Share-based Compensation

3 Months Ended

Sep. 30, 2012

Share-based Compensation.

Share-based Compensation

Note 17.  Share-based Compensation

At September 30, 2012, the Company had four share-based employee compensation plans (the “Old Plan,” the “2003 Plan,” the 2006 Long-term Incentive Plan, or “2006 LTIP” and the 2011 Long-Term Incentive Plan or “2011 LTIP”).

At September 30, 2012, there were 2,610 options outstanding.  Of those, 1,565 were options issued under the 2006 LTIP, 862 were issued under the 2003 Plan, and 183 under the Old Plan.  There are no further shares authorized to be issued under the Old Plan.  Under the 2003 Plan, 1,125 shares were authorized to be issued, with 60 shares under options having already been exercised under that plan since its inception, leaving a balance of 203 shares in that plan for future issuances.  Under the 2006 LTIP, 2,500 shares were authorized to be issued, with 190 shares under options having already been exercised under that plan since its inception.  At September 30, 2012, there were 73 nonvested restricted shares outstanding which were issued under the 2006 LTIP, with 635 shares having already vested under that plan since its inception.  At September 30, 2012, a balance of 37 shares is available in the 2006 LTIP for future issuances.  Under the 2011 LTIP, 1,500 shares were authorized to be issued.  As of September 30, 2012, 3 shares of restricted stock have vested under the plan, leaving a balance of 1,497 shares available in the 2011 LTIP for future issuances.

The following tables presents all share-based compensation costs recognized in our statements of income, substantially all of which is reflected in the selling, general and administrative expense line:

	Three months ended September 30,
(In thousands)	2012		2011
Share-based compensation
Stock options	$	315	$	389
Employee stock purchase plan	$	27	$	9
Restricted stock	$	314	$	273
Tax benefit at statutory rate	$	23	$	38

Stock Options

The Company measures share-based compensation cost for options using the Black-Scholes option pricing model.  The following table presents the weighted average assumptions used to estimate fair values of the stock options granted during the three months ended September 30 and the estimated annual forfeiture rates used to recognize the associated compensation expense:

	Incentive Stock Options FY 2013			Non- qualified Stock Options FY 2013			Incentive Stock Options FY 2012			Non- qualified Stock Options FY 2012
Risk-free interest rate	—		%	—		%	0.3		%	0.1		%
Expected volatility	—		%	—		%	63.6		%	63.9		%
Expected dividend yield	—		%	—		%	—		%	—		%
Forfeiture rate	—		%	—		%	7.50		%	7.50		%
Expected term (in years)	—			—			5.2 years			5.1 years
Weighted average fair value	$	—		$	—		$	1.99		$	1.94

Expected volatility is based on the historical volatility of the price of our common shares during the historical period equal to the expected term of the option.  We use historical information to estimate expected term within the valuation model.  The expected term of awards represents the period of time that options granted are expected to be outstanding.  The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.  Compensation cost is recognized using a straight-line method over the vesting or service period and is net of estimated forfeitures.

The forfeiture rate assumption is the estimated annual rate at which unvested awards are expected to be forfeited during the vesting period.  This assumption is based on our historical forfeiture rate.  Periodically, management will assess whether it is necessary to adjust the estimated rate to reflect changes in actual forfeitures or changes in expectations.

Options outstanding that have vested and are expected to vest as of September 30, 2012 are as follows:

(In thousands, except weighted average price and life data)	Awards	Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Life (yrs.)
Options vested	1,872	$	7.23	$	768	4.74
Options expected to vest	679	$	4.55	$	561	8.44
Total vested and expected to vest	2,551	$	6.51	$	1,329	5.73

Options with a fair value of approximately $540 and $206 vested during the three months ended September 30, 2012 and 2011, respectively.

A summary of stock option award activity under the Plans as of September 30, 2012 and 2011 and changes during the three months then ended, is presented below:

	Incentive Stock Options							Nonqualified Stock Options
							Weighted							Weighted
			Weighted-				Average			Weighted-				Average
			Average		Aggregate		Remaining			Average		Aggregate		Remaining
			Exercise		Intrinsic		Contractual			Exercise		Intrinsic		Contractual
(In thousands, except for weighted average price and life data)	Awards		Price		Value		Life (yrs.)	Awards		Price		Value		Life (yrs.)
Outstanding at July 1, 2012	1,871		$	5.26	$			877		$	8.89
Granted	—		$	—				—		$	—
Exercised	(44	)	$	4.06	$	35		—		$	—	$	—
Forfeited, expired or repurchased	(73	)	$	6.40				(21	)	$	7.23
Outstanding at September 30, 2012	1,754		$	5.24	$	1,127	6.7	856		$	8.93	$	266	4.0
Outstanding at September 30, 2012 and not yet vested	695		$	4.42	$	603	8.5	43		$	5.59	$	22	7.8
Exercisable at September 30, 2012	1,059		$	5.78	$	524	5.5	813		$	9.11	$	244	3.8

	Incentive Stock Options							Nonqualified Stock Options
							Weighted						Weighted
			Weighted-				Average		Weighted-				Average
			Average		Aggregate		Remaining		Average		Aggregate		Remaining
			Exercise		Intrinsic		Contractual		Exercise		Intrinsic		Contractual
(In thousands, except for weighted average price and life data)	Awards		Price		Value		Life (yrs.)	Awards	Price		Value		Life (yrs.)
Outstanding at July 1, 2011	1,196		$	6.19				749	$	9.77
Granted	702		$	3.52				119	$	3.65
Exercised	—		$	—	$	—		—	$	—	$	—
Forfeited, expired or repurchased	(11	)	$	5.66				—	$	—
Outstanding at September 30, 2011	1,887		$	5.20	$	396	7.6	868	$	8.93	$	63	5.0
Outstanding at September 30, 2011 and not yet vested	1,036		$	4.54	$	320	9.3	181	$	4.79	$	31	9.3
Exercisable at September 30, 2011	851		$	6.00	$	76	5.5	687	$	10.03	$	32	3.9

The Company issues new shares when stock options are exercised.

Restricted Stock

The Company measures restricted stock compensation costs based on the share price at the grant date less an estimate for forfeitures.  The annual forfeiture rate used to calculate compensation expense was 7.5% for three months ended September 30, 2012 and 2011.

A summary of nonvested restricted stock awards as of September 30, 2012 and 2011 and changes during the three months then ended, is presented below:

(In thousands)	Awards		Weighted Average Grant - date Fair Value
Nonvested at July 1, 2012	74		$	515
Granted	38		190
Vested	(38	)	(190		)
Forfeited	(1	)	(12		)
Nonvested at September 30, 2012	73		$	503
Nonvested at July 1, 2011	155		$	1,076
Granted	30		107
Vested	(37	)	(153		)
Forfeited	—		—
Nonvested at September 30, 2011	148		$	1,030

The Company issues share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years.  As of September 30, 2012, there was approximately $981 of total unrecognized compensation cost related to non-vested share-based compensation awards granted under the Plans.  That cost is expected to be recognized over a weighted average period of 1.7 years.

Employee Stock Purchase Plan

In February 2003, the Company’s shareholders approved an Employee Stock Purchase Plan (“ESPP”).  Employees eligible to participate in the ESPP may purchase shares of the Company’s stock at 85% of the lower of the fair market value of the common stock on the first day of the calendar quarter, or the last day of the calendar quarter.  Under the ESPP, employees can authorize the Company to withhold up to 10% of their compensation during any quarterly offering period, subject to certain limitations.  The ESPP was implemented on April 1, 2003 and is qualified under Section 423 of the Internal Revenue Code.  The Board of Directors authorized an aggregate total of 1,125 shares of the Company’s common stock for issuance under the ESPP.  During the three months ended September 30, 2012 and 2011, 32 shares and 13 shares were issued under the ESPP, respectively.  As of September 30, 2012, 371 total cumulative shares have been issued under the ESPP.