Annual report pursuant to Section 13 and 15(d)

EQUITY AND SHARE-BASED COMPENSATION PLANS

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EQUITY AND SHARE-BASED COMPENSATION PLANS
12 Months Ended
Feb. 03, 2018
EQUITY AND SHARE-BASED COMPENSATION PLANS  
EQUITY AND SHARE-BASED COMPENSATION PLANS

13.  EQUITY AND SHARE‑BASED COMPENSATION PLANS

Preferred Stock

Our Board is authorized to issue up to 2,000,000 shares of preferred stock and to determine the dividend rights and terms, redemption rights and terms, liquidation preferences, conversion rights, voting rights and sinking fund provisions of those shares without any further vote or act by Company shareholders. There was no issued preferred stock as of February 3, 2018 and January 28, 2017, respectively.

Stock Plans

In June 2016, our shareholders approved the Tailored Brands, Inc. 2016 Long-Term Incentive Plan (the “2016 LTIP”), which will be used for equity grants after June 2016. As amended in 2017, the 2016 LTIP provides for an aggregate of up to 9,300,000 shares, subject to adjustment, of our common stock (or the fair market value thereof) with respect to which stock options, stock appreciation rights, restricted stock, deferred stock units and performance based awards may be granted to full‑time key employees and to non‑employee directors of the Company. 

In addition, we continue to administer the 2004 Long-Term Incentive Plan (the “2004 LTIP”) and the 1996 Long‑Term Incentive Plan (“1996 Plan”) as a result of awards which remain outstanding pursuant to such plans. Awards are no longer available for grant under the 2004 LTIP and 1996 Plan.

Options granted under these plans vest annually in varying increments over a period from one to ten years and must be exercised within ten years of the date of grant. Grants of deferred stock units, performance units or restricted stock generally vest over a period from one to three years; however, certain grants vest annually at varying increments over a period up to ten years.

As of February 3, 2018, 6,700,667 shares were available for grant under the 2016 LTIP and 10,236,163 shares of common stock were reserved for future issuance under the existing plans.

Non‑Vested Deferred Stock Units, Performance Units and Restricted Stock Shares

The following table summarizes the activity of time-based and performance-based (collectively, “DSUs”) awards during fiscal 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

Units

 

Grant-Date Fair Value

 

 

 

Time-

 

Performance-

 

Time-

 

Performance-

 

 

    

Based

    

Based

    

Based

    

Based

 

Non-Vested at January 28, 2017

 

1,061,965

 

523,948

 

$

24.31

 

$

28.28

 

Granted

 

472,708

 

542,528

 

 

11.48

 

 

11.45

 

Vested(1)

 

(456,758)

 

 —

 

 

25.38

 

 

 —

 

Forfeited

 

(63,226)

 

(72,845)

 

 

19.70

 

 

22.01

 

Non-Vested at February 3, 2018

 

1,014,689

 

993,631

 

$

18.13

 

$

19.55

 


(1)

Includes 126,064 shares relinquished for tax payments related to vested DSUs in fiscal 2017.

The following table summarizes additional information about DSUs:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year

 

 

    

2017

    

2016

    

2015

 

DSUs issued

 

 

1,015,236

 

 

1,315,140

 

 

397,811

 

Weighted average grant date fair value

 

$

11.47

 

$

18.61

 

$

53.03

 

The fair value of shares vested was $11.6 million, $11.1 million and $10.2 million in fiscal 2017, 2016 and 2015, respectively. As of February 3, 2018, the intrinsic value of non‑vested DSUs was $47.2 million.  Grants of DSUs generally vest over a period of three years.  DSUs earn dividends throughout the vesting period that are subject to the same vesting terms as the underlying awards. 

The 542,528 performance units granted in 2017 represent a contingent right to earn shares of common stock, subject to the achievement of a Company-specific performance target for fiscal 2019. Assuming the performance target is achieved, 100% of the award will vest on the three year anniversary of the grant date. Performance units that are unvested at the end of the performance period will lapse and be forfeited.  Performance units earn dividends throughout the vesting period that are subject to the same vesting terms as the underlying awards. 

As of February 3, 2018, we have unrecognized compensation expense related to non‑vested DSUs of approximately $17.5 million which is expected to be recognized over a weighted‑average period of 1.5 years.

The following table summarizes activity of restricted stock during fiscal 2017:

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

    

Shares

    

Grant-Date

Fair Value

 

Non-Vested at January 28, 2017

 

36,878

 

$

15.56

 

Granted

 

 —

 

 

 —

 

Vested

 

(36,878)

 

 

15.56

 

Forfeited

 

 —

 

 

 —

 

Non-Vested at February 3, 2018

 

 —

 

$

 —

 

These restricted stock awards received non-forfeitable dividends when paid to shareholders of record at the payment date.

The following table summarizes additional information about restricted stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year

 

 

    

2017

    

2016

    

2015

 

Stock issued

 

 

 —

    

 

18,646

    

 

33,157

 

Weighted average grant date fair value

 

$

 —

 

$

17.37

 

$

27.93

 

Fair value of shares vested (in millions)

 

$

0.6

 

$

0.7

 

$

2.0

 

Stock Options

The following table summarizes the activity of stock options during fiscal 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

Remaining

 

Intrinsic

 

 

 

Number of

 

Average

 

Contractual

 

Value

 

 

    

Shares

    

Exercise Price

 

Term

    

(in thousands)

 

Outstanding at January 28, 2017

 

1,194,690

 

$

29.70

 

 

 

 

 

 

Granted

 

630,083

 

 

11.54

 

 

 

 

 

 

Exercised

 

(5,790)

 

 

17.43

 

 

 

 

 

 

Forfeited

 

(87,833)

 

 

15.78

 

 

 

 

 

 

Expired

 

(203,974)

 

 

37.88

 

 

 

 

 

 

Outstanding at February 3, 2018

 

1,527,176

 

$

21.97

 

7.4

Years  

$

9,369

 

Vested and expected to vest at February 3, 2018

 

1,500,002

 

$

22.14

 

7.4

Years  

$

9,079

 

Exercisable at February 3, 2018

 

576,616

 

$

32.28

 

5.1

Years  

$

939

 

The weighted‑average grant date fair value of stock options granted during fiscal 2017, 2016 and 2015 was $3.86,  $5.18 and $18.63, respectively. The fair value of options is estimated on the date of grant using the Black‑Scholes option pricing model using the following weighted‑average assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fiscal Year

 

 

 

2017

    

2016

    

2015

 

Risk-free interest rates

 

1.75%

 

1.22%

 

1.51%

 

Expected lives

 

5.0 years

 

5.0 years

 

5.0 years

 

Dividend yield

 

4.69%

 

4.13%

 

1.38%

 

Expected volatility

 

55.12%

 

47.95%

 

39.74%

 

The risk‑free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The expected lives represents the period of time the options are expected to be outstanding after their grant date. The dividend yield is based on the average of the annual dividend divided by the market price of our common stock at the time of declaration. The expected volatility is based on historical volatility of our common stock. The total intrinsic value of options exercised during fiscal 2017, 2016 and 2015 was less than $0.1 million, $0.1 million and $0.5 million, respectively. As of February 3, 2018, we have unrecognized compensation expense related to non‑vested stock options of approximately $2.9 million which is expected to be recognized over a weighted‑average period of 1.3 years.

Cash Settled Awards

During 2017, we granted stock-based awards to certain employees, which vest over a period of three years, and will be settled in cash ("cash settled awards").  The fair value of the cash settled awards at each reporting period is based on the price of our common stock and includes a market condition.  The fair value of the cash settled awards will be remeasured at each reporting period until the awards are settled.  At February 3, 2018, the liability associated with the cash settled awards was $4.6 million with $2.8 million recorded in accrued expenses and other current liabilities and $1.8 million recorded in other liabilities in the consolidated balance sheets.

The following table summarizes the activity of cash settled awards during fiscal 2017 (in thousands):

 

 

 

 

 

 

Cash Settled Awards

Non-Vested at January 28, 2017

 

$

 —

Granted

 

 

8,502

Vested

 

 

 —

Forfeited

 

 

 (149)

Non-Vested at February 3, 2018

 

$

8,353

As of February 3, 2018, we have unrecognized compensation expense related to non‑vested cash settled awards of approximately $5.7 million which is expected to be recognized over a weighted‑average period of 1.5 years.