Stock-Based Compensation

The Company had one stock incentive plan under which shares were available for grant at August 3, 2013: the 2005 Stock Incentive Plan (the “2005 Plan”). The Company previously granted share awards under its 1996 Long-Term Incentive Plan (the “1996 Plan”) and the 2000 Stock Incentive Plan (the “2000 Plan”) that remain unvested and/or unexercised as of August 3, 2013; however, the 1996 Plan expired during fiscal 2006 and the 2000 Plan expired during fiscal 2009, and no further share awards may be granted under the 1996 Plan and 2000 Plan. The 2005 Plan, the 2000 Plan, and the 1996 Plan are collectively referred to as the “Plans.”

The 2005 Plan permits the granting of options, restricted common stock, performance shares awards, restricted and performance stock units, or other equity-based awards to the Company’s employees, officers, directors, and consultants. The Company believes the granting of equity-based awards helps to align the interests of its employees, officers and directors with those of its stockholders. The Company has a practice of issuing new shares to satisfy stock option exercises, as well as for restricted stock, performance share grants and other awards made or settled in the form of Company stock. The 2005 Plan was approved by the Company’s stockholders on January 10, 2005, as amended with stockholder approval on July 20, 2005, for the issuance of incentive awards covering 12,500,000 shares of Class A common stock. Additionally, an amended and restated 2005 Plan was approved by the Company’s stockholders on May 19, 2010, which increased the incentive awards capacity to 17,500,000 shares of Class A common stock. An aggregate of 22,557,528 shares of Class A common stock have been issued or may be issued pursuant to the Plans. As of August 3, 2013, 4,548,424 shares were available for future grants under the Plan.

Stock Options

The Plans provide that the per-share exercise price of a stock option may not be less than the fair market value of the Company’s Class A common stock on the date the option is granted. Under the Plans, outstanding options vest over periods ranging from three to five years from the grant date and expire from five to ten years after the grant date. Certain stock option and other equity-based awards provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. The Company uses historical data, the implied volatility of market-traded options and other factors to estimate the expected price volatility, option lives, and forfeiture rates.

The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant and the estimated life of the option. The following weighted-average assumptions were used to estimate the fair value of options granted during the periods indicated using the Black-Scholes option-pricing model:



	13 Weeks Ended				26 Weeks Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
Dividend Yield	—	%	—	%	—	%	—	%
Expected Volatility	40.73	%	46.47	%	40.92	%	48.87	%
Risk-Free Interest Rate	0.70	%	0.45	%	0.56	%	0.48	%
Expected Life of Options (in Years)	3.3		3.3		3.3		3.3

At August 3, 2013, there was $0.4 million of total unrecognized compensation expense related to nonvested stock options under the Company’s share-based payment plans, which will be recognized over an average period of 1.8 years, representing the remaining vesting periods of such options through fiscal 2016.

The following table summarizes the Company’s stock option activities with respect to its Plans for the 26 weeks ended August 3, 2013, as follows (aggregate intrinsic value in thousands):



Options	Number of Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at February 2, 2013	1,564,167		$	4.29
Granted	150,000		$	3.78
Exercised	(150,863	)	$	3.54
Canceled	(606,437	)	$	4.97
Outstanding at August 3, 2013	956,867		$	3.93	3.07	$	621
Vested and expected to vest in the future at August 3, 2013	897,202		$	3.94	2.99	$	571
Exercisable at August 3, 2013	521,817		$	4.07	2.54	$	318

Options vested and expected to vest in the future is comprised of all options outstanding at August 3, 2013, net of estimated forfeitures. Additional information regarding stock options outstanding as of August 3, 2013, is as follows:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding as of August 3, 2013	Weighted- Average Remaining Contractual Life (in years)	Weighted- Average Exercise Price Per Share		Number Exercisable as of August 3, 2013	Weighted- Average Exercise Price Per Share
$ 2.66 - $ 4.09	492,001	3.14	$	3.22	280,995	$	3.32
$ 4.15 - $ 6.82	457,866	3.05	$	4.58	233,822	$	4.79
$ 8.67 - $ 10.95	7,000	0.17	$	10.46	7,000	$	10.46
$ 2.66 - $ 10.95	956,867	3.07	$	3.93	521,817	$	4.07

The weighted-average grant-date fair value of options granted during the 13 and 26 weeks ended August 3, 2013, and July 28, 2012, was $1.37, $1.13, $0.98 and $1.10, respectively. The total intrinsic values for options exercised during the 13 and 26 weeks ended August 3, 2013, and July 28, 2012, was $0.2 million, $0.2 million, none and less than $0.1 million, respectively.

Cash received from option exercises under all Plans for the 26 weeks ended August 3, 2013, and July 28, 2012, was $0.5 million and less than $0.1 million, respectively. The Company did not realize tax benefits for the tax deductions from option exercises as it must first utilize its regular NOL prior to realizing the excess tax benefits.

Restricted Common Stock, Restricted Stock Units, Performance Share Awards, and Performance Stock Units

Under the 2005 Plan, the Company grants directors, certain executives, and other key employees restricted common stock and restricted stock units with vesting contingent upon completion of specified service periods ranging from one to three years. The Company also grants certain executives and other key employees performance share awards and performance stock units with vesting contingent upon a combination of specified service periods and the Company’s achievement of specified corporate performance objectives. Restricted stock units and performance stock units awarded to employees represent the right to receive one share of the Company's Class A common stock upon vesting.

During the 26 weeks ended August 3, 2013, and July 28, 2012, the Company granted 234,759 and 174,580 shares, respectively, of restricted common stock to certain employees and directors under the Plans. The weighted-average grant-date fair value of the restricted common stock granted during the 26 weeks ended August 3, 2013, and July 28, 2012, was $3.03 and $3.58 per share, respectively. Additionally, the Company granted 97,126 restricted stock units to certain employees during the 26 weeks ended August 3, 2013 with a weighted-average grant-date fair value of $3.34 per share.

During the 26 weeks ended August 3, 2013, the Company granted 261,533 performance share awards under the 2005 Plan, with a grant-date fair value of $2.95 per share. Additionally, the Company granted 183,758 performance stock units to certain employees during the 26 weeks ended August 3, 2013, with a weighted-average grant-date fair value of $3.09 per share, with the opportunity of an additional 26,446 performance stock units to be earned if certain corporate performance objectives are achieved, which are not included in the total outstanding share awards below.

The fair value of nonvested restricted common stock awards, restricted stock units, performance share awards and performance stock units is equal to the specified grant date price of the Company’s Class A common stock on the grant date. The following table summarizes activity with respect to the Company’s nonvested restricted common stock, restricted stock units, performance share awards and performance stock units during the 26 weeks ended August 3, 2013:



Nonvested Restricted Common Stock, Restricted Stock Units, Performance Share Awards, and Performance Stock Units	Number of Shares		Weighted-Average Grant-Date Fair Value
Nonvested at February 2, 2013	644,492		$	2.89
Granted	777,176		$	3.01
Vested	(30,000	)	$	3.34
Forfeited	(49,601	)	$	3.08
Nonvested at August 3, 2013	1,342,067		$	2.94

At August 3, 2013, there was $2.3 million of total unrecognized compensation expense related to nonvested restricted common stock, restricted stock units, performance share awards, and performance stock units under the Company’s share-based payment plans, of which $1.9 million relates to restricted common stock and performance stock awards, and $0.4 million relates to restricted and performance stock units. That cost is expected to be recognized over a weighted-average period of 2.3 years. These estimates utilize subjective assumptions, which depend upon achievement of a combination of specified service periods and performance objectives. The number of shares to vest, and the related stock-based compensation expense to be incurred, may differ dependent upon actual performance objectives achieved. Therefore, the amount of unrecognized compensation expense noted above does not necessarily represent the expense that will ultimately be recognized by the Company in its condensed consolidated statements of operations.

The following tables summarize stock-based compensation recorded in the condensed consolidated statements of operations (in thousands):



	13 Weeks Ended				26 Weeks Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
Stock options	$	73	$	595	$	122	$	880
Restricted and performance stock awards and units	403		403		723		1,112
Stock-based compensation	$	476	$	998	$	845	$	1,992



	13 Weeks Ended				39 Weeks Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
Cost of sales	$	72	$	69	$	122	$	135
Selling, general, and administrative expenses	404		929		723		1,857
Stock-based compensation	$	476	$	998	$	845	$	1,992