiscal 2020 upon satisfaction of the specified earnings per share performance requirements. At the time issued, the restricted shares still had a service requirement until the April 2022 vesting date.

The table below summarizes the service-based restricted share awards, including both restricted shares and restricted share units, and performance-based award activity for officers and other key employees during Fiscal 2022, Fiscal 2021, and Fiscal 2020 (which do not include the TSR-based Restricted Share Unit activity described below):

	Fiscal 2022			Fiscal 2021			Fiscal 2020
		Weighted-			Weighted-			Weighted-
	Number of	average		Number of	average		Number of	average
	Shares or	grant date		Shares	grant date		Shares	grant date
	Units	fair value		or Units	fair value		or Units	fair value
Awards outstanding at beginning of year	238,889	$	61	308,369	$	61	251,924	$	68
Awards granted	67,965	$	89	42,855	$	89	131,425	$	40
Performance-based awards issued related to prior year EPS-based performance awards	—	$	—	—	$	—	42,438	$	76
Awards vested, including awards repurchased from employees for employees’ tax liability	(83,324)	$	77	(81,283)	$	77	(114,003)	$	56
Awards forfeited	(10,585)	$	62	(31,052)	$	62	(3,415)	$	62
Awards outstanding at end of year	212,945	$	64	238,889	$	61	308,369	$	61

The following table summarizes information about unvested service-based restricted share awards, including both restricted shares and restricted share units, as of January 28, 2023.

	Number of	Average
	Unvested	Fair Value
	Share	on
Description	Awards	Date of Grant
Service-based restricted shares with July 2023 vesting date	111,665	$	41
Service-based restricted shares with May 2024 vesting date	35,755	$	89
Service-based restricted share units with May 2025 vesting date	65,525	$	89
Total service-based awards outstanding at end of year	212,945	$	64

Additionally, during the First Quarter of Fiscal 2023, we granted 0.1 million of service-based restricted share units, subject to the recipient remaining an employee through the May 2026 vesting date.

TSR-based Restricted Share Units

The table below summarizes the TSR-based restricted share unit activity for officers and other key employees (in units) during Fiscal 2022, Fiscal 2021, and Fiscal 2020:

	Fiscal 2022			Fiscal 2021			Fiscal 2020
		Weighted-			Weighted-			Weighted-
		average			average			average
	Number of	grant date		Number of	grant date		Number of	grant date
	Share Units	fair value		Share Units	fair value		Share Units	fair value
TSR-based awards outstanding at beginning of year	130,440	$	78	83,345	$	50	—	$	—
TSR-based awards granted	66,525	$	111	56,750	$	117	83,345	$	50
TSR-based awards forfeited	(925)	$	115	(9,655)	$	68	—	$	—
TSR-based awards outstanding at end of year	196,040	$	89	130,440	$	78	83,345	$	50

The restricted share units granted in the table above are at target. The TSR-based restricted share units are subject to (1) our achievement of a specified TSR-based ranking by us relative to a comparator group during a period of approximately three years from the date of grant and (2) generally the recipient remaining an employee through the vesting date which is approximately three years from the date of grant. The number of shares ultimately earned, which will be settled in shares of our common stock on the vesting date, will be between 0% and 200% of the restricted share units at target. These TSR-based restricted share units are entitled to dividend equivalents for dividends declared on our common stock prior to the vesting date, which are payable after vesting of the restricted shares, solely for the number of shares ultimately earned. These TSR-based restricted share units do not have any voting rights prior to the vesting date.

The following table summarizes information about unvested TSR-based restricted share units as of January 28, 2023.

	Unvested		Fair Value
	TSR-Based	on
Description	Share/Unit	Date of Grant
TSR-based restricted share units (at target) with July 2023 vesting date	76,340	$	50
TSR-based restricted share units (at target) with May 2024 vesting date	53,500	$	117
TSR-based restricted share units (at target) with May 2025 vesting date	66,200	$	111
Total TSR-based restricted share units outstanding at end of year	196,040	$	89

Additionally, during the First Quarter of Fiscal 2023, we granted 0.1 million of TSR-based restricted share units at target, subject to (1) our achievement of a specified TSR-based ranking by Oxford relative to a comparator group during a period of approximately three years from the date of grant and (2) the recipient remaining an employee through the May 2026 vesting date. The number of shares ultimately earned will be between 0% and 200% of the restricted share units at target.

Director Share Awards

In addition to shares granted to employees, we grant restricted share awards to our non-employee directors for a portion of each non-employee director’s annual compensation. The non-employee directors must complete certain service requirements; otherwise, the restricted shares are subject to forfeiture. On the date of issuance, the non-employee directors are entitled to the same dividend and voting rights as other holders of our common stock. The non-employee directors are restricted from transferring or selling the restricted shares prior to the end of the vesting period.

Employee Stock Purchase Plan

There were less than 1 million shares of our common stock authorized for issuance under our Employee Stock Purchase Plan ("ESPP") as of January 28, 2023. The ESPP allows qualified employees to purchase shares of our common stock on a quarterly basis, based on certain limitations, through payroll deductions. The shares purchased pursuant to the ESPP are not subject to any vesting or other restrictions. On the last day of each calendar quarter, the accumulated payroll deductions are applied toward the purchase of our common stock at a price equal to 85% of the closing market price on that date. Equity compensation expense related to the employee stock purchase plan recognized was less than $1 million in each of Fiscal 2022, Fiscal 2021 and Fiscal 2020.