CarMax 2013 Annual Report Download - page 68

As of February 28, 2013, a total of 50,200,000 shares of our common stock had been authorized to be issued under
the long-term incentive plans. The number of unissued common shares reserved for future grants under the long-
term incentive plans was 12,474,285 as of that date.
Prior to fiscal 2007, the majority of associates who received share-based compensation awards primarily received
nonqualified stock options. From fiscal 2007 through fiscal 2009, these associates primarily received restricted
stock instead of stock options, and beginning in fiscal 2010, these associates primarily receive cash-settled restricted
stock units instead of restricted stock awards. Senior management and other key associates receive awards of
nonqualified stock options and, starting in fiscal 2010, stock-settled restricted stock units. Nonemployee directors
receive awards of nonqualified stock options and stock grants.
Nonqualified Stock Options. Nonqualified stock options are awards that allow the recipient to purchase shares of
our common stock at a fixed price. Stock options are granted at an exercise price equal to the fair market value of
our common stock on the grant date. The stock options generally vest annually in equal amounts over periods of
one to four years. These options are subject to forfeiture and expire no later than ten years after the date of the grant.
Cash-Settled Restricted Stock Units. Also referred to as restricted stock units, or RSUs, these are awards that entitle
the holder to a cash payment equal to the fair market value of a share of our common stock for each unit granted.
Conversion generally occurs at the end of a three-year vesting period. However, the cash payment per RSU will not
be greater than 200% or less than 75% of the fair market value of a share of our common stock on the grant date.
RSUs are liability awards that are subject to forfeiture and do not have voting rights.
Stock-Settled Restricted Stock Units. Also referred to as market stock units, or MSUs, these are awards to eligible
key associates that are converted into between zero and two shares of common stock for each unit granted.
Conversion generally occurs at the end of a three-year vesting period. The conversion ratio is calculated by dividing
the average closing price of our stock during the final forty trading days of the three-year vesting period by our stock
price on the grant date, with the resulting quotient capped at two. This quotient is then multiplied by the number of
MSUs granted to yield the number of shares awarded. MSUs are subject to forfeiture and do not have voting rights.
Restricted Stock. Restricted stock awards are awards of our common stock that are subject to specified restrictions
and a risk of forfeiture. The restrictions typically lapse three years from the grant date. Participants holding
restricted stock are entitled to vote on matters submitted to holders of our common stock for a vote. No restricted
stock awards have been granted since fiscal 2009, and no awards were outstanding during fiscal 2013. We realized
related tax benefits of $10.9 million in fiscal 2012 and $7.7 million in fiscal 2011 from the vesting of restricted stock
in those years, respectively.
(D) Share-Based Compensation
COMPOSITION OF SHARE-BASED COMPENSATION EXPENSE
Years Ended February 28 or 29
(In thousands) 2013 2012 2011
Cost of sales $ 3,010 $ 1,845 $ 2,081
CarMax Auto Finance income 2,521 1,867 1,603
Selling, general and administrative expenses 57,643 45,392 40,996
Share-based compensation expense, before income taxes $ 63,174 $ 49,104 $ 44,680
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