Stock Based Compensation

12 Months Ended

Feb. 03, 2018

Share-based Compensation [Abstract]

Stock Based Compensation

Note 10 – Stock Based Compensation

Compensation Plan Summaries

At our 2017 annual meeting of shareholders held on June 13, 2017, our shareholders approved a new equity incentive plan, the Shoe Carnival, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which replaces our 2000 Stock Option and Incentive Plan, as amended (the “2000 Plan”). We may issue stock options, stock appreciation rights, restricted stock, stock units and other stock-based awards to eligible participants under the 2017 Plan. According to the terms of the 2017 Plan, upon approval of the 2017 Plan by our shareholders, no further awards may be made under the 2000 Plan. A maximum of 1,000,000 shares of our common stock are available for issuance and sale under the 2017 Plan. In addition, any shares of our common stock subject to an award granted under the 2017 Plan, or to an award granted under the 2000 Plan that was outstanding on the date our shareholders approved the 2017 Plan, that expires, is cancelled or forfeited, or is settled for cash will, to the extent of such cancellation, forfeiture, expiration or cash settlement, automatically become available for future awards under the 2017 Plan.

Stock-based compensation includes stock options, cash-settled stock appreciation rights (SARs), restricted stock awards and restricted stock units. Stock options that were outstanding under the 2000 Plan typically were granted such that one-third of the shares underlying the stock options granted would vest and become fully exercisable on each of the first three anniversaries of the date of the grant and were assigned a 10-year term from the date of grant.  During fiscal 2017, all remaining stock options were exercised.

Restricted stock awards issued to employees are classified as either performance-based or service-based.  Performance-based restricted stock awards historically were granted such that they vest upon the achievement of specified levels of annual earnings per diluted share during a six-year period starting from the grant date.  Should the annual earnings per diluted share criteria not be met within the six-year period from the grant date, any shares still restricted will be forfeited. In fiscal 2016, we granted performance-based restricted stock awards that vest on March 31, 2019 if we achieve a specified level of annual earnings per diluted share in any of fiscal 2016, 2017 or 2018. Should the annual earnings per diluted share criteria not be met in any of three fiscal years, the restricted stock awards will be forfeited on March 31, 2019.  In fiscal 2017, we granted performance-based restricted stock awards with two-thirds vesting on March 31, 2019, and one third vesting on March 31, 2020. The number of shares vesting depends on whether the cumulative diluted earnings per share for fiscal 2017 and fiscal 2018 meet the threshold, target, or maximum levels. If performance goals are not achieved, the restricted stock will be forfeited.

Service-based restricted stock awards and restricted stock units typically are granted under one of four vesting periods: (a) one-third of the shares would vest on each of the first three anniversaries subsequent to the date of the grant; (b) the full award would vest at the end of a 5-year service period subsequent to the date of grant; (c) the full award would vest at the end of a 2-year service period subsequent to the date of grant; or (d) for our Directors, all restricted stock awards are issued to vest on January 2^nd. of the year following the year of the grant. Awards that contain both performance and service-based conditions require that the performance target be met during the required service period.

Under the 2017 Plan, all dividends paid with respect to shares subject to the non-vested portion of a restricted stock award are subject to the same restrictions and risk of forfeiture as the shares of restricted stock to which such dividends relate. Recipients of restricted stock units will be entitled to receive dividend equivalents, based on dividends actually declared and paid, on the restricted stock units, and such dividend equivalents will be subject to the same restrictions and risk of forfeiture as the restricted stock units. For awards granted under the 2000 Plan, all shares of non-vested service-based restricted stock provide non-forfeitable rights to all dividends declared by the Company and dividends on non-vested performance-based restricted stock are subject to deferral until such times as the shares vest and are released.

Plan Specific Activity and End of Period Balance Summaries

Stock Options

No stock options have been granted since fiscal 2008. All outstanding options had vested as of the end of fiscal 2011, therefore no unrecognized compensation expense remains.

The following table summarizes stock option transactions pursuant to our stock-based compensation plans:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at January 28, 2017		7,000		$	7.63
Granted		0
Forfeited or expired		0
Exercised		(7,000	)		7.63
Outstanding and exercisable at February 3, 2018		0		$	0.00		0.00	$	0

The following table summarizes information regarding options exercised:

(In thousands)	2017		2016		2015
Total intrinsic value (1)	$	127	$	0	$	229
Total cash received	$	54	$	0	$	155
Associated excess income tax benefits recorded	$	0	$	0	$	57

(1) Defined as the difference between the market value at exercise and the grant price of stock options exercised.

Restricted Stock

The following table summarizes transactions for our restricted stock awards pursuant to our stock-based compensation plans:

	Number of Shares			Weighted- Average Grant Date Fair Value
Restricted stock at January 28, 2017		964,858		$	22.63
Granted		274,346			24.09
Vested		(148,308	)		23.87
Forfeited		(174,971	)		18.67
Restricted stock at February 3, 2018		915,925		$	23.62

The total fair value at grant date of restricted stock awards that vested during fiscal 2017, 2016 and 2015 was $3.5 million, $1.4 million and $478,000, respectively. The weighted-average grant date fair value of stock awards granted during fiscal 2016 and fiscal 2015 was $24.98 and $24.43, respectively.

The following table summarizes transactions for our restricted stock units pursuant to our stock-based compensation plans:

	Number of Shares		Weighted- Average Grant Date Fair Value
Restricted stock units at January 28, 2017		0	$	0.00
Granted		4,000		19.55
Vested		0		0.00
Forfeited		0		0.00
Restricted stock units at February 3, 2018		4,000	$	19.55

The following table summarizes information regarding stock-based compensation expense recognized for restricted stock awards and restricted stock units:

(In thousands)	2017		2016		2015
Stock-based compensation expense before the recognized income tax benefit	$	5,041	$	3,507	$	3,340
Income tax benefit	$	2,490	$	1,322	$	1,274

The $5.0 million of expense recognized in fiscal 2017 included a $1.9 million cumulative catch-up of expense in the fourth quarter for awards which were deemed by management as probable to vest that previously were determined as not probable to vest prior to their expiration. This was partially offset by an expense reversal of $916,000 attributable to the first quarter reversal of the cumulative prior period expense for performance-based awards, which were deemed by management as not probable to vest prior to their expiration.

As of February 3, 2018, there was approximately $4.4 million of unrecognized compensation expense remaining related to both our performance-based and service-based restricted stock awards and restricted stock units. The cost is expected to be recognized over a weighted average period of approximately 1.2 years. This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.

Cash-Settled Stock Appreciation Rights

Our outstanding Cash-Settled Stock Appreciation Rights (SARs) were granted during the first quarter of fiscal 2015 to certain non-executive employees, such that one-third of the shares underlying the SARs will vest and become fully exercisable on each of the first three anniversaries of the date of the grant and were assigned a five-year term from the date of grant, after which any unexercised SARs will expire. Each SAR entitles the holder, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined. The SARs granted during the first quarter of fiscal 2015 were issued with a defined maximum gain of $10.00 over the exercise price of $24.26. Cash-settled SARs are accounted for as liability awards and classified as Other liabilities on the Consolidated Balance Sheets.

The following table summarizes SARs activity:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Outstanding at January 28, 2017		111,300		$	24.26
Granted		0			0
Forfeited		(4,375	)		24.26
Exercised		(3,450	)		24.26
Outstanding at February 3, 2018		103,475		$	24.26		2.1
Exercisable at February 3, 2018		59,541		$	24.26		2.1

The fair value of liability awards are remeasured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards.

The fair value was estimated using a trinomial lattice model with the following assumptions:

	February 3, 2018		January 28, 2017		January 30, 2016
Risk free interest rate yield curve		1.40% - 2.58%		0.49% - 1.94%		0.22% - 1.33%
Expected dividend yield		1.3%		1.1%		1.0%
Expected volatility		39.21%		35.51%		36.05%
Maximum life		2.1 Years		3.1 Years		4.1 Years
Exercise multiple		1.34		1.34		1.34
Maximum payout		$10.00		$10.00		$10.00
Employee exit rate		2.2% - 9.0%		2.2% - 9.0%		2.2% - 9.0%

The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our quarterly cash dividends in fiscal 2017, with the assumption that quarterly dividends would continue at the current rate. Expected volatility was based on the historical volatility of our stock. The exercise multiple and employee exit rate are based on historical option data.

The following table summarizes information regarding stock-based compensation recognized for SARs:

(In thousands)	2017			2016		2015
Stock-based compensation before the recognized income tax effect	$	(61	)	$	276	$	321
Income tax effect	$	(30	)	$	104	$	123

As of February 3, 2018, approximately $9,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over the two month period following February 3, 2018.