Stock Compensation Plans

12 Months Ended

Jun. 30, 2021

Share-based Payment Arrangement [Abstract]

On October 31, 2017, the shareholders approved the 2017 Stock Incentive Plan (“the 2017 Plan”) which allows for the issuance of stock awards, restricted stock awards, stock options, stock appreciation rights, and other stock-based awards, each of which may include performance-based conditions, to certain employees, non-employee directors, consultants, and advisors. The 2017 Plan authorizes the issuance of 2.1 million shares of our Class B Common Stock including unused shares from the former plan.

Stock-based compensation expense was $5.7 million, $5.6 million, and $6.6 million in fiscal years 2021, 2020 and 2019, respectively. The total income tax benefit for stock compensation arrangements was $1.1 million, $1.2 million, and $2.0 million in fiscal years 2021, 2020 and 2019, respectively. Included in the provision for income taxes for fiscal years 2021, 2020 and 2019, respectively, was a $0.4 million increase in taxes, a $0.2 million increase in taxes and a $0.3 million reduction in taxes for excess tax benefits from the vesting of stock awards. We generally use treasury shares for issuance of shares.

Relative Total Shareholder Return Performance Units:

We award relative total shareholder return performance units (“RTSR”) to key officers. Under these awards, a participant will earn from 0% to 200% of the target award depending upon how the compound annual growth rate of Kimball International common stock ranks within the peer group at the end of the performance period. RTSRs are vested at the end of the performance period and are issued as common shares shortly after the performance measurement period is complete. The

contractual life of the RTSRs is generally three years. If a participant is not employed on the date shares are vested, the RTSR award is forfeited, except in the case of death, retirement, total permanent disability, or certain other circumstances described in our employment policy. To the extent performance conditions are not fully attained, RTSRs are forfeited.

A summary of RTSR activity during fiscal year 2021 is presented below:


	Number of Shares(1)	Weighted Average Grant Date Fair Value
RTSRs outstanding at July 1, 2020	150,088	$21.12
Granted	198,642	$11.43
Vested	(4,947)	$13.04
Forfeited	(100,831)	$19.28
RTSRs outstanding at June 30, 2021	242,952	$13.96

(1) The shares granted include the maximum number of shares that may vest under RTSR awards; however, the actual number of shares which vest is determined based on the satisfaction of performance conditions, and therefore may be significantly lower. The shares vested include the earned number of shares to be issued based on performance conditions, while shares forfeited include shares that will not be issued as a result of not fully attaining the maximum performance conditions.

As of June 30, 2021, there was approximately $0.9 million of unrecognized compensation cost related to RTSRs. That cost is expected to be recognized over the vesting periods ending June 2022 through June 2023, with a weighted average vesting period of approximately one year, eight months. The grant date fair value of RTSR awards was calculated using a Monte Carlo simulation. This valuation technique includes estimating the movement of stock prices and the effects of volatility, interest rates, and dividends. The weighted average grant date fair value was $11.43, $20.78, and $21.43 for RTSR awards granted in fiscal years 2021, 2020, and 2019, respectively. During fiscal years 2021, 2020, and 2019, respectively, 4,947, 45,602, and 67,130 RTSRs vested at a fair value of $0.1 million, $0.5 million, and $1.2 million. The RTSR awards vested represent the total number of shares vested prior to the reduction of shares withheld to satisfy tax withholding obligations.

Restricted Share Units:

Restricted Share Units (“RSUs”) were granted to officers and employees. Upon vesting, the outstanding number of RSUs and, if applicable, the value of dividends accumulated over the vesting period are converted to shares of common stock. The contractual life of the RSUs is generally three years, however certain awards have shorter or longer contractual lives in order to transition from other types of compensation or to be used as a long-term retention tool. Also, in connection with the redesign of the Company’s annual cash incentive plan certain employees were awarded time-based retention and performance-based transition units with a contractual life ranging from one to two years. The number of performance-based transition units to be issued is dependent upon the Company’s EBITDA during fiscal year 2021, with a percentage payout ranging from 0% to 100% of the target. If the employment of a holder of an RSU terminates before the RSU has vested for any reason other than death, retirement, total permanent disability, or certain other circumstances described in our employment policy, the RSU and accumulated dividends will be forfeited.

A summary of RSU activity during fiscal year 2021 is presented below:


	Number of Shares	Weighted Average Grant Date Fair Value
RSUs outstanding at July 1, 2020	310,558	$16.86
Granted	590,408	$11.80
Vested	(240,955)	$16.10
Forfeited	(16,675)	$12.76
RSUs outstanding at June 30, 2021	643,336	$12.61

As of June 30, 2021, there was approximately $5.1 million of unrecognized compensation cost related to non-vested RSU compensation arrangements. That cost is expected to be recognized over vesting periods ending December 2021 through June 2024, with a weighted average vesting period of one year, ten months. The fair value of RSU awards is based on the stock price at the date of award. The weighted average grant date fair value was $11.80, $17.25, and $16.38 for RSU awards granted in fiscal years 2021, 2020, and 2019, respectively. During fiscal years 2021, 2020, and 2019, respectively, 240,955, 155,919, and

149,323 RSUs vested at a fair value of $3.9 million, $2.6 million, and $2.2 million. The fair value is equal to the closing price of shares of our Common Stock on the date of the grant. The RSU awards vested represent the total number of shares vested prior to the reduction of shares withheld to satisfy tax withholding obligations.

Unrestricted Share Grants:

Unrestricted shares may be granted to employees and non-employee members of the Board of Directors as consideration for service to Kimball International. Unrestricted share grants do not have vesting periods, holding periods, restrictions on sale, or other restrictions. The fair value of unrestricted shares is based on the stock price at the date of the award. During fiscal years 2021, 2020, and 2019, respectively, we granted a total of 44,795, 33,334, and 42,888 unrestricted shares of common stock at an average grant date fair value of $11.75, $15.93, and $15.42 for a total fair value, in thousands, of $526, $531, and $661. These shares are the total number of shares granted, prior to the reduction of shares withheld to satisfy tax withholding obligations. Unrestricted shares were awarded to key employees and non-employee members of the Board of Directors as compensation for director’s fees and as a result of directors’ elections to receive unrestricted shares in lieu of cash payment. Director’s fees are expensed over the period that directors earn the compensation.