NOTE 9—STOCK-BASED AWARDS

As of February 22, 2014, the Company has stock options, restricted stock awards and performance awards (collectively referred to as “stock-based awards”) outstanding under the following plans: 2012 Stock Plan, 2007 Stock Plan, 2002 Stock Plan, 1997 Stock Plan, Albertsons Amended and Restated 1995 Stock-Based Incentive Plan and the Albertsons 2004 Equity and Performance Incentive Plan. The Company’s 2012 Stock Plan, as approved by stockholders in fiscal 2013, is the only plan under which stock-based awards may be granted. The 2012 Stock Plan provides that the Board of Directors or the Leadership Development and Compensation Committee of the Board (the “Compensation Committee”) may determine at the time of grant whether each stock-based award granted will be a non-qualified or incentive stock-based award under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). The terms of each stock-based award will be determined by the Board of Directors or the Compensation Committee. Generally, stock-based awards granted prior to fiscal 2006 have a term of 10 years from fiscal 2006 to fiscal 2012 stock-based awards granted generally have a term of seven years, and starting in fiscal 2013 stock-based awards granted generally have a term of 10 years.

Stock options are granted to key salaried employees and have been granted to the Company’s non-employee directors to purchase common stock at an exercise price not less than 100 percent of the fair market value of the Company’s common stock on the date of grant. Prior to fiscal 2013, stock options vested over four years and starting in fiscal 2013, stock options vest in three years. Restricted stock awards are also awarded to key salaried employees. The vesting of restricted stock awards is determined at the discretion of the Board of Directors or its Compensation Committee. The restrictions on the restricted stock awards generally lapse between one and five years from the date of grant and the expense is recognized over the lapsing period. Performance awards as part of the long-term incentive program are granted to key salaried employees.

As of February 22, 2014, there were 12 reserved shares under the 2012 Stock Plan available for stock-based awards. Common stock is delivered out of treasury stock upon the exercise of stock-based awards. The provisions of future stock-based awards may change at the discretion of the Board of Directors or its Compensation Committee.

On March 20, 2013, the Company completed the Tender Offer and issued common stock to Symphony Investors, which the Company’s Board of Directors deemed to be a change-in-control for purposes of the Company’s outstanding stock-based awards, immediately accelerating the vesting of certain stock-based awards. The deemed change-in-control in conjunction with certain other events resulted in the immediate acceleration of certain additional stock-based awards. As a result of this action, the 2013 and 2012 long-term incentive program awards were immediately accelerated for the vast majority of the outstanding awards resulting in the recognition of the remaining unamortized stock-based compensation expense. However, as the exercise price for the vast majority of these awards was greater than the market price of the Company’s common stock at such time, the cash pay-out to management and employees was insignificant. Outstanding options granted prior to May of fiscal 2010 were also immediately accelerated resulting in the recognition of the remaining unamortized costs. In addition, the deemed change-in-control resulted in the acceleration of options and restricted stock awards granted after May of fiscal 2010 for certain employees meeting qualifying criteria. The Company recognized $9 of accelerated stock-based compensation charges in Selling and administrative expenses in fiscal 2014 as a result of the deemed change-in-control, comprised of $5 from long-term incentive programs, $3 from restricted stock awards and $1 from stock options.

Stock Options

Stock options granted, exercised and outstanding consisted of the following:


	Shares Under Option (In thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value (In thousands)
Outstanding, February 23, 2013		22,246		$	19.20
Granted		10,083			6.58
Exercised		(3,121	)		2.29
Canceled and forfeited		(5,873	)		23.70

Outstanding, February 22, 2014		23,335		$	14.87		5.41	$	15,982

Vested and expected to vest in the future as of February 22, 2014		21,646		$	15.56		5.12	$	15,101
Exercisable as of February 22, 2014		12,050		$	23.38		2.05	$	7,340

In fiscal 2014, the Company granted non-qualified stock options to certain employees under the Company’s 2012 Stock Plan. The Company granted 9 stock options with a weighted average grant date fair value of $2.78 per share, which vest over a period of three years, as part of a broad-based employee incentive initiative designed to retain and motivate employees across the Company.

In fiscal 2013, the Company’s Board of Directors granted 2 stock options to the Company’s Chief Executive Officer. The stock options have a grant date fair value of $1.40 per share. These options vest over three years. In fiscal 2013, the Company’s Board of Directors granted non-qualified stock options to the Company’s Chief Executive Officer, and the Board of Directors granted non-qualified stock options to certain other 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 pursued 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:


	2014			2013
Dividend yield		—	%		1.0 – 2.1	%
Volatility rate		49.3 – 51.3	%		42.3 – 61.2	%
Risk-free interest rate		0.6 – 1.0	%		0.4 – 0.6	%
Expected option life		4.0 – 6.0 years			4.5 – 6.0 years

The Company did not grant any shares of stock options during fiscal 2012.

Restricted Stock Awards

Restricted stock award activity consisted of the following:


	Restricted Stock (In thousands)			Weighted Average Grant-Date Fair Value
Outstanding, February 23, 2013		1,443		$	7.83
Granted		491			6.98
Lapsed		(967	)		6.23
Canceled and forfeited		(30	)		6.08

Outstanding, February 22, 2014		937		$	9.09

In fiscal 2013, the Company granted restricted stock awards of 1 shares to certain employees under the Company’s fiscal 2012 bonus plan at a fair value of $6.15 per share. The restricted stock awards will vest over a three year period from the date of grant.

Stock-Based Compensation Expense

The components of pre-tax stock-based compensation expense are included primarily in Selling and administrative expenses in the Consolidated Statements of Operations, the expense recognized and related tax benefits were as follows:


	2014			2013			2012
Stock-based compensation	$	22		$	13		$	13
Income tax benefits		(8	)		(5	)		(5	)

Stock-based compensation (net of tax)	$	14		$	8		$	8

The Company realized excess tax shortfalls of $1 related to stock-based awards during fiscal 2014, and $2 during each of fiscal 2013 and 2012.

Unrecognized Stock-Based Compensation Expense

As of February 22, 2014, there was $18 of unrecognized compensation expense related to unvested stock-based awards granted under the Company’s stock plans. The expense is expected to be recognized over a weighted average remaining vesting period of approximately two years.

Long-Term Incentive Plans

In fiscal 2013, 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 was 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. Due to the deemed change in control along with certain other events discussed above, the 2013 and 2012 long-term incentive program awards were immediately accelerated for the vast majority of the outstanding awards in fiscal 2014.

The grant date fair value used to determine compensation expense associated with the performance grant was calculated utilizing a Monte Carlo simulation. The grant date fair value of the 2013 LTIP award was $1.38 per award unit. The amount of the awards outstanding was insignificant as of February 22, 2014. The assumptions related to the valuation of the Company’s 2013 LTIP consisted of the following:


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