EQUITY COMPENSATION PLANS

9 Months Ended

Oct. 27, 2012

EQUITY COMPENSATION PLANS

EQUITY COMPENSATION PLANS

NOTE 13—EQUITY COMPENSATION PLANS

The Company has stock-based compensation plans, under which it grants stock options and restricted stock units to key employees and members of its Board of Directors. The Company generally recognizes compensation expense on a straight-line basis over the vesting period.

STOCK OPTIONS

The following table summarizes the options under the Company’s plan:

	Number of Shares
Outstanding — January 28, 2012	2,008,430
Granted	287,574
Exercised	(247,553	)
Forfeited	(36,225	)
Expired	(274,216	)
Outstanding — October 27, 2012	1,738,010

In the first nine months of fiscal year 2012, the Company granted approximately 288,000 stock options with a weighted average grant date fair value of $4.65. These options have a seven-year term and vest over a three-year period with a third vesting on each of the first three anniversaries of their grant date. The compensation expense recorded during the thirteen weeks and thirty-nine weeks ended October 27, 2012, for the options granted was immaterial.

In the first nine months of fiscal year 2011, the Company granted approximately 265,000 stock options with a weighted average grant date fair value of $5.38. These options have a seven-year term and vest over a three-year period with a third vesting on each of the first three anniversaries of their grant date. The compensation expense recorded during the thirteen weeks and thirty-nine weeks ended October 29, 2011, for the options granted was immaterial.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility is based on historical volatilities for a time period similar to that of the expected term blended with market based implied volatility at the time of the grant. The risk-free rate is based on the U.S. treasury yield curve for issues with a remaining term equal to the expected term.

The following are the weighted-average assumptions:

	October 27, 2012		October 29, 2011
Dividend yield	0.0	%	1.0	%
Expected volatility	57.7	%	58.2	%
Risk-free interest rate range:
High	0.6	%	1.9	%

Low	0.5	%	1.6	%
Ranges of expected lives in years	4 - 5		4 - 5

RESTRICTED STOCK UNITS

Performance Based Awards

In the third quarter of fiscal 2012, the Company granted approximately 106,000 restricted stock units that will vest if the employees remain continuously employed through the third anniversary date of the grant and the Company achieves a return on invested capital target for fiscal year 2014. The number of underlying shares that may be issued upon vesting will range from 0% to 150%, depending upon the Company achieving the financial targets in fiscal year 2014. The fair value for these awards was $9.98 per unit at the date of the grant. The compensation expense recorded for these restricted stock units was immaterial during the thirteen weeks and thirty-nine weeks ended October 27, 2012.

In the first quarter of fiscal 2011, the Company granted approximately 95,000 restricted stock units that will vest if the employees remain continuously employed through the third anniversary date of the grant and the Company achieves a return on invested capital target for fiscal year 2013. The number of underlying shares that may be issued upon vesting will range from 0% to 150%, depending upon the Company achieving the financial targets in fiscal year 2013. The fair value for these awards was $12.48 per unit at the date of the grant. The compensation expense recorded for these restricted stock units during the thirteen weeks and thirty-nine weeks ended October 29, 2011 was immaterial.

In the third quarter of fiscal 2012, the Company concluded that it is not likely to achieve the financial targets for the performance based awards granted in fiscal 2010 and 2011 and accordingly, recorded a $0.9 million benefit to reverse the to-date compensation expense recognized for these awards.

Market Based Awards

In the third quarter of fiscal 2012, the Company granted approximately 53,000 restricted stock units that will vest if the employees remain continuously employed through the third anniversary date of the grant and will become exercisable if the Company satisfies a total shareholder return target for the three-year period ending with fiscal 2014. The number of underlying shares that may become exercisable will range from 0% to 175% depending upon whether the market condition is achieved. The Company used a Monte Carlo simulation to estimate a $7.96 per unit grant date fair value. The compensation expense recorded for these restricted stock units during the thirteen weeks and thirty-nine weeks ended October 27, 2012, was immaterial.

In the first quarter of fiscal 2011, the Company granted approximately 48,000 restricted stock units that will vest if the employees remain continuously employed through the third anniversary date of the grant and will become exercisable if the Company satisfies a total shareholder return target for the three-year period ending with fiscal 2013. The number of underlying shares that may become exercisable will range from 0% to 175% depending upon whether the market condition is achieved. The Company used a Monte Carlo simulation to estimate a $14.73 per unit grant date fair value. The compensation expense recorded for these restricted stock units during the thirteen weeks and thirty-nine weeks ended October 29, 2011, was immaterial.

Other Awards

The Company did not grant any restricted stock units for officers’ deferred bonus matches under the Company’s non-qualified deferred compensation plan during fiscal 2012. In the first quarter of fiscal 2011, the Company granted approximately 50,000 restricted stock units, related to officers’ deferred bonus matches under the Company’s non-qualified deferred compensation plan, which vest over a three year period. The fair value of the fiscal 2011 awards was $13.68 and the compensation expense recorded for these awards during the thirteen weeks and thirty-nine weeks ended October 29, 2011, was immaterial.

In the third quarter of fiscal 2012, the Company granted approximately 33,000 restricted stock units to its non-employee directors of the board, which vest over a one year period with a quarter vesting on each of the first four quarters following their grant date. The fair value was $9.98 per unit and the compensation expense recorded for these restricted stock units during the thirteen weeks and thirty-nine weeks ended October 27, 2012, was immaterial.  In the second quarter of fiscal 2011, the Company granted approximately 42,000 restricted stock units to its non-employee directors of the board that vested immediately. The fair value was $10.67 per unit and the compensation expense recorded for these awards during the thirteen weeks and thirty-nine weeks ended October 27, 2012, was immaterial.

The following table summarizes the units under the Company’s plan, assuming maximum vesting of underlying shares for the performance and market based awards described above:

	Number of RSUs
Nonvested — January 28, 2012	626,747
Granted	319,082
Forfeited	(69,180	)
Vested	(43,216	)
Nonvested — October 27, 2012	833,433