Note 9 - Stock Based Compensation

Compensation Plan Summaries

On April 27, 2012, we completed a three-for-two stock split of the shares of our common stock, which was effected in the form of a stock dividend. All share and per share amounts referenced below give effect to the stock split and have been adjusted retroactively for all periods presented.

We have two stock-based compensation plans: the Outside Directors Stock Option Plan (the "Directors Plan") and the 2000 Stock Option and Incentive Plan (the "2000 Plan").

The Directors Plan was approved by our Board of Directors on March 4, 1999. The plan reserves for issuance 37,500 shares of common stock (subject to adjustment for stock splits, stock dividends and certain other changes to the common stock). No grants have been made under this plan since fiscal 2006, and it is currently the intention of the Board of Directors not to grant stock options under this plan in the future. At February 1, 2014, 16,500 shares of unissued common stock were reserved for possible future grants and there were 1,500 fully vested stock options outstanding under the Directors Plan.

The 2000 Plan was approved by our Board of Directors and shareholders effective June 8, 2000. On June 14, 2012, the 2000 Plan was amended to increase the number of shares reserved for issuance from 3,000,000 to 3,900,000 (subject to adjustment for subsequent stock splits, stock dividends and certain other changes in the common stock). The 2000 Plan was also amended to revise the provision governing the payment of dividends on shares of restricted stock. No further awards may be made under the 2000 Plan after the later of ten years from date of adoption, or ten years from the approval of any amendment. At February 1, 2014, there were 910,000 shares of unissued common stock reserved for future grants under the 2000 Plan.

Stock options currently outstanding under the 2000 Plan typically were granted such that one-third of the shares underlying the stock options granted would vest and become fully exercisable on each of the first three anniversaries of the date of the grant and were assigned a 10-year term from the date of grant. Restricted stock awards issued to employees under the 2000 Plan are classified as either performance-based or service-based. Performance-based restricted stock awards typically are granted such that they vest upon the achievement of specified levels of annual earnings per diluted share during a six-year period starting from the grant date. Should the annual earnings per diluted share criteria not be met within the six-year period from the grant date, any shares still restricted will be forfeited. Service-based restricted stock awards typically are granted under one of three vesting periods: (a) one-third of the shares would vest on each of the first three anniversaries subsequent to the date of the grant; (b) the full award would vest at the end of a 5-year service period subsequent to date of grant; or (c) for our Directors, all restricted stock awards are issued to vest on January 2 of the year following the year of the grant. Non-vested performance-based restricted stock granted before June 14, 2012 and all shares of non-vested service-based restricted stock provide non-forfeitable rights to all dividends declared by the Company. Dividends on non-vested performance-based restricted stock granted after June 14, 2012 are subject to deferral until such times as the shares vest and are released.

Plan Specific Activity and End of Period Balance Summaries

Stock Options

The following table summarizes the stock option transactions pursuant to the stock-based compensation plans:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at February 2, 2013		38,572		$	9.21
Granted		0
Forfeited or expired		0
Exercised		(7,000	)		9.91
Outstanding and exercisable at February 1, 2014		31,572		$	9.05		2.73	$	494

The following table summarizes information regarding options exercised:

(In thousands)	2013		2012		2011

Total intrinsic value ⁽¹⁾	$	103	$	2,473	$	1,624
Total cash received	$	69	$	2,219	$	2,464
Associated excess income tax benefits recorded	$	28	$	465	$	399

(1)

Defined as the difference between the market value at exercise and the grant price of stock options exercised.

The following table summarizes information regarding outstanding and exercisable options at February 1, 2014:

		Options Outstanding						Options Exercisable
Range of Exercise Price		Number of Options Outstanding		Weighted Average Remaining Life		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
$	7.63 - 10.36		31,572		2.73	$	9.05		31,572	$	9.05

The following table summarizes information regarding stock-based compensation expense recognized for non-vested options:

(In thousands)		2013		2012		2011⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit	$	0	$	0	$	22
Income tax benefit	$	0	$	0	$	8

(1)

Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

No stock options have been granted since fiscal 2008. All outstanding options had vested as of the end of fiscal 2011, therefore no unrecognized compensation expense remains. The total fair value at grant date of previously non-vested stock options that vested during fiscal year 2011 was $46,000.

Restricted Stock Awards

The following table summarizes the restricted share transactions pursuant to the 2000 Plan:

	Number of Shares			Weighted- Average Grant Date Fair Value
Restricted stock at February 2, 2013		499,280		$	18.84
Granted		222,300			20.85
Vested		(144,666	)		18.18
Forfeited or expired		(51,655	)		19.18
Restricted stock at February 1, 2014		525,259		$	19.84

The total fair value at grant date of restricted stock awards that vested during fiscal 2013, 2012 and 2011 was $2.6 million, $160,000 and $6.5 million, respectively. The weighted-average grant date fair value of stock awards granted during fiscal 2012 and fiscal 2011 was $19.51 and $17.08, respectively. Of the 51,655 restricted stock awards that were forfeited or that expired during the current fiscal year, 33,905 shares were restricted stock awards that expired unvested, as the performance measure was not achieved. These awards represented the third tier of the restricted stock granted on March 13, 2007 that expired in the first quarter of fiscal 2013.

The following table summarizes information regarding stock-based compensation expense recognized for restricted stock awards:

(In thousands)		2013		2012		2011⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit	$	2,985	$	3,663	$	1,882
Income tax benefit	$	1,141	$	1,436	$	712

(1)

Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

The $1.9 million of expense recognized in fiscal 2011 was comprised of compensation expense of $2.6 million offset by income of $716,000. The income was attributable to the fourth quarter reversal of the cumulative prior period expense for performance-based awards, which were deemed by management as not probable of vesting. These performance based awards represent the third tier of the of the restricted stock granted on March 13, 2007 which expired unvested on March 31, 2013 as the performance measure was not achieved within the six-year period from the grant date.

As of February 1, 2014, there was approximately $6.0 million of unrecognized compensation expense remaining related to both our performance-based and service-based restricted stock awards. The cost is expected to be recognized over a weighted average period of approximately 2.7 years. This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.

Cash-Settled Stock Appreciation Rights (SARs)

Our outstanding Cash-Settled Stock Appreciation Rights (SARs) were granted to certain non-executive employees such that one-third of the shares underlying the SARs would vest annually. The SARs were assigned a five-year term from the date of grant, after which any unexercised SARs will expire. Each SAR entitles the holder, upon exercise of their vested shares, to receive cash in an amount equal to the closing price of our stock on the date of exercise less the exercise price, with a maximum amount of gain defined. SARs were granted during the first quarter of fiscal 2012 and issued with a defined maximum gain of $6.67 over the exercise price of $17.17. In accordance with current authoritative guidance, cash-settled SARs are classified as Other liabilities on the Consolidated Balance Sheets.

The following table summarizes the SARs activity:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Outstanding at February 2, 2013		123,750		$	17.17
Granted		0			0.00
Forfeited		(4,000	)		17.17
Exercised		(41,000	)		17.17
Outstanding at February 1, 2014		78,750		$	17.17		2.99
Exercisable at February 1, 2014		39,375		$	17.17		2.99

The fair value of liability awards are remeasured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense is recognized over the vesting period, or immediately for vested awards. The weighted-average fair value of outstanding, non-vested SAR awards was $4.66 as of February 1, 2014.

The fair value was estimated using a trinomial lattice model with the following assumptions:

	February 1, 2014
Risk free interest rate yield curve		0.03% - 1.49	%
Expected dividend yield		1.0	%
Expected volatility		45.20	%
Maximum life		2.99 Years
Exercise multiple		1.38
Maximum payout	$	6.67
Employee exit rate		2.2% - 9.0	%

The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our quarterly cash dividends in fiscal 2013, with the assumption that quarterly dividends would continue at the current rate. Expected volatility was based on the historical volatility of our stock. The exercise multiple and employee exit rate are based on historical option data.

The following table summarizes information regarding stock-based compensation expense recognized for SARs:

(In thousands)	2013		2012		2011 ⁽¹⁾

Stock-based compensation expense before the recognized income tax benefit	$	272	$	349	$	197
Income tax benefit	$	104	$	137	$	74

(1)

Income tax benefit was calculated using an adjusted effective tax rate. The adjusted rate removes the tax effects from the favorable resolution of certain tax positions.

As of February 1, 2014, approximately $70,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a weighted-average period of approximately 1.0 year.