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Share-Based Compensation | 12 Months Ended
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Jan. 28, 2012
Share-Based Compensation |
Share-Based Compensation |
(17) Share-Based Compensation The Company has four share-based compensation plans. The Guess?, Inc. 2004 Equity Incentive Plan (the "Plan") provides that the Board of Directors may grant stock options and other equity awards to officers, key employees and certain consultants and advisors to the Company or any of its subsidiaries. The Plan authorizes the issuance of up to 20,000,000 shares of common stock. At January 28, 2012 and January 29, 2011, there were 13,429,837 and 13,723,669 shares available for grant under the Plan, respectively. Stock options granted under the Plan have ten-year terms and typically vest and become fully exercisable in increments of one-fourth of the shares granted on each anniversary from the date of grant. The three most recent annual grants have initial vesting periods of nine months, ten months and nine months, respectively, followed by three annual vesting periods. The Guess?, Inc. Employee Stock Purchase Plan ("ESPP") allows for qualified employees to participate in the purchase of designated shares of the Company's common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. The Guess?, Inc. 2006 Non-Employee Directors' Stock Grant and Stock Option Plan (the "Director Plan") provides for the grant of equity awards to non-employee directors. The Director Plan authorizes the issuance of up to 2,000,000 shares of common stock which consists of 1,000,000 shares that were initially approved for issuance on July 30, 1996 plus an additional 1,000,000 shares that were approved for issuance effective May 9, 2006. At January 28, 2012 and January 29, 2011, there were 930,338 and 951,373 shares available for grant under this plan, respectively. In addition, the Guess?, Inc. 1996 Equity Incentive Plan, under which equity grants have not been permitted since the approval of the Plan in 2004, continues to govern outstanding awards previously made thereunder. On June 18, 2011, Maurice Marciano, the Company's then-serving executive Chairman of the Board of Directors, notified the Company of his decision to retire as an employee and executive officer effective January 28, 2012, the end of fiscal 2012. Mr. Marciano will continue to serve as non-executive Chairman of the Board of Directors. In accordance with the terms of Mr. Marciano's employment agreement, the Company and Mr. Marciano entered into a two-year consulting agreement, under which Mr. Marciano will provide certain consulting services to the Company through January 2014. In connection with the ongoing services to be provided, Mr. Marciano's outstanding equity awards were modified to provide that all awards that would have otherwise been unvested and forfeited at January 28, 2012, will continue to vest in accordance with the original vesting terms for as long as Mr. Marciano continues to serve as a member of the Board of Directors of the Company. The original grant date fair value of the modified equity awards aggregated $4.7 million while the modified grant date fair value aggregated $5.0 million. As a result of the modification, compensation expense of $2.5 million was accelerated and recorded in fiscal 2012. On May 1, 2008, the Company granted an aggregate of 167,000 nonvested stock awards to certain employees which are subject to certain annual performance-based vesting conditions over a five-year period. On October 30, 2008, the Company granted an aggregate of 563,400 nonvested stock options to certain employees scheduled to vest over a four-year period, subject to the achievement of performance-based vesting conditions for fiscal 2010. During the first quarter of fiscal 2010, the Compensation Committee determined that the performance goals established in the prior year were no longer set at an appropriate level to incentivize and help retain employees given the greater than previously anticipated deterioration of the economy that had occurred since the goals were established. Therefore, in April 2009, the Compensation Committee modified the performance goals of that year's tranche of the outstanding performance-based stock awards and options to address the challenges associated with the economic environment. During first quarter of fiscal 2011 and fiscal 2012, the Compensation Committee modified the performance goals of the respective year's tranche of the outstanding performance-based stock awards to address the continuing challenges associated with the economic environment. None of the modifications had a material impact on the consolidated financial statements of the Company. Compensation expense for new stock options and nonvested stock awards is recognized on a straight-line basis over the vesting period. The Company estimates forfeitures in calculating the expense relating to share-based compensation as opposed to recognizing forfeitures as an expense reduction as they occur. The following table summarizes the share-based compensation expense recognized under all of the Company's stock plans during fiscal 2012, fiscal 2011 and fiscal 2010 (in thousands):
|  | Year Ended Jan. 28, 2012 |  | Year Ended Jan. 29, 2011 |  | Year Ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Stock options |  | $ | 7,123 |  | $ | 7,755 |  | $ | 8,051 |
Nonvested stock awards/units |  |  | 20,584 |  |  | 21,199 |  |  | 18,923 |
ESPP |  |  | 393 |  |  | 358 |  |  | 365 |
Total share-based compensation expense |  | $ | 28,100 |  | $ | 29,312 |  | $ | 27,339 |
Stock options The following table summarizes the stock option activity under all of the Company's stock plans during fiscal 2012:
|  | Number of Shares |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value ($000's) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Options outstanding at January 29, 2011 |  |  | 2,204,319 |  | $ | 27.50 |  |  |  |  |  |  |
Granted |  |  | 384,600 |  |  | 36.71 |  |  |  |  |  |  |
Exercised |  |  | (337,809 | ) |  | 21.30 |  |  |  |  |  |  |
Forfeited |  |  | (233,825 | ) |  | 33.42 |  |  |  |  |  |  |
Expired |  |  | — |  |  | — |  |  |  |  |  |  |
Options outstanding at January 28, 2012 |  |  | 2,017,285 |  | $ | 29.61 |  |  | 6.91 |  | $ | 10,577 |
Exercisable at January 28, 2012 |  |  | 1,209,010 |  | $ | 27.91 |  |  | 6.01 |  | $ | 8,325 |
Options exercisable and expected to vest at January 28, 2012 |  |  | 1,979,293 |  | $ | 29.53 |  |  | 6.87 |  | $ | 10,551 |
The fair value of each stock option was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants during fiscal 2012, fiscal 2011 and fiscal 2010.
Valuation Assumptions |  | Year ended Jan. 28, 2012 |  | Year ended Jan. 29, 2011 |  | Year ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Risk-free interest rate |  |  | 1.1 | % |  | 1.4 | % |  | 1.3 | %
Expected stock price volatility |  |  | 48.5 | % |  | 47.8 | % |  | 61.3 | %
Expected dividend yield |  |  | 2.2 | % |  | 1.6 | % |  | 1.8 | %
Expected life of stock options in years |  |  | 3.7 |  |  | 3.7 |  |  | 3.7 |
The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. The expected volatility is determined based on an average of both historical volatility and implied volatility. Implied volatility is derived from exchange traded options on the Company's common stock. The expected dividend yield is based on the Company's history and expectations of dividend payouts. The expected life is determined based on historical trends. The expected forfeiture rate is determined based on historical data. The weighted-average grant-date fair value of options granted was $11.58, $14.36 and $8.97 during fiscal 2012, fiscal 2011 and fiscal 2010, respectively. The total intrinsic value of stock options exercised during fiscal 2012, fiscal 2011 and fiscal 2010 was $5.9 million, $24.9 million and $19.7 million, respectively. The intrinsic value of stock options is defined as the difference between the Company's stock price on the exercise date and the grant-date exercise price. The total cash received from option exercises was $7.2 million, $19.9 million and $7.4 million during fiscal 2012, fiscal 2011 and fiscal 2010, respectively. The excess tax benefit realized for the tax deductions from option exercises for fiscal 2012 was $1.1 million and is included in cash flows from financing activities for fiscal 2012. The excess tax shortfall of $0.4 million was included in cash flows from operating activities for fiscal 2012. The compensation expense recognized was $7.1 million before the recognized income tax benefit of $2.7 million during fiscal 2012. As of January 28, 2012, there was approximately $7.1 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested stock options. This cost is expected to be recognized over a weighted-average period of 1.6 years. Nonvested stock awards/units The following table summarizes the nonvested stock awards/units activity under all of the Company's stock plans during fiscal 2012:
|  | Number of Shares/Units |  | Weighted- Average Grant-Date Fair Value |
--- | --- | --- | --- | --- | ---
Nonvested at January 29, 2011 |  |  | 1,032,854 |  | $ | 35.95 |
Granted |  |  | 347,535 |  |  | 38.98 |
Vested |  |  | (534,762 | ) |  | 36.28 |
Forfeited |  |  | (112,360 | ) |  | 42.13 |
Nonvested at January 28, 2012 |  |  | 733,267 |  | $ | 36.20 |
The weighted-average grant-date fair value of nonvested stock awards/units granted was $38.98, $45.51 and $20.03 during fiscal 2012, fiscal 2011 and fiscal 2010, respectively. The total fair value at grant date of previously nonvested stock awards/units that were vested during fiscal 2012, fiscal 2011 and fiscal 2010 was $19.4 million, $20.5 million and $16.0 million, respectively. During fiscal 2012, fiscal 2011 and fiscal 2010 the total intrinsic value of nonvested stock awards/units that vested was $19.3 million, $26.7 million and $14.3 million, respectively. The excess tax benefit realized for the tax deductions from vested shares and dividends paid on unvested shares for fiscal 2012 was $0.9 million and has been included in cash flows from financing activities for fiscal 2012. The excess tax shortfall of $1.5 million was included in cash flows from operating activities for fiscal 2012. The total intrinsic value of nonvested stock awards/units outstanding and unvested at January 28, 2012 was $21.5 million. The compensation expense included in SG&A expense recognized during fiscal 2012 was $20.6 million, before the recognized income tax benefit of $7.5 million. As of January 28, 2012, there was approximately $16.1 million of total unrecognized compensation cost, adjusted for estimated forfeitures, related to nonvested stock awards/units. This cost is expected to be recognized over a weighted-average period of 1.6 years. ESPP In January 2002, the Company established an ESPP, the terms of which allow for qualified employees (as defined) to participate in the purchase of designated shares of the Company's common stock at a price equal to 85% of the lower of the closing price at the beginning or end of each quarterly stock purchase period. Prior to March 4, 2009, the ESPP was a straight purchase plan with no holding period requirement. Effective March 4, 2009, the ESPP was amended to require participants to hold any shares purchased under the ESPP after April 1, 2009 for a minimum period of six months after purchase. In addition, all Company employees are subject to the terms of the Company's securities trading policy which generally prohibits the purchase or sale of any Company securities during the two weeks before the end of each fiscal quarter through two days after the public announcement by the Company of its earnings for that period. On January 23, 2002, the Company filed with the SEC a Registration Statement on Form S-8 registering 4,000,000 shares of common stock for the ESPP. On March 12, 2012 the Board of Directors approved a restatement of the ESPP which extended the term for an additional ten years, subject to shareholder approval at the Company's 2012 annual meeting. During fiscal 2012, fiscal 2011 and fiscal 2010, 47,456 shares, 42,695 shares and 73,810 shares of the Company's common stock were issued pursuant to the ESPP at an average price of $29.00, $30.69 and $16.92 per share, respectively. The fair value of stock compensation expense associated with the Company's ESPP was estimated on the date of grant using the Black-Scholes option-pricing valuation model and the following weighted-average assumptions for grants during fiscal 2012, fiscal 2011 and fiscal 2010.
Valuation Assumptions |  | Year ended Jan. 28, 2012 |  | Year ended Jan. 29, 2011 |  | Year ended Jan. 30, 2010 |
--- | --- | --- | --- | --- | --- | --- | ---
Risk-free interest rate |  |  | 0.1 | % |  | 0.1 | % |  | 0.2 | %
Expected stock price volatility |  |  | 49.0 | % |  | 43.4 | % |  | 62.3 | %
Expected dividend yield |  |  | 2.2 | % |  | 1.6 | % |  | 2.4 | %
Expected life of ESPP options (in months) |  |  | 3 |  |  | 3 |  |  | 3 |
The weighted-average grant-date fair value of ESPP options granted during fiscal 2012, fiscal 2011 and fiscal 2010 was $9.35, $9.39 and $5.19, respectively.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 + Details
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