Stock Based Awards

12 Months Ended

Feb. 25, 2012

Stock-Based Awards [Abstract]

STOCK-BASED AWARDS

NOTE 9—STOCK-BASED AWARDS

As of February 25, 2012, the Company has stock options, restricted stock awards and performance awards (collectively referred to as “stock-based awards”) outstanding under the following plans: 2007 Stock Plan, 2002 Stock Plan, 1997 Stock Plan, 1993 Stock Plan, SUPERVALU/Richfood Stock Incentive Plan, Albertsons Amended and Restated 1995 Stock-Based Incentive Plan and the Albertsons 2004 Equity and Performance Incentive Plan. The Company’s 2007 Stock Plan, as approved by stockholders in May 2007, is the only plan under which stock-based awards may be granted. The 2007 Stock Plan provides that the Board of Directors or the Leadership Development and Compensation Committee of the Board (the “Compensation Committee”) may determine at the time of grant whether each stock-based award granted will be a non-qualified or incentive stock-based award under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The terms of each stock-based award will be determined by the Board of Directors or the Compensation Committee. Generally, stock-based awards granted prior to fiscal 2006 have a term of 10 years and effective in fiscal 2006, stock-based awards granted will not be for a term of more than seven years.

Stock options are granted to key salaried employees and to the Company’s non-employee directors to purchase common stock at an exercise price not less than 100 percent of the fair market value of the Company’s common stock on the date of grant. Generally, stock options vest over four years. Restricted stock awards are also awarded to key salaried employees. The vesting of restricted stock awards granted is determined at the discretion of the Board of Directors or the Compensation Committee. The restrictions on the restricted stock awards generally lapse between one and five years from the date of grant and the expense is recognized over the lapsing period. Performance awards as part of the long-term incentive program are granted to key salaried employees.

The Company reserved 35 shares for grant as part of the 2007 Stock Plan. As of February 25, 2012, there were 21 shares available for grant. Common stock is delivered out of treasury stock upon the exercise of stock-based awards. The provisions of future stock-based awards may change at the discretion of the Board of Directors or the Compensation Committee.

LTIP

In April 2011 the Company granted performance awards to employees under the SUPERVALU INC. 2007 Stock Plan as part of the Company’s LTIP. Payout of the award, if at all, will be based on the highest payout under the terms of the grant based on the increase in market capitalization over the service period, or the achievement of financial goals for the three-year period ending February 22, 2014. Awards will be settled equally in cash and the Company’s stock.

To determine the fair value under the performance grant, the Company uses the Monte Carlo method. The significant assumptions relating to the valuation of the Company’s LTIP performance awards consisted of the following:

	2012
Dividend yield		4.2 – 4.6	%
Volatility rate		47.0 – 51.6	%
Risk-free interest rate		0.3 – 1.2	%
Expected life		2.2 – 3.1 years

The grant date fair value of the award made during the first quarter of fiscal 2012 was $2.40 per share. The cash settled portion of the award is classified as a liability and is remeasured at fair value each reporting period. As of February 25, 2012 the fair value of the cash portion of the award was $0.57 per share. The minimum payout value of cash and stock is $0 and the aggregate maximum amount the Company could be required to payout is $177.

Stock Options

Stock options granted, exercised and outstanding consisted of the following:

	Shares Under Option (In thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value (In thousands)
Outstanding, February 26, 2011		22,004		$	29.40
Granted		—			—
Exercised		—			—
Canceled and forfeited		(3,591	)		32.06
Outstanding, February 25, 2012		18,413		$	28.90		2.62	$	—
Vested and expected to vest in future as of February 25, 2012		18,243		$	29.04		2.60	$	—
Exercisable as of February 25, 2012		15,475		$	31.32		2.21	$	—

The Company did not grant any shares under stock options during fiscal 2012. The weighted average grant date fair value of all stock options granted during fiscal 2011 and 2010 was $3.99 and $4.92 per share, respectively. No stock options were exercised during fiscal 2012. The total intrinsic value of stock options exercised during each of fiscal 2011 and 2010 was $1. Intrinsic value is measured using the fair market value as of the date of exercise for stock options exercised and the fair market value as of February 25, 2012, less the applicable exercise price.

The fair value of each stock option is estimated as of the date of grant using the Black-Scholes option pricing model. Expected volatility is estimated based on an average of actual historical volatility and implied volatility corresponding to the stock option’s estimated expected term. The Company believes this approach to determine volatility is representative of future stock volatility. The expected term of a stock option is estimated based on analysis of stock options already exercised and foreseeable trends or changes in behavior. The risk-free interest rates are based on the U.S. Treasury securities maturities as of each applicable grant date. The dividend yield is based on analysis of actual historical dividend yield.

The significant weighted average assumptions relating to the valuation of the Company’s stock options consisted of the following:

	2011			2010
Dividend yield		2.0	%		2.0	%
Volatility rate		42.8 – 50.2	%		38.4 – 42.2	%
Risk-free interest rate		1.1 – 1.8	%		1.8 – 2.8	%
Expected option life		4.0 – 5.4 years			4.0 – 5.4 years

Restricted Stock Awards

Restricted stock award activity consisted of the following:

	Restricted Stock (In thousands)			Weighted Average Grant-Date Fair Value
Outstanding, February 26, 2011		855		$	17.86
Granted		13			9.07
Lapsed		(400	)		10.22
Canceled and forfeited		(24	)		19.81
Outstanding, February 25, 2012		444		$	17.96

Compensation Expense

The components of pre-tax stock-based compensation expense (included primarily in Selling and administrative expenses in the Consolidated Statements of Earnings) and related tax benefits were as follows:

	2012			2011			2010
Stock-based compensation	$	13		$	15		$	31
Income tax benefits		(5	)		(6	)		(12	)
Stock-based compensation (net of tax)	$	8		$	9		$	19

The Company realized excess tax shortfalls of $2, $2, and $1 related to stock-based awards during fiscal 2012, 2011 and 2010, respectively.

Unrecognized Compensation Expense

As of February 25, 2012, there was $25 of unrecognized compensation expense related to unvested stock-based awards granted under the Company’s stock plans. The expense is expected to be recognized over a weighted average remaining vesting period of approximately two years.