Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - FREDS INCFinancial_Report.xls
10-Q - FORM 10Q - FREDS INCv329058_10q.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR1.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR5.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR2.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR6.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR4.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR8.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR7.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR3.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR15.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR22.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR20.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR18.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR19.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR28.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR11.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR25.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR26.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR17.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR12.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR14.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR23.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR16.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR21.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR27.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR13.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR10.htm
XML - IDEA: XBRL DOCUMENT - FREDS INCR24.htm
EX-32 - EXHIBIT 32 - FREDS INCv329058_ex32.htm
EX-31.1 - EXHIBIT 31.1 - FREDS INCv329058_ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - FREDS INCv329058_ex31-2.htm
v2.4.0.6
STOCK-BASED COMPENSATION
9 Months Ended
Oct. 27, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 3: STOCK-BASED COMPENSATION

 

The Company accounts for its stock-based compensation plans in accordance with FASB ASC 718 “Compensation – Stock Compensation”. Under FASB ASC 718, stock-based compensation expense is based on awards ultimately expected to vest, and therefore has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant based on the Company’s historical forfeiture experience and will be revised in subsequent periods if actual forfeitures differ from those estimates.

 

FASB ASC 718 also requires the benefits of income tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required prior to FASB ASC 718. A summary of the Company’s stock-based compensation (a component of selling and general and administrative expenses) and related income tax benefit is as follows (in thousands):

 

    Thirteen Weeks Ended     Thirty-Nine Weeks Ended  
    October 27, 2012     October 29, 2011     October 27, 2012     October 29, 2011  
                         
Stock option expense   $ 256     $ 101     $ 424     $ 352  
Restricted stock expense     74       297       882       856  
ESPP expense     46       43       136       130  
Total stock-based compensation   $ 376     $ 441     $ 1,442     $ 1,338  
                                 
Income tax benefit on stock-based compensation   $ 94     $ 121     $ 398     $ 352  

 

The fair value of each option granted during the thirteen and thirty-nine week periods ended October 27, 2012 and October 29, 2011, respectively, are estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

    Thirteen Weeks Ended     Thirty-Nine Weeks Ended  
    October 27, 2012     October 29, 2011     October 27, 2012     October 29, 2011  
Stock Options                                
Expected volatility     39.7 %     40.5 %     39.7 %     41.4 %
Risk-free interest rate     0.5 %     1.5 %     0.5 %     1.9 %
Expected option life (in years)     4.00       5.84       4.06       4.96  
Expected dividend yield     1.27 %     0.86 %     1.26 %     0.91 %
                                 
Weighted average fair value at grant date   $ 3.86     $ 4.13     $ 3.90     $ 4.49  
                                 
Employee Stock Purchase Plan                                
Expected volatility     33.0 %     31.5 %     33.7 %     24.8 %
Risk-free interest rate     0.1 %     0.3 %     0.1 %     0.3 %
Expected option life (in years)     0.75       0.75       0.5       0.5  
Expected dividend yield     1.18 %     1.02 %     0.78 %     0.68 %
                                 
Weighted average fair value at grant date   $ 3.76     $ 3.59     $ 3.50     $ 3.07  

 

The following is a summary of the methodology applied to develop each assumption:

 

Expected Volatility - This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. The Company uses actual historical changes in the market value of our stock to calculate expected price volatility because management believes that this is the best indicator of future volatility. The Company calculates weekly market value changes from the date of grant over a past period representative of the expected life of the options to determine volatility. An increase in the expected volatility will increase compensation expense.

 

Risk-free Interest Rate - This is the yield of a U.S. Treasury zero-coupon bond issue effective at the grant date with a remaining term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

 

Expected Lives - This is the period of time over which the options granted are expected to remain outstanding and is based on historical experience. Options granted have a maximum term of seven and one-half years. An increase in the expected life will increase compensation expense.

 

Dividend Yield – This is based on the historical yield for a period equivalent to the expected life of the option. An increase in the dividend yield will decrease compensation expense.

 

Forfeiture Rate - This is the estimated percentage of options granted that are expected to be forfeited or cancelled before becoming fully vested. This estimate is based on historical experience. An increase in the forfeiture rate will decrease compensation expense.

 

Employee Stock Purchase Plan

 

The 2004 Employee Stock Purchase Plan (the “2004 Plan”), which was approved by Fred’s stockholders, permits eligible employees to purchase shares of our common stock through payroll deductions at the lower of 85% of the fair market value of the stock at the time of grant or 85% of the fair market value at the time of exercise. There were 40,267 shares issued during the thirty-nine weeks ended October 27, 2012. There are 1,410,928 shares approved to be issued under the 2004 Plan and as of October 27, 2012, there were 934,040 shares available.

 

Stock Options

 

The following table summarizes stock option activity during the thirty-nine weeks ended October 27, 2012:

 

    Options     Weighted
Average
Exercise Price
    Weighted Average
Remaining
Contractual Life
(Years)
    Aggregate
Intrinsic
Value
(Thousands)
 
                         
Outstanding at January 28, 2012     795,376     $ 11.52       3.0     $ 2,831  
Granted     415,169     $ 13.67                  
Forfeited / Cancelled     (24,600 )   $ 14.54                  
Exercised     (63,912 )   $ 13.14                  
Outstanding at October 27, 2012     1,122,033     $ 12.16       3.4     $ 1,619  
                                 
Exercisable at October 27, 2012     549,891     $ 11.25       2.0     $ 1,260  

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between Fred’s closing stock price on the last trading day of the period ended October 27, 2012 and the exercise price of the option multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that date. As of October 27, 2012, total unrecognized stock-based compensation expense net of estimated forfeitures related to non-vested stock options was approximately $1.6 million, which is expected to be recognized over a weighted average period of approximately 3.67 years. The total fair value of options vested during the thirty-nine weeks ended October 27, 2012 was $525.6 thousand.

 

Restricted Stock

 

The following table summarizes restricted stock activity during the thirty-nine weeks ended October 27, 2012:

 

    Number of Shares     Weighted Average
Grant Date Fair
Value
 
             
Non-vested Restricted Stock at January 28, 2012     711,600     $ 12.56  
Granted     123,979     $ 14.47  
Forfeited / Cancelled     (60,595 )   $ 12.36  
Vested     (114,967 )   $ 12.27  
Non-vested Restricted Stock at October 27, 2012     660,017     $ 12.98  

 

The aggregate pre-tax intrinsic value of restricted stock outstanding as of October 27, 2012 is $8.9 million with a weighted average remaining contractual life of 5.6 years. The unrecognized compensation expense net of estimated forfeitures, related to the outstanding stock is approximately $4.4 million, which is expected to be recognized over a weighted average period of approximately 6.7 years. The total fair value of restricted stock awards that vested during the thirty-nine weeks ended October 27, 2012 was $1.4 million.