Share-Based Compensation | 3 Months Ended |
2-May-15 |
Share-based Compensation [Abstract] | |
Share-Based Compensation | Share-Based Compensation |
The Company records the fair value of share-based payments to employees in the unaudited Consolidated Statements of Income and Comprehensive Income as compensation expense, net of forfeitures, over the requisite service period. |
Share-Based Compensation Plans |
The following summarizes share-based compensation expense: |
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| Thirteen Weeks Ended | | | | | |
| 2-May-15 | | 3-May-14 | | | | | |
| (in thousands) | | | | | |
Restricted stock units and restricted stock | $ | 2,607 | | | $ | 2,903 | | | | | | |
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Stock options | 1,244 | | | 3,433 | | | | | | |
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Total share-based compensation | $ | 3,851 | | | $ | 6,336 | | | | | | |
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The stock compensation related income tax benefit recognized by the Company during the thirteen weeks ended May 2, 2015 and May 3, 2014 was $2.7 million and $3.2 million, respectively. |
Stock Options |
During the thirteen weeks ended May 2, 2015, the Company granted stock options under the Amended and Restated Express, Inc. 2010 Incentive Compensation Plan (the "2010 Plan"). The fair value of the stock options is determined using the Black-Scholes-Merton option-pricing model as described later in this note. Stock options granted in 2015 under the 2010 Plan vest 25% per year over four years or upon reaching retirement eligibility, defined as providing 10 years of service and being at least 55 years old. These options have a ten year contractual life. Options granted to the Chief Executive Officer in prior years vest ratably over three years. The expense for stock options is recognized using the straight-line attribution method. |
The Company's activity with respect to stock options during the thirteen weeks ended May 2, 2015 was as follows: |
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| Number of | | Grant Date | | Weighted-Average Remaining Contractual Life (in years) | | Aggregate Intrinsic Value |
Shares | Weighted Average |
| Exercise Price Per Share |
| (in thousands, except per share amounts and years) |
Outstanding, January 31, 2015 | 3,470 | | | $ | 18.45 | | | | | |
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Granted | 240 | | | $ | 16.28 | | | | | |
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Exercised | — | | | $ | — | | | | | |
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Forfeited or expired | (50 | ) | | $ | 18.42 | | | | | |
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Outstanding, May 2, 2015 | 3,660 | | | $ | 18.31 | | | 6.7 | | $ | 752 | |
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Expected to vest at May 2, 2015 | 840 | | | $ | 17.24 | | | 8.7 | | $ | 465 | |
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Exercisable at May 2, 2015 | 2,776 | | | $ | 18.66 | | | 6.1 | | $ | 266 | |
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The following provides additional information regarding the Company's stock options: |
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| Thirteen Weeks Ended | | | | | |
| May 2, 2015 | | May 3, 2014 | | | | | |
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| (in thousands, except per share amounts) | | | | | |
Weighted average grant date fair value of options granted (per share) | $ | 7.76 | | | $ | 8.57 | | | | | | |
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Total intrinsic value of options exercised | $ | — | | | $ | — | | | | | | |
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As of May 2, 2015, there was approximately $5.5 million of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of approximately 1.6 years. |
The Company uses the Black-Scholes-Merton option-pricing model to value stock options granted to employees. The Company's determination of the fair value of stock options is affected by the Company's stock price as well as a number of subjective and complex assumptions. These assumptions include the risk-free interest rate, the Company's expected stock price volatility over the term of the award, expected term of the award, and dividend yield. |
The fair value of stock options was estimated at the grant date using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions: |
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| Thirteen Weeks Ended | | | | | | | |
| May 2, 2015 | | May 3, 2014 | | | | | | | |
Risk-free interest rate (1) | 1.59 | % | | 1.9 | % | | | | | | | |
Price volatility (2) | 47.9 | % | | 54.7 | % | | | | | | | |
Expected term (years) (3) | 6.25 | | | 6.25 | | | | | | | | |
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Dividend yield (4) | — | | | — | | | | | | | | |
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-1 | Represents the yield on U.S. Treasury securities with a term consistent with the expected term of the stock options. | | | | | | | | | | | |
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-2 | For the first two years following the initial public offering of the Company's common stock, this was based on the historical volatility of selected comparable companies over a period consistent with the expected term of the stock options because the Company had a limited history of being publicly traded. Comparable companies were selected primarily based on industry, stage of life cycle, and size. Beginning in May 2012, the Company began using its own volatility as an additional input in the determination of expected volatility. | | | | | | | | | | | |
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-3 | Calculated utilizing the “simplified” methodology prescribed by Staff Accounting Bulletin No. 107 due to the lack of historical exercise data necessary to provide a reasonable basis upon which to estimate the term. | | | | | | | | | | | |
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-4 | The Company does not currently plan on paying regular dividends. | | | | | | | | | | | |
Restricted Stock Units and Restricted Stock |
During the thirteen weeks ended May 2, 2015, the Company granted restricted stock units (“RSUs”) under the 2010 Plan, including 0.4 million RSUs with performance conditions. The fair value of RSUs is determined based on the Company's closing stock price on the day prior to the grant date in accordance with the 2010 Plan. The expense for RSUs without performance conditions is recognized using the straight-line attribution method. The expense for RSUs with performance conditions is recognized using the graded vesting method based on the expected achievement of the performance conditions. The RSUs with performance conditions are also subject to time-based vesting. All of the RSUs that are earned based on the achievement of performance criteria will vest on April 15, 2018. RSUs without performance conditions vest ratably over four years. |
The Company's activity with respect to RSUs and restricted stock, including awards with performance conditions, for the thirteen weeks ended May 2, 2015 was as follows: |
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| Number of | Grant Date | | | | | | | |
Shares | Weighted Average | | | | | | | |
| Fair Value Per Share | | | | | | | |
| (in thousands, except per share amounts) | | | | | | | |
Unvested, January 31, 2015 | 1,435 | | $ | 17.75 | | | | | | | | |
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Granted* | 1,165 | | $ | 16.28 | | | | | | | | |
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Vested | (440 | ) | $ | 18.61 | | | | | | | | |
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Forfeited | (57 | ) | $ | 17.56 | | | | | | | | |
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Unvested, May 2, 2015 | 2,103 | | $ | 16.76 | | | | | | | | |
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*There were approximately 0.5 million RSUs with three-year performance conditions included in this amount. This is based on current estimates against predefined financial performance targets ranging from 0% to 125%. |
The total fair value/intrinsic value of RSUs and restricted stock that vested during the thirteen weeks ended May 2, 2015 was $8.2 million. As of May 2, 2015, there was approximately $27.0 million of total unrecognized compensation expense related to unvested RSUs and restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.2 years. |