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Share-Based Compensation | 12 Months Ended
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Jan. 29, 2023
Share-Based Payment Arrangement, Noncash Expense [Abstract] |
Stock-Based Compensation | Share-Based Compensation Financial Statement Effects and Presentation Pre-tax share-based compensation, excluding the acceleration of Sierra Wireless equity awards, was included in the Statements of Income for fiscal years 2023, 2022 and 2021 as follows:
| Fiscal Year Ended
(in thousands) | January 29, 2023 |  | January 30, 2022 |  | January 31, 2021
Cost of sales | $ | 2,645 |  |  | $ | 2,901 |  |  | $ | 2,501 |
Selling, general and administrative | 21,493 |  |  | 32,578 |  |  | 37,000 |
Product development and engineering | 15,110 |  |  | 15,710 |  |  | 13,485 |
Share-based compensation | $ | 39,248 |  |  | $ | 51,189 |  |  | $ | 52,986 |
Restricted Stock Units, Employees The Company grants restricted stock units to certain employees, which are expected to be settled with shares of the Company's common stock. The grant date for these awards is equal to the measurement date. These awards are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typic ally 4 ye ars). The following table is a summary of the status of nonvested restricted stock unit awards as of January 29, 2023, and changes during the year.
| Restricted Stock Units, Stock Grants and Stock Units |  |
(in thousands, except per share data) | Shares |  | Weighted-Average Grant Date Fair Value (per share) |  |  |  |
Nonvested at January 30, 2022 | 1,902 |  |  | $ | 58.47 |  |  |  |  |
Granted | 687 |  |  | 41.91 |  |  |  |  |
Vested | (738) |  |  | 54.87 |  |  |  |  |
Forfeited | (212) |  |  | 60.38 |  |  |  |  |
Nonvested at January 29, 2023 | 1,639 |  |  | $ | 52.91 |  |  |  |  |
The aggregate unrecognized compensation for the non-vested restricted stock units as of January 29, 2023 was $67.2 million, which will be recognized over a weighted-average period of 2.5 years. Restricted Stock Units, Non-Employee Directors The Company maintains a compensation program pursuant to which restricted stock units are granted to the Company’s directors that are not employed by the Company or any of its subsidiaries. Under the Company's director compensation program, a portion of the stock units granted under the program would be settled in cash and a portion would be settled in shares of the Company's common stock. Restricted stock units awarded under the program are scheduled to vest on the earlier of (i) one year after the grant date or (ii) the day immediately preceding the annual meeting of stockholders in the year following the grant. The portion of a restricted stock unit award under the program that is to be settled in cash will, subject to vesting, be settled when the director who received the award separates from the board of directors. The portion of a restricted stock unit award under the program that is to be settled in shares of stock will, subject to vesting, be settled promptly following vesting. There were no changes to the terms and conditions of the existing awards. The restricted stock units that are to be settled in cash are accounted for as liabilities. These awards are not typically settled until a non-employee director’s separation from service, so the value of both the unvested and vested but unsettled awards are re-measured at the end of each reporting period until settlement. As of January 29, 2023, the total number of vested, but unsettled awards was 189,993 units, and the $6.1 million liability associated with these awards was included in "Other long-term liabilities" in the Balance Sheets. The restricted stock units that are to be settled in shares are accounted for as equity. The grant date for these awards is equal to the measurement date. These awards are valued as of the measurement date, based on the fair value of the Company's common stock at the grant date, and recognized as share-based compensation expense over the requisite vesting period (typically one year). The following table summarizes the activity for the non-employee directors restricted stock units for the fiscal year ended January 29, 2023:
(in thousands, except per share data) | Total Units |  | Units Subject to Share Settlement |  | Units Subject to Cash Settlement |  | Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 30, 2022 | 24 |  |  | 12 |  |  | 12 |  |  | $ | 68.06 |
Granted | 32 |  |  | 16 |  |  | 16 |  |  | 51.97 |
Vested | (24) |  |  | (12) |  |  | (12) |  |  | 68.06 |
Nonvested at January 29, 2023 | 32 |  |  | 16 |  |  | 16 |  |  | $ | 51.97 |
Total Stockholder Return ("TSR") Market-Condition Restricted Stock Units The Company grants TSR market-condition restricted stock units (the "TSR Awards") to certain executives of the Company, which are accounted for as equity awards. The TSR Awards have a pre-defined market condition, which determines the number of shares that ultimately vest, as well as a service condition. The TSR Awards are valued as of the grant date using a Monte Carlo simulation which takes into consideration the possible outcomes pertaining to the TSR market condition and expense is recognized on a straight-line basis over the requisite service periods and is adjusted for any actual forfeitures. In fiscal years 2023, 2022 and 2021, the Company granted, 125,399, 81,688 and 137,224, respectively, of TSR Awards. The market condition is determined based upon the Company’s TSR benchmarked against the TSR of the S&P SPDR Semiconductor ETF (NYSE:XSD) over one, two and three year periods (one-third of the awards vesting each performance period). Generally, the TSR Awards recipients must be employed for the entire performance period and be an active employee at the time of vesting of the awards. The grant-date fair values per unit of the TSR Awards granted in fiscal year 2023 for each one, two and three-year performance periods were $57.92, $68.94 and $75.69, respectively. The following table summarizes the activity for the TSR Awards for fiscal year 2023:
(in thousands, except per share data) | Total Units |  | Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 30, 2022 | 138 |  |  | $ | 61.61 |
Granted | 125 |  |  | 67.52 |
Vested | — |  |  | — |
Cancelled/Forfeited (1) | (175) |  |  | 58.98 |
Nonvested at January 29, 2023 | 88 |  |  | $ | 75.18 |
(1) Primarily represents cancellations due to awards not meeting the TSR target, as well as forfeitures due to the terminations of two officers. Amounts in the table above include the stated number of awards granted and outstanding. However, the number of awards that ultimately vest may be higher or lower than the originally granted amounts depending upon the actual TSR achievement level over the performance period. For example, of the 129,537 awards scheduled to vest on January 29, 2023, none actually vested due to lower than target TSR achievement levels. The aggregate unrecognized compensation expense for TSR Awards as of January 29, 2023 was $3.6 million, which will be recognized over a weighted-average period of 1.4 years. Market-Condition Restricted Stock Units, Employees In fiscal year 2022, the Company granted 54,928 restricted stock units to certain executives of the Company, which have a different pre-defined market condition that determines the number of shares that ultimately vest. These additional awards are eligible to vest during the period commencing March 9, 2021, and ending March 5, 2024 (the "Performance Period") as follows: the restricted stock units covered by the award will vest if, during any consecutive 30 trading day period that commences and ends during the Performance Period, the average per-share closing price of the Company’s common stock equals or exceeds $95.00. The award will also vest at a pro-rata percentage of the unvested portion of the total restricted units if a majority change in control of the Company occurs during the Performance Period and, in connection with such event, the Company’s stockholders become entitled to receive per-share consideration having a value equal to or greater than $71.00 but less than $95.00. If the change in control per-share consideration is equal to or greater than $95.00 the award will fully vest. These market-condition restricted stock units are valued as of the grant date using a Monte Carlo simulation model and expense is recognized on a straight-line basis over the requisite service period and is adjusted for any actual forfeitures. The grant-date fair value per unit of the awards granted in fiscal year 2022 was $49.55. The aggregate compensation expense for the market-condition restricted stock units has been fully recognized as of January 29, 2023. Market-Condition Restricted Stock Units, CEO In fiscal year 2020, the Company granted its Chief Executive Officer ("CEO") 320,000 restricted stock units with a market condition. The award is eligible to vest during the period commencing March 5, 2019, and ending March 5, 2024 (the "Performance Period") as follows: 30% of the restricted stock units covered by the award will vest if, during any consecutive 30 day trading period that commences and ends during the Performance Period, the average per-share closing price of the Company’s common stock equals or exceeds $71.00 ("Tranche 1") and the award will vest in full if, during any consecutive 30 day trading period that commences and ends during the Performance Period, the average per-share closing price of the Company’s common stock equals or exceeds $95.00 ("Tranche 2"). The award will also vest as to 30% if a majority change in control of the Company occurs during the Performance Period and, in connection with such event, the Company’s stockholders become entitled to receive per-share consideration having a value equal to or greater than $71.00 but less than $95.00. If the change in control per-share consideration is equal to or greater than $95.00 the award will fully vest. The award, to the extent then outstanding and not vested, will terminate upon the CEO’s separation from employment. The fair value of Tranche 1 and Tranche 2 at the grant date was determined to be $44.32 and $33.19, respectively, by application of the Monte Carlo simulation model. Expense is recognized on a straight-line basis over the requisite service periods and is adjusted for any actual forfeitures. On January 8, 2021, the Company's 30 day average-per-share closing price met the threshold for Tranche 1 resulting in the vesting of 30%, or 96,000 restricted stock units, of the original award. As of January 29, 2023, 224,000 restricted stock units were outstanding for the award. The aggregate compensation expense for the market-condition restricted stock units has been fully recognized as of January 29, 2023. Non-Qualified Stock Options From time to time, the Company grants non-qualified stock options to employees and/or non-employee directors. The fair values of these grants are measured on the grant date and recognized as expense over the requisite vesting period (typic ally 3-4 years). The maximum contractual term of stock options is generally 6 to 10 years. In fiscal year 2023, the Company granted 541,530 stock options to employees with a 3-year vesting period and a 4-year expected term. There were no stock options granted in fiscal years 2022 or 2021. T he number of authorized shares remaining available for grant under the equity incentive plan was 6,896,911 as of January 29, 2023. The Company uses the Black-Scholes pricing model to value stock options. The following table summarizes the assumptions used in the Black-Scholes model to determine the fair value of stock options granted in fiscal year 2023:
| Fiscal Year Ended
| January 29, 2023 |  |  |  |
Expected term, in years | 4 |  |  |  |
Estimated volatility | 50.5 | % |  |  |  |
Dividend yield | — |  |  |  |  |
Risk-free interest rate | 4.0 | % |  |  |  |
Weighted-average fair value on grant date | $ | 12.77 |  |  |  |  |
The assumptions used in the Black-Scholes option pricing model were determined as follows: •Fair Value of Common Stock - The closing price on the date of the grant. •Expected Term - The expected term represents the period that the Company's stock-based awards are expected to be outstanding. •Expected Volatility - The expected volatility was derived from the annualized volatility of the Company's closing stock price over the preceding six years based upon the life of the option award. •Risk-Free Interest Rate - The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with maturities approximately equal to the expected term of the stock option grants. •Dividend Yield - The Company has never declared or paid any cash dividends and do not plan to pay cash dividends in the foreseeable future, and, therefore, use an expected dividend yield of zero. The following table summarizes the activity for stock options for fiscal year 2023:
(in thousands, except per share data) | Number of Shares |  | Weighted- Average Exercise Price (per share) |  | Aggregate Intrinsic Value (1) |  |  |  | Number of Shares Exercisable |  | Weighted-Average Contractual Term (years)
Vested and expected to vest at January 30, 2022 | 118 |  |  | $ | 40.17 |  |  | $ | 3,253 |  |  |  |  | 84 |  |
Granted | 542 |  |  | 29.30 |  |  |  |  |  |  |  |  |
Exercised | (24) |  |  | 25.42 |  |  | 963 |  |  |  |  |  |  |
Forfeited | (28) |  |  | 42.78 |  |  |  |  |  |  |  |  |
Vested and expected to vest at January 29, 2023 | 608 |  |  | $ | 30.96 |  |  | $ | 2,151 |  |  |  |  | 68 |  | 5.4
Vested and exercisable at January 29, 2023 | 68 |  |  | $ | 44.24 |  |  | $ | 71 |  |  |  |  |  |  | 2.2
(1) The aggregate intrinsic value of stock options vested and exercisable and vested and expected to vest as of January 29, 2023 is calculated based on the difference between the exercise price and the $33.15 closing price of the Company's common stock as of January 29, 2023. The aggregate unrecognized compensation expense for the outstanding stock options as of January 29, 2023 was $6.4 million, which will be recognized over a weighted-average period of 2.8 years. The following table summarizes information regarding nonvested stock option awards at January 29, 2023:
(in thousands, except per share data) | Number of Shares |  | Weighted-Average Exercise Price (per share) |  | Weighted-Average Grant Date Fair Value (per share)
Nonvested at January 30, 2022 | 34 |  |  | $ | 47.73 |  |  | $ | 14.45 |
Granted | 542 |  |  | 29.30 |  |  | 12.77 |
Vested | (33) |  |  | 47.62 |  |  | 14.42 |
Forfeited | (3) |  |  | 39.12 |  |  | 13.96 |
Nonvested at January 29, 2023 | 540 |  |  | $ | 29.30 |  |  | $ | 12.77 |

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