DSW 2012 Annual Report Download - page 61

F- 21
dilutive. There were no warrants outstanding as of February 2, 2013.
Shareholders' Equity- On June 18, 2012, DSW announced that its Board of Directors authorized the Company to repurchase
up to $100 million of DSW Common Shares over the next twelve months. The share repurchase program may be suspended,
modified or discontinued at any time, and the Company has no obligation to repurchase any amount of its Common Shares
under the program. As of February 2, 2013, DSW has not made any repurchases under this program.
6. STOCK-BASED COMPENSATION
DSW Stock-Based Compensation Plan- The DSW 2005 Equity Incentive Plan (“the DSW Plan”) provides for the issuance of
equity awards to purchase up to 7.6 million common shares. The DSW Plan covers stock options, restricted stock units and
director stock units. Eligible recipients include key employees of DSW and affiliates, as well as directors of DSW. Options
generally vest 20% per year on a cumulative basis. Options granted under the DSW Plan generally remain exercisable for a
period of 10 years from the date of grant. Prior to fiscal 2005, DSW did not have a stock option plan or any equity units
outstanding. Prior to the Merger, RVI accounted for all DSW share and stock-based compensation activity as a capital
transaction of a subsidiary.
Stock Options- The majority of the Company’s 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 with a remaining life equal to
the expected term of the options at the grant date. Expected volatility is based on the historical volatility of the DSW Common
Shares. The expected term of options granted is derived from historical data on DSW stock option exercises. The dividend yield
assumption is based on DSW's expectation of future dividend payouts. DSW granted its first dividends in the third quarter of
fiscal 2011. Forfeitures of options are estimated at the grant date based on historical rates of DSW’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 DSW options
granted in each of the periods presented:
Fiscal years ended
Assumptions: February 2, 2013 January 28, 2012 January 29, 2011
Risk-free interest rate 1.2% 2.4% 2.5%
Annual volatility of DSW common stock 56.2% 55.1% 56.9%
Expected option term 5.5 years 5.9 years 4.9 years
Dividend yield 1.2% 0.0% 0.0%
DSW expensed $5.5 million, $5.1 million and $3.7 million, respectively, in fiscal 2012, 2011 and 2010 related to stock
options. The weighted average grant date fair value of each stock option granted in fiscal 2012, 2011 and 2010 was $25.17,
$20.55 and $13.40 respectively. In connection with the special dividends paid on October 26, 2012 and September 30, 2011,
DSW adjusted its outstanding stock options under the anti-dilution provision by decreasing the grant price and increasing the
number of shares to make the optionee whole as required under the DSW plan. As of February 2, 2013, the total compensation
cost related to unvested options not yet recognized was approximately $14.4 million, with a weighted average expense
recognition period remaining of 2.1 years. The following tables summarize DSW’s stock option activity and related per share
weighted average exercise prices (“WAEP”), weighted average remaining contract life and aggregate intrinsic value (shares
and intrinsic value in thousands):
Table of Contents DSW INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS