Express 2011 Annual Report Download - page 86

Download and view the complete annual report

Please find page 86 of the 2011 Express annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

Restricted Shares (Equity Issued Pre-IPO)
The Company’s activity with respect to restricted shares for 2011 was as follows:
Number of
Shares
Grant Date
Weighted Average
Fair Value
(in thousands, except per share amounts)
Unvested, January 29, 2011 ............. 220 $1.03
Granted ......................... — $—
Vested .......................... (187) $1.06
Repurchased ..................... (11) $0.90
Unvested, January 28, 2012 ............. 22 $0.90
On May 12, 2010, in conjunction with the IPO, certain restricted shares became fully vested. The total fair value
of restricted shares that vested during 2011, 2010, and 2009 was $0.2 million, $3.2 million, and $2.0 million,
respectively.
The weighted average grant date fair value of restricted shares granted during 2009 was $1.51.
As of January 28, 2012, there was less than $0.1 million of total unrecognized compensation expense related to
unvested restricted shares, which is expected to be recognized over a weighted-average period of approximately
0.5 years.
Valuation of Underlying Restricted Shares
Fair value of the underlying equity shares is determined by applying a contingent claims approach utilizing the
Black-Scholes-Merton pricing model and taking into consideration the rights and preferences of the underlying
equity shares. This model assumes asset volatility for comparable company’s equity volatility and leverage and a
marketability discount to reflect the lack of liquidity and ready market.
The following table illustrates the assumptions used in the Black-Scholes-Merton pricing model for the restricted
shares:
2009
Risk-free interest rate ............................... 0.20%
Asset volatility .................................... 50%
Time to liquidity event .............................. 7months
Marketability discount .............................. 10%
Equity dividend yield ............................... —
Risk-free interest rate—An interpolated rate from the U.S. constant maturity treasury rate for a term
corresponding to the time to liquidity event, as described below. An increase in the risk-free interest rate will
increase compensation expense.
Asset volatility—A measure of the amount by which the price of various comparable companies common stock
has fluctuated or is expected to fluctuate, as the Company’s common stock was not publicly-traded. The
comparable companies were selected by analyzing public companies in the industry based on various factors
including, but not limited to, company size, financial data availability, active trading volume, and capital
structure. An increase in the expected volatility will increase compensation expense.
Time to liquidity event—The period of time over which the underlying equity shares are expected to remain
outstanding. An increase in the expected term will increase compensation expense.
78