Note 16. Share-based Compensation

At June 30, 2019, the Company had two share-based employee compensation plans (the 2011 Long-Term Incentive Plan “LTIP” and the 2014 “LTIP”). Together these plans authorized an aggregate total of 4.5 million shares to be issued. On January 23, 2019, the shareholders of the Company approved an Amendment to and Restatement of the 2014 LTIP to increase the number of shares authorized to be issued by 2.0 million shares. As of June 30, 2019, the plans have a total of 2.8 million shares available for future issuances.

Historically, the Company issued share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. Beginning in Fiscal 2020, the Company extended the vesting period of new share-based compensation awards to 4 years. The Company issues new shares of stock when stock options are exercised. As of June 30, 2019, there was $10.2 million of total unrecognized compensation cost related to non-vested share-based compensation awards. That cost is expected to be recognized over a weighted average period of 1.8 years.

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, the estimated annual forfeiture rates used to recognize the associated compensation expense and the weighted average fair value of the options granted during the fiscal years ended June 30:


	June 30,			June 30,			June 30,
	2019			2018			2017
Risk-free interest rate		2.9	%		2.1	%		1.1	%
Expected volatility		58.4	%		57.6	%		55.6	%
Expected dividend yield		—			—			—
Forfeiture rate		6.5	%		6.5	%		6.5	%
Expected term		5.3	years		5.4	years		5.2	years
Weighted average fair value	$	6.52		$	11.25		$	15.33

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. The Company uses historical information to estimate the expected term, which represents the period of time that options granted are expected to be outstanding. The risk-free rate for the period equal to the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. 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 actual forfeiture rate on historical awards. Periodically, management will assess whether it is necessary to adjust the estimated rate to reflect changes in actual forfeitures or changes in expectations. Additionally, the expected dividend yield is equal to zero, as the Company has not historically issued and has no immediate plans to issue, a dividend.

A stock option summary as of June 30, 2019, 2018 and 2017 and changes during the years then ended, is presented below:


						Weighted
		Weighted-				Average
		Average		Aggregate		Remaining
		Exercise		Intrinsic		Contractual
(In thousands, except for weighted average price and life data)	Awards	Price		Value		Life (yrs.)

Outstanding at June 30, 2016	1,730	$	16.77	$	19,524	6.3
Granted	11		31.30
Exercised	(234)		7.38	$	4,849
Forfeited, expired or repurchased	(32)		33.04
Outstanding at June 30, 2017	1,475	$	18.02	$	12,212	5.7
Granted	50		21.43
Exercised	(445)		7.23	$	4,243
Forfeited, expired or repurchased	(23)		30.83
Outstanding at June 30, 2018	1,057	$	22.46	$	2,584	5.4
Granted	73		12.20
Exercised	(94)		4.06	$	311
Forfeited, expired or repurchased	(464)		30.61
Outstanding at June 30, 2019	572	$	17.56	$	273	5.0

Vested and expected to vest at June 30, 2019	566	$	17.59	$	273	5.0
Exercisable at June 30, 2019	469	$	18.09	$	273	4.2

Restricted Stock

The Company measures restricted stock compensation costs based on the stock price at the grant date less an estimate for expected forfeitures. The annual forfeiture rate used to calculate compensation expense was 6.5%, 5.7% and 6.5% for fiscal years ended June 30, 2019, 2018 and 2017, respectively.

A summary of restricted stock awards as of June 30, 2019, 2018 and 2017 and changes during the fiscal years then ended, is presented below:


		Weighted
		Average Grant -		Aggregate
(In thousands)	Awards	date Fair Value		Intrinsic Value

Non-vested at June 30, 2016	167	$	48.22
Granted	298		24.73
Vested	(86)		42.60	$	2,564
Forfeited	(45)		32.90
Non-vested at June 30, 2017	334	$	30.71
Granted	641		18.01
Vested	(191)		31.30	$	4,104
Forfeited	(80)		20.95
Non-vested at June 30, 2018	704	$	20.06
Granted	1,176		9.90
Vested	(434)		19.75	$	4,107
Forfeited	(158)		14.00
Non-vested at June 30, 2019	1,288	$	11.63

Performance-Based Shares

On September 22, 2017, the Company approved a plan to begin granting performance-based awards to certain key executives. The stock-settled awards will cliff vest based on relative Total Shareholder Return (“TSR”) compared to a pharmaceutical industry index over a three-year performance period. The Company measures share-based compensation cost for TSR awards using a Monte-Carlo simulation model.

A summary of performance-based share awards as of June 30, 2019 and 2018 and changes during the current fiscal years then ended, is presented below:


		Weighted
		Average Grant -		Aggregate
(In thousands, except for weighted average price and life data)	Awards	date Fair Value		Intrinsic Value

Non-vested at June 30, 2017	—		—
Granted	47		25.58
Vested	(27)		25.58	$	574
Forfeited	—		—
Non-vested at June 30, 2018	20	$	25.58
Granted	52	$	17.69
Vested	—	$	—	$	—
Forfeited	—	$	—
Non-vested at June 30, 2019	72	$	19.92

Employee Stock Purchase Plan

In February 2003, the Company’s stockholders 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 1.1 million shares of the Company’s common stock for issuance under the ESPP. During the fiscal years ended June 30, 2019, 2018 and 2017, 185 thousand shares, 66 thousand shares and 57 thousand shares were issued under the ESPP, respectively. As of June 30, 2019, 792 thousand total cumulative shares have been issued under the ESPP.

The following table presents the allocation of share-based compensation costs recognized in the Consolidated Statements of Operations by financial statement line item:


	For Fiscal Year Ended June 30,
(In thousands)	2019		2018		2017
Selling, general and administrative expenses	$	5,715	$	7,570	$	5,855
Research and development expenses		750		680		661
Cost of sales		2,562		1,646		1,203
Total	$	9,027	$	9,896	$	7,719

Tax benefit at statutory rate	$	2,031	$	2,919	$	2,818