Stock-Based Compensation Plans
|12 Months Ended|
Jan. 28, 2023
|Share-Based Payment Arrangement [Abstract]|
|Stock-Based Compensation Plans||Stock-Based Compensation Plans
Fixed Stock-Based Compensation Plans
The 2011 Omnibus Incentive Plan permitted us to grant to our employees, consultants and directors up to 4.0 million shares of our Common Stock plus any shares available under former plans which were previously approved by the shareholders. The plan permitted us to grant equity awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units (“RSUs”), performance bonuses, performance share units (“PSUs”), non-employee director stock options and other equity-related awards. As of March 17, 2021, the plan was no longer available for new grants of awards, but all outstanding awards that were granted under the plan prior to March 17, 2021 continue to be governed by the terms and conditions of the plan and applicable award agreements. Effective June 10, 2021, the 2011 Omnibus Incentive Plan was replaced and superseded by the 2021 Omnibus Incentive Plan (“Omnibus Plan”). The Omnibus Plan permits us to grant up to 6.5 million shares of our Common Stock to our employees, consultants and directors. The form of equity awards authorized for grant under the Omnibus Plan are substantially the same as those permitted by the predecessor plan.
Any restricted stock, RSUs or PSUs awarded are subject to certain general restrictions. The restricted stock shares or units may not be sold, transferred, pledged or disposed of until the restrictions on the shares or units have lapsed or have been removed under the provisions of the Omnibus Plan. In addition, if a holder of restricted shares or units ceases to be employed by us, any shares or units in which the restrictions have not lapsed will be forfeited.
The 2013 Director Deferred Compensation Plan permits any of our directors who receive a retainer or other fees for Board or Board committee service to defer all or a portion of such fees until a future date, at which time they may be paid in cash or shares of our common stock, or receive all or a portion of such fees in non-statutory stock options. Deferred fees that are paid out in cash will earn interest at the 30-year Treasury Bond Rate. If a director elects to be paid in common stock, the number of shares will be determined by dividing the deferred fee amount by the closing market price of a share of our common stock on the date of deferral. The number of options issued to a director will equal the deferred fee amount divided by 33% of the price of a share of our common stock. The exercise price will equal the fair market value of our common stock at the date the option is issued. The options are fully vested when issued and have a term of 10 years.
In conjunction with the acquisition of Family Dollar in 2015, we assumed the Family Dollar Stores, Inc. 2006 Incentive Plan (the “2006 Plan”). The 2006 Plan permitted the granting of a variety of compensatory award types, including stock options and performance share rights.
Total stock-based compensation expense was recorded in the accompanying consolidated income statements as follows:
We issue service-based RSUs to employees and officers and issue PSUs to certain of our officers. We recognize expense based on the estimated fair value of the RSUs or PSUs granted over the requisite service period, which is generally three years, on a straight-line basis or a shorter period based on the retirement eligibility of the grantee. The fair value of RSUs and PSUs is determined based on our closing stock price on the grant date.
The following table summarizes the status of service-based RSUs as of January 28, 2023 and changes during the year then ended:
The total fair value of the service-based restricted shares vested during the years ended January 28, 2023, January 29, 2022 and January 30, 2021 was $51.5 million, $56.8 million and $48.5 million, respectively. The weighted average grant date fair value of the RSUs granted in 2022, 2021 and 2020 was $158.05, $109.01 and $73.24, respectively. As of January 28, 2023, there was $58.0 million of total unrecognized compensation expense related to these RSUs which is expected to be recognized over a weighted-average period of 1.2 years.
The following table summarizes the status of PSUs as of January 28, 2023 and changes during the year then ended:
The total fair value of the PSUs vested during the years ended January 28, 2023, January 29, 2022 and January 30, 2021 was $44.5 million, $17.3 million and $19.6 million, respectively. The weighted average grant date fair value of the PSUs granted in 2022, 2021 and 2020 was $159.57, $95.04 and $74.46, respectively. As of January 28, 2023, there was $9.9 million of total unrecognized compensation expense related to these PSUs which is expected to be recognized over a weighted-average period of 0.9 years.
Stock options are valued using the Black-Scholes option pricing model and compensation expense is recognized on a straight-line basis over the requisite service period.
Options granted in 2021 and 2020 are immaterial. On March 19, 2022, we granted a one-time award of options to purchase 2,252,587 shares of our common stock with a fair value of $135.6 million to the Executive Chairman of the Board, who was also appointed Chief Executive Officer of the company effective January 29, 2023. The grant of options was subject to the terms and conditions of a five-year Executive Agreement. The option award has a ten-year term and is scheduled to vest in equal installments on each of the first anniversaries of the grant date, subject to the Executive Chairman’s continued employment with the company through each vesting date. The assumptions used in the Black-Scholes option pricing model for this award are as follows:
The simplified method was used to estimate the expected term of the options due to our lack of historical option exercise experience and the “plain vanilla” characteristics of the option award. The simplified method results in an expected term equal to the average of the weighted average time-to-vesting and the contractual life of the options. The expected stock price volatility is based on the historical volatility of our common stock over a period matching the expected term of the options granted. The dividend yield reflects that we have never paid cash dividends. The risk-free interest rate represents the yield curve in effect at the time of grant for U.S. Treasury zero-coupon securities with maturities that approximate the expected term of the options.
Certain of our directors elected to defer their compensation into stock options under the 2013 Director Deferred Compensation Plan. These options vest immediately and are expensed on the grant date.
The following tables summarize information about options outstanding at January 28, 2023 and changes during the year then ended:
The intrinsic value of options exercised during 2022, 2021 and 2020 was less than $0.1 million, $5.6 million and $0.9 million, respectively. As of January 28, 2023, there was $112.1 million of total unrecognized compensation expense related to these options which is expected to be recognized over a weighted-average period of 4.1 years.
The entire disclosure for share-based payment arrangement.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef