10.STOCK COMPENSATION PLANS AND CAPITAL STOCK TRANSACTIONS:

General

In April 2012, the Board approved the Chico’s FAS, Inc. 2012 Omnibus Stock and Incentive Plan (the “Omnibus Plan”), which replaced the Chico’s FAS, Inc. 2002 Omnibus Stock and Incentive Plan and was approved by our shareholders, effective June 21, 2012. As of the effective date, the Omnibus Plan provided for 7.0 million shares of our common stock that may be delivered to participants and their beneficiaries in addition to approximately 3.5 million shares of our common stock available for future awards under prior plans. Awards under the Omnibus Plan may be in the form of restricted stock, restricted stock units, performance awards, stock options, and stock appreciation rights, in accordance with the terms and conditions of the Omnibus Plan. The terms of each award will be determined by the Compensation and Benefits Committee of the Board of Directors.

We have historically issued restricted stock, including non-vested restricted stock and performance-based restricted stock, performance-based stock units, and stock options. Shares of non-vested restricted stock and performance-based restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon, and are considered to be currently issued and outstanding. Performance-based stock units are not entitled to voting rights or dividends. Generally, stock-based awards vest evenly over three years; stock options generally have a 10-year term. As of February 1, 2014, approximately 2.6 million nonqualified stock options are outstanding under the Omnibus Plan and approximately 9.0 million shares remain available for future grants of stock-based awards.

Stock-based compensation expense for all awards is based on the grant date fair value of the award, net of estimated forfeitures, and is recognized over the requisite service period of the awards. Compensation expense for restricted stock awards and stock options with a service condition is recognized on a straight-line basis over the requisite service period. Compensation expense for performance-based awards with a service condition is recognized ratably for each vesting tranche based on our estimate of the level and likelihood of meeting certain Company-specific performance goals. We estimate the expected forfeiture rate for all stock-based awards, and only recognize expense for those shares expected to vest. In determining the portion of the stock-based payment award that is ultimately expected to be earned, we derive forfeiture rates based on historical data. In accordance with the authoritative guidance, we revise our forfeiture rates, when necessary, in subsequent periods if actual forfeitures differ from those originally estimated. Total compensation expense related to stock-based awards in fiscal 2013, 2012 and 2011 was $27.1 million, $26.5 million and $15.2 million, respectively. The total tax benefit associated with stock-based compensation for fiscal 2013, 2012 and 2011 was $10.4 million, $10.1 million and $5.8 million, respectively.

Restricted Stock Awards

Restricted stock activity for fiscal 2013 was as follows:


	Number of Shares	Weighted Average Grant Date Fair Value

Unvested, beginning of period	3,066,264	$	13.27
Granted	2,228,050		16.99
Vested	(1,045,674)		13.70
Canceled	(365,506)		15.00
Unvested, end of period	3,883,134		15.13

Performance-based restricted stock activity for fiscal 2013 was as follows:


	Number of Shares	Weighted Average Grant Date Fair Value

Unvested, beginning of period	34,444	$	13.69
Granted	-		-
Vested	(17,222)		13.69
Canceled	-		-
Unvested, end of period	17,222		13.69

Total fair value of shares of restricted stock and performance-based restricted stock that vested during fiscal 2013, 2012 and 2011 was $17.6 million, $13.3 million and $5.3 million, respectively. The weighted average grant date fair value of restricted stock and performance-based restricted stock granted during the fiscal 2013, 2012 and 2011 was $16.99, $15.40, and $12.65, respectively. As of February 1, 2014, there was $33.2 million of unrecognized stock-based compensation expense related to non-vested restricted stock and performance-based restricted stock awards. That cost is expected to be recognized over a weighted average period of 2.4 years and 0.1 years for restricted stock and performance-based restricted stock, respectively. For performance-based restricted stock outstanding all relevant performance conditions have been met.

Performance-based Stock Units

Performance-based stock unit activity for fiscal 2013 was as follows:


	Number of Shares	Weighted Average Grant Date Fair Value

Unvested, beginning of period	657,316	$	15.01
Granted	756,050		16.59
Vested	(267,829)		15.01
Canceled	(659,602)		16.82
Unvested, end of period	485,935		15.01

Total fair value of performance-based stock units that vested during fiscal 2013 was $4.5 million. The weighted average grant date fair value of performance-based stock units granted during the fiscal 2013 and 2012 was $16.59 and $15.01, respectively. No performance-based stock units were granted in fiscal 2011. There was $1.3 million of unrecognized stock-based compensation expense related to performance-based stock units expected to vest. That cost is expected to be recognized over a weighted average period of approximately 1.0 years.

Stock Option Awards

We used the Black-Scholes option-pricing model to value our stock options. No stock options have been issued since 2011. Using this option-pricing model, the fair value of each stock option award was estimated on the date of grant. The fair value of the stock option awards, which are subject to pro-rata vesting generally over 3 years, is expensed on a straight-line basis over the vesting period of the stock options. The expected volatility assumptions were based on the historical volatility of the stock over a term equal to the expected term of the option granted. The expected terms of stock option awards granted were derived from historical exercise experience under the stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. The expected term assumption incorporates the contractual term of an option grant, which is ten years, as well as the vesting period of an award, which is generally pro-rata vesting over three years. The risk-free interest rates were based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted. The expected dividend yields were based on the expected annual dividend divided by the market price of our common stock at the time of declaration.

The weighted average assumptions relating to the valuation of our stock options for fiscal 2011 were as follows:



Weighted average fair value of grants	$	6.49
Expected volatility		66%
Expected term (years)		4.5 years
Risk-free interest rate		1.8%
Expected dividend yield		1.5%

Stock option activity for fiscal 2013 was as follows:


	Number of Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding, beginning of period	3,851,830	$	15.91
Granted	-		-
Exercised	(780,656)		12.56
Canceled or expired	(428,905)		23.70
Outstanding, end of period	2,642,269	$	15.63	5.01	$	9,174
Vested and expected to vest at February 1, 2014	2,627,964	$	15.65	5.00	$	9,111
Exercisable at February 1, 2014	2,243,041	$	16.04	4.63	$	7,861

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the excess, if any, of the closing stock price on the last trading day of fiscal 2013 and the exercise price, multiplied by the number of such in-the-money options) that would have been received by the option holders had all option holders exercised their options on February 1, 2014. This amount changes based on the fair market value of our common stock. Total intrinsic value of options exercised during fiscal 2013, 2012 and 2011 (based on the difference between our stock price on the respective exercise date and the respective exercise price, multiplied by the number of respective options exercised) was $4.3 million, $20.8 million and $5.2 million, respectively.

As of February 1, 2014, there was $0.4 million of total unrecognized compensation expense related to unvested stock options. That expense is expected to be recognized over a weighted average period of 0.4 years.

Cash received from option exercises for fiscal 2013 was $9.8 million. The actual tax benefit realized for the tax deduction from option exercises of stock option awards totaled $1.7 million for fiscal 2013.

Employee Stock Purchase Plan

We sponsor an employee stock purchase plan (“ESPP”) under which substantially all full-time employees are given the right to purchase shares of our common stock during each of the two specified offering periods each fiscal year at a price equal to 85 percent of the value of the stock immediately prior to the beginning of each offering period. During fiscal 2013, 2012 and 2011, approximately 187,000, 132,000, and 72,000 shares, respectively, were purchased under the ESPP. Cash received from purchases under the ESPP for fiscal 2013 was $2.6 million.

Share Repurchase Program

During fiscal 2013, we repurchased 13.8 million shares, at a total cost of approximately $245.0 million. On December 19, 2013, we announced that our Board approved a new $300 million share repurchase program of our outstanding common stock, and cancelled in its entirety the prior $300 million share repurchase program, which had $55.0 million remaining. However, we have no continuing obligation to repurchase shares under this authorization, and the timing, actual number and value of any additional shares to be purchased will depend on the performance of our stock price, market conditions and other considerations.