Share-based Compensation

12 Months Ended

Jun. 30, 2022

Share-based Compensation

Share-based Compensation

Note 14. Share-based Compensation

At June 30, 2022, the Company had two share-based employee compensation plans (the 2014 Long-Term Incentive Plan (“LTIP”) and the 2021 LTIP). Together these plans authorized an aggregate total of 8.0 million shares to be issued. As of June 30, 2022, the plans have a total of 1.5 million shares available for future issuances.

Historically, the Company has issued share-based compensation awards with a vesting period ranging up to 3 years and a maximum contractual term of 10 years. As of June 30, 2022, there was $8.3 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 1.6 years.

Stock Options

The Company measures share-based compensation costs for options using the Black-Scholes option pricing model. There were no stock options granted during the fiscal year ended June 30, 2022. 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:

	2021			2020
Risk-free interest rate		0.2	%		1.9	%
Expected volatility		82.5	%		73.7	%
Expected dividend yield		—	%		—	%
Forfeiture rate		—	%		—	%
Expected term		5.0	years		5.1	years
Weighted average fair value	$	3.86		$	4.00

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, 2022, 2021 and 2020 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, 2019	572	$	17.56	$	273	5.0
Granted	522	$	6.57
Exercised	(56)	$	5.42	$	237
Forfeited, expired or repurchased	(47)	$	24.73
Outstanding at June 30, 2020	991	$	12.11	$	678	5.6
Granted	309	$	5.95
Exercised	(37)	$	4.12	$	61
Forfeited, expired or repurchased	(217)	$	17.17
Outstanding at June 30, 2021	1,046	$	9.51	$	25	7.2
Exercised	(3)	$	3.55	$	2
Forfeited, expired or repurchased	(108)	$	14.63
Outstanding at June 30, 2022	935	$	8.94	$	—	6.5
Vested and expected to vest at June 30, 2022	935	$	8.94	$	—	6.5
Exercisable at June 30, 2022	530	$	10.98	$	—	5.6

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% for fiscal years ended June 30, 2022, 2021 and 2020.

A summary of restricted stock awards as of June 30, 2022, 2021 and 2020 and changes during the fiscal years then ended, is presented below:

		Weighted
		Average Grant-date		Aggregate
(In thousands, except for weighted average price data)	Awards	Fair Value		Intrinsic Value
Non-vested at June 30, 2019	1,288	$	11.63
Granted	941		6.45
Vested	(773)		10.54	$	6,401
Forfeited	(112)		10.75
Non-vested at June 30, 2020	1,344	$	8.70
Granted	901		5.74
Vested	(805)		8.60	$	4,668
Forfeited	(90)		9.18
Non-vested at June 30, 2021	1,350	$	6.75
Granted	1,110		4.14
Vested	(1,002)		5.97	$	3,789
Forfeited	(103)		5.54
Non-vested at June 30, 2022	1,355	$	5.28

Performance-Based Shares

The Company grants performance-based awards to certain key executives. The stock-settled awards will cliff vest based on a three-year performance measurement period. Awards issued prior to July 2021 are based on relative Total Shareholder Return (“TSR”) over a three-year period, which, in accordance with ASC 718, Compensation – Stock Compensation, are considered awards tied to market conditions. Half of the performance shares granted in July 2021 will be tied to our relative TSR, consistent with awards granted in prior years, with the other half tied to a variety of strategic portfolio goals, which, in accordance with ASC 718, Compensation – Stock Compensation, are considered awards tied to performance conditions. The Company measures share-based compensation cost for TSR awards using a Monte-Carlo simulation model. Compensation cost for awards tied to strategic portfolio goals is measured using the stock price at the grant date and is recognized based on performance at target award levels. However, in accordance with ASC 718, Compensation – Stock Compensation, the Company will assess the probability that the strategic portfolio goals will be met and adjust the cumulative compensation cost recognized accordingly at each reporting period.

A summary of performance-based share awards as of June 30, 2022, 2021 and 2020 and changes during the current fiscal years then ended, is presented below:

		Weighted
		Average Grant-date
(In thousands, except for weighted average price and life data)	Awards	Fair Value
Non-vested at June 30, 2019	72	$	19.92
Granted	178		10.71
Vested	(46)		15.08
Non-vested at June 30, 2020	204	$	12.99
Granted	339		9.22
Performance adjustment (1)	(12)		25.58
Non-vested at June 30, 2021	531	$	10.29
Granted	617		6.04
Performance adjustment (2)	(40)		17.69
Vested	(58)		7.72
Non-vested at June 30, 2022	1,050	$	7.65

________________________________________

(1) Represents the adjustment based on the performance of the September 2017 awards, which was below the Threshold goal level resulting in no shares vesting at the end of the three-year performance period.

(2) Represents the adjustment based on the performance of the July 2018 awards, which was below the Threshold goal level resulting in no shares vesting at the end of the three-year performance period.

Employee Stock Purchase Plan

In February 2003, the Company’s stockholders approved an Employee Stock Purchase Plan (“2003 ESPP”), under which the Company is authorized to issue 1.1 million shares of the Company’s common stock. The 2003 ESPP was implemented on April 1, 2003 and is qualified under Section 423 of the Internal Revenue Code. In January 2022, the stockholders of the Company approved a new ESPP (“2022 ESPP” and, together with the 2003 ESPP, “ESPPs”). The Company is authorized to issue an additional 1.5 million shares of the Company’s common stock under the 2022 ESPP, which is qualified under Section 423 of the Internal Revenue Code. During the fiscal years ended June 30, 2022, 2021 and 2020, 293 thousand shares, 109 thousand shares and 118 thousand shares were issued under the ESPPs, respectively. As of June 30, 2022, 1.3 million total cumulative shares have been issued under the ESPPs. 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 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)	2022		2021		2020
Selling, general and administrative expenses	$	7,536	$	7,016	$	7,087
Research and development expenses		181		538		801
Cost of sales		693		1,483		2,328
Total	$	8,410	$	9,037	$	10,216
Tax benefit at statutory rate	$	1,892	$	2,033	$	2,299