Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v2.4.0.6
Stock-Based Compensation
12 Months Ended
Mar. 31, 2013
Stock-Based Compensation  
Stock-Based Compensation

Note 11: Stock-Based Compensation

        The Company's stock-based compensation plans are broad-based, long-term retention programs intended to attract and retain talented employees and align stockholder and employee interests. The major components of stock-based compensation expense are as follows (amounts in thousands):

 
  Fiscal Year Ended
March 31, 2013
  Fiscal Year Ended
March 31, 2012
  Fiscal Year Ended
March 31, 2011
 
 
  Stock
Options
  Restricted
Stock
  LTIPs   Stock
Options
  Restricted
Stock
  LTIPs   Stock
Options
  Restricted
Stock
  LTIPs  

Cost of sales

  $ 710   $ 445   $ 356   $ 542   $ 81   $ 176   $ 216   $   $  

Selling, general and administrative expenses

    872     1,303     725     788     688     800     350     329     888  

Research and development

    58         130                          
                                       

 

  $ 1,640   $ 1,748   $ 1,211   $ 1,330   $ 769   $ 976   $ 566   $ 329   $ 888  
                                       

Employee Stock Options

        At March 31, 2013, the Company had four stock option plans that reserved shares of common stock for issuance to executives and key employees: the 1992 Key Employee Stock Option Plan, the 1995 Executive Stock Option Plan, the 2004 Long-Term Equity Incentive Plan (collectively, the "Prior Plans") and the 2011 Omnibus Equity Incentive Plan (the "2011 Incentive Plan"). All of these plans were approved by the Company's stockholders. The 2011 Incentive Plan has authorized the grant of up to 4.8 million shares of the Company's common stock, which is comprised of 4.0 million shares under the new plan and 0.8 million shares which remained under the Prior Plans. The 2011 Incentive Plan authorizes the Company to provide equity-based compensation in the form of (1) stock options, including incentive stock options, entitling the optionee to favorable tax treatment under Section 422 of the Code; (2) stock appreciation rights; (3) restricted stock and restricted stock units; (4) other share-based awards; and (5) performance awards. Options issued under these plans vest within one to three years and expire ten years from the grant date. Stock options granted to the Company's Chief Executive Officer on January 27, 2010 vest 50% on June 30, 2014 and 50% on June 30, 2015. If available, the Company issues shares of Common Stock from treasury stock upon exercise of stock options and vesting of restricted stock units. The Company has no plans to purchase additional shares in conjunction with its employee stock option program in the near future.

        Employee stock option activity for fiscal year 2013 is as follows (amounts in thousands, except exercise price, fair value and contractual life):

 
  Options   Weighted-
Average
Exercise
Price
 

Outstanding at March 31, 2012

    1,769   $ 13.43  

Granted

    333     4.70  

Exercised

    (50 )   2.18  

Forfeited

    (16 )   9.07  

Expired

    (85 )   23.76  
             

Outstanding at March 31, 2013

    1,951     11.84  
             

Exercisable at March 31, 2013

    1,260   $ 14.61  

Remaining weighted average contractual life of options exercisable (years)

         
5.0
 

Remaining weighted average contractual life of options outstanding (years)

         
6.4
 

        At March 31, 2013 and 2012, the weighted average grant-date fair value of non-vested shares was $4.09 and $5.27, respectively. The weighted average grant-date fair value of shares granted, vested, and forfeited during fiscal year 2013 was $2.78, $5.32 and $5.69, respectively. The total estimated fair value of shares vested during fiscal years 2013, 2012 and 2011 was $1.7 million, $0.6 million and $0.2 million, respectively. The intrinsic value of stock options exercised in fiscal years 2013, 2012, and 2011 was $0.2 million, $1.0 million and $0.6 million, respectively.

        As of March 31, 2013, the intrinsic value related to options outstanding was $1.8 million. The intrinsic value of options currently exercisable was $1.2 million. Total unrecognized compensation cost, net of estimated forfeitures, related to non-vested options was $1.4 million as of March 31, 2013. This cost is expected to be recognized over a weighted-average period of 1.4 years. At March 31, 2013 and 2012, respectively, the weighted average exercise price of stock options expected to vest was $6.81 and $9.07, respectively. The Company measures the fair value of each employee stock option grant at the date of grant using a Black-Scholes option pricing model. This model requires the input of assumptions regarding a number of complex and subjective variables that will usually have a significant impact on the fair value estimate. The following table summarizes the weighted average assumptions used in the Black-Scholes valuation model to value stock option grants:

 
  Fiscal Years Ended
March 31,
 
 
  2013   2012   2011  

Assumptions:

                   

Expected volatility

    70.9 %   83.2 %   85.9 %

Risk-free interest rate

    0.5 %   0.7 %   1.0 %

Expected option lives in years

    4.0     4.1     4.1  

Dividend yield

             

        The expected volatility is based on a historical volatility calculation of the Company's stock price. The risk-free rate is based on the U.S. Treasury yield with a maturity commensurate with the expected term. The expected term is based on the Company's historical option term which considers the weighted-average vesting, contractual term and vesting schedule. In addition, stock-based compensation expense is calculated based on the number of awards that are ultimately expected to vest, and therefore has been reduced for estimated forfeitures. The Company's estimate of expected forfeitures is based on the Company's actual historical annual forfeiture rate of 1.3%. The estimated forfeiture rate, which is evaluated each balance sheet date throughout the life of the award, provides a time-based adjustment of forfeited shares. The estimated forfeiture rate is reassessed at each balance sheet date and may change based on new facts and circumstances. The dividend yield is based on a set dividend rate of 0.0% as the Company has not paid and does not anticipate paying dividends.

        All options plans provide that options to purchase shares be supported by the Company's authorized but unissued common stock or treasury stock. All restricted stock and performance awards are also supported by the Company's authorized but unissued common stock or treasury stock. The prices of the options granted pursuant to these plans are not less than 100% of the value of the shares on the date of the grant.

Performance Vesting Stock Options

        During fiscal year 2006, the Company issued 166,667 performance awards with a weighted-average exercise price of $24.15 to the Chief Executive Officer which will entitle him to receive shares of common stock if and when the stock price maintains certain thresholds. These awards are open ended until they vest and will have a ten-year life after vesting or will expire on the third year following retirement, whichever comes first. Effective March 4, 2010, 83,333 of these awards were voluntarily relinquished and no concurrent grant, replacement award or other valuable consideration was provided.

Restricted Stock

        Restricted stock activity for fiscal year 2013 is as follows (amounts in thousands except fair value):

 
  Shares   Weighted-
average
Fair Value on
Grant Date
 

Non-vested restricted stock at March 31, 2012

    463   $ 8.25  

Granted

    109     4.72  

Vested

    (116 )   8.98  

Forfeited

    (15 )   9.19  
             

Non-vested restricted stock at March 31, 2013

    441     7.15  
             

        The Company grants shares of restricted stock to members of the Board of Directors, the Chief Executive Officer and a limited group of executives. In fiscal year 2013, restricted stock granted to the Board of Directors vests in one year, and restricted stock granted to certain executives vests 50% in two years and 50% in 3 years. In fiscal year 2012, restricted stock granted to the Board of Directors vests in nine months, restricted stock granted to the Chief Executive Officer vests on June 30, 2017 and restricted stock granted to certain executives vests 25% per year over four years. The contractual term on restricted stock is indefinite. Once vested, restricted shares cannot be sold until 90 days after the Chief Executive Officer, the executive or the member of the Board of Directors, as applicable, resigns from his or her position, or until the individual achieves the targeted ownership under the Company's stock ownership guidelines, and only to the extent that such ownership exceeds the target. Once vested, restricted shares cannot be sold until 90 days after the Chief Executive Officer, the executive or the member of the Board of Directors, as applicable, resigns from his or her position, or until the individual achieves the targeted ownership under the Company's stock ownership guidelines, and only to the extent that such ownership exceeds the target. As of March 31, 2013 and 2012, unrecognized compensation costs related to the unvested restricted stock share based compensation arrangements granted was $1.8 million and $3.2 million, respectively. The expense is being recognized over the respective vesting periods.

Long-term Incentive Plans ("LTIP")

        Historically the Board of Directors of the Company has approved annual Long Term Incentive Plans which cover two year periods. The Plans are primarily based upon the achievement of an Adjusted EBITDA target for the two-year period. At the time of the award, the individual plans entitle the participants to receive cash or restricted shares of the Company's common stock, or a combination of both. The 2013/2014 LTIP also awarded restricted stock shares which vest over the course of three years from the anniversary of the establishment of the plan and are not subject to a performance metric. The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis and adjusts compensation expense to match expectations. Any related liability is reflected in the line item "Accrued expenses" on the Consolidated Balance Sheets and any restricted stock commitment is reflected in the line item "Additional paid-in capital" on the Consolidated Balance Sheets.

        In the Operating activities section of the Consolidated Statements of Cash Flows, stock-based compensation expense was treated as an adjustment to net income (loss) for fiscal years 2013, 2012 and 2011.