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Stock-Based Compensation
6 Months Ended
Jul. 30, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-Based Compensation

NOTE 14—STOCK-BASED COMPENSATION

The Company estimates the value of equity grants based upon an option-pricing model and recognizes this estimated value as compensation expense over the vesting periods. The Company recognizes expense associated with performance-based awards when it becomes probable that the performance condition will be met. Once it becomes probable that an award will vest, the Company recognizes compensation expense equal to the number of shares which are probable to vest multiplied by the fair value of the related shares measured at the grant date.

Stock-based compensation expense is included in selling, general and administrative expenses on the condensed consolidated statements of operations. The Company recorded stock-based compensation expense of $10.3 million and $6.3 million during the three months ended July 30, 2016 and August 1, 2015, respectively. The Company recorded stock-based compensation expense of $14.3 million and $11.6 million during the six months ended July 30, 2016 and August 1, 2015, respectively. No stock-based compensation cost has been capitalized in the accompanying condensed consolidated financial statements.

2012 Stock Option Plan and 2012 Stock Incentive Plan

As of July 30, 2016, 8,782,871 options were outstanding with a weighted-average exercise price of $49.23 per share and 5,458,093 options were vested with a weighted-average exercise price of $50.59 per share. The aggregate intrinsic value of options outstanding, options vested or expected to vest, and options exercisable as of July 30, 2016 was $7.2 million, $6.1 million, and $2.2 million, respectively. Stock options exercisable as of July 30, 2016 had a weighted-average remaining contractual life of 7.48 years. As of July 30, 2016, the total unrecognized compensation expense related to unvested options was $52.0 million, which is expected to be recognized on a straight-line basis over a weighted-average period of 4.26 years.

As of July 30, 2016, the Company had 1,182,588 restricted stock units outstanding with a weighted-average grant date fair value of $56.42 per share. During the three months ended July 30, 2016, 113,944 restricted stock units with a weighted-average grant date fair value of $61.50 per share vested. During the six months ended July 30, 2016, 128,032 restricted stock units with a weighted-average grant date fair value of $62.14 per share vested. As of July 30, 2016, there was $48.0 million of total unrecognized compensation expense related to unvested restricted stock and restricted stock units which is expected to be recognized over a weighted-average period of 3.99 years.

2012 Stock Incentive Plan Grant to Waterworks Associates

On May 27, 2016, on the date of our acquisition of Waterworks, the Company granted stock options to certain Waterworks associates under the 2012 Stock Incentive Plan to purchase 322,784 shares of its common stock, with an exercise price of $33.54 per share, which is equal to the closing price of the Company’s common stock on the date of grant. These options are fully vested as of the date of grant but any shares issued upon exercise of such options will be subject to selling restrictions which are scheduled to lapse in five equal installments on the first, second, third, fourth and fifth anniversaries of the grant date. The fully vested options resulted in a one-time non-cash stock-based compensation charge of $3.7 million in the three and six months ended July 30, 2016.

Rollover Units

In connection with the acquisition of Waterworks, $1.5 million rollover units in the Waterworks subsidiary (the “Rollover Units”) were recorded as part of the transaction. The Rollover Units are subject to the terms of the Waterworks LLC agreement, including redemption rights at an amount equal to the greater of (i) the $1.5 million remitted as consideration in the business combination or (ii) an amount based on the percentage interest represented in the overall valuation of the Waterworks subsidiary (the “Appreciation Rights”). The Appreciation Rights are measured at fair value and are subject to fair value measurements during the expected life of the Rollover Units, with changes to fair value recorded in the condensed consolidated statements of operations. The fair value of the Appreciation Rights is determined based on an option pricing method (“OPM”). The Company did not record any expense related to the Appreciation Rights during the three and six months ended July 30, 2016. As of July 30, 2016, the liability associated with the Rollover Units and related Appreciation Rights was $1.5 million, which is included in other non-current obligations on the condensed consolidated balance sheets.

Profit Interests

In connection with the acquisition of Waterworks, profit interests units in the Waterworks subsidiary (the “Profit Interests”) were issued to certain Waterworks associates. The Profit Interests are measured at their grant date fair value and expensed on a straight-line basis over their expected life, or five years. The Profit Interests are subject to fair value measurements during their expected life, with changes to fair value recorded in the condensed consolidated statements of operations. The fair value of the Profit Interests is determined based on an OPM. For the three and six months ended July 30, 2016 the Company recorded $0.1 million related to the Profit Interests, which is included in selling, general and administrative expenses on the condensed consolidated statements of operations. As of July 30, 2016, the liability associated with the Profit Interests was $0.1 million, which is included in other non-current obligations on the condensed consolidated balance sheets.