Stein Mart 2008 Annual Report Download - page 40

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-16
and options are granted based on annual EPS goals. As defined by the Compensation Plan, 50% of the performance shares will be
earned if the aggregate three year actual EPS equals Threshold (85% of goal), 100% of the performance shares will be earned if the
aggregate three year actual EPS equals Target (100% of goal), and 150% of the performance shares will be earned if the aggregate three
year actual EPS equals Superior (115% of goal). The number of stock options to be granted is based on a calculation of option values as
defined in the Compensation Plan.
In accordance with SFAS No. 123R, recording of share-based compensation expense for awards with performance conditions is based on
the probable outcome of that performance condition. EPS Performance Shares are earned based on the Company’s achieving aggregate
three year EPS goals. Due to the effect of the 2006, 2007 and 2008 EPS shortfall to goal, no share-based compensation expense was
recorded for these performance-based shares in 2006, 2007 and 2008.
During fiscal 2006, 240,000 performance shares were granted to certain key employees as provided by the Omnibus Plan. A total of
115,000 performance shares become fully vested when the NASDAQ market price (“MP”) for the Company’s stock equals or exceeds
$18.00 per share for twenty consecutive trading days before the fourth anniversary of the grant date. The remaining 125,000 performance
shares vest in the same manner when the MP equals or exceeds $24.00 per share. The total value of share-based compensation expense
for these market condition awards, referred to herein as “MP Performance Shares”, was determined by multiplying the total number of
shares expected to be issued by the performance share fair value and is being recognized over the weighted-average implicit performance
period. Since the MP Performance Shares contain a market condition for vesting, the fair value of the awards was determined using a
Monte Carlo simulation model with the following assumptions: expected volatility of 45.3%, expected dividend yield of 1.7%, a four-year
expected return of 21.7% and a contractual term of four years. The expected volatility is based on the historical volatility of our stock prices
over assumed expected terms.
A summary of restricted stock awards and MP Performance Shares activity as of and for the three years ended January 31, 2009 is as
follows (shares in thousands):
Restricted Stock Awards MP Performance Shares
Shares
Weighted-
Average
Grant Date
Fair Value Shares
Weighted-
Average
Grant Date
Fair Value
Non-vested at January 28, 2006 262 $17.75
Granted 361 14.31 240 $14.24
Vested (57) 6.36
Forfeited (22) 19.78
Non-vested at February 3, 2007 544 16.82 240 14.24
Granted 178 9.12
Vested (19) 16.36
Forfeited (123) 20.51
Non-vested at February 2, 2008 580 14.39 240 14.24
Granted 561 4.86
Vested (32) 15.65
Forfeited (151) 11.01
Non-vested at January 31, 2009 958 $ 9.30 240 $14.24
Total unrecognized compensation cost $4,847 None
Weighted-average expected life remaining 2.7 years None
The total fair value of restricted stock awards vested during fiscal 2008 was $0.1 million. As of January 31, 2009, there were no vested MP
Performance Shares.
9. Store Closing Charges
The Company closes under-performing stores in the normal course of business. The Company closed ten stores during 2008, two stores
during 2007 and six stores during 2006 incurring pre-tax lease termination and severance costs. Lease termination costs are net of
estimated sublease income that could reasonably be obtained for the properties. In the event the Company is not successful in subleasing
closed store locations when management expects, additional reserves for store closing costs may be recorded. During 2008, 2007 and