STOCK-BASED COMPENSATION

The Company has two stock-based compensation methods available when determining employee compensation.

(1)Long-Term Incentive Compensation Plans

Long-Term Incentive Compensation Plan

The long-term incentive compensation plan provides for shares of common stock to be awarded to officers and key employees based on performance targets set by the Compensation Committee of the Board of Directors (the “Committee”). the Company’s shareholders previously approved 700,000 shares to be issued under the plan. As of September 30, 2017, 92,508 shares have been issued. The committee selected fully-diluted earnings per share as the performance goal for the three-year performance periods July 1, 2015 – June 30, 2018 (2016-2018), July 1, 2016 – June 30, 2019 (2017-2019) and July 1, 2017 – June 30, 2020 (2018-2020). The Committee selected fully-diluted earnings per share and total shareholder return as a performance goal for the executive officers for the three-year performance periods 2017-2019 and 2018-2020. Stock awards will be issued to participants as soon as practicable following the end of the performance periods subject to verification of results and Committee approval. The compensation cost related to the number of shares to be granted under each performance period is fixed on the grant date, which is the date the performance period begins.

During the quarter ended September 30, 2017, the Company recorded no plan expense. During the quarter ended September 30, 2016, the Company recorded expense of $0.2 million. If the target performance goals for 2016-2018, 2017-2019 and 2018-2020 would be achieved, the total amount of compensation cost recognized over the requisite performance periods would be $1.0 million, $1.1 million and $0.8 million, respectively.

(2)Stock Plans

Omnibus Stock Plan

The Omnibus Stock Plan is for key employees, officers and directors and provides for the granting of incentive and nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and performance units. The Company’s shareholders previously approved 700,000 shares to be issued under the plan.

Under the plan, options were granted at an exercise price equal to the fair market value of the underlying common stock at the date of grant and exercisable for up to 10 years. All options were exercisable when granted. It is the Company’s policy to issue new shares upon exercise of stock options. The Company accepts shares of the Company’s common stock as payment for the exercise price of options. Shares received as payment are retired upon receipt. During the quarters ended September 30, 2017 and 2016, the Company issued options for 21,439 and 24,317 common shares and recorded expense of $0.2 million and $0.3 million related to stock option grants, respectively.

Under the plan, the Company issued 1,863 and 1,778 shares to non-executive directors as compensation and recorded expense of $0.1 million during the quarters ended September 30, 2017 and 2016.

At September 30, 2017, 513,644 shares were available for future grants.

2006 and 2009 Stock Option Plans

The stock option plans were for key employees, officers and directors and provided for granting incentive and nonqualified stock options. Under the plans, options were granted at an exercise price equal to the fair market value of the underlying common stock at the date of grant and exercisable for up to 10 years. All options were exercisable when granted. No additional options can be granted under the 2006 and 2009 stock option plans.

There were no options granted and no expense recorded under these Plans during the three months ended September 30, 2017 and 2016.

A summary of the status of the Company’s stock plans as of September 30, 2017, June 30, 2017 and 2016, and the changes during the periods then ended is presented below:



			Weighted		Aggregate
	Shares		Average		Intrinsic Value
	(in thousands)		Exercise Price		(in thousands)
Outstanding and exercisable at June 30, 2016	270	$	22.85	$	4,638
Granted	24		47.45
Exercised	(98)		20.57
Canceled	(9)		20.51
Outstanding and exercisable at June 30, 2017	187	$	27.21	$	5,039
Granted	21		45.21
Exercised	-		-
Canceled	(5)		39.53
Outstanding and exercisable at September 30, 2017	203	$	28.77	$	4,457

The following table summarizes information for options outstanding and exercisable at September 30, 2017:



		Options
		Outstanding and	Weighted Average
	Range of	Exercisable	Remaining		Exercise
	Prices	(in thousands)	Life (Years)		Price
$	6.96 - 13.90	38	2.1	$	12.13
	17.23 - 19.77	34	4.2		18.54
	20.50 - 27.57	39	5.8		25.69
	31.06 - 32.13	32	7.2		31.62
	43.09 - 47.45	60	8.9		45.42
$	6.96 - 47.45	203	6.0	$	28.77

In March 2016, the FASB issued Improvements to Employee Share-Based Payment Accounting (ASU 2016-09), which amends ASC Topic 718, Compensation – Stock Compensation. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. During the quarter ended September 30, 2017, the Company adopted ASU 2016-09. Excess tax benefits from share-based compensation are included within net income and accrued liabilities as part of operating activities in the statement of cash flows and are no longer included as a financing activity. This change is applied prospectively. The standard allows for an accounting policy election to account for forfeitures as an estimate or to account for forfeitures as they occur. The Company elected to continue estimating the number of awards expected to be forfeited and adjust the estimate on an ongoing basis.

For the quarter ended September 30, 2017, the Company recognized net tax benefits related to share-based compensation awards of $0.1 million as a reduction of income tax expense in the consolidated statements of income. The impact of this change for the prior year quarter ended September 30, 2016 would have been a reduction of income tax expense of $1.0 million. Prior to adoption, these items were recorded in additional paid-in capital in the consolidated balance sheets.