Stock-Based Compensation

3 Months Ended

Apr. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

Note 4.  Stock-Based Compensation

General

Stock-based compensation for awards recognized during the thirteen weeks ended April 30, 2011 and May 1, 2010 is based on the grant date fair value estimated in accordance with the relevant accounting guidance.

For the thirteen weeks ended April 30, 2011 and May 1, 2010, stock-based compensation expense was $3.6 million and $2.8 million, respectively.  The total tax benefit associated with stock-based compensation for the thirteen weeks ended April 30, 2011 and May 1, 2010 was $1.4 million and $1.1 million, respectively.  We recognize stock-based compensation costs net of a forfeiture rate for only those shares expected to vest and on a straight-line basis over the requisite service period of the award. 

Methodology Assumptions

We use the Black-Scholes option-pricing model to value our stock options.  Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant.  The fair value of our stock option awards, which are subject to pro-rata vesting generally over 3 years, is expensed on a straight-line basis over the vesting period of the stock options.  The expected volatility assumption inherent in the pricing model is based on the historical volatility of our stock over a term equal to the expected term of the option granted.  The expected term of stock option awards granted is derived from historical exercise experience under our stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. 

The expected term assumption incorporates the contractual term of an option grant, which is generally ten years, as well as the vesting period of an award, which is generally pro-rata vesting over 3 years.  The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.  The expected dividend yield is based on the expected annual dividend divided by the market price of our common stock at the time of declaration.

The weighted average assumptions relating to the valuation of our stock options for the thirteen weeks ended April 30, 2011 and May 1, 2010 were as follows:

	Thirteen Weeks Ended
	April 30, 2011	May 1, 2010
Weighted average fair value of grants	$6.70	$6.95
Expected volatility	66%	66%
Expected term (years)	4.5	4.5
Risk-free interest rate	2.0%	2.1%
Expected dividend yield	1.5%	1.0%

Stock-Based Awards Activity

As of April 30, 2011, 7,148,374 nonqualified options are outstanding at a weighted average exercise price of $13.22 per share, and approximately 4.9 million shares remain available for future grants of either stock options, restricted stock or restricted stock units, stock appreciation rights ("SARs") or performance shares. 

            The following table presents a summary of our stock options activity for the thirteen weeks ended April 30, 2011:

	Number of Shares	Weighted Average Exercise Price
Outstanding, beginning of period	6,033,101	$12.87
Granted	1,381,500	13.69
Exercised	(167,005)	5.59
Canceled or expired	(99,222)	11.45
Outstanding, end of period	7,148,374	13.22
Exercisable at April 30, 2011	4,170,384	14.86

The following table presents a summary of our restricted stock activity for the thirteen weeks ended April 30, 2011:

	Number of Shares	Weighted Average Grant Date Fair Value
Nonvested, beginning of period	1,430,335	$9.27
Granted	644,832	13.69
Vested	(152,236)	10.73
Canceled	(80,813)	9.70
Nonvested, end of period	1,842,118	10.68

Performance-based Awards

In both fiscal 2009 and 2010, we granted David F. Dyer, our President and Chief Executive Officer, a performance award under which he was eligible to receive from 0 to 133,333 shares, with a target of 100,000 shares, contingent upon the achievement of certain Company-specific performance goals in fiscal 2009 and 2010.  At each fiscal year-end, it was determined that he had earned 133,333 shares based on our performance. For the 2009 grant, the award will vest 3 years from the date of grant.  For the 2010 grant, the award will vest 2 years from the date of grant.  We accounted for the grants by recording compensation expense, based on the number of shares ultimately expected to vest on a straight-line basis over the respective service period. 

In the first quarter of fiscal 2011, a new performance-based stock award was granted to Mr. Dyer.  Similar to the 2009 and 2010 grants, under this performance award, Mr. Dyer is eligible to receive up to 133,333 shares, with a target of 100,000 shares, contingent upon the achievement of certain Company-specific performance goals during fiscal 2011.  Any shares earned as a result of the achievement of such goals (whether issued at the time of grant or as additional shares earned at the end of the performance measurement period) will vest 1 year from the date of grant.  We are recording compensation expense, based on the number of shares ultimately expected to vest, recognized on a straight-line basis over the 1-year service period.  Additionally, we reevaluate the amount of compensation expected to be earned at the end of each reporting period and record an adjustment, if necessary.

In the first quarter of fiscal 2010, certain of our executive officers were granted Performance Stock Units ("PSU").  Each PSU award has the ability to be converted into shares on the second anniversary of the grant date upon the achievement of certain Company-specific performance goals for fiscal 2011 and have an earn-out opportunity equal up to 100% of the units awarded.  Similar to the performance awards granted to Mr. Dyer, compensation cost is recognized on a straight-line basis over the vesting period, based on the number of shares ultimately expected to vest and depending on the level and likelihood of the performance condition being met.  Additionally, we reevaluate the amount of compensation expected to be earned at the end of each reporting period and record an adjustment, if necessary.  

            In the first quarter of fiscal 2011, certain of our executive officers were granted a restricted stock award of which a performance condition was attached to 50% of the award, contingent upon the achievement of certain Company-specific performance goals during fiscal 2011.  Any shares earned as a result of the achievement of such goals will vest over 3 years from the date of grant.  We are recording compensation expense net of a forfeiture rate, based on the number of shares ultimately expected to vest, recognized on a straight-line basis over the 3-year service period.