EQUITY COMPENSATION PLANS

3 Months Ended

May 04, 2013

EQUITY COMPENSATION PLANS

EQUITY COMPENSATION PLANS

NOTE 10—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 options activity under the Company’s plans for the thirteen weeks ended May 4, 2013:

	Number of Shares
Outstanding — beginning balance	1,678,593
Granted	308,963
Exercised	(3,418	)
Forfeited	(3,331	)
Expired	(9,855	)
Outstanding — ending balance	1,970,952

In the first quarter of fiscal 2013, the Company granted approximately 309,000 stock options with a weighted average grant date fair value of $5.11 per unit.  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 ended May 4, 2013 for the options granted was immaterial.  There were no options issued in the prior year first quarter.

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:

	May 4, 2013
Dividend yield	0.0	%
Expected volatility	52.5	%
Risk-free interest rate range:
High	0.73	%
Low	0.67	%
Ranges of expected lives in years	4 - 5

RESTRICTED STOCK UNITS

Performance Based Awards

In the first quarter of fiscal 2013, the Company granted approximately 109,000 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 2015. 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 2015. The fair value for these awards was $11.85 per unit at the date of the grant. The compensation expense recorded for these restricted stock units was immaterial during the thirteen weeks ended May 4, 2013.  There were no performance based award grants in the prior year first quarter.

Market Based Awards

In the first quarter of fiscal 2013, the Company granted approximately 55,000 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 2015. 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 $13.41 per unit grant date fair value. The compensation expense recorded for these restricted stock units during the thirteen weeks ended May 4, 2013 was immaterial.  There were no market based award grants in the prior year first quarter.

Other Awards

The Company granted restricted stock units for officers’ deferred bonus matches under the Company’s non-qualified deferred compensation plan during the first quarter of fiscal 2013, which vest over a three-year period. The fair value of the award was $46,000 and the compensation expense recorded for these awards during the thirteen weeks ended May 4, 2013 was immaterial.

The following table summarizes the nonvested units’ activity under the Company’s plan for the thirteen weeks ended May 4, 2013, assuming maximum vesting of underlying shares for the performance and market based awards described above:

	Number of Units
Beginning balance	796,600
Granted	272,342
Forfeited	(211,667	)
Vested	(9,547	)
Ending balance	847,728