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Stock-Based Compensation | 12 Months Ended
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Feb. 01, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-Based Compensation | 12. Stock-Based Compensation On May 1, 2013, the Company’s Board of Directors approved the Company’s assumption and adoption of the 2006 Management Incentive Plan (the 2006 Plan) that was previously sponsored by Burlington Coat Factory Holdings, LLC. The 2006 Plan terminated on April 12, 2016. The Company’s 2013 Omnibus Incentive Plan (the 2013 Plan and, together with the 2006 Plan, the Plans), originally adopted effective prior to and in connection with the Company’s initial public offering, was amended and restated effective May 17, 2017. The 2006 Plan, prior to its termination, and the 2013 Plan provide for the granting of stock options, restricted stock and other forms of awards to key employees and directors of the Company or its affiliates. The Company accounts for awards issued under the Plans in accordance with Topic No. 718. As of February 1, 2020, there were 3,280,488 shares of common stock available for issuance under the 2013 Plan. CEO Awards A portion of the awards granted during Fiscal 2019 were granted to Michael O’Sullivan, the Company’s Chief Executive Officer (the CEO), upon commencement of his employment in September 2019. To compensate the CEO for a portion of the equity awards forfeited at his prior employer, he received a make-whole long-term incentive grant with a target grant date fair value of $25.0 million, comprised of 50% time-based restricted stock units and 50% stock options, vesting in one-third annual increments (subject to the CEO’s continued employment through the applicable vesting date). The CEO also received a prorated portion of his Fiscal 2019 long-term incentive award (such award having a target grant date fair value equal to $8.5 million), delivered as 50% performance-based restricted stock units, 25% stock options and 25% time-based restricted stock units, on the same terms as the Company’s Fiscal 2019 annual equity grants. Stock Options Options granted during Fiscal 2019, Fiscal 2018 and Fiscal 2017, were all service-based awards granted under the Plans at the following exercise prices:
|  | Exercise Price Ranges |
|  | From |  |  | To |
Fiscal 2019 |  | $ | 145.08 |  |  | $ | 231.86 |
Fiscal 2018 |  | $ | 113.80 |  |  | $ | 172.40 |
Fiscal 2017 |  | $ | 80.91 |  |  | $ | 110.50 |
All awards granted during Fiscal 2019, Fiscal 2018 and Fiscal 2017, other than certain awards granted to the CEO as noted above, vest 25% on each of the first four anniversaries of the grant date. The final exercise date for any option granted is the tenth anniversary of the grant date. Options granted during Fiscal 2019, Fiscal 2018 and Fiscal 2017 become exercisable if the grantee’s employment is terminated without cause or, in some instances, the recipient resigns with good reason, within a certain period of time following a change in control. Unless determined otherwise by the plan administrator, upon cessation of employment other than for cause, the majority of options that have not vested will terminate immediately, and unexercised vested options will be exercisable for a period of 60 to 180 days. In May 2013, the Company’s Board of Directors approved a modification to all then outstanding options. The modification, through a combination of either reduced exercise prices or cash payments, did not affect the existing vesting schedules. The modification resulted in a total of $0.1 million of incremental compensation expense during Fiscal 2017, of which less than $0.1 million was payable in cash. These costs were recorded in the line item “Stock option modification expense” in the Company’s Consolidated Statement of Income. There was no incremental compensation expense as a result of the modification during Fiscal 2019 or Fiscal 2018. As of February 1, 2020, the Company does not expect to recognize any additional compensation expense related to the modification. Non-cash stock compensation expense is as follows:
|  | (in thousands) |
|  | Fiscal Year Ended |
|  | February 1, |  |  | February 2, |  |  | February 3, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Type of Non-Cash Stock Compensation |  |  |  |  |  |  |  |  |  | (53 Weeks) |
Restricted stock grants (a) |  | $ | 20,454 |  |  | $ | 18,967 |  |  | $ | 15,864 |
Stock option grants (a) |  |  | 19,222 |  |  |  | 16,518 |  |  |  | 11,039 |
Stock option modification (b) |  |  | — |  |  |  | — |  |  |  | 131 |
Performance stock grants (a) |  |  | 4,252 |  |  |  | — |  |  |  | — |
Total (c) |  | $ | 43,928 |  |  | $ | 35,485 |  |  | $ | 27,034 |
(a) | Included in the line item “Selling, general and administrative expenses” in the Company’s Consolidated Statements of Income.
(b) | Represents non-cash compensation related to the May 2013 stock option modification as discussed above. Amounts are included in the line item “Stock option modification expense” in the Company’s Consolidated Statements of Income.
(c) | The amounts presented in the table above exclude the effect of income taxes. The tax benefit related to the Company’s non-cash stock compensation was $9.0 million, $9.7 million and $2.8 million during Fiscal 2019, Fiscal 2018 and Fiscal 2017, respectively.
As of February 1, 2020, the Company had 1,890,955 options outstanding to purchase shares of common stock, and there was $40.8 million of unearned non-cash stock-based option compensation that the Company expects to recognize as expense over a weighted average period of 2.5 years. The awards are expensed on a straight-line basis over the requisite service period. Stock option transactions during Fiscal 2019 are summarized as follows:
|  | Number of Shares |  |  | Weighted Average Exercise Price Per Share |
Options outstanding, February 2, 2019 |  |  | 2,337,316 |  |  | $ | 64.48 |
Options granted |  |  | 417,286 |  |  |  | 180.22 |
Options exercised (a) |  |  | (710,964 | ) |  |  | 48.14 |
Options forfeited |  |  | (152,683 | ) |  |  | 89.20 |
Options outstanding, February 1, 2020 |  |  | 1,890,955 |  |  | $ | 94.17 |
(a) | Options exercised during Fiscal 2019 had a total intrinsic value of $94.1 million.
The following table summarizes information about the options outstanding and exercisable as of February 1, 2020:
|  | Options Outstanding |  |  | Options Exercisable |
Exercise Prices |  | Number Outstanding at February 1, 2020 |  |  | Weighted Average Remaining Contractual Life (Years) |  |  | Number Exercisable at February 1, 2020 |  |  | Weighted Average Remaining Contractual Life (Years) |
$0.79 - $4.55 |  |  | 399,129 |  |  |  | 3.4 |  |  |  | 247,329 |  |  |  | 3.4 |
$26.96+ |  |  | 1,491,826 |  |  |  | 7.7 |  |  |  | 424,077 |  |  |  | 6.3 |
|  |  | 1,890,955 |  |  |  |  |  |  |  | 671,406 |  |  |  |  |
The following table summarizes information about the stock options vested and expected to vest during the contractual term:
|  | Options |  |  | Weighted Average Remaining Contractual Life (Years) |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value (in millions) |
Vested and expected to vest |  |  | 1,890,955 |  |  |  | 6.8 |  |  | $ | 94.17 |  |  | $ | 233.2 |
The fair value of each stock option granted was estimated on the date of grant using the Monte Carlo Simulation option pricing model prior to the date of the Company’s initial public offering and the Black Scholes option pricing model subsequent to the date of the initial public offering. The fair value of each stock option granted during Fiscal 2019 was estimated using the following assumptions:
|  | Fiscal Year Ended |
|  | February 1, |
|  | 2020 |
Risk-free interest rate |  | 1.47% - 3.00% |
Expected volatility |  | 32% - 36% |
Expected life (years) |  | 5.69 - 6.25 |
Contractual life (years) |  |  | 10.0 |
Expected dividend yield |  |  | 0.0% |
Weighted average grant date fair value of options issued |  | $ | 67.41 |
The expected dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. Since the Company completed its initial public offering in October 2013, it does not have sufficient history as a publicly traded company to evaluate its volatility factor. As such, the expected stock price volatility is based upon the historical volatility of the stock price over the expected life of the options of peer companies that are publicly traded. The risk free interest rate was based on the U.S. Treasury rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the awards being valued. For grants issued during Fiscal 2019, Fiscal 2018 and Fiscal 2017, the expected life of the options was calculated using the simplified method, which defines the life as the average of the contractual term of the options and the weighted average vesting period for all option tranches. This methodology was utilized due to the short length of time our common stock has been publicly traded. Restricted Stock Awards Restricted stock awards granted during Fiscal 2019 were all service-based awards. The fair value of each unit of restricted stock granted during Fiscal 2019 was based upon the closing price of the Company’s common stock on the grant date. As of February 1, 2020, the Company had 40,000 awards outstanding that cliff vest at the end of the service periods ranging from three years to five years from the grant date. Awards granted to non-employee members of the Company’s Board of Directors before Fiscal 2018 have graded vesting provisions that generally vest in thirds over a three-year period. Awards granted to non-employee members of the Company’s Board of Directors during Fiscal 2018 and Fiscal 2019 vest 100% on the first anniversary of the grant date. The remaining awards outstanding as of February 1, 2020, other than certain awards granted to the CEO as noted above, have graded vesting provisions that generally vest in quarters over a four-year-period. Following a change of control, all unvested restricted stock awards shall remain unvested, provided, however, that 100% of such shares shall vest if, following such change of control, the employment of the recipient is terminated without cause or, in some instances, the recipient resigns with good reason, within a certain period of time following a change in control. As of February 1, 2020, there was approximately $43.0 million of unearned non-cash stock-based compensation related to restricted stock awards that the Company expects to recognize as an expense over the next 2.5 years. The awards are expensed on a straight-line basis over the requisite service periods. Prior to May 1, 2019, the Company granted shares of restricted stock. Grants made on and after May 1, 2019 are in the form of restricted stock units. Award grant, vesting and forfeiture transactions during Fiscal 2019 are summarized as follows:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value Per Award |
Non-vested awards outstanding, February 2, 2019 |  |  | 666,842 |  |  | $ | 81.93 |
Awards granted |  |  | 192,278 |  |  |  | 177.72 |
Awards vested (a) |  |  | (344,800 | ) |  |  | 67.48 |
Awards forfeited |  |  | (62,546 | ) |  |  | 101.32 |
Non-vested awards outstanding, February 1, 2020 |  |  | 451,774 |  |  |  | 131.03 |
| (a) | Restricted stock awards vested during Fiscal 2019 had a total intrinsic value of $60.1 million.
Performance Share Units Beginning in Fiscal 2019, the Company granted performance share units to its senior executives. Vesting of these performance share units is based on pre-established EBIT margin expansion and sales compound annual growth rate (CAGR) goals (each weighted equally) over a three-year performance period. Based on the Company’s achievement of these goals, each award may range from 50% (at threshold performance) to no more than 200% of the target award. In the event that actual performance is below threshold, no award will be made. In addition to the performance conditions, each performance share unit cliff vests at the end of a three-year service period. Following a change of control, all unvested performance share units shall remain unvested, provided, however, that 100% of such shares shall vest if, following such change of control, the employment of the recipient is terminated without cause or, in some instances, the recipient resigns with good reason, within a certain period of time following a change in control. As of February 1, 2020, there was approximately $12.6 million of unearned non-cash stock-based compensation related to performance share units that the Company expects to recognize as an expense over the next 2.3 years. The awards are expensed on a straight-line basis over the requisite service periods. Performance share unit transactions during Fiscal 2019 are summarized as follows:
|  | Number of Shares |  |  | Weighted Average Grant Date Fair Value Per Award |
Non-vested units outstanding, February 2, 2019 |  |  | — |  |  | $ | — |
Units granted |  |  | 89,448 |  |  |  | 173.51 |
Awards forfeited |  |  | (8,497 | ) |  |  | 170.08 |
Non-vested units outstanding, February 1, 2020 |  |  | 80,951 |  |  |  | 173.87 |

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