Annual report pursuant to Section 13 and 15(d)

EQUITY AND SHARE-BASED COMPENSATION PLANS

v3.20.1
EQUITY AND SHARE-BASED COMPENSATION PLANS
12 Months Ended
Feb. 01, 2020
EQUITY AND SHARE-BASED COMPENSATION PLANS  
EQUITY AND SHARE-BASED COMPENSATION PLANS

15.  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 1, 2020 and February 2, 2019, 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.

Stock options and stock appreciation rights granted under these plans vest annually in varying increments over a period from one to three 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.

As of February 1, 2020, 3,676,509 shares were available for grant under the 2016 LTIP and 8,680,893 shares of common stock were reserved for future issuance under the existing plans.

Non-Vested Deferred Stock Units, Performance Units and Restricted Stock

The following table summarizes the activity of time-based and performance-based (collectively, “DSUs”) awards during fiscal 2019:

Weighted-Average

 

Units

Grant-Date Fair Value

 

Time-

Performance-

Time-

Performance-

 

    

Based

    

Based

    

Based

    

Based

 

Non-Vested at February 2, 2019

939,086

 

336,906

$

22.60

$

18.59

Granted

 

164,662

 

 

5.53

 

Vested(1)

 

(487,020)

 

(73,064)

 

21.61

 

23.27

Forfeited

 

(145,219)

 

(98,030)

 

22.11

 

17.25

Non-Vested at February 1, 2020

 

471,509

 

165,812

$

17.81

$

17.33

(1) Includes 173,360 shares relinquished for tax payments related to vested DSUs in fiscal 2019.

The following table summarizes additional information about DSUs:

Fiscal Year

 

    

2019

    

2018

    

2017

 

DSUs issued

164,662

941,328

1,015,236

Weighted average grant date fair value

$

5.53

$

26.81

$

11.47

We have determined the performance targets for the 165,812 outstanding performance units are not probable of achievement and are not expected to vest. Performance units that are unvested at the end of the performance period will lapse and be forfeited.

The fair value of shares vested was $12.2 million, $17.2 million and $11.6 million in fiscal 2019, 2018 and 2017, respectively. As of February 1, 2020, the intrinsic value of non-vested DSUs was $2.5 million.  As of February 1, 2020, we have unrecognized compensation expense related to non-vested DSUs of approximately $4.8 million which is expected to be recognized over a weighted-average period of 0.9 years.

Stock Options and Stock Appreciation Rights (“SARs”)

The following table summarizes the activity of stock options during fiscal 2019:

Weighted-

 

Average

Aggregate

 

Weighted-

Remaining

Intrinsic

 

Number of

Average

Contractual

Value

 

    

Shares

    

Exercise Price

 

Term

    

(in thousands)

 

Outstanding at February 2, 2019

 

1,252,072

$

23.64

Granted

 

3,258,797

 

7.42

Exercised

 

 

Forfeited

 

(415,327)

10.44

Expired

 

(142,955)

26.98

Outstanding at February 1, 2020

 

3,952,587

$

11.53

 

8.5

Years  

$

Vested and expected to vest at February 1, 2020

 

3,814,766

$

11.68

 

8.4

Years  

$

Exercisable at February 1, 2020

 

830,093

$

24.59

 

5.8

Years  

$

During the first quarter of 2019, we granted SARs, which vest ratably over a period of three years, and will be settled in stock. Each vested SAR entitles the holder to the right of the difference between the value of our common stock on the date of exercise and the common stock price on the date of grant. We use the Black-Scholes option pricing model to estimate the fair value of SARs on the date of grant.

The following table summarizes the activity of SARs during fiscal 2019:

Average

Aggregate

Weighted-

Remaining

Intrinsic

Number of

Average

Contractual

Value

    

Shares

    

Exercise Price

 

Term

    

(in thousands)

Outstanding at February 2, 2019

 

$

Granted

 

414,476

 

7.62

Exercised

 

 

Forfeited

 

 

Expired

 

 

Outstanding at February 1, 2020

 

414,476

$

7.62

 

9.2

Years  

$

Vested and expected to vest at February 1, 2020

 

414,476

$

7.62

 

9.2

Years  

$

Exercisable at February 1, 2020

 

$

 

Years  

$

The weighted-average grant date fair value of stock options granted during fiscal 2019, 2018 and 2017 was $2.98, $10.29 and $3.86, respectively. The weighted-average grant date fair value of the SARs granted during fiscal 2019 was $3.01 per share.  The fair value of stock options and SARs is estimated on the date of grant using the Black-Scholes option pricing model using the following weighted-average assumptions:

Fiscal Year

 

2019

    

2018

    

2017

 

Risk-free interest rate

2.35%

2.70%

1.75%

Expected lives

5.0 years

5.0 years

5.0 years

Dividend yield(1)

4.09%

4.21%

4.69%

Expected volatility

62.65%

56.55%

55.12%

(1) Awards granted after announcement of the suspension of our dividend assume a dividend yield of 0%.

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 stock options and SARs 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. There were no stock options or SARs exercised during fiscal 2019. The total intrinsic value of stock options exercised during fiscal 2018 and 2017 was $1.7 million and less than $0.1 million, respectively. As of February 1, 2020, we have unrecognized compensation expense related to non-vested stock options and SARs of approximately $8.3 million which is expected to be recognized over a weighted-average period of 1.5 years.

Cash Settled Awards

We have 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.  The fair value of the cash settled awards will be remeasured at each reporting period until the awards are settled.  At February 1, 2020, the liability associated with the cash settled awards was $1.7 million and was recorded in accrued expenses and other current liabilities in the consolidated balance sheets.  At February 2, 2019, the liability associated with the cash settled awards was $3.8 million with $2.4 million recorded in accrued expenses and other current liabilities and $1.4 million recorded in other liabilities in the consolidated balance sheets.

The following table summarizes the activity of cash settled awards during fiscal 2019 (in thousands):

 

Cash Settled Awards

Non-Vested at February 2, 2019

 

$

5,072

Granted

 

4,480

Vested

 

(2,426)

Forfeited

 

(906)

Non-Vested at February 1, 2020

 

$

6,220

As of February 1, 2020, we have unrecognized compensation expense related to non-vested cash settled awards of approximately $2.2 million which is expected to be recognized over a weighted-average period of 1.6 years.