4. Share-Based Compensation
The Company recorded share-based compensation expense in the amount of $1.1 million and $1.0 million for the three months ended October 27, 2012 and October 29, 2011, respectively, and $2.9 million for both the nine months ended October 27, 2012 and the nine months ended October 29, 2011.
During the nine months ended October 27, 2012, the Company issued 982,000 SARs, 507,054 restricted and deferred stock awards, 200,000 performance units and 12,500 stock options primarily in connection with the Company's annual performance review process for all employees in April 2012. The SAR, restricted stock and stock option awards granted to employees during the nine months ended October 27, 2012 cliff vest on the third anniversary of the grant date, subject to continued employment with the Company. The 200,000 performance units were issued to Gregory J. Scott, the Company's Chief Executive Officer, in connection with his annual performance review. If the Company achieves the operating income target approved by the board of directors for fiscal year 2012, the performance units will vest as follows subject to Mr. Scott's continued employment with the Company through such dates: 100,000 units on April 16, 2014 and 100,000 units on April 16, 2015. Upon vesting, each performance unit will be convertible into one share of the Company's common stock.
Each SAR granted represents the right to receive a payment measured by the increase in the fair market value of one share of common stock from the date of grant of the SAR to the date of exercise of the SAR. Upon exercise, the SARs will be settled in stock. The fair value of a SAR is calculated using the Black-Scholes option-pricing model. The fair value of the restricted stock and the performance units is based on the closing stock price of an unrestricted share of the Company's common stock on the grant date. Total compensation expense related to share-based awards is recognized in the consolidated financial statements on a straight-line basis over the requisite service period of the awards.
During the nine months ended October 27, 2012, 262,410 shares of common stock were issued upon exercise of previously issued stock options.