Share-Based Compensation

3 Months Ended

May 02, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Equity Incentive Plan

Effective July 26, 2002, the Company adopted the 2002 Equity Incentive Plan (the “Plan”) pursuant to which the Company’s board of directors may grant stock options, restricted shares, and restricted stock units to officers, directors, key employees and professional service providers. The Plan, as amended, allows for the issuance of up to a total of 7,600,000 shares under the Plan. As of May 2, 2015, 3,787,175 stock options, restricted shares, or restricted stock units were available for grant.

Common Stock Options

All stock options have a term not greater than ten years. Stock options vest and become exercisable in whole or in part, in accordance with vesting conditions set by the compensation committee of the Company’s board of directors. Options granted to date generally vest over four years from the date of grant.

Stock option activity under the Plan was as follows:



	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)
Balance as of January 31, 2015	1,160,934		$	24.80	8.0
Granted	116,894		28.58
Forfeited	(51,247	)	34.82
Exercised	(56,150	)	6.55
Balance as of May 2, 2015	1,170,431		25.61		7.9
Exercisable as of May 2, 2015	396,932		$	12.25	6.8

The fair value of each option award granted to employees, including outside directors, is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



	Thirteen Weeks Ended
	May 2, 2015		May 3, 2014
Expected volatility	47.0	%	50.0	%
Risk-free interest rate	1.8	%	1.9	%
Expected life of options	6.4 years		6.4 years
Expected dividend yield	—	%	—	%

The Company uses the simplified method to estimate the expected term of the option. The expected volatility incorporates historical and implied volatility of similar entities whose share prices are publicly available. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The per-share weighted average grant-date fair value of stock options granted to employees, including outside directors, for the thirteen weeks ended May 2, 2015 and May 3, 2014 was $13.67 and $18.82, respectively.

Restricted Stock Units and Performance-Based Restricted Stock Units

All restricted stock units ("RSU") and performance-based restricted stock units ("PSU") vest in accordance with vesting conditions set by the compensation committee of the Company’s board of directors. RSU's granted to date have vesting periods ranging from less than one year to five years from the date of grant. PSU's granted to date vest 100% at the end of a cumulative three year performance period, subject to satisfaction of the applicable performance goals established for the respective grant. The Company periodically assesses the probability of achievement of the performance criteria and adjusts the amount of compensation expense accordingly. Compensation is recognized over the vesting period and adjusted for the probability of achievement of the performance criteria.

RSU and PSU activity during the thirteen weeks ended May 2, 2015 was as follows:



	Restricted Stock Units			Performance-Based Restricted Stock Units
	Number		Weighted-Average Grant Date Fair Value	Number	Weighted-Average Grant Date Fair Value
Non-vested balance as of January 31, 2015	147,770		35.95	392,181	38.20
Granted	92,578		28.58	85,282	28.58
Forfeited	(774	)	38.71	—	—
Non-vested balance as of May 2, 2015	239,574		33.09	477,463	36.48

As of May 2, 2015, there was $30.4 million of total unrecognized compensation costs related to non-vested share-based compensation arrangements (including stock options, restricted stock units and performance-based restricted stock units) granted under the Plan. That cost is expected to be recognized over a weighted average vesting period of 3.2 years.