Stein Mart 2011 Annual Report Download - page 43

Table of Contents
STEIN MART, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in tables in thousands, except per share amounts)
The fair value of each stock option granted during 2011, 2010 and 2009 was estimated at the date of grant using the Black-Scholes options
pricing model with the following weighted-average assumptions: expected volatility of 69.7%, 73.3% and 66.1%, respectively, expected
dividend yield of 0% for all three years, a risk-
free interest rate of 1.9%, 2.3% and 2.8%, respectively, and an expected option term of 4.1 years,
5.2 years and 6.0 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.
In December 2010, as a result of paying a special cash dividend, all outstanding stock options were modified to decrease the exercise price in
order to maintain the original grant fair value. No incremental stock compensation expense resulted from the modification.
Restricted Stock and Performance Share Awards
We have issued restricted stock and performance share awards to eligible employees and directors through the Omnibus Plan. All restricted
stock awards have restriction periods tied primarily to employment, and all performance share awards have vesting tied to internal or market-
based performance and service. Shares awarded under the Omnibus Plan entitle the shareholder to all rights of common stock ownership except
that the shares may not be sold, transferred, pledged, exchanged or otherwise disposed of during the restriction period. Vesting for most awards
is based on the service period and vesting generally occurs between two and three years following the date of grant. Unvested shares are
forfeited upon termination of employment. The total value of share-based compensation expense for restricted stock and performance share
awards is based on the closing price of our common stock on the date of grant, except for market-based performance shares. During 2011, we
granted 352,000 performance shares for which the value was determined by using a Monte-Carlo simulation model. Performance share awards
provide the right to receive a share award at the end of a specified period which a performance goal has been established.
The following table summarizes non-vested stock activity for the year ended January 28, 2012 (shares in thousands):
The total fair value of restricted stock vested was $1.3 million, $2.2 million and $0.9 million for 2011, 2010, and 2009, respectively. The total
fair value of performance awards vested was $1.1 million, $2.1 million and $0 for 2011, 2010, and 2009, respectively.
Share
-Based Compensation Expense
For the years ended January 28, 2012, January 29, 2011 and January 30, 2010, pre-tax share-based compensation expense was recorded as
follows:
The total tax benefit recognized in the Consolidated Statements of Income was $1.5 million in both 2011 and 2010, respectively. There was no
tax benefit recognized in 2009 due to the valuation allowance against deferred tax assets in that year.
F
-
16
Restricted Stock Awards
Performance Share Awards
Shares
Weighted-
Average
Grant Date
Fair Value
Shares
Weighted-
Average
Grant Date
Fair Value
Non
-vested at January 29, 2011
611
$
8.62
523
$
9.55
Granted
453
8.87
352
11.37
Vested
(182
)
7.10
(117
)
9.53
Cancelled or forfeited
(106
)
10.19
(193
)
10.44
Non
-
vested at January 28, 2012
776
$
8.90
565
$
10.46
Total unrecognized compensation cost
$
3,877
$
3,429
Weighted
-
average expected life remaining
1.3 years
0.9 years
2011
2010
2009
Cost of merchandise sold
$
2,552
$
2,606
$
2,951
Selling, general and administrative expenses
1,269
1,177
1,659
Total share
-
based compensation expense
$
3,821
$
3,783
$
4,610