Stock-Based Compensation

3 Months Ended

May 04, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

6. Stock-Based Compensation

The Company has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (the “2016 Plan”). The initial share reserve under the 2016 Plan was 5,725,538 shares of common stock. A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. At May 4, 2019 the Company had 2,341,884 shares available under the 2016 Plan.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are cancelled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis. At May 4, 2019, there are 784,251 stock options that remain outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the Company’s 2006 Plan and 2016 Plan, on a combined basis, for the first three months of fiscal 2019:

	Restricted shares			Restricted stock units ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Performance stock units ⁽⁴⁾		Total number of shares			Weighted-average grant-date fair value
Shares
Outstanding non-vested shares at beginning of year		30,000			1,372,628			204,040			—			—		1,606,668		$	2.93
Shares granted		—			390,299			19,371			29,410			720,000		1,159,080		$	1.83
Shares vested/issued		(10,000	)		(374,202	)		(2,575	)		(29,410	)		—		(416,187	)	$	3.39
Shares canceled		—			—			—			—			—		—		$	-
Outstanding non-vested shares at end of quarter		20,000			1,388,725			220,836			—			720,000		2,349,561		$	2.31

(1)

During the first quarter of fiscal 2019, the Company granted 150,299 RSUs in connection with the partial achievement of performance targets under the 2017-2018 LTIP, see Note 5, Long-Term Incentive Plans. In addition, the Company granted, as a signing award, 240,000 time-based RSUs to Mr. Kanter, which will vest equally over four years. As a result of net share settlement, of the 374,202 time-based RSUs which vested during the first quarter of fiscal 2019, only 295,788 shares of common stock were issued.

(2)

The 19,371 shares of deferred stock, with a fair value of $49,391, represent compensation to certain directors in lieu of cash, in accordance with their irrevocable elections. The shares of deferred stock will vest three years from the date of grant or at separation of service, based on the irrevocable election of each director.

(3)

During the first quarter of fiscal 2019, the Company granted 29,410 shares of stock, with a fair value of approximately $74,996, to certain directors as compensation in lieu of cash, in accordance with their irrevocable elections. Directors are required to elect 50% of their quarterly retainer in equity. Any shares in excess of the minimum required election are issued from the Company’s Fourth Amended and Restated Non-Employee Director Compensation Plan (“Non-Employee Director Compensation Plan”).

(4)

On February 19, 2019, the Company granted 720,000 shares of performance stock units (“PSUs”), with a fair value of $1.0 million, to Mr. Kanter. The PSUs vest in installments when the following milestones are met: one-third of the PSUs vest when the trailing 90-day volume-weighted average closing stock price (“VWAP”) is $4.00, one-third of the PSUs vest when the VWAP is $6.00 and one-third when the VWAP is $8.00. All PSUs will expire on April 1, 2023 if no performance metric is achieved. The $1.0 million is being expensed over the respective derived service periods of each tranche of 16 months, 25 months and 30 months, respectively. The respective fair value and derived service periods assigned to the PSUs were determined using a Monte Carlo model based on: the Company’s historical volatility of 55.9%, a term of 4.1 years, stock price on the date of grant of $2.50 per share, a risk-free rate of 2.5% and a cost of equity of 9.5%.

	Number of shares		Weighted-average exercise price per option		Weighted-average remaining contractual term	Aggregate intrinsic value
Stock Options
Outstanding options at beginning of year		957,400	$	4.50	5.1 years	$	16,878
Options granted		—		—			—
Options expired and canceled		—		—			—
Options exercised		—		—			—
Outstanding options at end of quarter		957,400	$	4.50	4.8 years	$	2,850
Options exercisable at end of quarter		849,808	$	4.76	4.2 years	$	1,900

Valuation Assumptions

For the first three months of fiscal 2019, the Company granted 720,000 PSUs, 390,299 RSUs and 19,371 shares of deferred stock. For the first three months of fiscal 2018, the Company granted 138,888 stock options, 56,080 shares of restricted stock, 305,161 RSUs and 21,494 shares of deferred stock.

Unless otherwise specified by the Compensation Committee, RSUs, restricted stock and deferred stock are valued using the closing price of the Company’s common stock on the day immediately preceding the date of grant.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. There were no stock options granted in the first quarter of fiscal 2019. The following assumptions were used for grants for the first quarter of fiscal 2018:

	May 5, 2018
Expected volatility		48.9	%
Risk-free interest rate		2.55	%
Expected life	4.5 yrs
Dividend rate		—

Non-Employee Director Compensation Plan

The Company granted 6,862 shares of common stock, with a fair value of approximately $17,498, to certain of its non-employee directors as compensation in lieu of cash in the first three months of fiscal 2019.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $0.4 million and $0.4 million for the first three months of fiscal 2019 and fiscal 2018, respectively. The total compensation cost related to time-vested stock options, restricted stock, RSU and PSU awards not yet recognized as of May 4, 2019 was approximately $3.3 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 30 months.