Quarterly report pursuant to Section 13 or 15(d)

Note 10 - Share-based Compensation

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Note 10 - Share-based Compensation
6 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
(
10
)
Share-Based Compensation
 
During the
six
months ended
December 31, 2019
and
2018,
we recognized total share-based compensation expense of
$0.1
million and
$0.8
million, respectively. These amounts have been included in the consolidated statements of comprehensive income within selling, general and administrative expenses. As of
December 31, 2019,
$0.8
million of total unrecognized compensation expense related to non-vested equity awards is expected to be recognized over a weighted average period of
2.0
years. There was
no
share-based compensation capitalized for the
six
months ended
December 31, 2019
or
2018.
 
At
December 31, 2019,
there were
1,461,475
shares of common stock available for future issuance pursuant to the Ethan Allen Interiors Inc. Stock Incentive Plan. Stock options are granted with an exercise price equal to the market price of our common stock at the date of grant, vest ratably over a specified service period, and have a contractual term of
10
years. Equity awards can also include performance vesting conditions. Company policy further requires an additional
one
year holding period beyond the service vest date for certain executives. Grants to independent directors have a
three
-year service vesting condition.
 
A summary of stock option activity during the
six
months ended
December 31, 2019
is presented below.
 
           
Weighted
 
           
Average
 
   
Options
   
Exercise Price
 
Outstanding at June 30, 2019
   
378,911
    $
21.95
 
Granted
   
49,188
    $
17.82
 
Exercised
   
(4,500
)   $
11.74
 
Canceled (forfeited/expired)
   
(23,162
)   $
23.25
 
Outstanding at December 31, 2019
   
400,437
    $
21.49
 
Exercisable at December 31, 2019
   
314,373
    $
21.56
 
 
Stock options granted to employees during fiscal
2020
were valued using the Black-Scholes option pricing model with the following assumptions. There were
no
stock option awards granted to employees during fiscal
2019.
 
   
FY 2020
 
Volatility
   
30.8
%
Risk-free rate of return
   
1.84
%
Dividend yield
   
4.56
%
Expected average life (years)
   
6.7
 
 
Non-employee (independent) directors were granted stock options during the
first
quarter of each fiscal year presented and valued using the Black-Scholes option pricing model with the following assumptions.
 
   
FY 2020
   
FY 2019
 
Volatility
   
30.8
%    
31.3
%
Risk-free rate of return
   
1.55
%    
2.80
%
Dividend yield
   
3.97
%    
3.24
%
Expected average life (years)
   
5.3
     
5.0
 
 
A summary of stock unit awards activity during the
six
months ended
December 31, 2019
is presented below.
 
           
Weighted Average
 
   
Units
   
Grant Date Fair Value
 
Outstanding at June 30, 2019
   
313,882
    $
22.80
 
Granted
   
99,405
    $
12.72
 
Vested
   
-
    $
-
 
Canceled (forfeited/expired)
   
-
    $
-
 
Outstanding at December 31, 2019
   
413,287
    $
20.37
 
 
We estimate, as of the date of grant, the fair value of performance stock units with a discounted cash flow model, using as model inputs the risk-free rate of return as the discount rate, dividend yield for dividends
not
paid during the restriction period, and a discount for lack of marketability for a
one
-year post-vest holding period. The lack of marketability discount used is the present value of a future put option using the Chaffe model. The weighted average assumptions used for the stock units granted during fiscal
2020
and
2019,
respectively, is presented below.
 
 
   
FY 2020
   
FY 2019
 
Volatility
   
30.5
%    
32.1
%
Risk-free rate of return
   
1.72
%    
2.72
%
Dividend yield
   
3.97
%    
3.24
%
Expected average life (years)
   
3.0
     
3.0
 
 
There was
no
restricted stock award activity during fiscal
2020.
As of
December 31, 2019,
there were
no
restricted stock awards outstanding.