| Stock-Based Compensation | Note 5 - Stock-Based Compensation At our 2017 annual meeting of shareholders held on June 13, 2017, our shareholders approved a new equity incentive plan, the
Shoe Carnival, Inc. 2017 Equity Incentive Plan (the “2017 Plan”), which replaces our 2000 Stock Option and Incentive
Plan, as amended (the “2000 Plan”). According to the terms of the 2017 Plan, upon approval of the 2017 Plan by
our shareholders, no further awards may be made under the 2000 Plan. A maximum of 1,000,000 shares of our common stock are
available for issuance and sale under the 2017 Plan. In addition, any shares of our common stock subject to an award granted
under the 2017 Plan, or to an award granted under the 2000 Plan that was outstanding on the date our shareholders approved
the 2017 Plan, that expires, is cancelled or forfeited, or is settled for cash will, to the extent of such cancellation, forfeiture,
expiration or cash settlement, automatically become available for future awards under the 2017 Plan. Stock-based compensation
includes stock options, cash-settled stock appreciation rights (SARs) and restricted stock awards. Additionally, we recognize stock-based
compensation expense for the discount on shares sold to employees through our employee stock purchase plan. For the thirteen and
twenty-six weeks ended July 29, 2017, stock-based compensation expense for the employee stock purchase plan was $9,000 before the
income tax benefit of $3,000 and $20,000 before the income tax benefit of $8,000, respectively. For the thirteen and twenty-six
weeks ended July 30, 2016, stock-based compensation expense
for the employee stock purchase plan was $11,000 before the income tax benefit of $4,000 and $24,000 before the income tax benefit
of $9,000, respectively. No stock options have
been granted since fiscal 2008. All outstanding options had vested as of the end of fiscal 2011; therefore no unrecognized compensation
expense remains. In the first six months of fiscal 2017 there were 3,500 options exercised and there were 3,500 options outstanding
and exercisable as of July 29, 2017. The following section summarizes the share
transactions for our restricted stock awards:
Number of Weighted-
Restricted stock at January 28, 2017 964,858 $ 22.63
Granted 273,398 24.10
Vested (32,274 ) 24.24
Forfeited or expired (151,953 ) 17.74
Restricted stock at July 29, 2017 1,054,029 $ 23.67 The weighted-average
grant date fair value of stock awards granted during the twenty-six week periods ended July 29, 2017 and July 30, 2016 was $24.10
and $24.94, respectively. The total fair value at grant date of restricted stock awards that vested during the first six months
of fiscal 2017 was $782,000. The total fair value at grant date of restricted stock awards that vested during the first six months
of fiscal 2016 was $854,000. Of the 151,953 shares of restricted stock that were forfeited or that expired in the first six months
of fiscal 2017, 135,000 shares were restricted stock awards that expired unvested in the first quarter of fiscal 2017, as the performance
measures were not achieved. These awards represented the three tiers of the restricted stock awards granted on March 15, 2011. The following table summarizes information
regarding stock-based compensation expense recognized for restricted stock awards:
(In thousands) Thirteen Thirteen Twenty-six Twenty-six
Stock-based compensation before the recognized income tax effect $ 1,133 $ 1,414 $ 1,144 $ 1,902
Income tax effect $ 430 $ 538 $ 431 $ 725 The $1.1 million of expense
recognized in the first six months of fiscal 2017 was comprised of compensation expense of $2.1 million, partially offset by income
of $916,000. The income was attributable to the reversal of the cumulative prior period expense for performance-based awards, which
were deemed by management as no longer probable to vest prior to their expiration. As of July 29, 2017,
approximately $6.2 million of unrecognized compensation expense remained related to both our performance-based and service-based
restricted stock awards. The cost is expected to be recognized over a weighted average period of approximately 1.6 years. This
incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated
performance conditions for performance-based stock awards. The following table summarizes the SARs
activity:
Number of Weighted- Weighted-
Outstanding at January 28, 2017 111,300 $ 24.26
Forfeited 0 0.00
Exercised 0 0.00
Outstanding at July 29, 2017 111,300 $ 24.26 2.6
Exercisable at July 29, 2017 64,741 $ 24.26 2.6 SARs
were granted during the first quarter of fiscal 2015 to certain non-executive employees, such that one-third of the shares underlying
the SARs will vest and become fully exercisable on each of the first three anniversaries of the date of the grant and were assigned
a five-year term from the date of grant, after which any unexercised SARs will expire. Each SAR entitles the holder, upon exercise
of their vested shares, to receive cash in an amount equal to the closing price of our common stock on the date of exercise less
the exercise price, with a maximum amount of gain defined. The SARs granted during the first quarter of fiscal 2015 were issued
with a defined maximum gain of $10.00 over the exercise price of $24.26. The fair value of these
liability awards are re-measured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases
or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. The
weighted-average fair value of outstanding, non-vested SAR awards as of July 29, 2017 and July 30, 2016 was $1.97 and $4.86, respectively. The fair value was estimated
using a trinomial lattice model with the following assumptions:
July 29, 2017 July 30, 2016
Risk free interest rate yield curve 1.00% - 1.83 % 0.19% - 1.03 %
Expected dividend yield 1.6 % 1.1 %
Expected volatility 35.68 % 36.32 %
Maximum life 2.6 Years 3.6 Years
Exercise multiple 1.34 1.34
Maximum payout $ 10.00 $ 10.00
Employee exit rate 2.2% - 9.0 % 2.2% - 9.0 % The risk free interest rate was based on
the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our historical
quarterly cash dividends, with the assumption that quarterly dividends would continue at that rate. Expected volatility was based
on the historical volatility of our common stock. The exercise multiple and employee exit rate were based on historical option
data. The following table summarizes information
regarding stock-based compensation recognized for SARs:
Thirteen Thirteen Twenty-six Twenty-six
Stock-based compensation before the recognized income tax effect $ (261 ) $ 72 $ (237 ) $ 212
Income tax effect $ (99 ) $ 27 $ (89 ) $ 81 As of July 29, 2017,
approximately $23,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be
recognized over a weighted-average period of approximately 0.7 years. |
