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Share-Based Compensation | 12 Months Ended
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Feb. 01, 2020
Share-based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation Share-Based Compensation Plans 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. Effective May 19, 2017, the Plan was amended to increase the authorized issuance of shares from 15,000,000 shares of common stock to 29,100,000 shares of common stock. In addition, the amendment provided that awards granted on or after May 1, 2017 (other than stock options or stock appreciation rights) would be counted against the number of shares available to be issued under the Plan as 3.54 shares for every one share actually issued. The amendment also extended the term through May 19, 2027 and extended the Company’s ability to grant certain performance-based awards under the Plan through the first annual meeting of the Company’s shareholders in calendar 2022. As of February 1, 2020 and February 2, 2019, there were 12,595,751 and 13,622,590 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. Stock awards/units granted under the Plan typically vest in increments of one-fourth of the shares granted on each anniversary from the date of grant. The three most recent annual grants for stock options and other equity awards had initial vesting periods of nine months followed by three annual vesting periods. The Guess?, Inc. Employee Stock Purchase Plan (“ESPP”) allows 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. Effective May 20, 2016, the Director Plan was amended to extend the term through June 30, 2026, reduce the authorized issuance of shares from 2,000,000 shares of common stock to 1,850,000 shares of common stock and allow more flexibility to structure compensation arrangements for the Company’s non-employee directors. All other remaining provisions under the Director Plan remained in full force and effect. As of February 1, 2020 and February 2, 2019, there were 357,404 and 423,873 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. Performance-Based Awards The Company has granted certain nonvested units that require certain minimum performance targets to be achieved in order for these awards to vest. Vesting is also subject to continued service requirements through the vesting date. If the minimum performance targets are not forecasted to be achieved, no expense is recognized during the period. The Company has granted certain nonvested stock units subject to performance-based vesting conditions to select executive officers. Each award of nonvested stock units generally has an initial vesting period from the date of the grant through either (i) the end of the first fiscal year or (ii) the first anniversary of the date of grant, followed by annual vesting periods which may range from two-to-three years. The nonvested stock units are subject to the achievement of certain performance-based vesting conditions. The Company has also granted a target number of nonvested stock units to select key management, including certain executive officers. The number of shares that may ultimately vest with respect to each award may range from 0% up to 200% of the target number of shares, subject to the achievement of certain performance-based vesting conditions. Any shares that are ultimately issued are scheduled to vest at the end of the third fiscal year following the grant date. Market-Based Awards The Company has granted certain nonvested stock units which are subject to market-based performance targets in order for these units to vest. Vesting is also subject to continued service requirements through the vesting date. The grant date fair value for such nonvested stock units was estimated using a Monte Carlo simulation that incorporates option-pricing inputs covering the period from the grant date through the end of the performance period. Compensation expense for such nonvested stock units is recognized on a straight-line basis over the vesting period, regardless of whether the market condition is satisfied. The Company has granted certain nonvested stock units subject to market-based vesting conditions to select executive officers. The number of shares that may ultimately vest will equal 0% to 150% of the target number of shares, subject to the performance of the Company’s total stockholder return (“TSR”) relative to the TSR of a select group of peer companies over a three-year period. Contingently Returnable Restricted Stock Awards In connection with a new employment agreement entered into between the Company and Mr. Alberini (the “Alberini Employment Agreement”), who became the Company’s Chief Executive Officer on February 20, 2019, the Company granted 150,000 restricted stock units that vested immediately but were considered contingently returnable as a result of a one-year implied service condition set forth in the Alberini Employment Agreement. This service condition was not yet met as of February 1, 2020. Compensation expense for these types of restricted stock units are recognized on a straight-line basis over the implied service period. Other Special Grants On February 20, 2019, the Company also granted 600,000 stock options and 250,000 nonvested stock units which were subject to the achievement of certain performance-based vesting conditions to Mr. Alberini in connection with the Alberini Employment Agreement. Share-Based Compensation Expense Compensation expense for nonvested stock options and stock awards/units that are not subject to performance-based vesting conditions is recognized on a straight-line basis over the vesting period. Compensation expense for performance-based awards that vest in increments is recognized based on an accelerated attribution method. During fiscal 2018, the Company adopted authoritative guidance which eliminated the requirement to estimate forfeitures, but rather provides for an election that would allow entities to account for forfeitures as they occur. The Company adopted this election using the modified retrospective method and recorded a cumulative adjustment to reduce retained earnings by approximately $0.3 million as of the beginning of the period of adoption. The following table summarizes the share-based compensation expense recognized under all of the Company’s stock plans during fiscal 2020, fiscal 2019 and fiscal 2018 (in thousands):
| Year Ended |  | Year Ended |  | Year Ended
| Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Stock options | $ | 2,811 |  |  | $ | 2,563 |  |  | $ | 2,345 |
Stock awards/units | 21,250 |  |  | 17,187 |  |  | 16,347 |
ESPP | 229 |  |  | 223 |  |  | 160 |
Total share-based compensation expense | $ | 24,290 |  |  | $ | 19,973 |  |  | $ | 18,852 |
Stock options The following table summarizes the stock option activity under all of the Company’s stock plans during fiscal 2020:
| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value ($000’s)
Options outstanding at February 2, 2019 | 3,580,909 |  |  | $ | 20.71 |  |  |  |  |  |
Granted | 1,812,800 |  |  | $ | 17.02 |  |  |  |  |  |
Exercised | (455,781 | ) |  | $ | 14.57 |  |  |  |  |  |
Forfeited | (1,145,066 | ) |  | $ | 18.82 |  |  |  |  |  |
Expired | (248,775 | ) |  | $ | 23.19 |  |  |  |  |  |
Options outstanding at February 1, 2020 | 3,544,087 |  |  | $ | 20.10 |  |  | 7.02 |  | $ | 13,102 |
Exercisable at February 1, 2020 | 1,537,712 |  |  | $ | 24.34 |  |  | 4.53 |  | $ | 4,152 |
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 2020, fiscal 2019 and fiscal 2018:
| Year Ended |  | Year Ended |  | Year Ended
Valuation Assumptions | Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Risk-free interest rate | 2.3 | % |  | 2.3 | % |  | 1.5 | %
Expected stock price volatility | 48.9 | % |  | 46.1 | % |  | 37.1 | %
Expected dividend yield | 3.4 | % |  | 4.3 | % |  | 8.0 | %
Expected life of stock options | 4.4 years |  |  | 4.4 years |  |  | 4.4 years |
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 stock price 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 weighted average grant date fair value of options granted was $5.50, $5.89 and $1.57 during fiscal 2020, fiscal 2019 and fiscal 2018, respectively. The total intrinsic value of stock options exercised was $2.9 million, $3.4 million and $0.7 million during fiscal 2020, fiscal 2019 and fiscal 2018, 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 $6.6 million, $8.9 million and $1.4 million during fiscal 2020, fiscal 2019 and fiscal 2018, respectively. The compensation expense included in SG&A expense recognized was $2.8 million before the recognized income tax benefit of $0.7 million during fiscal 2020. As of February 1, 2020, there was approximately $8.6 million of unrecognized compensation cost related to nonvested stock options. This cost is expected to be recognized over a weighted average period of 2.0 years. The excess tax windfall included in cash flows from operating activities related to stock option activity was minimal for fiscal 2020. Stock awards/units The following table summarizes the nonvested stock awards/units activity under all of the Company’s stock plans during fiscal 2020:
| Number of Awards/Units |  | Weighted Average Grant Date Fair Value
Nonvested at February 2, 2019 | 2,632,169 |  |  | $ | 16.04 |
Granted | 1,073,555 |  |  | $ | 19.14 |
Vested | (960,846 | ) |  | $ | 17.27 |
Forfeited | (647,625 | ) |  | $ | 17.27 |
Nonvested at February 1, 2020 | 2,097,253 |  |  | $ | 16.68 |
The following table summarizes the activity for nonvested performance-based units and nonvested market-based units included in the table above during fiscal 2020:
| Performance-Based Units |  | Market-Based Units
| Number of Units |  | Weighted Average Grant Date Fair Value |  | Number of Units |  | Weighted Average Grant Date Fair Value
Nonvested at February 2, 2019 | 1,371,230 |  |  | $ | 16.44 |  |  | 518,409 |  |  | $ | 14.28 |
Granted 1 | 455,339 |  |  | $ | 18.33 |  |  | 17,557 |  |  | $ | 15.20 |
Vested 1 | (222,308 | ) |  | $ | 17.53 |  |  | (158,014 | ) |  | $ | 15.20 |
Forfeited | (464,238 | ) |  | $ | 17.24 |  |  | (89,750 | ) |  | $ | 15.58 |
Nonvested at February 1, 2020 | 1,140,023 |  |  | $ | 16.66 |  |  | 288,202 |  |  | $ | 13.43 |
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1 | As a result of the achievement of certain market-based vesting conditions, there were 17,557 shares that vested in addition to the original target number of shares granted in fiscal 2017.
The fair value of each market-based nonvested stock unit was estimated on the grant date using the Monte Carlo simulation. There were no new market-based nonvested stock units granted during fiscal 2020. The following assumptions were used for the grants during fiscal 2019 and fiscal 2018:
| Year Ended |  | Year Ended
Valuation Assumptions | Feb 2, 2019 |  | Feb 3, 2018
Risk-free interest rate | 2.6 | % |  | 1.4 | %
Expected stock price volatility | 42.1 | % |  | 39.7 | %
Expected dividend yield | — | % |  | — | %
Expected life of market-based awards | 2.6 years |  |  | 2.8 years |
The weighted average grant date fair value for the total nonvested stock awards/units granted was $19.14, $20.81 and $11.41 during fiscal 2020, fiscal 2019 and fiscal 2018, respectively. The total fair value at grant date of previously nonvested stock awards/units that were vested during fiscal 2020, fiscal 2019 and fiscal 2018 was $16.6 million, $10.9 million and $18.4 million, respectively. During fiscal 2020, fiscal 2019 and fiscal 2018, the total intrinsic value of nonvested stock awards/units that vested was $16.8 million, $14.6 million and $12.6 million, respectively. The total intrinsic value of nonvested stock awards/units outstanding and unvested as of February 1, 2020 was $44.6 million. The compensation expense included in SG&A expense recognized during fiscal 2020 was $21.3 million before the recognized income tax benefit of $5.0 million. As of February 1, 2020, there was approximately $17.8 million of total unrecognized compensation cost related to nonvested stock awards/units. This cost is expected to be recognized over a weighted average period of 1.6 years. The excess tax shortfall of $1.1 million related to stock award/unit activity was included in cash flows from operating activities for fiscal 2020. ESPP The Company’s ESPP allows 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. The ESPP requires participants to hold any shares purchased under the ESPP 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. The Company has 4,000,000 shares of common stock registered under the ESPP. The Company’s ESPP will remain in effect through March 11, 2022. During fiscal 2020, fiscal 2019 and fiscal 2018, 53,424 shares, 43,737 shares and 54,300 shares of the Company’s common stock were issued pursuant to the ESPP at an average price of $14.65, $16.88 and $10.45 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 with the following weighted average assumptions used for grants during fiscal 2020, fiscal 2019 and fiscal 2018.
| Year Ended |  | Year Ended |  | Year Ended
Valuation Assumptions | Feb 1, 2020 |  | Feb 2, 2019 |  | Feb 3, 2018
Risk-free interest rate | 2.0 | % |  | 2.0 | % |  | 1.0 | %
Expected stock price volatility | 51.7 | % |  | 59.1 | % |  | 45.8 | %
Expected dividend yield | 3.4 | % |  | 4.6 | % |  | 7.6 | %
Expected life of ESPP options | 3 months |  |  | 3 months |  |  | 3 months |
The weighted average grant date fair value of ESPP options granted during fiscal 2020, fiscal 2019 and fiscal 2018 was $4.29, $5.17 and $2.85, respectively.

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