Equity Award Plans

12 Months Ended

Sep. 30, 2012

Equity Award Plans [Abstract]

EQUITY AWARD PLANS

14. EQUITY AWARD PLANS

The Company has three equity award plans: the 1994 Director Stock Option Plan (the “Director Plan”), the Amended and Restated 1987 Stock Option Plan (the “1987 Plan”) and the Amended and Restated 2005 Equity Incentive Plan (the “2005 Plan”). The Director Plan expired on December 31, 2004 and no further awards may be granted under the Director Plan. The 1987 Plan expired on December 9, 2007, and no further awards may be issued under the 1987 Plan. Options issued under the Director Plan and the 1987 Plan will remain outstanding until they have expired, been exercised or have otherwise terminated. Up to a total of 4,350,000 options were able to be issued under the 1987 Plan and the Director Plan (including up to a total of 400,000 options which were issuable under the Director Plan), but 521,354 of these options became unavailable for grant upon the expiration of the 1987 Plan on December 9, 2007 and the expiration of the Director Plan on December 31, 2004. In January 2006, the stockholders of the Company approved the adoption of the 2005 Plan and, in January 2009 and February 2011, approved amendments to increase the number of issuable shares. Under the 2005 Plan, employees, directors, consultants and other individuals who provide services to the Company, may be granted awards in the form of options, stock appreciation rights, restricted stock or restricted stock units. Up to 2,000,000 shares of the Company’s common stock may be issued in respect of awards under the 2005 Plan, as amended, with no more than 1,000,000 of those shares permitted to be issued in respect of restricted stock or restricted stock units granted under the 2005 Plan. Awards of options to purchase the Company’s common stock will have exercise prices as determined by the Compensation Committee of the Board (the “Compensation Committee”), but such exercise prices may not be lower than the fair market value of the stock on the date of grant.

No options have been granted by the Company with an exercise price less than the fair market value of the Company’s common stock on the date of grant for any of the periods presented. The majority of the options issued under the plans vest ratably over four or five-year periods, although some options have both market price and time vesting requirements, and options issued under the plans generally expire ten years from the date of grant. Restricted stock awards issued under the 2005 Plan have restrictions that lapse ratably over periods ranging from one to five years. Each non-employee director of the Company’s Board is granted 4,000 shares of restricted stock on an annual basis that will vest one year from the date of grant. The Company issues new shares of common stock upon exercise of vested options. As of September 30, 2012, there were 518,782 shares of the Company’s common stock available for grant under the 2005 Plan, with no more than 286,745 of those shares permitted to be issued in respect of restricted stock or restricted stock units granted under the 2005 Plan.

Stock option activity for all plans was as follows:

	Outstanding Options			Weighted Average Exercise Price		Weighted Average Remaining Life		Aggregate Intrinsic Value
	(in thousands)					(years)		(in thousands)
Balance—September 30, 2011		648		$	11.60
Granted		107			15.85
Exercised		(135	)		8.25
Forfeited		(11	)		15.59
Expired		(2	)		4.90
Balance—September 30, 2012		607		$	13.05		6.9	$	3,872
Exercisable—September 30, 2012		202		$	10.16		4.9	$	1,815

During the years ended September 30, 2012, 2011 and 2010, the total intrinsic value of options exercised was $1,544,000, $9,659,000 and $4,452,000, respectively. The total cash received from these option exercises was $107,000, $2,285,000 and $1,369,000, respectively, and the actual tax benefit realized for the tax deductions from these option exercises was $580,000, $3,617,000 and $1,671,000, respectively. During fiscal 2012, 2011 and 2010, options to purchase 119,600, 368,800 and 443,900 shares of common stock, respectively, with aggregate exercise prices of $1,007,000, $2,428,000 and $2,552,000, respectively, were exercised by the option holders and net-share settled by the Company, such that the Company withheld 51,041, 109,926 and 220,359 shares of the Company’s common stock, respectively, which had a fair market value equal to the aggregate exercise prices of the options.

In September 2008, the Company granted two stock options under the 2005 Plan to an executive officer, each to purchase 200,000 shares of common stock at an exercise price of $6.87 per share (see Note 17). The first stock option vests ratably over a five-year period. The second stock option vests ratably over a five-year period and was subject to the further condition that, on or before the fifth anniversary of the grant date, the closing price for a share of the Company’s common stock shall have exceeded $15.00 for a period of 30 consecutive trading days. In January 2010, the Company granted stock options under the 2005 Plan to three executive officers, to purchase a combined total of 120,000 shares of common stock at an exercise price of $11.89 per share. The stock options vest ratably over a five-year period and were subject to the further condition that, on or before the fifth anniversary of the grant date, the closing price for a share of the Company’s common stock shall have exceeded $15.00 for a period of 30 consecutive trading days. On November 4, 2010, the conditions that the Company’s common stock shall have exceeded $15.00 for a period of 30 consecutive trading days were satisfied.

The weighted average fair value of stock options granted during fiscal 2012, 2011 and 2010 was estimated to be $6.17, $9.69 and $7.61 per option share, respectively. The weighted average fair value of each option granted is calculated on the date of grant using the Black-Scholes option pricing model for most option grants and a Monte Carlo simulation option pricing model for the fiscal 2010 grants that included a market price condition. Weighted-average assumptions for option grants were as follows:

	Year Ended September 30,
	2012			2011			2010
Expected dividend yield		4.5	%		3.2	%		none
Expected price volatility		63.0	%		62.5	%		62.9	%
Risk-free interest rate		1.0	%		2.4	%		2.7	%
Expected life		5.5 years			5.8 years			6.5 years

Expected dividend yield was determined using a weighted average of the Company’s annualized dividend rate compared to the market price of the Company’s common stock as of the grant date. Expected volatility was determined using a weighted average of the historic volatility of the Company’s common stock as of the option grant date measured over a period equal to the expected life of the grant. Risk-free interest rates were based on the United States Treasury yield curve in effect at the date of the grant. Expected lives were determined using a weighted average of the historic lives of previously issued grants of the Company’s options.

The following table summarizes information about stock options outstanding as of September 30, 2012:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
	(in thousands)		(years)				(in thousands)
$  3.52 to $  5.00		18		6.1	$	3.52		7	$	3.52
5.01 to     6.00		14		3.2		5.01		14		5.01
6.01 to     6.50		21		2.7		6.45		21		6.45
6.51 to     7.00		170		5.8		6.87		90		6.87
7.01 to   12.00		109		7.1		11.78		11		10.87
12.01 to   22.00		169		7.8		16.91		38		16.36
22.01 to   22.13		106		8.4		22.13		21		22.13
$  3.52 to $22.13		607		6.9	$	13.05		202	$	10.16

Restricted stock activity for the 2005 Plan was as follows:

	Outstanding Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested—September 30, 2011		210		$	16.81
Granted		110			15.59
Vested		(86	)		17.85
Forfeited		(19	)		14.06
Nonvested—September 30, 2012		215		$	16.02

In December 2011, the Compensation Committee established the performance goals for the award of performance-based RSUs for four executive officers, under the Amended and Restated Destination Maternity Corporation 2005 Equity Incentive Plan. The RSUs earned, if any, will be based on the Company’s cumulative operating income, as reflected in the Company’s financial statements, with respect to fiscal 2012 through and including fiscal 2014 (the “Performance Period”) and will generally be further contingent on the continued employment of the executive officers with the Company, through the date on which the shares in respect of these RSUs, if any, are issued following the end of the Performance Period, and the achievement of a minimum level of operating income in fiscal 2014. Any dividends declared on the shares of the Company’s common stock underlying the RSUs will be credited as additional RSUs based on the fair market value of the Company’s common stock on the dividend payment date. The additional RSUs, if any, will be earned on the same terms as the original RSUs. The executive officers will earn a cumulative total of 19,531 RSUs, excluding RSUs from dividends declared, if the Company’s cumulative operating income during the Performance Period equals or exceeds a threshold of $120,000,000, and will ratably earn up to a maximum cumulative total of 58,590 RSUs, excluding RSUs from dividends declared, if the Company’s operating income during the Performance Period equals or exceeds $132,000,000.

As of September 30, 2012, $5,164,000 of total unrecognized compensation cost related to all non-vested equity awards is expected to be recognized over a weighted-average period of 1.6 years.

During fiscal 2012, 2011 and 2010, certain stock option exercises and vesting restricted stock awards were net-share settled by the Company such that the Company withheld shares of the Company’s common stock, which had a fair market value equivalent to the minimum statutory obligation for the applicable income and employment taxes for the awards, and the Company remitted the cash value to the appropriate taxing authorities. The total shares withheld, which were 30,849, 128,646 and 87,326, respectively, during fiscal 2012, 2011 and 2010, are reflected as repurchase of common stock in the accompanying financial statements, and were based on the value of the Company’s common stock on the exercise or vesting date. The remaining shares, net of those withheld, were delivered to the award holders. Total payments for tax obligations to the tax authorities were $597,000, $2,786,000 and $960,000 for fiscal 2012, 2011 and 2010, respectively.