Stock-Based Compensation and Employee Stock Plans

The Company has the ability to grant restricted shares of common stock, restricted stock units and options to purchase common stock under the 2012 Plan. As of February 2, 2019, shares of common stock available for future issuance pursuant to the 2012 Plan were 6,089,337 shares.

The following represents total stock-based compensation recognized in the Consolidated Statements of Income for the fiscal years presented (in thousands):



	2018		2017		2016
Stock option expense	$	7,147	$	8,686	$	9,506
Restricted stock expense	34,794		27,553		24,096
Total stock-based compensation expense	$	41,941	$	36,239	$	33,602
Total related tax benefit	$	9,104	$	12,130	$	11,718

Stock Options – Stock options are generally granted on an annual basis, vest 25% per year over four years and have a seven-year maximum term.

The fair value of each stock option granted is estimated on the grant date using the Black-Scholes ("Black-Scholes") option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and the Company's experience. These options are expensed on a straight-line basis over the vesting period, which is considered to be the requisite service period. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on the Company's historical experience and future expectations.

The fair value of stock-based awards to employees is estimated on the date of grant using the Black-Scholes valuation with the following assumptions:



	Employee Stock Option Plans
Black-Scholes Valuation Assumptions	2018			2017			2016
Expected life (years)⁽¹⁾	5.20			5.47			5.40
Expected volatility⁽²⁾	33.15% - 37.41%			29.24% - 33.86%			29.20% - 31.93%
Weighted average volatility	34.61		%	30.52		%	31.01		%
Risk-free interest rate⁽³⁾	2.55% - 3.04%			1.70% - 2.25%			1.07% - 1.90%
Expected dividend yield	2.40% - 2.82%			1.30% - 2.78%			1.03% - 1.59%
Weighted average grant date fair value	$	9.02		$	11.98		$	12.56


⁽¹⁾	The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.


⁽²⁾	Expected volatility is based on the historical volatility of the Company's common stock over a time frame consistent with the expected life of the stock options.


⁽³⁾	The risk-free interest rate is based on the implied yield available on U.S. Treasury constant maturity interest rates whose term is consistent with the expected life of the stock options.

The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and experience.

The stock option activity from January 30, 2016 through February 2, 2019 is presented in the following table:



	Shares Subject to Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, January 30, 2016	3,974,512		$	38.29	2.94	$	51,930
Granted	1,143,326		47.79
Exercised	(1,348,241	)	22.28
Forfeited / Expired	(208,512	)	50.01
Outstanding, January 28, 2017	3,561,085		$	46.71	3.88	$	22,638
Granted	786,246		45.28
Exercised	(582,022	)	28.43
Forfeited / Expired	(635,360	)	50.60
Outstanding, February 3, 2018	3,129,949		$	48.97	4.08	$	389
Granted	881,334		34.18
Forfeited / Expired	(880,856	)	45.96
Outstanding, February 2, 2019	3,130,427		$	45.65	4.07	$	1,783
Exercisable, February 2, 2019	1,511,580		$	50.53	2.65	$	184
Vested and expected to vest, February 2, 2019	2,917,529		$	46.22	3.95	$	1,486

The aggregate intrinsic value reported in the table above is based on the Company's closing stock prices for the last business day of the period indicated. The total intrinsic value for stock options exercised during 2017 and 2016 was $10.7 million and $36.4 million, respectively. The total fair value of options vested during 2018, 2017 and 2016 was $8.1 million, $9.6 million and $8.4 million, respectively. The nonvested stock option activity for the year ended February 2, 2019 is presented in the following table:



	Shares Subject to Options		Weighted Average Grant Date Fair Value
Nonvested, February 3, 2018	1,650,991		$	13.29
Granted	881,334		9.02
Vested	(572,972	)	14.13
Forfeited	(340,506	)	11.29
Nonvested, February 2, 2019	1,618,847		$	11.09

As of February 2, 2019, unrecognized stock-based compensation expense from nonvested stock options was approximately $10.4 million, net of estimated forfeitures, which is expected to be recognized over a weighted average period of approximately 2.42 years.

The Company issues new shares of common stock upon exercise of stock options.

Additional information regarding options outstanding as of February 2, 2019 is as follows:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$24.48 - $34.05	830,465	6.18	$	33.10	26,660	$	28.35
$35.22 - $47.09	945,577	3.41	46.07		589,971	46.49
$47.73 - $55.29	932,936	3.26	50.62		583,454	51.41
$55.49 - $58.86	421,449	3.23	58.44		311,495	58.41
$24.48 - $58.86	3,130,427	4.07	$	45.65	1,511,580	$	50.53

Restricted Stock – The Company issues shares of restricted stock to eligible employees, which are subject to forfeiture until the end of an applicable vesting period. The awards generally vest on the third anniversary of the date of grant, subject to the employee's continuing employment as of that date.

The restricted stock activity from January 30, 2016 through February 2, 2019 is presented in the following table:



	Shares		Weighted Average Grant Date Fair Value
Nonvested, January 30, 2016	2,204,980		$	50.97
Granted	789,460		47.89
Vested	(438,160	)	47.05
Forfeited	(196,240	)	51.23
Nonvested, January 28, 2017	2,360,040		$	50.64
Granted	2,228,573		41.47
Vested	(359,956	)	54.13
Forfeited	(624,420	)	49.38
Nonvested, February 3, 2018	3,604,237		$	44.84
Granted	1,616,600		33.96
Vested	(549,293	)	49.88
Forfeited	(1,213,927	)	45.05
Nonvested, February 2, 2019	3,457,617		$	38.88

As of February 2, 2019, total unrecognized stock-based compensation expense from nonvested shares of restricted stock, net of estimated forfeitures, was approximately $47.6 million before income taxes, which is expected to be recognized over a weighted average period of approximately 1.47 years.

During 2013, the Company issued a special grant of 1,185,793 shares of performance-based restricted stock in support of the Company's five-year strategic plan ("the 2013 Long-Term Incentive Plan"). These awards did not achieve the pre-established financial performance metrics by the end of the performance period, which ended on February 3, 2018. The remaining nonvested shares forfeited during fiscal 2018 and became available for issuance under the 2012 Plan.

During 2017, the Company issued a special grant of 674,209 shares of performance-based restricted stock in support of the Company's strategic initiatives ("the 2017 Long-Term Incentive Plan"). As of February 2, 2019, nonvested restricted stock outstanding included 383,807 shares of these performance-based awards. The Company expects 63,712 shares to vest so long as the award recipient remains with the Company through April 2020.