Stock-Based Compensation

STOCK OPTION PLANS

The number of shares authorized for issuance under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”), is 15,252 shares at December 31, 2015. On October 21, 2015, the Company's number of shares authorized for issuance under the 2005 Plan increased 2 shares as a result of cancellations, forfeitures or terminations under the 1997 Plan. The 2005 Plan provides for the grant of non-qualified and incentive stock options, restricted stock, stock appreciation rights and deferred stock awards to employees and non-employees. All stock options are granted with an exercise price of not less than 100% of the fair value of the Company’s common stock at the date of grant and the options generally have a term of seven years. There were 2,786 shares available for future grant under the 2005 Plan at December 31, 2015.

As part of the Company's ongoing annual equity grant program for employees, the Company grants performance-based restricted stock awards to certain executives pursuant to the 2005 Plan. These performance awards vest over a three or four year requisite service period subject to the achievement of specific financial performance targets related to adjusted EBITDA as a percentage of revenue. Based on the performance targets, these awards require graded vesting that results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly.

EMPLOYEE STOCK PURCHASE PLAN

The number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 1,800 shares. On December 8, 2015, the Company's shareholders approved an increase in the number of shares authorized for issuance under the ESPP to 1,800, an increase of 400. Under the ESPP, rights are granted to purchase shares of common stock at 85% of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation as defined in the ESPP. There were 46 and 41 shares issued under the ESPP during the six months ended December 31, 2015 and 2014, respectively. Shares available for future purchase under the ESPP totaled 440 at December 31, 2015.

STOCK OPTION AND AWARD ACTIVITY

The following table summarizes activity of the Company’s stock option plans since June 30, 2015:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at June 30, 2015	830		$	13.43	1.66
Granted	—		—
Exercised	(175	)	9.82
Cancelled	(24	)	17.25
Outstanding at December 31, 2015	631		$	14.29	1.42

The following table summarizes the status of the Company’s non-vested restricted stock awards since June 30, 2015:



	Non-vested Restricted Stock Awards
	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2015	1,866		$	10.72
Granted	518		15.90
Vested	(703	)	10.78
Forfeited	(84	)	10.79
Outstanding at December 31, 2015	1,597		$	12.37

STOCK-BASED COMPENSATION EXPENSE

The Company recognized the full expense of its share-based payment plans in the consolidated statements of operations for the three and six months ended December 31, 2015 and 2014 in accordance with FASB ASC 718. During the three and six months ended December 31, 2015, the Company capitalized $153 of stock-based compensation expense on the consolidated balance sheets. In the prior years, the Company did not capitalize any such costs on the consolidated balance sheets, as such costs were not material. Under the fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures. The following table presents share-based compensation expenses from continuing operations included in the Company’s consolidated statements of operations:



	Three Months Ended December 31,						Six Months Ended December 31,
	2015			2014			2015			2014
Cost of revenues	$	6		$	115		$	155		$	266
Selling, general and administrative	2,063			1,778			4,191			3,744
Research and development	323			363			748			797
Share-based compensation expense before tax	2,392			2,256			5,094			4,807
Income tax benefit	(992		)	(839		)	(2,033		)	(1,759		)
Share-based compensation expense, net of income taxes	$	1,400		$	1,417		$	3,061		$	3,048