Note 17 - Share-Based Compensation

12 Months Ended

May 31, 2013

Share-based Arrangements with Employees and Nonemployees [Abstract]

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

17.  SHARE–BASED COMPENSATION

Successor share-based compensation

Plan summary

The IVD Holdings Inc. 2011 Equity Incentive Plan (the “2011 Plan”) was established in December 2011 by Holdings.  Under the 2011 Plan, awards of stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units, performance awards and any other awards that are convertible into or based on stock can be granted as incentive or compensation to employees, non-employee directors, consultants or advisors of the Company and Holdings.  The share-based compensation expense relating to awards to those persons has been pushed down from Holdings to the Company. 

A maximum of 514,631 shares of Holdings stock may be delivered in satisfaction of, or may underlie, awards under the 2011 Plan. Stock option awards are granted with either service-based vesting, performance-based vesting, or a combination of either performance-based and market-based vesting.  The service-vested options typically vest over a five year period (20% per year).  The performance-vested options vest in tranches upon the achievement of certain performance objectives, which are measured over approximately a four year period.  The stock appreciation rights vest only on the occurrence of a liquidity event.  These awards have a 10 year term.  Restricted stock unit awards typically vest over a two year period (50% per year) and do not expire. Upon vesting, restricted stock units are settled in shares of Holdings’ common stock.

Valuation method used and assumptions

The Company estimates the fair value of stock options and stock appreciation rights using a Monte Carlo simulation approach. Key input assumptions used to estimate the fair value of stock options and stock appreciation rights include the initial value of common stock, expected term until the exercise of the equity award, the expected volatility of the equity value, risk-free rates of return and dividend yields, if any. The Company estimated the fair value of options and stock appreciation rights at the grant date using the following weighted average assumptions:

	Year Ended
	May 31, 2013
Risk-free interest rate (1)	0.24%
Expected volatility (2)	50.00%
Expected life (years) (3)	4.70
Expected dividend yield (4)	None

1. Based on the U.S. Constant Maturity Treasury (CMT) curve in effect at the time of award.

2. Expected stock price volatility is based on the average historical volatility of the Company when it was publicly traded and weekly stock returns of comparable companies during the period corresponding to the expected life of the options and stock appreciation rights.

3. Represents the period of time options are expected to remain outstanding.

4. The Company has not paid dividends on its common stock and does not expect to pay dividends on its common stock in the near future.

Stock options

Time vested options

Compensation cost for stock options with tiered vesting terms is recognized on a straight-line basis over the vesting periods. Activity for the service-vested options was as follows for the year ended May 31, 2013:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value (1)
Time vested options outstanding at May 31, 2012		139,779		$	100.00
Granted		28,750			100.00
Exercised		-			-
Forfeited		(18,400	)		100.00
Expired or cancelled		(1,700	)		100.00
Time vested options outstanding at May 31, 2013		148,429			100.00		8.6	$	-
Exercisable at May 31, 2013		27,255			100.00		7.7		-

(1) The aggregate intrinsic value in the above table represents the total pre-tax amount that a participant would receive if the option had been exercised on the last day of the respective fiscal year. Options that are underwater are not included in the intrinsic value amount.

The weighted-average grant-date fair value of share options granted during the fiscal year ended May 31, 2013 was $27.73.

As of May 31, 2013, there was $2.8 million of total unrecognized compensation cost related to nonvested service-based stock option awards. This compensation cost is expected to be recognized over a weighted average period of approximately 3.6 years.

Performance and market vested options

The Company has granted awards that contain performance conditions as well as awards that contain both performance and market conditions.  Awards granted which vest upon either the satisfaction of a performance or market condition were measured at grant date based solely on the achievement of the performance condition since at grant date the Company believed the satisfaction of the performance condition was probable.

Compensation cost for performance based stock options is recognized when the achievement of the performance conditions is considered probable. Management reassesses at each reporting date whether satisfaction of the performance condition is probable. If changes in the estimated outcome of the performance conditions affect the quantity of the awards expected to vest, the cumulative effect of the change is recognized in the period of change. As of May 31, 2013, management believes the achievement of the performance conditions related to the performance based stock options is probable and expense has been recognized since the awards were granted. Activity for the performance based options was as follows for the year ended May 31, 2013:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value (1)
Performance vested options outstanding at May 31, 2012		135,779		$	100.00
Granted		28,750			100.00
Exercised		-			-
Forfeited		(23,000	)		100.00
Expired or cancelled		-			-
Performance vested options outstanding at May 31, 2013		141,529			100.00		8.8	$	-
Exercisable at May 31, 2013		-			-		-		-

(1) The aggregate intrinsic value in the above table represents the total pre-tax amount that a participant would receive if the option had been exercised on the last day of the respective fiscal year. Options that are underwater are not included in the intrinsic value amount.

The weighted-average grant-date fair value of share options granted during the fiscal year ended May 31, 2013 was $20.59.

As of May 31, 2013, there was $2.2 million of total unrecognized compensation cost related to nonvested performance-based stock option awards. This compensation cost is expected to be recognized over a weighted average period of approximately 3.2 years.

Restricted stock units

The fair value of restricted stock is estimated using the Monte Carlo simulation approach described above and is then discounted due to non-marketability. The following is a summary of the changes in unvested restricted stock units for the fiscal year ended May 31, 2013:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Nonvested restricted stock units outstanding at May 31, 2012		2,100		$	78.64
Granted		1,600			78.64
Vested		(800	)		78.64
Forfeited		-			-
Nonvested restricted stock units outstanding at May 31, 2013		2,900			78.64

As of May 31, 2013, there was $0.2 million of total unrecognized compensation cost related to nonvested restricted stock awards. This compensation cost is expected to be recognized over the weighted average period of approximately 1.3 years.

Stock appreciation rights

The stock appreciation rights granted contain both a performance and a market condition and are cash settled so require liability classification.  The market condition is a defined return to investors and was incorporated into the grant date fair value calculation.  The performance condition is only met upon a liquidity event. As of May 31, 2013, management has determined that the satisfaction of that performance condition is not considered probable. Therefore, no expense or liability has been recognized.

The following is a summary of the changes in cash-settled stock appreciation rights for the fiscal year ended May 31, 2013:

	Number of Shares			Weighted-Average Grant-Date Fair Value
Stock appreciation rights outstanding at May 31, 2012		87,000		$	20.59
Granted		63,300			20.59
Vested		-			-
Forfeited		(18,000	)		20.59
Cancelled/Expired		(5,000	)		20.59
Stock appreciation rights outstanding at May 31, 2013		127,300			20.59

As of May 31, 2013, the fair value of the liability relating to cash settled stock appreciation rights was $2.6 million.

Shares available for future grants

As of May 31, 2013, a total of 93,673 shares were available for future grants under the 2011 Plan.

Predecessor share-based compensation

Plan summary

The Company had a Long-Term Incentive Plan that was approved by the shareholders in 2005 (the “2005 Plan”). Under the 2005 Plan, the Company was able to award stock options, stock appreciation rights, restricted stock, deferred stock, and other performance-based awards as incentive and compensation to employees and directors. The 2005 Plan provided for accelerated vesting of option and restricted stock awards if there was a change in control, as defined in the 2005 Plan. The 2005 Plan was terminated effective upon the Immucor Acquisition and no awards are currently outstanding or may be granted in the future under the 2005 Plan.

Plan activity

In an annual group grant in June 2011, the Company issued 162,535 performance based units and 228,890 restricted stock units with a grant date fair value of $19.85. These units had an original vesting period of three years.

Compensation expense of predecessor and successor

Share-based compensation of the Predecessor reflects the fair value of employee share-based awards, including options, restricted stock, restricted stock units and performance units, which were typically recognized as expense on a straight line basis over the requisite service period of the award.

Immediately prior to the Immucor Acquisition, all outstanding awards became fully vested and the unrecognized compensation expense was recognized.

Share-based compensation of the Successor reflects the fair value of employee share-based awards, including both performance and service vested. For service- vested awards, the expense is typically recognized on a straight line basis over the requisite service period. For performance-vested awards, the expense is recognized when the achievement of the performance conditions is considered probable.

A summary of share-based compensation recorded in the Successor and Predecessor statements of operations is as follows (in thousands):

				Successor			Predecessor
				August 20, 2011			June 1, 2011
	Year Ended			Through			Through			Year Ended
	May 31, 2013			May 31, 2012			August 19, 2011			May 31, 2011
Share-based compensation	$	1,423			753			16,233			6,941
Tax benefit		(549	)		(264	)		(5,682	)		(2,147	)
Share-based compensation, net		874			489			10,551			4,794