v3.3.1.900
Stock-based Compensation
 12 Months Ended
Jan. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION

The DSW Inc. 2014 Long-Term Incentive Plan ("the 2014 Plan") provides for the issuance of equity awards to purchase up to 8.5 million DSW Common Shares. The Company began issuing shares under the 2014 Plan after the DSW Inc. 2005 Equity Incentive Plan expired in the second quarter of fiscal 2015. The 2014 Plan covers stock options, RSUs, PSUs, director stock units ("DSUs") and Stock Appreciation Rights ("SARs"). Eligible recipients include key employees of DSW Inc. and affiliates, as well as directors. Options generally vest 20% per year on a cumulative basis. Options granted under the 2014 Plan generally remain exercisable for a period of 10 years from the date of grant.

Stock-Based Compensation Expense- The following table summarizes stock-based compensation expense for the periods presented:
 
Fiscal
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
(in thousands)
Stock Options
$
5,532

 
$
5,827

 
$
5,891

Restricted Stock Units
2,953

 
2,097

 
1,797

Performance-Based Restricted Stock Units
3,979

 
1,324

 
503

Director Stock Units
1,037

 
1,247

 
1,151

Total
$
13,501

 
$
10,495

 
$
9,342



Stock Options- The majority of the stock-based compensation awards are granted on an annual basis in the first quarter of each year. The risk-free interest rate is based on the yield for U.S. Treasury securities for the expected term of the options at the grant date. Expected volatility is based on the historical volatility of the DSW Inc. Common Shares. The expected term of options granted is derived from historical data on DSW Inc.'s stock option exercises. The dividend yield assumption is based on DSW Inc.'s expectation of future dividend payouts. Forfeitures of options are estimated at the grant date based on historical rates of DSW Inc.’s stock option activity and reduce the compensation expense recognized.

The following table illustrates the weighted-average assumptions used in the Black-Scholes pricing model for options granted in each of the periods presented:
 
Fiscal
Assumptions:
2015
 
2014
 
2013
   Risk-free interest rate
1.4%
 
1.8%
 
0.7%
   Annual volatility of DSW Common Shares
37.9%
 
44.5%
 
53.4%
   Expected option term
5.1 years
 
5.4 years
 
4.7 years
   Dividend yield
2.1%
 
2.3%
 
1.3%
Other Data:
 
 
 
 
 
   Weighted average grant date fair value
$8.87
 
$11.82
 
$12.85


As of January 30, 2016, the total compensation cost related to unvested options not yet recognized was approximately $14.5 million, with a weighted average expense recognition period remaining of 2.2 years. For the periods presented, the following tables summarize stock option activity, related per share weighted average exercise prices (“WAEP”), weighted average remaining contract life and aggregate intrinsic value (shares and intrinsic value in thousands):
 
Fiscal
 
2015
 
2014
 
2013
 
Shares
 
WAEP
 
Shares
 
WAEP
 
Shares
 
WAEP
Outstanding beginning of year
3,156

 
$
20.91

 
3,347

 
$
17.62

 
3,694

 
$
14.50

Granted
1,395

 
$
32.47

 
502

 
$
34.49

 
492

 
$
31.75

Exercised
(539
)
 
$
13.83

 
(505
)
 
$
10.22

 
(748
)
 
$
10.99

Forfeited
(163
)
 
$
33.34

 
(188
)
 
$
27.32

 
(91
)
 
$
21.79

Outstanding end of year
3,849

 
$
25.56

 
3,156

 
$
20.91

 
3,347

 
$
17.62

Options exercisable end of year
2,007

 
$
20.35

 
1,682

 
$
15.16

 
1,430

 
$
13.08



As of January 30, 2016
 
Shares
 
WAEP
 
Weighted Average Remaining Contract Life
 
Aggregate Intrinsic Value
Options exercisable
 
2,007

 
$
20.35

 
3.3 years
 
$
12,905

Options expected to vest
 
1,639

 
$
31.26

 
8.7 years
 
612

Options vested and expected to vest
 
3,646

 
$
25.25

 
5.7 years
 
$
13,517



Year of Grant
 
Range of Exercise Prices
 
Weighted Average Remaining Contract Life
 
Options Outstanding
 
Options Exercisable
 
Min
 
Max
 
 
Options Outstanding
 
WAEP
 
Aggregate Intrinsic Value (1)
 
Options Exercisable
 
WAEP
 
Aggregate Intrinsic Value (1)
2006 - expire 2016
 
$
12.93

 
$
14.50

 
0.6 years
 
92

 
$
12.98

 
$
1,019

 
93

 
$
12.98

 
$
1,020

2007 - expire 2017
 
$
18.57

 
$
19.94

 
1.2 years
 
297

 
$
19.84

 
1,241

 
297

 
$
19.84

 
1,241

2008 - expire 2018
 
$
6.01

 
$
9.15

 
2.2 years
 
165

 
$
6.20

 
2,941

 
165

 
$
6.20

 
2,941

2009 - expire 2019
 
$
4.65

 
$
7.00

 
3.2 years
 
136

 
$
4.79

 
2,607

 
136

 
$
4.79

 
2,607

2010 - expire 2020
 
$
12.34

 
$
12.38

 
4.2 years
 
330

 
$
12.37

 
3,843

 
330

 
$
12.37

 
3,843

2011 - expire 2021
 
$
17.43

 
$
22.71

 
5.1 years
 
253

 
$
17.44

 
1,662

 
191

 
$
17.44

 
1,253

2012 - expire 2022
 
$
26.66

 
$
27.18

 
4.7 years
 
466

 
$
26.67

 
—

 
331

 
$
26.66

 
—

2013 - expire 2023
 
$
31.68

 
$
31.68

 
5.1 years
 
361

 
$
31.68

 
—

 
219

 
$
31.68

 
—

2014 - expire 2024
 
$
29.74

 
$
37.88

 
6.9 years
 
433

 
$
34.53

 
—

 
151

 
$
35.41

 
—

2015 - expire 2025
 
$
23.21

 
$
37.50

 
8.9 years
 
1,316

 
$
32.17

 
298

 
94

 
$
37.50

 
—

Total
 
$
4.65

 
$
37.88

 
5.9 years
 
3,849

 
$
25.56

 
$
13,611

 
2,007

 
$
20.35

 
$
12,905



(1) The aggregate intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option at year end. A zero value reflects an exercise price above the closing market price of DSW Class A Common Shares for fiscal 2015.

The aggregate intrinsic value is calculated as the amount by which the fair value of the underlying common shares exceeds the option exercise price. The total intrinsic value of options exercised during fiscal 2015, 2014 and 2013 was $8.9 million, $11.9 million and $20.9 million, respectively. The total fair value of options that vested during fiscal 2015, 2014 and 2013 was $3.7 million, $2.5 million and $3.8 million, respectively.

Restricted Stock Units ("RSUs")- Beginning in fiscal 2013, RSUs granted generally cliff vest over three years, and prior to fiscal 2013, RSUs granted cliff vest over four years. RSUs receive dividend equivalents in the form of additional RSUs, which are subject to the same restrictions and forfeiture provisions as the original award. The grant date fair value of RSUs is based on the closing market price of DSW Class A Common Shares on the date of the grant. The aggregate intrinsic value is calculated as the amount by which the fair value of the underlying common shares exceeds the exercise price. The total intrinsic value of RSUs that vested during fiscal 2015, 2014 and 2013 was $3.5 million, $3.7 million and $4.0 million, respectively. The total fair value of RSUs that vested during fiscal 2015, 2014 and 2013 was $2.0 million, $1.4 million and $0.7 million, respectively. As of January 30, 2016, the total compensation cost related to nonvested RSUs not yet recognized was approximately $7.0 million with a weighted average expense recognition period remaining of 1.7 years. The exercise price for all RSUs is zero.

For the periods presented, the following tables summarize RSU activity, weighted average grant date fair value (“GDFV”) and aggregate intrinsic value (units and intrinsic value in thousands):
 
Fiscal
 
2015
 
2014
 
2013
 
Units
 
GDFV
 
Units
 
GDFV
 
Units
 
GDFV
Outstanding at beginning of year
320

 
$
29.21

 
377

 
$
23.41

 
436

 
$
15.39

Granted
199

 
$
30.54

 
103

 
$
34.53

 
92

 
$
35.50

Vested
(115
)
 
$
21.32

 
(114
)
 
$
14.11

 
(136
)
 
$
5.51

Forfeited
(32
)
 
$
32.99

 
(46
)
 
$
29.55

 
(15
)
 
$
29.46

Outstanding at end of year
372

 
$
31.83

 
320

 
$
29.21

 
377

 
$
23.41



 
 
 
 
 
 
Weighted Average
 
Aggregate
 
 
 
 
 
 
Remaining
 
Intrinsic
As of January 30, 2016
 
Units
 
GDFV
 
Contract Life
 
Value
RSUs expected to vest
 
307

 
$
31.78

 
1.3 years
 
$
7,373



Performance-Based Restricted Stock Units ("PSUs")- The Company began granting PSUs in fiscal 2013. These awards cliff vest at the end of a three-year period based upon achievement of pre-established goals as of the end of the first year of the term. PSUs receive dividend equivalents in the form of additional PSUs, which are subject to the same restrictions and forfeiture provisions as the original award. Consistent with RSUs, the grant date fair value of PSUs is based on the closing market price of DSW Class A Common Shares on the date of grant. The total intrinsic value of PSUs that vested during fiscal 2015 was $1.8 million. The total fair value of PSUs that vested during fiscal 2015 was $1.7 million. As of January 30, 2016, the total compensation cost related to nonvested PSUs not yet recognized was approximately $4.0 million with a weighted average expense recognition period remaining of 2.1 years. The weighted average exercise price for all PSUs is zero.

For the periods presented, the following tables summarize PSU activity, GDFV and aggregate intrinsic value (units and intrinsic value in thousands):
 
Fiscal
 
2015
 
2014
 
2013
 
Units
 
GDFV
 
Units
 
GDFV
 
Units
 
GDFV
Outstanding beginning of year
173

 
$
33.50

 
69

 
$
31.76

 
—

 
$
—

Granted
208

 
$
33.30

 
111

 
$
34.52

 
69

 
$
31.76

Vested
(75
)
 
$
22.80

 
—

 
$
—

 
—

 
$
—

Forfeited
(13
)
 
$
35.16

 
(7
)
 
$
32.74

 
—

 
$
—

Outstanding end of year
293

 
$
28.70

 
173

 
$
33.50

 
69

 
$
31.76



 
 
 
 
 
 
Weighted Average
 
Aggregate
 
 
 
 
 
 
Remaining
 
Intrinsic
As of January 30, 2016
 
Units
 
GDFV
 
Contract Life
 
Value
PSUs expected to vest
 
253

 
$
28.70

 
1.2 years
 
$
6,080



Director Stock Units- The Company issues stock units to directors who are not employees. Stock units are automatically granted to each non-employee director on the date of each annual meeting of shareholders based on the closing market price of DSW Class A Common Shares. In addition, each director eligible to receive compensation for board service may elect to have the cash portion of such directors’ compensation paid in the form of stock units. Stock units granted to directors vest immediately and are settled upon the director terminating service from the board. For grants beginning in fiscal 2012, directors were given the option to exercise their units at a specified point in the future or upon completion of service. Stock units granted to directors, which are not subject to forfeiture, are considered to be outstanding for the purposes of computing basic earnings per share. The exercise price of the director stock units is zero. The following table summarizes director stock unit activity (units in thousands):
 
Fiscal
 
2015
 
2014
 
2013
Outstanding beginning of year
360

 
330

 
316

Granted
40

 
52

 
34

Exercised
(95
)
 
(22
)
 
(20
)
Outstanding end of year
305

 
360

 
330



Executive Equity Modification- On November 3, 2015, DSW announced that the Chief Executive Officer of the Company would retire, effective December 31, 2015. In connection with the retirement, DSW entered into a Retirement and Consulting Agreement, which stated that the executive will receive accelerated vesting of outstanding RSUs, PSUs and stock options. Per ASC Topic 718, Stock Compensation, this acceleration caused a change in the terms or conditions of the share-based payment award and was thus considered a modification.

Per ASC Topic 718-10-35-3, a modification of the terms or conditions of an equity award shall be treated as an exchange of the original award for a new award. The effects of a modification should be measured as follows: (a) incremental compensation cost shall be measured as the excess, if any, of the fair value of the modified award over the fair value of the original award immediately before its terms are modified, (b) total recognized compensation cost for an equity award shall at least equal the fair value of the award at the grant date unless at the date of the modification the performance or service conditions of the original award are not expected to be satisfied, and (c) a change in compensation cost for an equity award measured at intrinsic value shall be measured by comparing the intrinsic value of the modified award, if any, with the intrinsic value of the original award, if any, immediately before the modification. The modification resulted in a benefit of less than $0.1 million.

Stock Appreciation Rights ("SARs")- The 2014 Plan also covers the issuance of SARs. DSW Inc. entered into a SARs agreement with a non-employee on June 16, 2014, wherein DSW Inc. granted a total of 0.5 million SARs in two equal tranches with respect to DSW Class A Common Shares. On April 16, 2015, DSW Inc. provided notice of termination of the agreement with the non-employee resulting in an acceleration of the vesting of the SARs, as outlined in the agreement, and the SARs remain exercisable until June 2016. DSW Inc. will value the SARs at fair value until the expiration or exercise date. During fiscal 2015 and 2014, DSW recorded a benefit of $1.1 million and expense of $1.7 million, respectively. As of January 30, 2016 and January 31, 2015, the net liability was $0.6 million and $1.7 million, respectively.

The fair value of the SARs was estimated using the Black-Scholes pricing model with the following assumptions for the periods presented:
Assumptions:
As of January 30, 2016
 
As of January 31, 2015
   Risk-free interest rate
0.4%
 
0.6%
   Expected volatility of DSW Common Shares
33.0%
 
24.9%
   Expected term
0.4 years
 
2.3 years
   Expected dividend yield
2.5%
 
2.3%