9. Share-Based Compensation

The Company accounts for share-based compensation under the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”), which requires companies to measure and recognize compensation expense for all share-based payments at fair value. Total share-based compensation expense included in the Consolidated Statements of Operations for the 13 and 26 weeks ended July 28, 2012 was $7.1 million ($4.4 million, net of tax) and $28.0 million ($17.3 million net of tax), respectively and for the 13 and 26 weeks ended July 30, 2011 was $3.2 million ($2.0 million, net of tax) and $5.5 million ($3.4 million net of tax), respectively.

Stock Option Grants

The Company grants both time-based and performance-based stock options under its 2005 Stock Award and Incentive Plan. Time-based stock option awards vest over the requisite service period of the award or to an employee’s eligible retirement date, if earlier. Performance-based stock option awards vest over one year and are earned if the Company meets pre-established performance goals.

A summary of the Company’s stock option activity for the 26 weeks ended July 28, 2012 follows:


	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands)					(In years)		(In thousands)
Outstanding—January 28, 2012		11,197		$	15.31
Granted		1,046		$	14.26
Exercised (1)		(1,946	)	$	9.55
Cancelled		(597	)	$	14.62

Outstanding—July 28, 2012		9,700		$	16.39		2.2	$	55,957

Vested and expected to vest—July 28, 2012		9,579		$	16.41		2.2	$	55,261

Exercisable—July 28, 2012 (2)		6,425		$	13.88		1.7	$	45,242

(1)	Options exercised during the 26 weeks ended July 28, 2012 had exercise prices ranging from $4.54 to $20.62.

(2)	Options exercisable represent “in-the-money” vested options based upon the weighted average exercise price of vested options compared to the Company’s stock price at July 28, 2012.

The weighted-average grant date fair value of stock options granted during the 26 weeks ended July 28, 2012 and July 30, 2011 was $3.69 and $4.73, respectively. The aggregate intrinsic value of options exercised during the 26 weeks ended July 28, 2012 and July 30, 2011 was $15.0 million and $1.3 million, respectively.

Cash received from the exercise of stock options was $18.5 million for the 26 weeks ended July 28, 2012 and $2.7 million for the 26 weeks ended July 30, 2011. The actual tax benefit realized from stock option exercises totaled $4.4 million for the 26 weeks ended July 28, 2012 and $0.3 million for the 26 weeks ended July 30, 2011.

The fair value of stock options was estimated based on the closing market price of the Company’s common stock on the date of the grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


	26 Weeks Ended
Black-Scholes Option Valuation Assumptions	July 28, 2012			July 30, 2011
Risk-free interest rate (1)		0.6	%		2.1	%
Dividend yield		2.8	%		2.6	%
Volatility factor (2)		41.2	%		42.7	%
Weighted-average expected term (3)		4.0 years			5.0 years
Expected forfeiture rate (4)		8.0	%		8.0	%

(1)	Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of our stock options.

(2)	Based on a combination of historical volatility of the Company’s common stock and implied volatility.

(3)	Represents the period of time options are expected to be outstanding, based on historical experience.

(4)	Based upon historical experience.

As of July 28, 2012, there was $2.9 million of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted average period of 2.2 years.

Restricted Stock Grants

Time-based restricted stock awards are comprised of time-based restricted stock units. These awards vest over three years; however, they may be accelerated to vest over one year if the Company meets pre-established performance goals in the year of grant. Time-based restricted stock units receive dividend equivalents in the form of additional time-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

Performance-based restricted stock awards include performance-based restricted stock units. These awards cliff vest at the end of a three year period based upon the Company’s achievement of pre-established goals throughout the term of the award. Performance-based restricted stock units receive dividend equivalents in the form of additional performance-based restricted stock units, which are subject to the same restrictions and forfeiture provisions as the original award.

The grant date fair value of all restricted stock awards is based on the closing market price of the Company’s common stock on the date of grant.

A summary of the Company’s restricted stock activity is presented in the following tables:


	Time-Based Restricted Stock Units					Performance-Based Restricted Stock Units
	26 Weeks Ended July 28, 2012					26 Weeks Ended July 28, 2012
(Shares in thousands)	Shares			Weighted-Average Grant Date Fair Value		Shares			Weighted-Average Grant Date Fair Value
Nonvested - January 28, 2012		1,784		$	15.73		1,762		$	14.23
Granted		1,497			14.77		888			14.76
Vested		(1,074	)		16.65		—			—
Cancelled		(588	)		16.17		(401	)		11.70

Nonvested - July 28, 2012		1,619		$	14.07		2,249		$	14.89

As of July 28, 2012, there was $28.3 million of unrecognized compensation expense related to non-vested time-based restricted stock unit awards that is expected to be recognized over a weighted average period of 2.0 years.

Additionally, there was $17.0 million of unrecognized compensation expense related to performance-based restricted stock unit awards which will be recognized as achievement of performance goals is probable.

As of July 28, 2012, the Company had 23.4 million shares available for all equity grants.