Share-Based Compensation

3 Months Ended

May 02, 2021

Share-based Payment Arrangement, Noncash Expense [Abstract]

Financial Statement Effects and Presentation

Pre-tax share-based compensation was included in the Statements of Income as follows:


	Three Months Ended
(in thousands)	May 2, 2021		April 26, 2020
Cost of sales	$	718	$	530
Selling, general and administrative	7,359		5,959
Product development and engineering	3,762		2,890
Total share-based compensation	$	11,839	$	9,379

Restricted Stock Units, Employees

The Company grants restricted stock units to certain employees, which are expected to be settled with shares of the Company's common stock. The grant date for these awards is equal to the measurement date. These awards are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically 4 years). In the three months ended May 2, 2021, the Company granted 134,944 restricted stock units to employees.

Total Stockholder Return ("TSR") Market-Condition Restricted Stock Units

The Company grants TSR market-condition restricted stock units (the "TSR Awards") to certain executives of the Company. The TSR Awards have a pre-defined market-condition, which determines the number of shares that ultimately vest, as well as a service condition. The TSR Awards are valued as of the grant date using a Monte Carlo simulation which takes into consideration the possible outcomes pertaining to the TSR market condition and expense is recognized on a straight line basis over the vesting periods and is adjusted for any actual forfeitures.

In the three months ended May 2, 2021, the Company granted 81,688 TSR Awards, which are accounted for as equity awards. The market condition is determined based upon the Company’s TSR benchmarked against the TSR of the S&P SPDR Semiconductor ETF (NYSE:XSD) over one, two and three year periods (one-third of the awards vesting each performance period). Generally, the fiscal year 2022 award recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards. The grant-date fair value per unit of the awards granted in the three months ended May 2, 2021 for each one, two and three year performance period was $67.28, $83.94 and $95.52, respectively.

Market-Condition Restricted Stock Units

In the three months ended May 2, 2021, the Company granted 54,928 restricted stock units with a market condition. The awards are eligible to vest during the period commencing March 9, 2021, and ending May 5, 2024 (the "Performance Period") as follows: the restricted stock units covered by the award will vest if, during any consecutive 30 trading day period that commences and ends during the Performance Period, the average per-share closing price of the Company’s common stock equals or exceeds $95.00. The grant-date fair value per unit of the awards granted in the three months ended May 2, 2021 was $49.55.