Stock-based Compensation

Omnibus Incentive Plan

In November 2018, the Board of Directors approved the amendment of the Company’s 2016 Omnibus Incentive Plan, as amended and restated on December 10, 2015 (the “Omnibus Incentive Plan”). The amendment to the 2016 Omnibus Incentive Plan was approved by the Company’s shareholders and became effective on December 14, 2018 to increase the aggregate number of shares that may be issued under the plan by an additional 0.7 million shares to 4.2 million. The 2016 Omnibus Incentive Plan provides for the granting of service-based and performance-based stock awards as well as performance-based cash incentive awards. The 2016 Omnibus Incentive Plan expires in November 2025.

As of February 1, 2020, there were approximately 1.1 million shares remaining under the 2016 Omnibus Incentive Plan available for future grants. The Company issues new shares of common stock when stock option awards are exercised and restricted stock units vest.

Impact on Results

A summary of the total compensation expense and associated income tax benefit recognized related to stock-based compensation arrangements on a consolidated basis is as follows:



	Three Months Ended				Six Months Ended
	February 1, 2020		February 2, 2019		February 1, 2020		February 2, 2019
	(millions)				(millions)
Compensation expense	$	0.8	$	3.6	$	2.4	$	8.3
Income tax benefit	$	—	$	0.7	$	—	$	1.7

Service-based Stock Options

The Company’s weighted-average assumptions used to estimate the fair value of stock options granted during the periods presented were as follows:



	Six Months Ended
	February 1, 2020			February 2, 2019
Expected term (years)	5.2			5.2
Expected volatility	61.6		%	47.5		%
Risk-free interest rate	1.6		%	2.9		%
Expected dividend yield	—		%	—		%
Weighted-average grant date fair value	$	2.75		$	35.65

A summary of the stock option activity under the service-based plans during the six months ended February 1, 2020 is as follows:



	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms	Aggregate Intrinsic Value ^(a)
	(thousands)				(years)	(millions)
Options outstanding – August 3, 2019	850.4		$	156.00	4.1	$	—
Granted	274.6		5.13
Exercised	—		—
Canceled/Forfeited	(378.3	)	185.56
Options outstanding – February 1, 2020	746.7		$	85.54	4.9	$	—

Options vested and expected to vest at February 1, 2020 ^(b)	707.4		$	89.98	4.9	$	—
Options exercisable at February 1, 2020	402.3		$	139.70	3.8	$	—

_______


^(a)	The intrinsic value is the amount by which the market price at the end of the period of the underlying share of stock exceeds the exercise price of the stock option.


^(b)	The number of options expected to vest takes into consideration estimated expected forfeitures.

As of February 1, 2020, there was $2.3 million of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of 0.9 years. There were no options exercised during the three and six months ended February 1, 2020 and the total intrinsic value of options exercised during the three and six months ended February 2, 2019 was de minimus. The total grant date fair value of options that vested during the six months ended February 1, 2020 and February 2, 2019 was approximately $5.0 million and $9.3 million, respectively.

Market-based Stock Options

Market-based non-qualified stock options (“NQSO Awards”) entitle the holder to receive options to purchase shares of common stock of the Company during the vesting period. However, such awards are subject to the grantee’s continuing employment and the Company’s achievement of certain market-based goals over the pre-defined performance period.

The NQSOs Awards’ fair value is determined using a Monte-Carlo simulation model on the grant date. A Monte-Carlo simulation model estimates the fair value of the market-based awards granted in the three months ended February 1, 2019 based on an expected term of 7.0 years, a risk-free interest rate of 1.5%, an expected dividend yield of zero and an expected volatility measure of 62.9% for the Company. Compensation expense for NQSOs Awards is recognized over the vesting period regardless of whether the market conditions are expected to be achieved.

As of February 1, 2020, there were a total of 0.2 million NQSO Awards outstanding with an average exercise price of $23.15 per share. The total unrecognized compensation at February 1, 2020 was $0.7 million to be recognized over 2.3 years. There were no vestings of the NQSOs Awards as of February 1, 2020.

Service-based Restricted Equity Awards

A summary of restricted equity awards activity during the six months ended February 1, 2020 is as follows:



	Service-based Restricted Equity Awards
	Number of Shares		Weighted- Average Grant Date Fair Value Per Share
	(thousands)
Nonvested at August 3, 2019	67.4		$	91.42
Granted	—		—
Vested	(28.0	)	113.32
Canceled/Forfeited	(7.5	)	89.03
Nonvested at February 1, 2020	31.9		$	72.78

As of February 1, 2020, there was $0.5 million of total unrecognized compensation cost related to the service-based Restricted Equity Awards, which is expected to be recognized over a remaining weighted-average vesting period of 0.5 years.

Market-based Restricted Equity Awards

Market-based Restricted Equity Awards entitle the holder to receive shares of common stock of the Company during the vesting period. However, such awards are subject to the grantee’s continuing employment and the Company’s achievement of certain market-based goals over the pre-defined performance period. The market-based Restricted Equity Awards fair value is determined using a Monte-Carlo simulation model on the grant date. Compensation expense for market-based Restricted Equity Awards is recognized over the vesting period regardless of whether the market conditions are expected to be achieved.

The Company issued no grants of market-based Restricted Equity Awards during the second quarter of Fiscal 2020. As of February 1, 2020, there were a total of 0.1 million Restricted Equity Awards outstanding which had a weighted average grant date fair value of $9.35 per share. The total unrecognized compensation at February 1, 2020 was $1.0 million to be recognized over 2.3 years. There were no vestings of the market-based Restricted Equity Awards as of February 1, 2020.