Shareholders' Equity

3 Months Ended

Apr. 28, 2012

Shareholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

8. SHAREHOLDERS’ EQUITY

Common Stock

In connection with certain lease modifications during fiscal 2011, the Company issued 900,000 shares of its common stock to one of its landlords. The fair value on the date of issuance was approximately $1.6 million, which is being amortized on a straight-line basis as a component of occupancy costs over the respective rent reduction period.

Preferred Stock

In conjunction with the Term Loan, the Company issued the Series B Preferred to an affiliate of Golden Gate Capital which, based on the initial conversion ratio, gives that affiliate the right to purchase up to 13.5 million shares of the Company’s common stock. The Series B Preferred shares have an exercise price initially equal to $1.75 per share of the Company’s underlying common stock. The initial holder of the Series B Preferred is entitled to customary registration rights with respect to the underlying common stock. See Note 9, “Fair Value Measurements – Recurring Fair Value Measurements” for further discussion on the accounting treatment of the Series B Preferred.

Stock-Based Compensation

The Company maintains two stock-based incentive plans: (1) the 2005 Performance Incentive Plan (the “Performance Plan”) and (2) the amended and restated Employee Stock Purchase Plan (the “ESPP”). The types of awards that may be granted under the Performance Plan include stock options, stock appreciation rights, restricted stock, and other forms of awards granted or denominated in the Company’s common stock or units of the Company’s common stock. Persons eligible to receive awards under the Performance Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under the Performance Plan is determined at the date of grant. Each award expires on a date determined at the date of grant; however, the maximum term of options and stock appreciation rights under the Performance Plan is ten years after the grant date of the award. As of April 28, 2012, the maximum number of shares of the Company’s common stock that was available for award grants under the Performance Plan was 2.9 million shares. Any shares subject to awards under prior stock plans that are canceled, forfeited or otherwise terminate without having vested or been exercised, as applicable, will become available for other award grants under the Performance Plan. The Performance Plan will terminate on March 22, 2015, unless terminated earlier by the Company’s Board of Directors.

Stock Options

The Company accounts for stock-based compensation expense in accordance with ASC Topic 718, Stock Compensation (“ASC 718”). The Company uses the Black-Scholes option-pricing model to estimate the grant date fair value of its stock-based compensation expense. Forfeitures are estimated at the date of grant based on historical rates and reduce the compensation expense to be recognized during the vesting period. The expected term of options granted is derived primarily from historical data on employee exercises adjusted for expected changes to option terms, if any. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. Expected volatility is based primarily on the historical volatility of the Company’s common stock. The Company records stock-based compensation expense using the straight-line method over the vesting period, which is generally three to four years. The Company’s stock-based awards generally begin vesting one year after the grant date and, for stock options, expire in seven to ten years or three months after termination of employment with the Company. The Company’s stock-based compensation expense resulted from awards of stock options, restricted stock, and stock appreciation rights, as well as from shares purchased under the ESPP.

The fair value of the Company’s stock-based compensation activity was determined using the following weighted- average assumptions:

	For the First Quarter Ended
	April 28, 2012						April 30, 2011
	Stock Options			ESPP			Stock Options			ESPP
Expected life		4 years			0.5 years			4 years			0.5 years
Expected volatility		87	%		87	%		83	%		60	%
Risk-free interest rate		0.92	%		0.65	%		1.6	%		0.29	%
Expected dividends	$	—		$	—		$	—		$	—

Under the Company’s stock option plans, incentive and nonqualified options have been granted to employees and directors to purchase common stock at prices equal to the fair value of the Company’s shares at the respective grant dates. A summary of stock option (incentive and nonqualified) activity for the first quarter of fiscal 2012 is presented below:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Yrs.)		Aggregate Intrinsic Value ($000s)
Outstanding at January 28, 2012		2,990,501		$	6.61
Granted		14,000			1.77
Exercised		—			—
Forfeited or expired		(240,734	)		13.70
Outstanding at April 28, 2012		2,763,767		$	5.97		4.2	$	6
Vested and expected to vest at April 28, 2012		2,530,519		$	6.17		4.1	$	5
Exercisable at April 28, 2012		1,378,036		$	8.07		3.5	$	3

The weighted-average grant-date fair value per share of options granted during the first quarter of fiscal 2012 and 2011 was $1.77 and $3.55, respectively. There were no stock options exercised during the first quarter of 2012 and 2011.

Restricted Stock Awards

A summary of restricted stock awards activity under the Company’s 2005 Plan for the first quarter of fiscal 2012 is presented in the following table. Except as described below, such restricted stock awards contain a time-based restriction as to vesting. These awards generally vest over four years with 25% of the grant vesting each year on the anniversary of the grant date.

	Shares			Weighted- Average Grant-Date Fair Value
Outstanding at January 28, 2012		765,523		$	3.91
Granted		2,112,532			1.77
Vested		(162,461	)		4.47
Forfeited or expired		(93,236	)		4.14
Outstanding at April 28, 2012		2,622,358		$	2.27

Included in the number of restricted stock awards granted during the first quarter of fiscal 2012 are 675,000 shares which only vest upon the achievement of certain performance-based financial targets.

The weighted-average grant-date fair value per share of restricted stock awards granted during the first quarter of 2012 and 2011 was $1.77 and $3.55, respectively. The total fair value of awards vested during the first quarter of 2012 and 2011 was $0.3 million each.

Restricted Stock Units

A summary of restricted stock units activity under the Company’s 2005 Plan for the first quarter of fiscal 2012 is presented below. Restricted stock units contain a time-based restriction as to vesting. These awards generally vest 100% on the first anniversary of the grant date.

	Shares		Weighted- Average Grant-Date Fair Value
Outstanding at January 28, 2012		150,000	$	3.19
Granted		—		—
Vested		—		—
Forfeited or expired		—		—
Outstanding at April 28, 2012		150,000	$	3.19

Stock-based compensation expense related to nonvested stock options, restricted stock awards and restricted stock units recognized in the first quarter of fiscal 2012 and 2011, was $0.8 million and $0.9 million, respectively.

At April 28, 2012, the Company had approximately $4.5 million of compensation cost related to nonvested stock options, restricted stock awards and restricted stock units not yet recognized. This unearned compensation expense is expected to be recognized over a weighted-average period of approximately 2.8 years.

Employee Stock Purchase Plan (“ESPP”)

The Company’s ESPP, provides a method for Company employees to voluntarily purchase Company common stock at a 10% discount from fair market value as of the beginning or the end of each six-month purchasing period, whichever is lower. The ESPP covers substantially all employees who have three months of service with the Company, excluding senior executives. The ESPP is intended to constitute an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code of 1986, as amended.

During the first quarters of fiscal 2012 and 2011, the Company issued 104,435, and 84,232 shares at an average price of $1.58 and $2.92, respectively, under the ESPP.