10.    Share-based awards

Equity Incentive Plans

The Company has had a number of equity incentive plans over the years. The plans were adopted in order to attract and retain the best available personnel for positions of substantial authority and to provide additional incentive to employees, directors, and consultants to promote the success of the Company’s business. Incentive compensation was awarded under the Amended and Restated Restricted Stock Option Plan until April 2002 and under the 2002 Equity Incentive Plan through July 2007, at which time the 2007 Incentive Award Plan was adopted. All of the plans generally provided for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, and other types of awards to employees, consultants, and directors. Unless provided otherwise by the administrator of the plan, options vested over four years at the rate of 25% per year from the date of grant and most must be exercised within ten years. Options were granted with the exercise price equal to the fair value of the underlying stock on the date of grant.

2011 Incentive Award Plan

In June 2011, the Company adopted the 2011 Incentive Award Plan (the 2011 Plan). The 2011 Plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, dividend equivalent rights, stock payments, deferred stock and cash-based awards to employees, consultants, and directors. Following its adoption, awards are only being made under the 2011 Plan, and no further awards will be made under any prior plan. The 2011 Plan reserves for the issuance upon grant or exercise of awards up to 4,750 shares of the Company’s common stock plus 746 shares that were not issued under prior plans.

The Company measures share-based compensation cost on the grant date, based on the fair value of the award, and recognizes the expense on a straight-line method over the requisite service period for awards expected to vest. The Company estimated the grant date fair value of stock options using a Black-Scholes valuation model using the following weighted-average assumptions:

The expected volatility is based on the historical volatility of a peer group of publicly-traded companies. The risk free interest rate is based on the United States Treasury yield curve in effect on the date of grant for the respective expected life of the option. The expected life represents the time the options granted are expected to be outstanding. We have limited historical data related to exercise behavior since our initial public offering on October 30, 2007. As a result, the Company has elected to generally use the shortcut approach to determine the expected life in accordance with the SEC Staff Accounting Bulletin on share-based payments. The Company does not currently pay a regular dividend.

The Company granted 621 stock options during fiscal 2011. The compensation cost that has been charged against income was $9,731, $9,918, and $5,949 for fiscal 2011, 2010, and 2009, respectively. The weighted-average grant date fair value of options granted in fiscal 2011, 2010 and 2009 was $34.81, $13.58 and $6.64, respectively. At January 28, 2012, there was approximately $32,156 of unrecognized compensation expense related to unvested stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately two years.

The total intrinsic value of options exercised was $86,030, $42,118 and $4,783 in fiscal 2011, 2010 and 2009, respectively.

Restricted stock awards

During fiscal 2010, the Company granted restricted common shares to its newly appointed President and Chief Executive Officer. Restricted shares cannot be sold or otherwise transferred during the vesting period. The award cliff vested on December 29, 2011. The award was expensed on a straight-line basis over the 20 month vesting period. During fiscal 2011 the Company issued restricted stock to certain employees and its board of directors. Employee grants will vest over four years at the rate of 25% per year from the date of grant and director grants will generally cliff vest within one year. The compensation expense recorded in fiscal 2011 and 2010 was $1,874 and $1,237, respectively. At January 28, 2012 and January 29, 2011, unrecognized compensation cost related to restricted stock awards was $935 and $1,543, respectively.

A summary of the status of the Company’s stock option activity is presented in the following tables:

The Company completed an initial public offering during fiscal 2007 which resulted in compensation expense related to performance based grants of $425 and $637 in fiscal 2010 and 2009, respectively. There was no compensation expense related to performance based grants in 2011. No performance-based options were granted during fiscal 2011, 2010 and 2009.

Cash received from option exercises under all share-based payment arrangements for fiscal 2011, 2010 and 2009 was $27,639, $17,100 and $1,228, respectively. The total income tax benefit recognized in the income statement for the share-based compensation arrangements was $3,545, $3,300 and $1,464 for fiscal 2011, 2010 and 2009, respectively. The actual tax benefit realized for the tax deductions from option exercise and restricted stock vesting of the share-based payment arrangements totaled $29,439, $13,373 and $630, respectively, for fiscal 2011, 2010 and 2009.

The following table presents information related to options outstanding and options exercisable at January 28, 2012, under the Company’s stock option plans based on ranges of exercise prices:

The aggregate intrinsic value of outstanding and exercisable options as of January 28, 2012 was $180,995 and $90,599, respectively. The last reported sale price of our common stock on the NASDAQ Global Select Market on January 28, 2012 was $77.31 per share.