Quarterly report pursuant to Section 13 or 15(d)

Stock-based Compensation

v2.4.0.6
Stock-based Compensation
9 Months Ended
Dec. 31, 2011
Stock-based Compensation  
Stock-based Compensation

Note 9. Stock-based Compensation

 

Stock Options

 

At December 31, 2011, 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.

 

On October 31, 2011, the Company granted a total of 376,000 options pursuant to the 2011 Incentive Plan to certain non-executive key members of the management group.  These options vest on a pro-rata basis over a three year period and expire on October 31, 2021.  The exercise price of the options was $9.22 per share (not less than 100% of the value of the Company’s common shares on the date of grant).  The grant date fair value per share was $4.95, $5.94 and $5.98 for the tranches that vest on October 31, 2012, 2013 and 2014, respectively.

 

The Company measured the fair value of these employee stock option grants at the grant date using the Black-Scholes pricing model with the following weighted average assumptions:

 

 

 

Quarter Ended
December 31, 2011

 

Assumptions:

 

 

 

Expected option lives

 

4.1 years

 

Expected volatility

 

84.7%

 

Risk-free interest rate

 

0.7%

 

Dividend yield

 

0%

 

 

The compensation expense (recovery) associated with stock-based compensation for the quarters and nine month periods ended December 31, 2011 and 2010 were recorded on the Condensed Consolidated Statements of Operations as follows (amounts in thousands):

 

 

 

Quarters Ended December 31,

 

Nine Months Ended December 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

$

(114

)

$

56

 

$

341

 

$

126

 

Selling, general and administrative expenses

 

(683

)

373

 

1,037

 

785

 

Total stock-based compensation expense (recovery)

 

$

(797

)

$

429

 

$

1,378

 

$

911

 

 

In the “Operating activities” section of the Condensed Consolidated Statements of Cash Flows, stock-based compensation expense was treated as an adjustment to Net income for the nine month periods ended December 31, 2011 and 2010. Approximately 66 thousand and 118 thousand stock options were exercised in the quarter and nine month periods ended December 31, 2011, respectively.  Approximately 11 thousand stock options were exercised during the quarter and nine month period ended December 31, 2010.

 

Restricted Stock

 

The Company grants shares of its common stock as restricted stock to members of the Board of Directors and the Chief Executive Officer. Restricted stock and restricted stock units granted to the Board of Directors vest within one year while restricted stock granted to the Chief Executive Officer on January 27, 2010 vests 50% on June 30, 2014 and 50% on June 30, 2015. Once vested, restricted shares cannot be sold until 90 days after the Chief Executive Officer or the member of the Board of Directors resigns from his position.  The contractual term on restricted stock is indefinite. In the third quarter of fiscal year 2012, 50 thousand shares of restricted stock units were granted to the non-management members of the Board of Directors.  In the second quarter of fiscal year 2011, 47 thousand shares of restricted stock were granted to the non-management members of the Board of Directors.  As of December 31, 2011, there was $0.6 million in unrecognized compensation costs related to the unvested restricted stock based compensation arrangements granted.

 

2012/2013 LTIP

 

During the first quarter of fiscal year 2012, the Board of Directors of the Company approved the 2012/2013 LTIP, a new long-term incentive plan based upon the achievement of an Adjusted EBITDA target for the two-year period comprised of fiscal years ending in March 2012 and 2013.  At the time of the award, participants will receive restricted shares of the Company’s common stock of up to 100% of the award earned.  The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis and recorded a recovery of $1.3 million in the quarter ended December 31, 2011 and no expense for the nine month period ended December 31, 2011.  The Company will continue to monitor the likelihood of whether the Adjusted EBITDA financial metric will be realized and will adjust compensation expense to match expectations.

 

2011/2012 LTIP

 

During the first quarter of fiscal year 2011, the Board of Directors of the Company approved the 2011/2012 LTIP, a long-term incentive plan based upon the achievement of an Adjusted EBITDA target for the two-year period comprised of fiscal years ending in March 2011 and 2012.  At the time of the award, participants will receive at least 10% of the earned award in restricted shares of the Company’s common stock; and the remainder of the award earned will be realized in cash.  The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis and recorded expense of $1.3 million in the nine month period ended December 31, 2011, based on this assessment. The Company recorded no expense for the quarter ended December 31, 2011.  As of December 31, 2011, the Company had accrued $5.6 million and the related liability is reflected in the line item “Accrued expenses” on the Condensed Consolidated Balance Sheets and $0.6 million in the line item “Additional paid-in capital” on the Condensed Consolidated Balance Sheets.  The Company will continue to monitor the likelihood of whether the Adjusted EBITDA financial metric will be realized and will adjust compensation expense to match expectations.

 

2010/2011 LTIP

 

During the second quarter of fiscal year 2010, the Board of Directors of the Company approved the 2010/2011 LTIP, a long-term incentive plan based upon the achievement of an Adjusted EBITDA target for the two-year period comprised of fiscal years ending in March 2010 and 2011.  At the time of the award and at the sole discretion of the Compensation Committee, participants may receive up to 15% of the award in restricted shares of the Company’s common stock, and the remainder of the award will be realized in cash.  During the second quarter of fiscal year 2012, the Company paid the cash component of the award and issued 15% of the total award in restricted shares.