Note 11 - Share-Based Compensation
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Jun. 30, 2012
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Disclosure of Compensation Related Costs, Share-based Payments [Text Block] |
(11) Share-Based
Compensation
For
the twelve months ended June 30, 2012, 2011, and 2010,
share-based compensation expense totaled $1.7 million, $0.9
million, and $2.3 million respectively. These amounts have
been included in the Consolidated Statements of Operations
within selling, general and administrative expenses. During
the twelve months ended June 30, 2012, 2011, and 2010, we
recognized related tax benefits associated with our
share-based compensation arrangements totaling $0.6
million, $0.3 million and $0.8 million, respectively
(before valuation allowances). Such amounts have been
included in the Consolidated Statements of Operations
within income tax expense.
We
estimate, as of the date of grant, the fair value of stock
options awarded using the Black-Scholes option-pricing
model. Use of a valuation model requires management to make
certain assumptions with respect to selected model inputs,
including anticipated changes in the underlying stock price
(i.e. expected volatility) and option exercise activity
(i.e. expected life). Expected volatility is based on the
historical volatility of our stock. The risk-free rate of
return is based on the U.S. Treasury bill rate for the term
closest matching the expected life of the grant. The
dividend yield is based on the annualized dividend rate at
the grant date relative to the grant date stock price. The
expected life of options granted, which represents the
period of time that the options are expected to be
outstanding, is based, primarily, on historical data. The
weighted average assumptions used for fiscal years ended
June 30 are noted in the following table:
At
June 30, 2012, we had 505,696 shares of common stock
available for future issuance pursuant to the 1992 Stock
Option Plan (the “Plan”). The maximum number of
shares of common stock reserved for issuance under the Plan
is 6,487,867 shares. Following is a description of grants
made under the Plan.
Stock
Option Awards
The
Plan provides for the grant of non-compensatory stock
options to eligible employees and non-employee directors.
Stock options granted under the Plan are non-qualified
under Section 422 of the Internal Revenue code and allow
for the purchase of shares of our common stock. The Plan
also provides for the issuance of stock appreciation rights
("SARs") on issued options, however, no SARs have been
issued as of June 30, 2012. The awarding of such options is
determined by the Compensation Committee of the Board of
Directors after consideration of recommendations proposed
by the Chief Executive Officer. Option awards are generally
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 (4 years for awards to employees;
2 years for awards to independent directors), and have a
contractual term of 10 years.
Effective
October 1, 2011, the Company and M. Farooq Kathwari, our
President and Chief Executive Officer, entered into a new
employment agreement (the "Agreement"). Pursuant to the
terms of the Agreement, Mr. Kathwari was awarded on October
1, 2011, (i) options to purchase 300,000 shares of our
common stock at an exercise price of $13.61 which
vest ratably over a 5-year period on each June 30,
unless earlier vested, in certain circumstances, in
accordance with the terms of the Agreement. During fiscal
2012, the Company awarded options to purchase an aggregate
of 36,000 shares of our common stock to certain executives
other than Mr. Kathwari, which vest in four equal annual
installments on the grant date anniversary.
All
options were issued at the closing stock price on each
grant date, and have a contractual term of 10 years. A
summary of stock option activity occurring during the
fiscal year ended June 30, 2012 is presented below:
The
weighted average grant-date fair value of options granted
during fiscal 2012, 2011, and 2010 was $5.98, $1.70 and
$5.17 respectively. The total intrinsic value of options
exercised during 2012, 2011 and 2010 was $0.1 million, $0.0
million, and $0.0 million, respectively. As of June 30,
2012, there was $1.8 million of total unrecognized
compensation cost related to nonvested options granted
under the Plan. That cost is expected to be recognized over
a weighted average period of 3.5 years. A summary of the
nonvested shares as of June 30, 2012 and changes during the
year then ended is presented below:
Restricted
Stock Awards
In
connection with Mr. Kathwari’s October 10, 2007
employment agreement, he received on July 1, 2008 an award
of 20,000 shares of restricted stock with vesting based on
the performance of the Company's stock price during the
three year periods subsequent to the award date as compared
to the Standard and Poor’s 500 index. The measurement
period ended on June 30, 2012, and 20,000 shares
vested.
On
July 26, 2011, as a result of the Company’s
performance, the Compensation Committee of the
Company’s board of directors awarded Mr. Kathwari
30,000 service-based restricted shares, which vest in three
equal annual installments on the grant date anniversary.
Effective October 1, 2011, pursuant to the terms of the
Agreement, Mr. Kathwari was awarded 105,000 shares of
restricted stock, which vested ratably over a 5-year
period on each June 30, unless earlier vested, in certain
circumstances, in accordance with the terms of the
Agreement.
A
summary of nonvested restricted share activity occurring
during the fiscal year ended June 30, 2012 is presented
below.
As
of June 30, 2012, there was $1.8 million of total
unrecognized compensation cost related to restricted shares
granted under the Plan. That cost is expected to be
recognized over a weighted average period of 2.6 years. The
total fair value of restricted shares vested during the
fiscal years ending June 30, 2012 and 2011 was $1.4 million
and $0.4 million respectively.
Stock
Unit Awards
In
connection with previous employment agreements, Mr.
Kathwari was deemed to have earned 126,000 stock units. In
the event of the termination of his employment, regardless
of the reason for termination, Mr. Kathwari will receive
shares of common stock equal to the number of stock units
earned.
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