Share-Based Compensation Plans
|3 Months Ended|
Feb. 02, 2020
|Share-based Payment Arrangement [Abstract]|
|Share-Based Compensation Plans||
Share-Based Compensation Plans
For the three months ended February 2, 2020 and January 27, 2019, the Company recognized share-based compensation expense of $0.5 million and $0.1 million, respectively. These expenses are included in Selling, administrative and other operating costs in the Company’s Condensed Consolidated Statements of Operations.
During fiscal 2019, the Company granted performance stock units (“PSUs”) to executive management, restricted stock units (“RSUs”) to certain employees including executive management and its annual equity grant of RSUs to the Board of Directors of the Company (“Board of Directors”).
The PSUs are eligible to vest in three equal tranches at the end of each performance period. Vesting of the PSUs is dependent on the achievement of the adjusted Earnings Before Interest, Taxes, Depreciation and Amortization margin percentage goals based on adjusted revenues at the end of each fiscal year end of the one-year, two-year and three-year performance periods and provided that the employees remain employed with the Company on each of those vesting dates. The payout percentages can range from 0% to 150%. The RSUs for the employees vest in equal annual tranches over three years, provided the employees remain employed with the Company on each of those vesting dates. The RSUs for the Board of Directors vest in one year from the grant date provided that the director provides continued service through the vesting date. The grant date fair value for the PSUs and RSUs is measured using the closing stock price on the grant date. The PSUs and RSUs had a total grant date fair value of approximately $1.2 million and $2.1 million, respectively.
For stock options granted in the prior fiscal years, the fair value of the option grants was estimated using the Black-Scholes option-pricing model, which requires estimates of key assumptions based on both historical information and management judgment regarding market factors and trends. For RSUs granted in the prior fiscal year that are classified as equity awards, the grant date fair value is measured using the closing stock price on the grant date. These awards vest in equal annual tranches over three years, provided the employees remain employed with the Company on each of those vesting dates.
During fiscal 2018, the Company granted PSUs and RSUs that are classified as a liability at fair value, which is computed using a Monte Carlo simulation and re-measured periodically based on the effect that the market condition has on these awards. The liability and corresponding expense is adjusted accordingly until the awards are settled. As of the first quarter ended February 2, 2020, the total fair value of the remaining PSUs and RSUs was approximately $0.1 million and $0.5 million, respectively.
Vesting of the PSUs is dependent on the achievement of target stock prices at the end of each of the one-year, two-year and three-year performance periods. The ending stock price is the average price of the last 20 trading days prior to and including the final day of each performance period. The payout percentages can range from 0% to 200%. The RSUs vest in equal annual tranches over three years, provided the employees remain employed with the Company on each of those vesting dates.
Upon vesting, the PSUs and RSUs may be settled in either cash or stock at the Company’s election, with any stock settlement being subject to the Company having a sufficient number of shares then available under its equity incentive plan to satisfy such awards. Any awards settled in cash will be capped at two times the Company’s closing stock price on the grant date, multiplied by the number of awards vesting.
In prior years, the Company granted phantom units in the form of cash-settled RSUs to certain senior management level employees. The total fair value at the grant date was approximately $0.3 million with a weighted average fair value per unit of $4.35. The units vest in equal annual tranches over three years, provided the employees remain employed on each of those vesting dates. These awards are classified as a liability and re-measured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock. As of the first quarter ended February 2, 2020, the total fair value was less than $0.1 million and 5,465 phantom units were outstanding.
Summary of Equity and Liability Awards
The following tables summarize the activities related to the Company’s share-based equity and liability awards for the three months ended February 2, 2020:
For the three months ended February 2, 2020, there was no issuance of any share-based payment awards or any exercise of stock options. As of February 2, 2020, total unrecognized compensation expense of $2.0 million related to PSUs, stock options, RSUs and phantom units will be recognized over the remaining weighted average vesting period of 1.9 years of which $1.2 million, $0.6 million and $0.2 million are expected to be recognized in fiscal 2020, 2021 and 2022, respectively.
The entire disclosure for share-based payment arrangement.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef