Annual report pursuant to Section 13 and 15(d)

Stock Compensation Plans

v3.8.0.1
Stock Compensation Plans
12 Months Ended
Oct. 29, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Compensation Plans
Stock Compensation Plans

2015 Equity Incentive Plan

On June 9, 2016, the stockholders of the Company approved the 2015 Equity Incentive Plan (the “2015 Plan”), which replaced the 2006 Plan. The 2015 Plan was previously adopted by the Board of Directors (the “Board”) on October 19, 2015 and subsequently amended on January 13, 2016. The 2015 Plan authorizes the Board to award equity-based compensation in the form of (1) stock options, including incentive stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units (“RSUs”), (5) performance awards, (6) other stock-based awards, and (7) performance compensation awards. Subject to adjustment as provided in the 2015 Plan, up to an aggregate of 3,000,000 shares of the Company’s common stock may be issued or transferred in connection with awards granted thereunder.

For fiscal 2017, the Company granted an aggregate of 851,488 stock options, 248,915 RSUs and 71,311 phantom units in the form of cash-settled RSUs. This was comprised of: (i) 851,488 stock options and 175,145 RSUs granted to certain employees including executive management as long-term incentive awards, (ii) 73,770 RSUs granted to independent members of the Board as part of their annual compensation and (iii) 71,311 phantom units granted to certain senior management level employees.

The grants were based on the total fair value at the grant date of these stock options and RSUs of approximately $2.7 million in fiscal 2017. The grants for the Board members vested immediately, whereas the grants for the employees will vest in equal annual tranches over three years provided the employees remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $4.43. Compensation expense for the vested units was recognized on the grant date. The stock options expire 10 years from the initial grant date and have a weighted average exercise price of $4.46. Compensation expense for the stock options and RSUs that did not immediately vest is recognized over the vesting period.

For fiscal 2016, the Company granted an aggregate of 981,154 stock options and 261,721 RSUs. The grants were based on the fair value at the grant date with a total fair value of approximately $3.9 million. With the exception of the grants for the Board members that vested immediately, the grants will vest in equal annual tranches over three years provided the employees remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $6.41. Compensation expense for the vested units was recognized on the grant date. The stock options have a weighted average exercise price of $6.48 and expire 10 years from the initial grant date. Compensation expense for the stock options and units that did not immediately vest is recognized over the vesting period.

The following table summarizes transactions involving outstanding stock options and non-vested restricted stock and restricted stock unit awards (stock awards) under the 2015 plan:

 
Stock Options
 
Restricted Stock
2015 Plan
Number of
shares
 
Weighted
average
exercise
price
 
Weighted
average
contractual
life
 
Aggregate
Intrinsic
Value
 
Number of
shares
 
Weighted
average
grant date
fair value
 
 
 
 
 
(in years)
 
(in thousands)
 
 
 
 
Outstanding - November 1, 2015

 
$

 

 
$

 

 
$

Granted
981,154

 
$
6.48

 

 
$

 
261,721

 
$
6.41

Forfeited
(2,748
)
 
$
6.06

 

 
$

 
(550
)
 
$
6.06

Vested RSU

 
$

 

 
$

 
(75,219
)
 
$
6.06

Outstanding - October 30, 2016
978,406

 
$
6.48

 
9.51

 
$
242

 
185,952

 
$
7.13

Granted
851,488

 
$
4.46

 

 
$

 
248,915

 
$
4.43

Forfeited
(54,270
)
 
$
6.14

 

 
$

 
(10,862
)
 
$
6.14

Vested RSU

 
$

 

 
$

 
(137,816
)
 
$
5.36

Deferred RSU

 
$

 

 
$

 
36,885

 
$
4.35

Outstanding - October 29, 2017
1,775,624

 
$
5.52

 
9.03

 
$
2,881

 
323,074

 
$
5.09

Unvested at October 29, 2017
1,400,714

 
$
5.18

 
9.19

 
$
1,796

 


 

Exercisable at October 29, 2017
374,910

 
$
6.79

 
8.43

 
$
1,085

 
 
 
 


In fiscal 2017, the grants of the phantom units were based on the fair value at the grant date with a total fair value of approximately $0.3 million. The units vest in equal annual tranches over three years provided the employees remain employed on each of those vesting dates. The weighted average fair value per unit was $4.35. These cash-settled awards are classified as a liability and remeasured at the end of each reporting period based on the change in fair value of one share of the Company’s common stock. Compensation expense is recognized over the vesting period. The liability and corresponding expense are adjusted accordingly until the awards are settled. As of and for the year ended October 29, 2017, 29,507 units have been forfeited.

2006 Incentive Stock Plan

The 2006 Incentive Stock Plan (the “2006 Plan”) was approved by the shareholders of the Company in April 2007 and permitted the issuance of stock options, restricted stock and restricted stock units to employees and non-employee directors of the Company. The 2006 Plan terminated on September 5, 2016 and all of the outstanding shares granted under the 2006 Plan will remain valid.

During fiscal 2016, the Company granted 189,897 stock options and 38,314 RSUs. The grants were based on the fair value at the grant date with a total fair value of approximately $0.8 million. The grants will vest in equal annual tranches over three years provided the employees remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $7.18. The stock options have a weighted average exercise price of $7.18 and expire 10 years from the initial grant date. Compensation expense for the stock options and units that were not immediately vested is recognized over the vesting period.

During fiscal 2015, the Company granted 393,528 stock options and 170,979 RSUs. The grants were based on the fair value at the grant date with a total fair value of approximately $2.8 million. The grants will vest in equal annual tranches over three years provided the employee remain employed on each of those vesting dates. The weighted average fair value per unit for the RSUs was $9.32. The stock options have a weighted average exercise price of $9.21 and expire seven years from the grant date. Compensation expense for the stock options and units that were not immediately vested is recognized over the vesting period.

The following table summarizes transactions involving outstanding stock options and non-vested restricted stock and restricted stock unit awards (stock awards) under the 2006 plan:
 
Stock Options
 
Restricted Stock
2006 Plan
Number of
shares
 
Weighted
average
exercise
price
 
Weighted
average
contractual
life
 
Aggregate
Intrinsic
Value
 
Number of
shares
 
Weighted
average
grant date
fair value
 
 
 
 
 
(in years)
 
(in thousands)
 
 
 
 
Outstanding - November 2, 2014
764,150

 
$
9.22

 
5.43

 
$
776

 
23,334

 
$
7.68

Granted
393,528

 
$
9.21

 

 
$

 
170,979

 
$
9.32

Forfeited
(94,000
)
 
$
12.49

 

 
$

 

 
$

Vested RSU

 
$

 

 
$

 
(144,154
)
 
$
9.11

Exercised
(83,264
)
 
$
6.39

 

 
$

 

 
$

Outstanding - November 1, 2015
980,414

 
$
9.14

 
5.31

 
$
727

 
50,159

 
$
9.17

Granted
189,897

 
$
7.18

 

 
$

 
38,314

 
$
7.18

Exercised
(11,682
)
 
$
6.39

 

 
$

 

 
$

Forfeited
(216,000
)
 
$
8.34

 

 
$

 

 
$

Vested RSU

 
$

 

 
$

 
(44,692
)
 
$
9.24

Outstanding - October 30, 2016
942,629

 
$
8.97

 
6.91

 
$
1

 
43,781

 
$
7.35

Exercised
(300
)
 
$
6.39

 

 
$

 

 
$

Forfeited
(218,031
)
 
$
11.26

 

 
$

 
(12,426
)
 
$
7.15

Vested RSU

 
$

 

 
$

 
(15,463
)
 
$
7.42

Outstanding - October 29, 2017
724,298

 
$
8.28

 
6.15

 
$
3,170

 
15,892

 
$
7.44

Unvested at October 29, 2017
76,889

 
$
7.42

 
9.29

 
$
271

 


 


Exercisable at October 29, 2017
647,409

 
$
8.38

 
6.90

 
$
2,899

 

 



2015 and 2006 Plans

Determining Fair Value - Stock Options

The fair value of the option grants under both plans were 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.

Expected volatility - We developed the expected volatility by using the historical volatilities of the Company for a period equal to the expected life of the option.

Expected term - We derived our expected term assumption based on the simplified method due to a lack of historical exercise data, which results in an expected term based on the midpoint between the graded vesting dates and contractual term of an option.

Risk-free interest rate - The rates are based on the average yield of a U.S. Treasury bond, with a term that was consistent with the expected life of the stock options.

Expected dividend yield - We have not paid and do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield was assumed to be zero.

The Company estimated the fair value of each stock option grant using the Black-Scholes option-pricing model. The weighted average assumptions used to estimate the fair value of stock options for the respective fiscal years were as follows:
 
October 29,
2017
 
October 30,
2016
 
November 1,
2015
Weighted-average fair value of stock option granted
$1.83
 
$2.41
 
$2.97
Expected volatility
40.0%
 
40.0%
 
40.0%
Expected term (in years)
6.00
 
6.00
 
4.67
Risk-free interest rate
1.89%
 
1.32%
 
1.53%
Expected dividend yield
0.0%
 
0.0%
 
0.0%


Share-based compensation expense was recognized in Selling, administrative and other operating costs in the Company’s Consolidated Statements of Operations as follows (in thousands):
 
Year Ended
 
October 29,
2017
 
October 30,
2016
 
November 1,
2015
Selling, administrative and other operating costs
$
2,755

 
$
1,828

 
$
2,906

Total
$
2,755

 
$
1,828

 
$
2,906



As of October 29, 2017, total unrecognized compensation expense of $2.9 million related to stock options, RSUs and phantom units will be recognized over the remaining average vesting period of 2.6 years of which $2.0 million, $0.7 million, and $0.2 million is expected to be recognized in fiscal 2018, 2019 and 2020, respectively.