STOCK-BASED AWARDS

6 Months Ended

Sep. 08, 2012

STOCK-BASED AWARDS

NOTE 7 — STOCK-BASED AWARDS

The Company recognized total stock-based compensation of $4 in the second quarter ended September 8, 2012 and September 10, 2011. The Company recognized total stock-based compensation of $9 and $8 for the year-to-date ended September 8, 2012 and September 10, 2011, respectively. These costs were included in Selling and administrative expenses in the Condensed Consolidated Statements of Earnings.

Long-Term Incentive Plans

In May 2012, the Company granted 5 performance award units to certain employees under the SUPERVALU INC. 2007 Stock Plan as part of the Company’s long-term incentive program (“2013 LTIP”). Payout of the award will be based on the increase in share price over the three-year service period ending May 1, 2015, and will be settled in the Company’s stock.

The grant date fair value used to determine compensation expense associated with the performance grant was calculated utilizing a Monte Carlo simulation. The assumptions related to the valuation of the Company’s 2013 LTIP consisted of the following:

	2013
Dividend yield		4.1%
Volatility rate		44.8 — 45.8%
Risk-free interest rate		0.4%
Expected life		3.0 years

The grant date fair value of the 2013 LTIP award was $1.38 per award unit. At the end of the three-year service period, the award units will be converted to shares based on the aggregate award value as determined by multiplying the award units by the increase in the Company share price over the service period above the $5.77 grant date share price. The aggregate award will be divided by the closing market price as of May 1, 2015, to determine the number of shares awarded.

In April 2011, the Company granted performance awards to employees under the SUPERVALU INC. 2007 Stock Plan as part of the Company’s long-term incentive program (“2012 LTIP”). Payout of the award, if at all, will be based on the highest payout under the terms of the grant based on the increase in market capitalization over the service period, or the achievement of financial goals for the three-year period ending February 22, 2014. Awards will be settled equally in cash and the Company’s stock.

The fair value used to determine compensation expense associated with the Company’s 2012 LTIP performance grant is calculated utilizing a Monte Carlo simulation. The assumptions related to the valuation of the Company’s 2012 LTIP consisted of the following:

	2013		2012
Dividend yield		—  %		4.2%
Volatility rate		76.7 — 79.1%		47.4 — 51.6%
Risk-free interest rate		0.2 — 1.2%		0.3 — 1.2%
Expected life		1.7 — 3.1 years		2.7 — 3.1 years

The grant date fair value of the 2012 LTIP award was $2.40 per share. The fair value of the cash portion of the award is classified as a liability and is remeasured at fair value each reporting period. As of September 8, 2012 and February 25, 2012, the fair value of the cash portion of the award was $0.13 and $0.57 per share, respectively. The minimum payout value of cash and stock is $0 and the aggregate maximum amount the Company could be required to payout is $177.

Stock Options

On July 17, 2012, the Company’s Board of Directors granted non-qualified stock options to the Company’s Chief Executive Officer, and the Leadership Development and Compensation Committee of the Board granted non-qualified stock options to certain employees, under the Company’s 2012 Stock Plan. The Company granted 8 stock options with a weighted average grant date fair value of $0.98 per share as part of a broad-based employee incentive initiative designed to retain and motivate employees across the Company as it pursues its business transformation strategy. These options vest over three years.

The Company used the Black-Scholes option pricing model to estimate the fair value of the options at grant date based upon the following assumptions.

	2013
Dividend yield		2.1%
Volatility rate		60.5 — 61.2%
Risk-free interest rate		0.6%
Expected life		4.5 —5.0 years

The Company did not grant any shares under stock options during the second quarter and year-to-date ended September 10, 2011.

Restricted Stock Awards

In April 2012, the Company granted 1 share of restricted stock awards (“RSAs”) to certain employees under the Company’s fiscal 2012 bonus plan at a fair value of $6.15 per share. The RSAs will vest over a three year period from the date of grant.