Famous Footwear 2012 Annual Report Download - page 75

2012 BROWN SHOE COMPANY, INC. FORM 10-K 73
ASC 718, Compensation – Stock Compensation, and ASC 505, Equity, require companies to recognize compensation
expense in an amount equal to the fair value of all share-based payments granted to employees over the requisite
service period for each award. In certain limited circumstances, the Company’s incentive compensation plan provides
for accelerated vesting of the awards, such as in the event of a change in control, qualified retirement, death or
disability. The Company has a policy of issuing treasury shares in satisfaction of share-based awards.
Share-based compensation expense of $6.5 million, $5.6 million and $6.1 million was recognized in 2012, 2011 and
2010, respectively, as a component of selling and administrative expenses. The following table details the share-based
compensation expense by plan and the total related income tax benefit for 2012, 2011 and 2010:
($ thousands) 2012 2011 2010
Expense for share-based compensation plans:
Stock options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 215 $ 513 $ 824
Stock performance awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 328 471 1,243
Restricted stock grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,946 4,649 4,077
Total share-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,489 5,633 6,144
Less: Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,507 2,107 2,082
Total share-based compensation expense, net of income tax benefit. . . . . . . . . . . . . . . . . . $ 3,982 $ 3,526 $ 4,062
The Company issued 925,676, 559,401 and 546,300 shares of common stock in 2012, 2011 and 2010, respectively, for restricted
stock grants, stock options exercised and stock performance awards issued to employees and common and restricted stock
grants issued to directors. There were no significant modifications to any share-based awards in 2012, 2011 or 2010.
Stock Options
Stock options are granted to employees at exercise prices equal to the quoted market price of the Company’s stock at the
date of grant. Stock options generally vest over four years and have a term of 10 years. Compensation cost for all stock
options is recognized over the requisite service period for each award. No dividends are paid on unexercised options.
Expense for stock options is recognized on a straight-line basis separately for each vesting portion of the stock option award.
The Company granted 26,000, 111,500 and 143,000 stock options during 2012, 2011 and 2010, respectively. Fair values
of options granted in 2012, 2011 and 2010 were estimated using the Black-Scholes option-pricing model based on the
following assumptions:
2012 2011 201
Dividend yield. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1% 2.2% 2.0%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66.5% 62.9% 59.8%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4% 2.5% 2.9%
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7 7
Dividend yields are based on historical dividend yields. Expected volatilities are based on historical volatilities of the
Company’s common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in eect at the time of grant
for periods corresponding with the expected term of the options. The expected term of options represents the weighted-
average period of time that options granted are expected to be outstanding, giving consideration to vesting schedules and
the Company’s historical exercise patterns.
Summarized information about stock options outstanding and exercisable at February 2, 2013 is as follows:
Outstanding Exercisable
Weighted- Weighted- Weighted-
Average Average Average
Number of Remaining Exercise Number of Exercise
Exercise Price Range Options Life (Years) Price Options Price
$3.33 – $8.65 . . . . . . . . . . . . . . . . . . . . . . . . . 127,700 7 $ 4.07 60,625 $ 3.83
$8.66 – $13.97. . . . . . . . . . . . . . . . . . . . . . . . . 163,406 4 10.75 109,281 11.19
$13.98 – $19.29 . . . . . . . . . . . . . . . . . . . . . . . . 774,548 3 15.75 706,548 15.87
$19.30 – $24.61 . . . . . . . . . . . . . . . . . . . . . . . . 140,906 3 21.38 140,906 21.38
$24.62 – $29.93. . . . . . . . . . . . . . . . . . . . . . . . 3,000 4 24.97 3,000 24.97
$29.94 – $35.25. . . . . . . . . . . . . . . . . . . . . . . . 80,247 4 35.25 80,247 35.25
1,289,807 3 $ 15.81 1,100,607 $ 16.88
The weighted-average remaining contractual term of stock options outstanding and currently exercisable at February 2, 2013
was 3.4 years and 2.7 years, respectively. The aggregate intrinsic value of stock options outstanding and currently
exercisable at February 2, 2013 was $3.9 million and $2.4 million, respectively. Intrinsic value for stock options is calculated
based on the exercise price of the underlying awards as compared to the quoted price of the Company’s common stock as
of the reporting date.