Stock-Based Compensation

9 Months Ended

Nov. 03, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

5. Stock-Based Compensation

The Company has one active stock-based compensation plan: the 2016 Incentive Compensation Plan (the “2016 Plan”). The initial share reserve under the 2016 Plan was 5,725,538 shares of our common stock. A grant of a stock option award or stock appreciation right will reduce the outstanding reserve on a one-for-one basis, meaning one share for every share granted. A grant of a full-value award, including, but not limited to, restricted stock, restricted stock units and deferred stock, will reduce the outstanding reserve by a fixed ratio of 1.9 shares for every share granted. At November 3, 2018, the Company had 4,576,630 shares available under the 2016 Plan.

In accordance with the terms of the 2016 Plan, any shares outstanding under the previous 2006 Incentive Compensation Plan (the “2006 Plan”) at August 4, 2016 that subsequently terminate, expire or are canceled for any reason without having been exercised or paid are added back and become available for issuance under the 2016 Plan, with stock options being added back on a one-for-one basis and full-value awards being added back on a 1 to 1.9 basis. At November 3, 2018, there are 804,782 stock options and 128,408 full-value awards that remain outstanding under the 2006 Plan.

The 2016 Plan is administered by the Compensation Committee. The Compensation Committee is authorized to make all determinations with respect to amounts and conditions covering awards. Options are not granted at a price less than fair value on the date of the grant. Except with respect to 5% of the shares available for awards under the 2016 Plan, no award will become exercisable unless such award has been outstanding for a minimum period of one year from its date of grant.

The following tables summarize the share activity and stock option activity for the Company’s 2006 Plan and 2016 Plan, on a combined basis, for the first nine months of fiscal 2018:

	Restricted shares			Restricted stock units ⁽¹⁾			Deferred shares ⁽²⁾			Fully-vested shares ⁽³⁾			Total number of shares			Weighted-average grant-date fair value ⁽⁴⁾
Shares
Outstanding non-vested shares at beginning of year		36,666			1,048,552			115,457			—			1,200,675		$	3.43
Shares granted		30,000			1,050,650			82,289			105,645			1,268,584		$	2.48
Shares vested/issued		(3,333	)		(627,220	)		(7,708	)		(105,645	)		(743,906	)	$	2.98
Shares canceled		(33,333	)		(91,747	)		—			—			(125,080	)	$	2.84
Outstanding non-vested shares at end of quarter		30,000			1,380,235			190,038			—			1,600,273		$	2.93

(1)

RSUs were primarily granted in connection with the partial achievement of performance targets under the 2016-2017 LTIP and time-based awards under the 2018-2020 LTIP, see Note 4, Long-Term Incentive Plans. As a result of net share settlement, of the 627,220 RSUs which vested during the first nine months of fiscal 2018, only 573,094 shares of common stock were issued.

(2)

The 82,289 shares of deferred stock, with a fair value of $162,984, represent compensation to certain directors in lieu of cash, in accordance with their irrevocable elections. The shares of deferred stock will vest three years from the date of grant or at separation of service, based on the irrevocable election of each director.

(3)

During the first nine months of fiscal 2018, the Company granted 105,645 shares of stock, with a fair value of approximately $204,475, to certain directors as compensation in lieu of cash, in accordance with their irrevocable elections. Directors are required to elect 50% of their quarterly retainer in equity. Any shares in excess of the minimum required election are issued from the Company’s Third Amended and Restated Non-Employee Director Compensation Plan (“Non-Employee Director Compensation Plan”).

(4)

The fair value of a restricted share, deferred share and fully-vested share is equal to the Company’s closing stock price on the day immediately preceding the date of grant.

	Number of shares			Weighted-average exercise price per option		Weighted-average remaining contractual term	Aggregate intrinsic value
Stock Options
Outstanding options at beginning of year		1,195,910		$	4.80		$	21,750
Options granted		153,888		$	2.48			—
Options expired and canceled		(366,626	)	$	4.73			2,000
Options exercised		—			—			—
Outstanding options at end of quarter		983,172		$	4.49	5.1 years	$	144,396
Options exercisable at end of quarter		829,284		$	4.87	4.3 years	$	26,308

Valuation Assumptions

For the first nine months of fiscal 2018, the Company granted 153,888 stock options, 30,000 shares of restricted stock, 1,050,650 RSUs and 82,289 shares of deferred stock. For the first nine months of fiscal 2017, the Company granted 30,000 stock options, 484,558 shares of restricted stock, 804,701 RSUs and 74,968 shares of deferred stock.

Unless otherwise specified by the Compensation Committee, RSUs, restricted stock and deferred stock are valued using the closing price of the Company’s common stock on the day immediately preceding the date of grant.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used for grants for the first nine months of fiscal 2018 and fiscal 2017, respectively:

	For the nine months ended
	November 3, 2018	October 28, 2017
Expected volatility	48.9% - 57.1%		49.9	%
Risk-free interest rate	2.55% - 2.63%	1.44%
Expected life	3.0 - 4.5 yrs.	3.0 yrs
Dividend rate	-		—

Non-Employee Director Compensation Plan

The Company granted 40,309 shares of common stock, with a fair value of approximately $81,081, to certain of its non-employee directors as compensation in lieu of cash in the first nine months of fiscal 2018.

Stock Compensation Expense

The Company recognized total stock-based compensation expense of $1.1 million and $1.3 million for the first nine months of fiscal 2018 and fiscal 2017, respectively. The total compensation cost related to time-vested stock options, restricted stock and RSU awards not yet recognized as of November 3, 2018 was approximately $2.9 million, net of estimated forfeitures, which will be expensed over a weighted average remaining life of 34 months.