Note L - Share-Based Employee Compensation

9 Months Ended

Mar. 04, 2014

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

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

NOTE L – SHARE-BASED EMPLOYEE COMPENSATION

We compensate our employees and directors using share-based compensation through the following plans:

The Ruby Tuesday, Inc. Stock Incentive Plan and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan

A committee, appointed by the Board of Directors, administers the Ruby Tuesday, Inc. Stock Incentive Plan (“SIP”) and the Ruby Tuesday, Inc. 1996 Stock Incentive Plan (“1996 SIP”), and has full authority in its discretion to determine the key employees, officers, and non-employee directors to whom share-based incentives are granted and the terms and provisions of share-based incentives. Option grants under the SIP and 1996 SIP can have varying vesting provisions and exercise periods as determined by such committee. A majority of currently outstanding options granted under the SIP and 1996 SIP vest within three years following the date of grant and expire seven years after the date of grant. The SIP and 1996 SIP permit the committee to make awards of shares of common stock, awards of stock options or other derivative securities related to the value of the common stock, and certain cash awards to eligible persons. These discretionary awards may be made on an individual basis or for the benefit of a group of eligible persons. All options awarded under the SIP and 1996 SIP have been awarded with an exercise price equal to the fair market value at the time of grant.

At March 4, 2014, we had reserved a total of 4,849,000 and 143,000 shares of common stock for the SIP and 1996 SIP, respectively. Of the reserved shares at March 4, 2014, 1,861,000 and 77,000 were subject to options outstanding for the SIP and 1996 SIP, respectively. Stock option exercises are settled with the issuance of new shares. Net shares of common stock available for issuance at March 4, 2014 under the SIP and 1996 SIP were 2,988,000 and 66,000, respectively. As discussed below, during the second quarter of fiscal 2014 our shareholders approved an amendment to the SIP allowing non-employee directors to participate in the SIP.

The Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation Plan for Directors

Under the Ruby Tuesday, Inc. Stock Incentive and Deferred Compensation Plan for directors (the “Directors’ Plan”), non-employee directors are eligible for awards of share-based incentives. On October 9, 2013, our shareholders approved an amendment to the SIP allowing non-employee directors to participate in the SIP instead of requiring that such awards be made from the Directors’ Plan. The amendment did not increase the number of shares of common stock available for issuance under the SIP. At March 4, 2014, only an insignificant number of shares of common stock available for issuance under the Directors’ Plan remained. All future share-based compensation granted to non-employee directors will be awarded from shares of common stock available for issuance under the SIP. As further discussed in Note R to the Condensed Consolidated Financial Statements, the Directors’ Plan was amended and restated on April 9, 2014, primarily for the purpose of terminating those portions of the Directors’ Plan providing for the award of share-based compensation to non-employee directors.

Stock Options

The following table summarizes our stock option activity for the 39 weeks ended March 4, 2014 under these stock option plans (in thousands, except per-share data):

	Stock Options			Weighted Average Exercise Price
Service-based vesting:
Balance at June 4, 2013		1,911		$	8.27
Granted		601			9.34
Exercised		(244	)		6.45
Forfeited		(311	)		9.29
Balance at March 4, 2014		1,957		$	8.66
Exercisable		1,094		$	8.60
Market-based vesting:
Balance at June 4, 2013		250		$	7.81
Granted		570			9.34
Forfeited		(85	)		9.34
Balance at March 4, 2014		735		$	8.82
Exercisable	–			–

At March 4, 2014, there was approximately $3.2 million of unrecognized pre-tax compensation expense related to non-vested stock options. This cost is expected to be recognized over a weighted-average period of 1.6 years.

During the first quarter of fiscal 2014, we granted 601,000 service-based stock options to certain employees under the terms of the SIP. The stock options awarded vest in equal annual installments over a three-year period following grant of the award, and have a maximum life of seven years.

Also during the first quarter of fiscal 2014, we granted 570,000 market-based stock options to certain employees under the terms of the SIP. The stock options vest if a share of our common stock appreciates to $14 per share or more for a period of 20 consecutive trading days on or before December 3, 2015. The stock options have a maximum life of seven years.

Restricted Stock

The following table summarizes our restricted stock activity for the 39 weeks ended March 4, 2014 (in thousands, except per-share data):

	Restricted Stock			Weighted-Average Grant-Date Fair Value
Performance-based vesting:
Non-vested at June 4, 2013		356		$	7.06
Granted		–			–
Vested		(18	)		7.87
Forfeited		(270	)		6.81
Non-vested at March 4, 2014		68		$	7.81

	Restricted Stock			Weighted-Average Grant-Date Fair Value
Service-based vesting:
Non-vested at June 4, 2013		1,136		$	7.92
Granted		423			8.83
Vested		(398	)		8.12
Forfeited		(140	)		8.76
Non-vested at March 4, 2014		1,021		$	8.11

The fair values of the restricted share awards reflected above were based on the fair market value of our common stock on the grant date. At March 4, 2014, unrecognized compensation expense related to restricted stock grants expected to vest totaled approximately $4.9 million and will be recognized over a weighted average vesting period of approximately 1.4 years.

During the second quarter of fiscal 2014, RTI granted approximately 60,000 restricted shares to non-employee directors under the terms of the Stock Incentive Plan.  These shares cliff vest over a one year period following grant of the award.

During the first quarter of fiscal 2014, we granted 344,000 shares of service-based restricted stock to certain employees under the terms of the SIP and 1996 SIP, 186,000 of which will cliff vest 2.5 years following the grant date and 158,000 of which will vest in three equal installments over a three-year period following the date of grant.

Also during the first quarter of fiscal 2014, the Executive Compensation Committee of the Board of Directors determined that the performance condition was not achieved for 269,000 shares of performance-based restricted stock granted in fiscal 2013. As a result, 235,000 shares of restricted stock were cancelled and returned to the pool of shares available for grant under the SIP and 1996 SIP and 34,000 shares of restricted stock awarded to our President and Chief Executive Officer were cancelled and retired.

As discussed further in Note J to the Condensed Consolidated Financial Statements, our Executive Vice President, Chief Operations Officer, Senior Vice President, Chief People Officer, and other management personnel separated employment with the Company during the first three quarters of fiscal 2014. Several of these individuals held share-based compensation awards at the times of their separations, and these awards were either vested or forfeited in accordance with the terms of the original awards.

Included within share-based compensation expense for the 13- and 39-week periods ended March 4, 2014 were charges that were insignificant and $0.3 million, respectively, representing the incremental costs resulting from accelerated vesting, net of forfeitures.