| 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 thirty-nine weeks ended October 28, 2017, stock-based compensation expense for the employee stock purchase
plan was $10,000 before the income tax benefit of $4,000 and $30,000 before the income tax benefit of $12,000, respectively. For
the thirteen and thirty-nine weeks ended October 29, 2016, stock-based compensation expense for the employee stock purchase plan
was $9,000 before the income tax benefit of $3,000 and $33,000 before the income tax benefit of $12,000, 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 nine months of fiscal 2017 there were 3,500 options exercised and there
were 3,500 options outstanding and exercisable as of October 28, 2017. The
following section summarizes the share transactions for our restricted stock awards:
Number
of Shares Weighted- Average
Grant Date
Fair Value
Restricted stock at January
28, 2017 964,858 $ 22.63
Granted 274,346 24.09
Vested (119,107 ) 24.27
Forfeited
or expired (168,937 ) 18.46
Restricted stock
at October 28, 2017 951,160 $ 23.59 The
weighted-average grant date fair value of stock awards granted during the thirty-nine week periods ended October 28, 2017, and
October 29, 2016, was $24.09 and $24.98, respectively. The total fair value at grant date of restricted stock awards that vested
during the first nine months of fiscal 2017 was $2.9 million. The total fair value at grant date of restricted stock awards that
vested during the first nine months of fiscal 2016 was $854,000. Of the 168,937 shares of restricted stock that were forfeited
or that expired in the first nine 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 Weeks
Ended October
28, 2017 Thirteen Weeks
Ended October
29, 2016 Thirty-nine Weeks
Ended October
28, 2017 Thirty-nine Weeks
Ended October
29, 2016
Stock-based
compensation before the recognized income tax effect $ 996 $ 1,295 $ 2,140 $ 3,197
Income
tax effect $ 398 $ 482 $ 830 $ 1,208 The
$2.1 million of expense recognized in the first nine months of fiscal 2017 was comprised of compensation expense of $3.1 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 to be no longer probable to vest prior to their expiration. As
of October 28, 2017, approximately $4.9 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
1.7 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 Shares Weighted- Average Exercise
Price Weighted- Average Remaining Contractual Term
(Years)
Outstanding
at January 28, 2017 111,300 $ 24.26
Forfeited (3,500 ) 24.26
Exercised 0 0.00
Outstanding
at October 28, 2017 107,800 $ 24.26 2.4
Exercisable
at October 28, 2017 62,991 $ 24.26 2.4 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 October 28, 2017 and October 29,
2016 was $3.22 and $4.53, respectively. The
fair value was estimated using a trinomial lattice model with the following assumptions:
October
28, 2017 October
29, 2016
Risk free interest
rate yield curve 1.01%
- 2.06% 0.18%
- 1.33%
Expected
dividend yield 1.4 % 1.1 %
Expected volatility 37.34 % 35.06 %
Maximum life 2.4
Years 3.4
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:
(In thousands) Thirteen Weeks
Ended October
28, Thirteen Weeks
Ended October
29, Thirty-nine Weeks
Ended October
28, Thirty-nine Weeks
Ended October
29,
Stock-based
compensation before the recognized income tax effect $ 140 $ 12 $ (97 ) $ 208
Income
tax effect $ 56 $ 4 $ (38 ) $ 79 As
of October 28, 2017, approximately $23,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over the five month period following the third quarter of fiscal 2017. |
