23. Share-based compensation

Signet operates several share based compensation plans which can be categorized as “Saving Share Plans,” “Omnibus Plans,” “Long-Term Incentive Plans,” and “Executive Plans.”

Saving Share Plans

Signet has three share option savings plans (collectively “the Plans”) available to employees as follows:

•

Employee Share Savings Plan, for US employees

•

Sharesave Plan, for UK employees

•

Irish Sharesave Plan for Republic of Ireland employees

The Plans are compensatory and compensation expense is recognized over the requisite service period. In any 10 year period not more than 10% of the issued Common Shares of the Company from time to time may, in aggregate, be issued or be issuable pursuant to options granted under the Plans or any other employees share plans adopted by Signet.

The Employee Share Savings Plan is a savings plan intended to qualify under US Section 423 of the US Internal Revenue Code and allows employees to purchase Common Shares at a discount of approximately 15% to the closing price of the New York Stock Exchange on the date of grant. Options granted under the Employee Share Savings Plan vest after 24 months and are generally only exercisable between 24 and 27 months of the grant date.

The Sharesave and Irish Sharesave Plans allow eligible employees to purchase Common Shares at a discount of approximately 20% below a determined market price based on the London Stock Exchange. The market price is determined as the average middle market price for the three trading days prior to the invitation date, or the market price on the day immediately preceding the participation date, or other market price agreed in writing, whichever is the higher value. Options granted under the Sharesave Plan and the Irish Sharesave Plan vest after 36 months and are generally only exercisable between 36 and 42 months from commencement of the related savings contract.

Omnibus Plans

In Fiscal 2010 Signet adopted the Omnibus Incentive Plan (the “Omnibus Plan”). Awards that may be granted under the Omnibus Plan include restricted stock, restricted stock units (“RSU’s”), stock options and stock appreciation rights. The Fiscal 2011, Fiscal 2012 and Fiscal 2013 Awards granted under the Omnibus Plan have two elements, time-based restricted stock and performance-based restricted stock units. The time-based restricted stock has a three year vesting period, subject to continued employment and has the same voting rights and dividend rights as Common Shares (which are payable once the shares have vested). Performance-based restricted stock units granted vest based upon the achievement of cumulative actual operating income as a percentage of targeted operating income for the relevant three year performance period. Performance is measured over a three year vesting period from the start of the fiscal year in which the award is granted. The Omnibus Plan permits the grant of awards to employees for up to 7,000,000 Common Shares.

Long-Term Incentive Plans (“LTIP’s”)

The Long-Term Incentive Plan 2000 was replaced by the Long-Term Incentive Plan 2005. LTIPs are subject to certain internal performance criteria and cannot be exercised unless there is achievement of an annual rate of compound growth in income before income taxes above the respective US and UK retail price indices at constant exchange rates of Signet for Signet executives, or, growth in divisional operating income for divisional executives, and, of return on capital employed (“ROCE”) of Signet or related division as appropriate. To the extent that the performance criteria are satisfied, the participant will receive a combination of share options and cash in equal value. Compensation expense is recognized over the three-year performance period for all plans and options granted have 10-year contractual terms. The Company’s LTIPs, which are shareholder approved, permit the grant of share options to employees for up to 10% of the Company’s issued Common Shares over any 10 year period of time, including any other employees share plans adopted by Signet or a maximum of 5% over 10 years including discretionary option plans. No awards have been granted under the LTIPs since the adoption of the Omnibus Incentive Plan in Fiscal 2010.

Executive Plans

Signet operates three 2003 executive share plans (the “2003 Plans”), together referred to as the “Executive Plans.” Option awards under the Executive Plans are generally granted with an exercise price equal to the market price of the Company’s shares at the date of grant. Options under the Executive Plans are subject to certain internal performance criteria and cannot be exercised unless Signet achieves an annual rate of compound growth in earnings per share above the retail price index. The performance criteria are measured over a three year period from the start of the fiscal year in which the award is granted. Effective from Fiscal 2008, grants awarded under the 2003 Plans, other than for employee directors, are no longer subject to the performance criteria. Signet’s Executive Plans, which are shareholder approved, permit the grant of share options to employees for up to 10% of the issued Common Shares over any 10 year period, including any other employees share plans adopted by Signet or a maximum of 5% over 10 years including discretionary option plans. A maximum of 8,568,841 shares may be issued pursuant to options granted to US participants in the Executive Plans. No awards have been granted under the Executive Plans since the adoption of the Omnibus Incentive Plan in Fiscal 2010.

Signet recognized total share-based compensation expense of $15.7 million in Fiscal 2013 (Fiscal 2012: $17.0 million; Fiscal 2011: $17.2 million). The Fiscal 2013, Fiscal 2012 and Fiscal 2011 expense includes $1.9 million, $4.4 million and $5.7 million, respectively, of share-based compensation incurred in connection with the Chief Executive Officer’s (“CEO”) employment agreement dated September 29, 2010, for amounts foregone from his former employment. Under this agreement, 289,554 shares valued at $12.5 million were granted based upon the mid-market closing price of Signet’s stock on January 18, 2011. Of the shares granted, 116,392 shares vested on January 19, 2011, 92,083 shares vested in Fiscal 2013, while 61,127 shares are expected to vest in Fiscal 2014 and 19,952 are expected to vest in Fiscal 2015, based on the vesting schedule of his foregone awards.

Tax benefits associated with share-based compensation expense in Fiscal 2013, Fiscal 2012 and Fiscal 2011 was $5.4 million, $5.7 million and $5.3 million, respectively. Unrecognized compensation cost related to non-vested share options and RSU’s by plan type are as follows:


	Unrecognized Compensation Cost
	2013		2012		2011
(in millions)
Omnibus Plans	$	14.6	$	16.3	$	11.0
Saving Share Plans		2.9		3.3		1.8
CEO Shares		0.4		2.3		6.7
Executive Plans		—		—		0.1
LTIPs		—		—		0.2

Total	$	17.9	$	21.9	$	19.8
Weighted average period of amortization		1.7 years		1.6 years		1.8 years

The Company either issues new shares or utilizes treasury shares to satisfy share option exercises under its plans. Cash received from the exercise of share options granted under Signet’s plans during Fiscal 2013, Fiscal 2012 and Fiscal 2011 was $21.6 million, $10.6 million and $11.3 million, respectively.

Share plan status


	Saving Share Plans					Omnibus Plans⁽¹⁾					Executive Plans
	No. of shares			WAEP⁽²⁾		No. of shares			WAEP⁽²⁾		No. of shares			WAEP⁽²⁾
	millions					millions					millions
Outstanding at January 28, 2012		0.4		$	26.10		1.5		$	—		0.8		$	37.97
Movements in period
Granted		0.1		$	41.17		0.4		$	—		—		$	—
Exercised		(0.1	)	$	22.82		(0.6	)	$	—		(0.5	)	$	35.78
Lapsed		(0.1	)	$	26.55		(0.1	)	$	—		—		$	—

Outstanding at February 2, 2013		0.3		$	32.48		1.2		$	—		0.3		$	39.07

Exercisable at January 28, 2012		—		$	—		—		$	—		0.8		$	37.97
Exercisable at February 2, 2013		—		$	—		—		$	—		0.3		$	39.07

(1)	Includes shares issued to the Chief Executive Officer, whose contract includes share based compensation for amounts foregone from his prior employment.

(2)	Weighted Average Exercise Price.

The weighted average share price at the date of exercise for share options exercised during Fiscal 2013 was $17.35 (Fiscal 2012: $32.13; Fiscal 2011: $39.83). The weighted average remaining contractual life (“WACL”) on outstanding shares was 1.9 years for the Saving Share Plans, 1.1 years for the Omnibus Plans and 3.4 years for the Executive Plans. The WACL on exercisable shares for the Executive Plans was 3.4 years.


	Saving Share Plans									Omnibus Plans
	2013			2012			2011			2013			2012			2011
Share price⁽¹⁾	$	49.89		$	40.09		$	33.17		$	47.15		$	44.33		$	35.18
Exercise price⁽¹⁾	$	41.17		$	28.32		$	26.49		$	—		$	—		$	—
Risk free interest rate		0.4	%		0.7	%		0.8	%		n/a			n/a			n/a
Expected life of options		2.7 years			3.0 years			2.9 years			2.9 years			2.9 years			2.9 years
Expected volatility		41	%		43	%		49	%		n/a			n/a			n/a
Dividend yield		1.4	%		1.0	%		1.6	%		1.2	%		0.7	%		0.7	%
Fair value⁽¹⁾	$	15.40		$	11.55		$	9.80		$	46.12		$	43.52		$	36.80

(1)	Weighted average.

The expected volatility is determined by calculating the historical volatility of Signet’s share price over the previous ten years. The expected life used in the model is based on the historical exercise behavior of the main categories of option recipients.

The total intrinsic value of awards outstanding and exercisable as of February 2, 2013 was $89.3 million and $6.5 million, respectively, and the aggregate intrinsic value for share options exercised during Fiscal 2013, Fiscal 2012 and Fiscal 2011 was $40.8 million, $8.8 million and $11.9 million respectively.