Stein Mart 2010 Annual Report Download - page 38

STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
F-14
In connection with the executive deferral and executive split-dollar life insurance plans, whole life insurance contracts were purchased on
the related participants. At January 29, 2011 and January 30, 2010, the cash surrender value of these policies was $11.9 million and $10.5
million, respectively, and is included in other assets in the Consolidated Balance Sheets.
We have a noncontributory executive retiree medical plan wherein eligible retired executives may continue their pre-retirement medical,
dental and vision benefits through age 65. The postretirement benefit liability was $0.4 million at both January 29, 2011 and January 30,
2010. Accumulated other comprehensive income on the Consolidated Balance Sheets includes $(0.2) million and $(0.3) million for this
plan at January 29, 2011 and January 30, 2010, respectively. The expense recorded in net income for 2009 and 2010 was immaterial.
8. Stockholders’ Equity
Dividend
On November 10, 2010, the Board of Directors declared a special cash dividend of $0.50 per common share that was paid on December
22, 2010 to shareholders of record on December 8, 2010.
Stock Repurchase Plan
During 2010, 2009 and 2008, we repurchased 870,531 shares, 13,154 shares and 4,839 shares of our common stock in the open market at
a total cost of $7.1 million, $123 thousand and $18 thousand, respectively. Stock repurchases in these years were for taxes due on the
vesting of employee stock awards. As of January 29, 2011, there are 619,460 shares which can be repurchased pursuant to the Board of
Directors’ current authorization.
Share-Based Compensation Plans
We have an Employee Stock Purchase Plan (the “Stock Purchase Plan”) whereby all employees who complete six months employment
and who work on a full-time basis or are regularly scheduled to work more than 20 hours per week are eligible to participate in the Stock
Purchase Plan. Participants in the Stock Purchase Plan may purchase shares of the Company’s common stock at 85% of the lower of the
fair market value of the Company’s stock determined at either the beginning or the end of each semi-annual option period. Shares eligible
under the Stock Purchase Plan, which is effective for the years 1997 through 2015, are limited to 2.8 million shares in the aggregate, with
no more than 200,000 shares being made available in each calendar year, excluding carryover from previous years. In 2010, 2009 and
2008, the participants acquired 145,395 shares, 154,895 shares and 405,232 shares of common stock at weighted-average per share
prices of $5.27, $3.38 and $1.97, respectively. The fair value of Stock Purchase Plan shares was estimated using the Black-Scholes call
option value method with the following weighted-average assumptions for 2010: expected volatility of 54.5%, expected dividend yield of 0%,
a risk-free interest rate of 0.2%, a present-value discount factor of 1.0% and an expected term of six months. Share-based compensation
expense for the Stock Purchase Plan was $0.3 million in both 2010 and 2009 and $0.5 million in 2008.
Our Omnibus Plan provides that shares of common stock may be granted to certain key employees and outside directors through non-
qualified stock options, incentive stock options, stock appreciation rights, performance awards, restricted stock, or any other award made
under the terms of the plan. The Board of Directors, or its delegated authority, determines the exercise price and all other terms of all
grants. In general, one-third of the awards granted become exercisable on each of the third, fourth and fifth anniversary dates of grant and
the awards expire seven years after the date of grant.
The following table presents the number of awards authorized and available for grant under the Omnibus Plan at January 29, 2011 (shares
in thousands):
Shares
Total awards authorized 7,500
A
wards available for
g
rant 1,583
Stock Options
The fair value of each stock option granted during 2010, 2009 and 2008 was estimated at the date of grant using the Black-Scholes options
pricing model with the following weighted-average assumptions: expected volatility of 73.3%, 66.1% and 58.7%, respectively, expected
dividend yield of 0% for all three years, a risk-free interest rate of 2.3%, 2.8% and 1.5%, respectively, and an expected option term of 5.2
years, 6.0 years and 4.1 years, respectively. The expected volatility is based on the historical volatility of our stock prices over assumed
expected terms. The risk-free interest rate is estimated from yields of U.S. Treasury instruments of varying maturities with terms consistent
with the expected terms of the options. The expected term of an option is calculated from a lattice model using historical employee
exercise data.