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Note R - Stock-Based Compensation
9 Months Ended
Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note R– Stock-Based Compensation

In March 2006, the Board of Directors approved the Steven Madden, Ltd. 2006 Stock Incentive Plan (the “Plan”) under which nonqualified stock options, stock appreciation rights, performance shares, restricted stock, other stock-based awards and performance-based cash awards may be granted to employees, consultants and non-employee directors. The stockholders approved the Plan on May 26, 2006. On May 25, 2007, the stockholders approved an amendment to the Plan to increase the maximum number of shares that may be issued under the Plan from 2,700,000 to 3,487,500. On May 22, 2009, the stockholders approved a second amendment to the Plan that increased the maximum number of shares that may be issued under the Plan to 9,144,000. The following table summarizes the number of shares of common stock authorized for use under the Plan, the number of stock-based awards granted (net of expired or cancelled awards) under the Plan and the number of shares of common stock available for the grant of stock-based awards under the Plan:

Common Stock authorized
    9,144,000  
         
Stock based awards, including restricted stock and stock options granted, net of expired or cancelled
    6,374,000  
         
Common Stock available for grant of stock-based awards as of September 30, 2011
    2,770,000  

Total equity-based compensation expense for the three and nine months ended September 30 is as follows:

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
Restricted stock
  $ 1,093     $ 1,110     $ 4,050     $ 3,440  
Stock options
    1,679       1,177       4,287       2,523  
Total
  $ 2,772     $ 2,287     $ 8,337     $ 5,963  

Equity-based compensation is included in operating expenses on the Company’s Condensed Consolidated Statements of Income.

Stock Options

Cash proceeds and intrinsic values related to total stock options exercised during both the three- and nine-month periods ended September 30, 2011 and 2010 are as follows:

   
Three Months Ended
September 30,
   
Nine Months Ended
September 30,
 
   
2011
   
2010
   
2011
   
2010
 
Proceeds from stock options exercised
  $ 520     $ 485     $ 4,005     $ 2,398  
Intrinsic value of stock options exercised
  $ 1,062     $ 808     $ 8,861     $ 5,422  

During the three and nine months ended September 30, 2011, approximately 86,000 and 697,000 options vested with a weighted average exercise price of $24.61 and $15.23, respectively. During the three and nine months ended September 30, 2010, 77,000 and 474,000 options vested with a weighted average exercise price of $14.97 and $10.27, respectively. As of September 30, 2011, there were 1,948,000 unvested options with a total of $10,463 of unrecognized compensation cost and a weighted average vesting period of 2.5 years. As of September 30, 2010, there were 2,339,000 unvested options with a total of $10,752 of unrecognized compensation cost and a weighted average vesting period of 3.1 years.

The Company estimates the fair value of options granted using the Black-Scholes option-pricing model, which requires several assumptions. The expected term of the options represents the estimated period of time until exercise and is based on the historical experience of similar awards. Expected volatility is based on the historical volatility of the Company’s common stock. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. With the exception of a special dividend paid in each of November 2005 and 2006, the Company historically has not paid dividends and thus the expected dividend rate is assumed to be zero. The following weighted average assumptions were used for stock options granted:

Note R – Stock-Based Compensation (continued)

 
Nine Months Ended September 30,
 
2011
 
2010
       
Expected volatility
47.3% to 48.7%
 
47.2% to 52.4%
Risk-free interest rate
0.61% to 1.78%
 
1.08% to 2.16%
Expected life (in years)
2.8 to 4.4
 
2.8 to 4.4
Expected dividend yield
None
 
None
Weighted average fair value
$10.91
 
$8.45

Activity relating to stock options granted under the Company’s plans during the nine months ended September 30, 2011 is as follows:

   
Number of Shares
   
Weighted Average Exercise Price
   
Weighted Average Remaining Contractual Term
   
Aggregate Intrinsic Value
 
                             
Outstanding at January 1, 2011
    2,703,000     $ 14.08              
Granted
    582,000       29.80              
Exercised
    (357,000 )     11.21    
 
       
Cancelled/Forfeited
    (167,000 )     19.30          
 
 
                                 
Outstanding at September 30, 2011
    2,761,000     $ 17.45       4.8     $ 35,899  
                                 
Exercisable at September 30, 2011
    813,000     $ 14.25       4.2     $ 13,101  

Restricted Stock

The following table summarizes restricted stock activity during the nine months ended September 30, 2011 and 2010:

   
2011
   
2010
 
   
Number of Shares
   
Weighted Average Fair Value at Grant Date
   
Number of Shares
   
Weighted Average Fair Value at Grant Date
 
                                 
Non-vested at January 1
    563,000     $ 17.20       671,000     $ 13.98  
Granted
    334,000       31.34       177,000       20.33  
Vested
    (179,000 )     14.93       (288,000 )     13.35  
Forfeited
    —       —       (15,000 )     18.99  
                                 
Non-vested at September 30
    718,000     $ 24.34       545,000     $ 14.67  

As of September 30, 2011, there was $12,609 of total unrecognized compensation cost related to restricted stock awards granted under the Plan. This cost is expected to be recognized over a weighted average of 2.9 years. The Company determines the fair value of its restricted stock awards based on the market price of its common stock on the date of grant.