Stockholders' Equity

3 Months Ended

Mar. 31, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 15—Stockholders’ Equity

Preferred Stock

The Company has authorized an aggregate of 20,000,000 shares of preferred stock, par value $0.01 per share, of which 112,500 shares are designated as Series A preferred stock, par value $0.01 per share. There were no shares of preferred stock issued and outstanding as of March 31, 2012, December 31, 2011 and April 2, 2011.

Share Repurchase Programs

During September 2011, the Company’s Board of Directors approved a multi-year share repurchase program (the “2011 Share Repurchase Program”) for up to $200,000 of the Company’s outstanding common stock. During the Three Months Ended March 31, 2012, the Company did not repurchase any shares under the 2011 Share Repurchase Program, leaving $188,674 of common stock to be repurchased.

On May 12, 2010, the Company’s Board of Directors authorized a share repurchase program (the “2010 Share Repurchase Program”) for the repurchase of up to 5,000,000 shares of the Company’s common stock. During the Three Months Ended April 2, 2011, the Company repurchased 560,842 shares of its common stock under the 2010 Share Repurchase Program for $29,150 (based on an average of $51.97 per share). There are no shares of the Company’s common stock available for repurchase under the 2010 Share Repurchase Program.

Stock Incentive Plans

The Company granted 295,449 and 342,600 stock options during the Three Months Ended March 31, 2012 and the Three Months Ended April 2, 2011, respectively. The fair values of stock options granted during the Three Months Ended March 31, 2012 and the Three Months Ended April 2, 2011 were estimated as of the dates of grant using the Black-Scholes-Merton option pricing model with the following assumptions:

	Three Months Ended
	March 31, 2012			April 2, 2011
Weighted average risk free rate of return (a)		0.62	%		1.66	%
Dividend yield		—			—
Expected volatility of the market price of the Company’s common stock		56.0	%		57.7	%
Expected option life (years)		4.1			4.1

(a) based on the quoted yield for U.S. five-year treasury bonds as of the date of grant.

A summary of stock-based compensation expense is as follows:

	Three Months Ended
	March 31, 2012		April 2, 2011
Stock-based compensation expense before income taxes:
Stock options	$	2,028	$	3,821
Restricted stock grants		3,395		7,526
Total		5,423		11,347
Income tax benefit:
Stock options		682		1,366
Restricted stock grants		453		2,263
Total		1,135		3,629
Stock-based compensation expense after income taxes:
Stock options		1,346		2,455
Restricted stock grants		2,942		5,263
Total	$	4,288	$	7,718

A summary of stock option award activity under the Company’s stock incentive plans as of and for the Three Months Ended March 31, 2012 is presented below:

	Options			Weighted Average Exercise Price
Outstanding as of December 31, 2011		1,886,925		$	38.35
Granted		295,449			56.53
Exercised		(479,112	)		27.39
Forfeited / Expired		(21,335	)		49.63
Outstanding as of March 31, 2012		1,681,927		$	44.52
Options Exercisable as of March 31, 2012		1,009,827		$	38.82

A summary of the activity for unvested restricted share/unit awards under the Company’s stock incentive plans (excluding Performance Awards, defined below) as of and for the Three Months Ended March 31, 2012 is presented below:

	Restricted shares/units			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2011		859,766		$	39.77
Granted		176,847			56.58
Vested		(258,101	)		29.58
Forfeited		(17,614	)		46.80
Unvested as of March 31, 2012		760,898		$	46.96

During the Three Months Ended March 31, 2012 and the Three Months Ended April 2, 2011, share-based compensation awards granted to certain of the Company’s officers under Warnaco Group’s 2005 Stock Incentive Plan included 55,557 and 80,050 performance-based restricted stock/restricted unit awards, respectively, (“Performance Awards”) in addition to the service-based stock options and restricted stock awards, included in the preceding tables. The Performance Awards include both a performance condition and a market condition (see Note 1 of Notes to Consolidated Financial Statements—Nature of Operations and Summary of Significant Accounting Policies – Stock-Based Compensation in the Company’s Annual Report on Form 10-K for Fiscal 2011 for further details on the Performance Awards).

Under the performance condition, the estimated compensation expense is based on the grant date fair value (the closing price of the Company’s common stock on the date of grant) and the Company’s current expectations of the probable number of Performance Awards that will ultimately be earned. The fair value of the Performance Awards under the market condition on the respective grant dates ($1,893 as of March 6, 2012 and $3,245 as of March 1, 2011) is based upon a Monte Carlo simulation model, which encompasses the Company’s relative total shareholder return (“TSR”) (change in closing price of the Company’s common stock on the New York Stock Exchange compared to that of a peer group of companies (“Peer Companies”)) during the Measurement Period. The Measurement Period includes both:

(i) the period from the beginning of Fiscal 2012 to March 6, 2012 (the grant date) for Performance Awards granted on March 6, 2012, and the period from the beginning of Fiscal 2011 to March 1, 2011 (the grant date) for Performance Awards granted on March 1, 2011, for which actual TSR’s are calculated; and

(ii) the periods from the respective grant dates to the end of the fiscal years ending 2013 or 2014, respectively, a total of 2.82 years and 2.83 years, respectively,(the “Remaining Measurement Period”), for which simulated TSR’s are calculated.

The calculation of simulated TSR’s under the Monte Carlo model for the Remaining Measurement Period for Performance Awards granted on March 6, 2012 and on March 1, 2011 included the following assumptions:

	March 6, 2012	March 1, 2011
Weighted average risk free rate of return	0.38%	1.07%
Dividend yield	—	—
Expected volatility - Company (a)	38.26%	61.50%
Expected volatility - Peer Companies	28.3% - 74.8%	38.2% - 113.4%
Remaining measurement period (years)	2.82	2.83

(a) Expected volatility—Company for Performance Awards granted on March 6, 2012 and on March 1, 2011 is based on a Remaining Measurement Period of 2.82 years and 2.83 years, respectively.

The Company recorded compensation expense for the Performance Awards during the Three Months Ended March 31, 2012 and the Three Months Ended April 2, 2011 based on the performance condition.

Performance Award activity for the Three Months Ended March 31, 2012 was as follows:

	Performance Shares			Weighted Average Grant Date Fair Value
Unvested as of December 31, 2011		154,500		$	49.65
Granted		55,557			56.54
Vested		—			—
Forfeited		(1,450	)		55.57
Unvested as of March 31, 2012		208,607		$	51.44