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v2.4.0.6
Stock-Based Compensation
9 Months Ended
Oct. 27, 2012
Stock-Based Compensation [Abstract]  
Stock-Based Compensation

NOTE 4 — Stock-Based Compensation

The Company adopted the 2009 Omnibus Incentive Plan (the 2009 Plan) pursuant to which key employees, officers, and directors shall be eligible to receive grants of stock options, stock appreciation rights, restricted stock, restricted stock units or performance share units to purchase or receive, as applicable, up to an aggregate of 3,626,000 shares of common stock based on eligibility, vesting, and performance standards established by the board of directors. Stock options granted are generally exercisable ratably over three or four years, subject to certain employment terms and conditions. The stock options generally expire ten years from the date of grant.

Effective May 15, 2003, the Company adopted the 2003 Ownership Incentive Plan (the 2003 Plan) pursuant to which key employees, officers, and directors were eligible to receive options to purchase common stock for an aggregate of up to 19.8% of the number of shares of the common stock outstanding upon adoption of the 2003 Plan based on eligibility, vesting, and performance standards established by the board of directors. Upon adopting the 2009 Plan, the Company discontinued use of the 2003 Plan and no further equity awards have been or will be made under the 2003 Plan.

The Company recognized $2.5 million and $7.6 million in compensation expense related to stock-based compensation during the third quarter of 2012 and Year-to-date 2012, respectively, and $1.4 million and $3.5 million in compensation expense related to stock-based compensation for the third quarter of 2011 and Year-to-date 2011, respectively. The Company recognized $0.5 million and $1.9 million, respectively, in stock-based compensation associated with performance-based stock grants during the third quarter and Year-to-date 2012. No expense was recognized for performance-based stock grants for fiscal 2011. As of October 27, 2012, the Company had 2,366,759 shares available for equity grants.

 

Stock Options

The following table represents stock option activity during the Year-to-date 2012 period.

 

                                 
    Common
Stock Options
    Weighted-
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual
Term
    Aggregate
Intrinsic
Value
 
    (in thousands)     (per share)     (in years)     (in thousands)  

Outstanding January 28, 2012

    1,600     $ 18.41       7.32     $ 15,680  

Granted

    125     $ 27.33                  

Exercised

    (127   $ 6.21                  

Expired or forfeited

    (15   $ 21.26                  
   

 

 

   

 

 

                 

Outstanding October 27, 2012

    1,583     $ 20.06       6.91     $ 16,991  
   

 

 

   

 

 

   

 

 

   

 

 

 

Vested at October 27, 2012

    945     $ 15.02       6.08     $ 14,730  
   

 

 

   

 

 

   

 

 

   

 

 

 

The weighted average fair value of stock options at the grant date was $12.50 and $13.67 during the third quarter of 2012 and Year-to-date 2012, respectively and $19.02 and $16.45 during the third quarter of 2011 and Year-to-date 2011, respectively. The intrinsic value of options exercised was $1.9 million and $2.9 million during the third quarter of 2012 and Year-to-date 2012, respectively and $0.1 million and $2.1 million for the third quarter of 2011 and Year-to-date 2011, respectively. All outstanding vested options are currently exercisable as of October 27, 2012.

The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following range of assumptions:

 

                                 
    Thirteen weeks ended     Thirty-nine weeks ended  
    October 27,
2012
    October 29,
2011
    October 27,
2012
    October 29,
2011
 

Risk-free interest rate (1)

    1.1     1.2%-2.3%       1.1%-1.8%       1.2%-2.9%  

Dividend yield

    —         —         —         —    

Volatility factors for the expected market price of the Company’s common stock (2)

    53.0     55.0     53.0     55.0

Weighted average expected term (3)

    6.0 years       6.0 years       6.0 years       6.0 years  

 

(1) Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life of stock options.
(2) Expected stock price volatility is based on comparable volatilities of peer companies within rue21’s industry.
(3) Represents the period of time options are expected to be outstanding. The weighted-average expected option term was determined using the “simplified method” as allowed by Staff Accounting Bulletin Topic 14. The expected term used to value a share option grant under the simplified method is the midpoint between the vesting date and the contractual term of the share option.

As of October 27, 2012, there was $9.2 million of unrecognized compensation expense related to non-vested stock option awards that is expected to be recognized over a weighted-average period of 1.01 years. The total fair value of shares vested during the third quarter of 2012 and Year-to-date 2012 was $0.3 million and $3.7 million respectively, and $0.2 million and $2.4 million for the third quarter of 2011 and Year-to-date 2011, respectively.

 

Restricted Stock Units

Time-based restricted stock unit awards vest generally over three years.

Performance-based stock unit awards generally vest over three years if the performance goal is achieved in the first year period. The level of goal achievement, if any, will determine the number of shares that may be received.

The following table summarizes information regarding non-vested outstanding restricted stock units as of October 27, 2012:

Restricted Stock Unit Grants

 

                                 
    Time-Based Restricted Stock Units     Performance Share Units  
    Thirty-nine weeks Ended October 27, 2012     Thirty-nine weeks Ended October 27, 2012  
    Shares     Weighted Averaged
Fair Value at Grant
Date
    Shares     Weighted Averaged
Fair Value at Grant
Date
 
    (in thousands)     (per share)     (in thousands)     (per share)  

Non-vested as of January 28, 2012

    162     $ 29.85       —       $ —    

Granted

    182     $ 27.20       199     $ 27.24  

Vested

    (51   $ 30.26       —       $ —    

Expired or forfeited

    (1   $ (30.12     —       $ —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Non-vested as of October 27, 2012

    292     $ 28.12       199     $ 27.24  
   

 

 

   

 

 

   

 

 

   

 

 

 

As of October 27, 2012, there was $8.1 million of unrecognized compensation expense related to non-vested restricted stock unit awards that is expected to be recognized over a weighted-average period of 1.21 years. The total fair value of shares vested during the third quarter of 2012 and Year-to-date 2012 was $0.1 million and $1.5 million respectively, and no material value vested during the third quarter of 2011 and Year-to-date 2011 period.

As of October 27, 2012, there was $2.6 million of unrecognized compensation expense related to non-vested performance share unit awards that is expected to be recognized over a weighted-average period of 1.64 years. The total fair value of shares vested during the third quarter of 2012 and Year-to-date 2012 as well as during the third quarter of 2011 and Year-to-date 2011 period was $0.