Common Shares And Stock Based Compensation

12 Months Ended

Feb. 28, 2011

Common Shares And Stock Based Compensation [Abstract]

COMMON SHARES AND STOCK BASED COMPENSATION

NOTE 15 – COMMON SHARES AND STOCK BASED COMPENSATION

At February 28, 2011 and 2010, common shares authorized consisted of 187,600,000 Class A and 15,832,968 Class B common shares.

Class A common shares have one vote per share and Class B common shares have ten votes per share. There is no public market for the Class B common shares of the Corporation. Pursuant to the Corporation’s Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. While it is the Corporation’s general policy to repurchase Class B common shares whenever they are offered by a holder, if the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer, other than to a permitted transferee.

Total stock-based compensation expense, recognized in “Administrative and general expenses” on the Consolidated Statement of Operations, was $13,017 ($10,204 net of tax), which reduced earnings per share and earnings per share – assuming dilution by $0.26 and $0.25 per share, respectively, during the year ended February 28, 2011. During 2010, total stock-based compensation expense was $5,819 ($3,648 net of tax), which reduced both earnings per share and earnings per share – assuming dilution by $0.09 per share. During 2009, total stock-based compensation expense was $4,369 ($2,738 net of tax), which reduced both earnings per share and earnings per share – assuming dilution by $0.06 per share.

Under the Corporation’s stock option plans, options to purchase common shares are granted to directors, officers and other key employees at the then-current market price. In general, subject to continuing service, options become exercisable commencing twelve months after the date of grant in annual installments and expire over a period of not more than ten years from the date of grant. The Corporation generally issues new shares when options to purchase Class A common shares are exercised and treasury shares when options to purchase Class B common shares are exercised.

Stock option transactions and prices are summarized as follows:

	Number of Class A Options			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at February 28, 2010		5,305,132		$	19.00
Granted		587,394			24.52
Exercised		(1,010,493	)		23.92
Cancelled		(348,102	)		21.70
Outstanding at February 28, 2011		4,533,931		$	16.01		6.0	$	14,260
Exercisable at February 28, 2011		3,557,127		$	20.96		5.5	$	8,291

	Number of Class B Options			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at February 28, 2010		1,210,520		$	20.19
Granted		118,375			24.69
Exercised		(162,500	)		24.91
Outstanding at February 28, 2011		1,166,395		$	19.96		5.7	$	2,578
Exercisable at February 28, 2011		865,187		$	22.96		5.2	$	639

The fair value of the options granted is estimated using the Black-Scholes option-pricing model with the following assumptions:

	2011			2010			2009
Risk-free interest rate		1.4	%		1.3	%		2.5	%
Dividend yield		2.3	%		6.0	%		2.7	%
Expected stock volatility		0.81			0.71			0.31
Expected life in years		2.3			2.4			2.4

The weighted average fair value per share of options granted during 2011, 2010 and 2009 was $10.43, $2.83 and $3.13, respectively. The total intrinsic value of options exercised was $9,377, $1,985 and $116 in 2011, 2010 and 2009, respectively.

During 2009, approximately 60,000 performance shares were awarded to certain executive officers under the American Greetings 2007 Omnibus Incentive Compensation Plan (the “Plan”). The performance shares represent the right to receive Class B common shares, at no cost to the officer, upon achievement of management objectives over a performance period of up to two years. The number of performance shares actually earned is based on the percentage of the officer’s target incentive award, if any, that the officer achieves during the performance period under the Corporation’s Key Management Annual Incentive Plan. The Corporation recognizes compensation expense related to performance shares ratably over the estimated period during which the shares could be earned. During 2009, the target incentive awards were not earned as operating targets were not reached and thus, no compensation expense related to the performance shares was recognized. During 2010, the management objectives were met and the executives earned all 59,864 performance shares.

In 2010, the shareholders approved an amendment to the Plan reserving an additional 1,600,000 Class A common shares and 400,000 Class B common shares for issuance under the Plan. In connection with this amendment, in April 2009, performance shares were awarded to certain of the Corporation’s employees, including executive officers under the Plan. The performance shares represent the right to receive Class A common shares or Class B common shares, at no cost to the employee, upon achievement of management objectives over up to three annual performance periods and the satisfaction of a service-based vesting period.

The number of performance shares actually credited to a participant is based on achieving a corporate consolidated earnings before interest and taxes (“EBIT”) goal at the end of each of the three annual performance periods. Each of the three annual performance periods are subject to the same EBIT goals, which were established as of the date of grant. At the end of each performance period, provided that the performance objectives are met, the shares are then subject to a vesting requirement of two years of continuing service. The Corporation recognizes compensation expense related to performance shares ratably over the estimated combined performance and vesting period. During 2010, the required performance objectives for the first year performance period were satisfied and 709,000 performance shares were credited to participants. During 2011, the required performance objectives for the second year performance period were satisfied and 742,000 performance shares were credited to participants.

The following table summarizes the activity related to performance shares during 2011:

	Number of Class A Performance Shares			Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at February 28, 2010		615,000
Credited		648,000
Vested		(286,483	)
Forfeited		(227,017	)
Unvested at February 28, 2011		749,500			1.3	$	16,227
	Number of Class B Performance Shares
Unvested at February 28, 2010		153,864
Credited		94,000
Vested		(106,864	)
Forfeited		-
Unvested at February 28, 2011		141,000			1.3	$	3,053

The fair value of the performance shares is estimated using the Black-Scholes option-pricing model with the following assumptions:

	2011			2010
Risk-free interest rate		1.62	%		1.54	%
Dividend yield		4.38	%		4.48	%
Expected stock volatility		0.76			0.78
Expected life in years		2.5			2.3

The fair value per share of the performance shares in 2011 and 2010 was $10.20 and $9.67, respectively.

During 2011, the Company awarded restricted share units to officers and other key employees. The restricted share units represent the right to receive Class A common shares or Class B common shares, at no cost to the employee, upon the satisfaction of a two-year continuous service-based vesting period. The Corporation recognizes compensation expense related to restricted share units ratably over the vesting period.

The following table summarizes the activity related to restricted stock units during 2011:

	Number of Class A Restricted Stock Units			Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Unvested at February 28, 2010		-
Granted		124,920
Vested		-
Forfeited		(13,921	)
Unvested at February 28, 2011		110,999			0.7	$	2,403
	Number of Class B Restricted Stock Units
Unvested at February 28, 2010		-
Granted		29,675
Vested		-
Forfeited		-
Unvested at February 28, 2011		29,675			1.1	$	642

The fair value of the restricted stock units is estimated using the Black-Scholes option-pricing model with the following assumptions:

	2011
Risk-free interest rate		1.09	%
Dividend yield		2.3	%
Expected stock volatility		0.90
Expected life in years		1.6

The fair value per share of the restricted share units in 2011 was $23.65 at the date of the grant.

The risk-free interest rate was based upon the U.S. Treasury yield curve at the time of the grant. Dividend yield was estimated using the Corporation’s annual dividend in the year when the award was granted. Historical information was the primary basis for the estimates of expected stock volatility and expected life of the award.

As of February 28, 2011, the Corporation had unrecognized compensation expense of approximately $3,157, $4,659, and $1,326 before taxes, related to stock options, performance shares and restricted stock units, respectively.

The unrecognized compensation expense is expected to be recognized over an average period of approximately one year. Cash received from stock options exercised for the years ended February 28, 2011, 2010 and 2009, was $18,842, $5,834, and $366, respectively. The actual tax benefit realized from the exercise of share-based payment arrangements totaled $6,510, $762, and $45 for the years ended February 28, 2011, 2010 and 2009, respectively.

The number of shares available for future grant at February 28, 2011 is 924,164 Class A common shares and 134,054 Class B common shares.