Share-Based Compensation Share-based Compensation (Tables)

12 Months Ended

Dec. 29, 2012

Schedule of Share-based Payment Award, Manager Share Appreciation Plan, Valuation Assumptions [Table Text Block]

ptions used in determining the fair value of the MSAP awards during 2012 were as follows:



	2012
Expected price volatility	45	%
Risk-free interest rate	0.6	%
Weighted-average expected term (years)	4.2
Dividend yield	—

Ther

Schedule of Share-based Payment Award, Employee Stock Purchase Plan, Valuation Assumptions [Table Text Block]

Assumptions used in determining the fair value of shares issued under the Buying Plan during 2012, 2011 and 2010 were as follows:



	2012	2011		2010
Expected price volatility	39%-49%	36%-67%		52%-60%
Risk-free interest rate	0.1%-0.2%	0.1	%	0.2%-0.3%
Weighted-average expected term (years)	0.5	0.5		0.5
Dividend yield	—	—		—

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

Additional information for options outstanding at year-end 2012 is as follows:



	Outstanding Options				Exercisable Options
Range of Exercise Prices	Shares Underlying	Weighted Average Remaining Contractual Term (Years)	Weighted Average Exercise Price		Exercisable Shares	Weighted Average Remaining Contractual Term (Years)	Weighted Average Exercise Price
$ 0 – $ 7.00	705,786	1.0	$	5.25	705,786	1.0	$	5.25
7.01 – 10.75	683,071	5.8	10.31		141,742	5.4	10.35
10.76 – 15.54	776,599	2.8	11.35		479,665	2.2	11.40
15.55 – 22.00	167,195	0.4	16.22		167,195	0.4	16.22
22.01 – 29.70	184,080	1.2	29.50		184,080	1.2	29.50
$ 0 – 29.70	2,516,731	2.8	$	11.05	1,678,468	1.7	$	11.25

Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block]

A summary of RSU activity in 2012 and 2011 is as follows:



	Number of RSU's		Weighted Average Grant Date Fair Value
Unvested at year-end 2010	—
Granted	134,544		10.36
Vested	—
Forfeited	(1,406	)	10.36
Unvested at year-end 2011 (weighted-average remaining vesting period of 2.4 years)	133,138		10.36
Granted	188,001		10.56
Vested	(44,052	)
Forfeited	(2,236	)	10.34
Unvested at year-end 2012 (weighted-average remaining vesting period of 2.0 years)	274,851		10.50

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

A summary of restricted share activity in 2012, 2011 and 2010 is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at year-end 2009 (weighted-average remaining vesting period of 0.4 years)	7,025		5.97
Granted	7,303		10.60
Vested	(7,025	)	5.97
Forfeited	—
Unvested at year-end 2010 (weighted-average remaining vesting period of 0.5 years)	7,303		10.60
Granted	13,347		9.95
Vested	(7,303	)	10.60
Forfeited	—
Unvested at year-end 2011 (weighted-average remaining vesting period of 0.5 years)	13,347		9.95
Granted	—
Vested	(13,347	)	9.95
Forfeited	—
Unvested at year-end 2012	—		—

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

SHARE-BASED COMPENSATION

West Marine’s Omnibus Equity Incentive Plan (the “Plan”) is intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of associates and non-employee directors upon whose judgment, interest and special effort the successful conduct of its operation is largely dependent. The Plan permits a variety of compensation methods, including non-qualified stock options, incentive stock options, restricted stock, restricted stock units and other share-based awards. All associates and non-employee directors are eligible to participate under the Plan, with the exception of Randolph K. Repass, Chairman of the Company’s Board of Directors and a significant, but not controlling, stockholder. At year-end 2012, 10,300,000 shares of common stock had been reserved under the Plan and 1,836,467 shares were available for future issuance.

The Company recognizes compensation expense for share-based payments based on the grant date fair value of the awards. Share-based payments consist of stock option grants, restricted share awards, restricted stock units and Associates Stock Buying Plan ("Buying Plan") issuances, each as described further below.

Share-based compensation expense for 2012, 2011 and 2010 was approximately $3.1 million, $2.4 million and $2.5 million, respectively, of which expense for stock options was $1.9 million, $1.8 million and $2.2 million in 2012, 2011 and 2010, respectively. In 2012, the Company recognized $0.4 million in tax benefits from stock options exercised, restricted stock vested and disqualifying Buying Plan transactions, of which $0.4 million was recognized as excess tax benefits in additional paid-in capital and $0.4 million was recognized as cash flow from financing activities. In 2011, the Company recognized $0.2 million in tax benefits from stock options exercised, restricted stock vested and disqualifying Buying Plan transactions, of which $0.3 million was recognized as excess tax benefits in additional paid-in capital and $0.3 million was recognized as cash flow from financing activities. In 2010, the Company recognized $0.3 million in tax benefits from stock options exercised, restricted stock vested and disqualifying stock purchase plan transactions, of which $0.3 million was recognized as excess tax benefits in additional paid-in capital and $0.3 million was recognized as cash flow from financing activities. The tax benefit was included in the Company’s consolidated statement of operations for the same period. Share-based compensation of $0.5 million was included in capitalized indirect inventory in 2012, $0.4 million in 2011 and $0.3 million in 2010.

Included in cost of goods sold and SG&A expense is share-based compensation expense, net of estimated forfeitures, that have been included in the statements of operations for all share-based compensation arrangements as follows:



(in thousands)	2012		2011		2010
Cost of goods sold	$	542	$	409	$	334
Selling, general and administrative expense	2,586		1,985		2,172
Share-based compensation expense	$	3,128	$	2,394	$	2,506

Stock Options

West Marine awards options to purchase shares of common stock to its non-employee directors and to certain eligible associates employed at the time of the grant. For fiscal 2007 through 2010, options granted to associates under the Plan vested over three years and expire five years following the grant date. Grants in 2006 vested over four years and generally expired five years from the grant date. Grants in 2011 and 2012 vest over three years and expire seven years from the grant date. Prior to 2011, options granted to non-employee directors vested after six months and expire five years from the grant date. Options granted to non-employee directors in 2012 vest after one year and expire seven years from the grant date. Options granted to non-employee directors in 2011 vested after six months and expire seven years from the grant date. The Company has determined the fair value of options awarded by applying the Black-Scholes Merton option pricing valuation model and using following assumptions:



	2012		2011		2010
Expected price volatility	49	%	49	%	51	%
Risk-free interest rate	0.5% - 0.6%		1.4	%	0.9% - 1.7%
Weighted-average expected term (years)	4.5		4.5		3.5
Dividend yield	—		—		—

Expected price volatility: This is the percentage amount by which the price of West Marine common stock is expected to fluctuate annually during the estimated expected life for stock options. Expected price volatility is calculated using historical monthly closing prices over a period matching the weighted-average expected term, as management believes such changes are the best indicator of future volatility. An increase in expected price volatility would increase compensation expense.

Share issuance: The Company’s policy is to issue new shares of common stock for purchase under the Plan. Shares of common stock are authorized by the Company’s Board of Directors, subject to stockholder approval, for issuance under the Plan. Subject to adjustment, the maximum number of shares currently available for grant under the Plan may not exceed 10,300,000 shares.

Risk-free interest rate: This is the U.S. Treasury zero-coupon rate, as of the grant date, for issues having a term equal to the expected life of the stock option. An increase in the risk-free interest rate would increase compensation expense.

Expected term: This is the period of time over which stock options are expected to remain outstanding. The Company calculates expected term based on the average of the vesting period and the full contractual term. An increase in the expected term would increase compensation expense.

Dividend yield: The Company historically has not made any dividend payments nor does it expect to pay dividends in the foreseeable future. An increase in the dividend yield would decrease compensation expense.

A summary of the Company’s stock option activity in 2012, 2011 and 2010 is as follows:



	Number of Shares		Weighted Average Exercise Price	Weighted Average Option Grant Date Fair Value
Outstanding at year-end 2009 (1,969,741 stock options exercisable at a weighted-average exercise price of $15.32)	3,636,572		11.37	5.80
Granted	734,875		10.95	4.12
Exercised	(184,995	)	5.49	2.82
Forfeited	(79,856	)	8.11	2.89
Expired	(354,795	)	18.84	12.00
Outstanding at year-end 2010 (2,238,084 stock options exercisable at a weighted-average exercise price of $12.85)	3,751,801		10.93	5.08
Granted	452,887		10.36	4.27
Exercised	(270,721	)	4.95	1.77
Forfeited	(96,340	)	8.56	3.18
Expired	(303,087	)	13.71	5.57
Outstanding at year-end 2011 (2,492,684 stock options exercisable at a weighted-average exercise price of $11.72)	3,534,540		11.14	5.24
Granted	361,636		10.69	4.28
Exercised	(642,246	)	6.07	2.04
Forfeited	(35,256	)	10.01	3.91
Expired	(701,943	)	15.92	7.84
Outstanding at year-end 2012 (1,678,468 stock options exercisable at a weighted-average exercise price of $11.25)	2,516,731		11.05	5.21

The weighted-average grant date fair value of options granted in 2012, 2011 and 2010 was $4.28, $4.27 and $4.12 per share, respectively. The aggregate fair value of options vested during 2012, 2011 and 2010 was $3.3 million, $4.2 million and $5.4 million, respectively.

As of market close December 29, 2012, the aggregate intrinsic value for stock options outstanding was $4.1 million, and $3.9 million for exercisable options. The total intrinsic value of options actually exercised was $3.0 million in 2012, $1.3 million in 2011 and $0.9 million in 2010. In 2012, the weighted-average grant date fair value of options granted was $4.28 per share. There were 1,103,102 options that vested in 2012 with an aggregate grant date fair value of $3.3 million. At December 29, 2012, unrecognized compensation expense for stock options, net of expected forfeitures, was $2.5 million, with a weighted-average remaining expense recognition period of 1.8 years.

Additional information for options outstanding at year-end 2012 is as follows:



	Outstanding Options				Exercisable Options
Range of Exercise Prices	Shares Underlying	Weighted Average Remaining Contractual Term (Years)	Weighted Average Exercise Price		Exercisable Shares	Weighted Average Remaining Contractual Term (Years)	Weighted Average Exercise Price
$ 0 – $ 7.00	705,786	1.0	$	5.25	705,786	1.0	$	5.25
7.01 – 10.75	683,071	5.8	10.31		141,742	5.4	10.35
10.76 – 15.54	776,599	2.8	11.35		479,665	2.2	11.40
15.55 – 22.00	167,195	0.4	16.22		167,195	0.4	16.22
22.01 – 29.70	184,080	1.2	29.50		184,080	1.2	29.50
$ 0 – 29.70	2,516,731	2.8	$	11.05	1,678,468	1.7	$	11.25

At December 29, 2012, there were 1,787,251 stock options expected to vest in the future, with an intrinsic value of $2.9 million, a weighted-average exercise price of $9.16 per share and a weighted-average remaining contractual term of 0.8 years.

Restricted Share Awards

The Plan also provides for awards of shares to eligible associates and non-employee directors that are subject to restrictions on transfer for a period of time (“restricted shares”). Vesting of restricted shares for eligible associates and non-employee directors is subject to continuing service to West Marine. Restricted shares granted to non-employee directors in 2011 vest 100% one year after the grant date. No restricted shares were awarded in 2012. Compensation expense for restricted share awards was $0.1 million in 2012. There was no unrecognized compensation expense for unvested restricted share awards, net of expected forfeitures, in 2012. A summary of restricted share activity in 2012, 2011 and 2010 is as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Unvested at year-end 2009 (weighted-average remaining vesting period of 0.4 years)	7,025		5.97
Granted	7,303		10.60
Vested	(7,025	)	5.97
Forfeited	—
Unvested at year-end 2010 (weighted-average remaining vesting period of 0.5 years)	7,303		10.60
Granted	13,347		9.95
Vested	(7,303	)	10.60
Forfeited	—
Unvested at year-end 2011 (weighted-average remaining vesting period of 0.5 years)	13,347		9.95
Granted	—
Vested	(13,347	)	9.95
Forfeited	—
Unvested at year-end 2012	—		—

The weighted-average grant date fair value of restricted shares granted in 2011 and 2010 was $9.95 and $10.60 per share, respectively. There were no restricted shares granted in 2012. The total fair value of restricted shares vested in 2012, 2011 and 2010 was $0.1 million, $0.1 million and less than $0.1 million, respectively.

Restricted Stock Units

The Plan also provides for awards of restricted stock units (“RSU's”) to eligible associates and non-employee directors that are subject to the recipient's continuing service to the Company. RSU's granted to eligible associates in 2011 and 2012 vest over a three-year period at the rate of 33%, 33% and 34% on the anniversary of the grant date. RSU's granted to eligible non-employee directors in 2012 vest on the one-year anniversary of the grant date. Compensation expense for RSU's was $0.9 million in 2012. Unrecognized compensation expense for unvested RSU's, net of expected forfeitures, was $2.2 million in 2012. A summary of RSU activity in 2012 and 2011 is as follows:



	Number of RSU's		Weighted Average Grant Date Fair Value
Unvested at year-end 2010	—
Granted	134,544		10.36
Vested	—
Forfeited	(1,406	)	10.36
Unvested at year-end 2011 (weighted-average remaining vesting period of 2.4 years)	133,138		10.36
Granted	188,001		10.56
Vested	(44,052	)
Forfeited	(2,236	)	10.34
Unvested at year-end 2012 (weighted-average remaining vesting period of 2.0 years)	274,851		10.50

The weighted-average grant date fair value of RSU's granted in 2012 and 2011 was $10.56 and $10.36 per share. The total fair value of RSUs vested in 2012 was $0.5 million.

Associates Stock Buying Plan

The Company has a Buying Plan under which all eligible associates may elect to participate on semiannual grant dates. Participating associates purchase West Marine shares at 85% of the lower of the closing price on (a) the grant date or (b) the purchase date. The Buying Plan includes a twelve calendar month holding period for all purchases beginning on the date on which shares are purchased by participants under the Buying Plan. The number of shares purchased under the Buying Plan in 2012, 2011 and 2010 were 87,095, 83,758 and 83,452, respectively. Expense recognized in 2012 was $0.2 million. Expense recognized in each of the years 2011 and 2010 was $0.3 million. Shares available for future issuance under the Buying Plan at the end of 2012, 2011 and 2010 were 504,743, 591,838 and 675,596, respectively. Assumptions used in determining the fair value of shares issued under the Buying Plan during 2012, 2011 and 2010 were as follows:



	2012	2011		2010
Expected price volatility	39%-49%	36%-67%		52%-60%
Risk-free interest rate	0.1%-0.2%	0.1	%	0.2%-0.3%
Weighted-average expected term (years)	0.5	0.5		0.5
Dividend yield	—	—		—

Manager Share Appreciation Plan

During 2012, West Marine introduced and awarded a new form of compensation, the Manager Share Appreciation Plan (“MSAP”). This award is a long-term cash incentive intended to both motivate and reward certain West Marine Associates. The MSAP award is a cash incentive which is tied to appreciation in West Marine's stock price. The appreciation on MSAP awards is capped. The plan is cash-settled plan and earned by associates over a number of years; therefore, it is within the scope of Accounting Standards Codification 718, Compensation - Stock Compensation because the amount earned by the associates is based on the price of the Company's stock. Additionally, since the award is settled in cash, the fair value of the award is recorded as a liability, rather than equity. As such, the Company re-measures the awards at fair value each reporting period until the award is settled. The awards vest 33%, 33% and 34% over a three-year period.

Fair value was determined using a Monte Carlo simulation model. A Monte Carlo simulation is a generally accepted statistical technique used, in this instance, to simulate a range of possible future stock prices for West Marine. These stock prices are used to determine the fair values of the awards that have been granted. The Company is using the forfeiture rate of its non-qualified stock options, since the Company does not have sufficient history of the MSAP awards. The Company believes this is a reasonable interim assumption until the Company has sufficient forfeiture history on these awards. The fair value of the award at December 29, 2012 was $2.04 per award. Assumptions used in determining the fair value of the MSAP awards during 2012 were as follows:



	2012
Expected price volatility	45	%
Risk-free interest rate	0.6	%
Weighted-average expected term (years)	4.2
Dividend yield	—

There were 162,125 grants of MSAP awards on June 1, 2012, to eligible associates. During 2012, there were 13,375 MSAP forfeitures resulting in net MSAP shares of 148,750. The MSAP compensation expense recorded for 2012 was $0.1 million and the corresponding liability at December 29, 2012 was also $0.1 million.

Share-based Compensation Expense COGS & SG&A [Table Text Block]



(in thousands)	2012		2011		2010
Cost of goods sold	$	542	$	409	$	334
Selling, general and administrative expense	2,586		1,985		2,172
Share-based compensation expense	$	3,128	$	2,394	$	2,506

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

A summary of the Company’s stock option activity in 2012, 2011 and 2010 is as follows:



	Number of Shares		Weighted Average Exercise Price	Weighted Average Option Grant Date Fair Value
Outstanding at year-end 2009 (1,969,741 stock options exercisable at a weighted-average exercise price of $15.32)	3,636,572		11.37	5.80
Granted	734,875		10.95	4.12
Exercised	(184,995	)	5.49	2.82
Forfeited	(79,856	)	8.11	2.89
Expired	(354,795	)	18.84	12.00
Outstanding at year-end 2010 (2,238,084 stock options exercisable at a weighted-average exercise price of $12.85)	3,751,801		10.93	5.08
Granted	452,887		10.36	4.27
Exercised	(270,721	)	4.95	1.77
Forfeited	(96,340	)	8.56	3.18
Expired	(303,087	)	13.71	5.57
Outstanding at year-end 2011 (2,492,684 stock options exercisable at a weighted-average exercise price of $11.72)	3,534,540		11.14	5.24
Granted	361,636		10.69	4.28
Exercised	(642,246	)	6.07	2.04
Forfeited	(35,256	)	10.01	3.91
Expired	(701,943	)	15.92	7.84
Outstanding at year-end 2012 (1,678,468 stock options exercisable at a weighted-average exercise price of $11.25)	2,516,731		11.05	5.21

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Statement of Position (SOP)

-Number 93-6

-Paragraph 53

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 123R

-Paragraph 64, 65, A240

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 40

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 505

-SubTopic 50

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

+ Details

- Definition

Tabular disclosure of option exercise prices, by grouped ranges, including the upper and lower limits of the price range, the number of shares under option, weighted average exercise price and remaining contractual option terms.

+ References+ Details