Note G – Stock-Based Compensation

The Company has two types of stock-based compensation awards in effect for its employees and directors. The Company has issued stock options since 1986 and restricted stock units (RSUs) since fiscal 2010. Total compensation expense related to stock-based awards for the fiscal years ended April 30, 2013, 2012 and 2011 was $3.5 million, $3.4 million and $4.0 million, respectively. The Company recognizes stock-based compensation costs net of an estimated forfeiture rate for those shares expected to vest on a straight-line basis over the requisite service period of the award. The Company estimates the forfeiture rates based upon its historical experience.

Stock Incentive Plans

At April 30, 2013, the Company had stock option and RSU awards outstanding under four different plans: (1) 1999 stock option plan for employees; (2) amended and restated 2004 stock incentive plan for employees; (3) 2006 non-employee directors equity ownership plan; and (4) 2011 non-employee directors equity ownership plan. As of April 30, 2013, there were 1,133,999 shares of common stock available for future stock-based compensation awards under the Company’s stock incentive plans.

Methodology Assumptions

For purposes of valuing stock option grants, the Company has identified two employee groups and one non-employee director group, based upon observed option exercise patterns. The Company uses the Black-Scholes option-pricing model to value the Company’s stock options for each of the three groups. Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant. The fair value of the Company’s stock option awards is expensed on a straight-line basis over the vesting period of the stock options. The expected volatility assumption is based on the historical volatility of the Company’s stock over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from the Company’s historical exercise experience and represents the period of time that stock option awards granted are expected to be outstanding for each of the three identified groups. The expected term assumption incorporates the contractual term of an option grant, which is generally ten years for employees and from four to ten years for non-employee directors, as well as the vesting period of an award, which is typically three years. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

For purposes of determining the fair value of RSUs, the Company uses the closing stock price of its common stock as reported on the NASDAQ Global Select Market on the date of grant, reduced by the discounted value of future expected dividend payments during the vesting period, since the recipients are not entitled to dividends during the vesting period. The fair value of the Company’s RSU awards is expensed on a straight-line basis over the vesting period of the RSUs to the extent the Company believes it is probable the related performance criteria, if any, will be met. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the vesting period of the RSU grant.

The weighted-average assumptions and valuation of the Company’s stock options were as follows:


		FISCAL YEARS ENDED APRIL 30
		2013			2012			2011
Weighted-average fair value of grants	$	7.39		$	5.43		$	8.87
Expected volatility		42.5	%		35.1	%		49.1	%
Expected term in years		6.1			6.0			6.2
Risk-free interest rate		1.09	%		2.24	%		2.64	%
Expected dividend yield		0.0	%		2.0	%		1.7	%

Stock Option Activity

Stock options granted and outstanding under each of the Company’s plans vest evenly over a three-year period and have contractual terms of ten years. The exercise price of all stock options granted is equal to the fair market value of the Company’s common stock on the option grant date.

The following table presents a summary of the Company’s stock option activity for the fiscal years ended April 30, 2013, 2012 and 2011 (remaining contractual term in years and exercise prices are weighted-averages):


	NUMBER OF OPTIONS	REMAINING CONTRACTUAL TERM	WEIGHTED AVERAGE EXERCISE PRICE		AGGREGATE INTRINSIC VALUE (in thousands)
Outstanding at April 30, 2010	2,105,515	5.6	$	29.03	$	295

Granted	115,000	9.1		20.87		- -
Exercised	(27,000)	- -		14.80		216
Cancelled or expired	(588,159)	- -		29.58		- -
Outstanding at April 30, 2011	1,605,356	5.7	$	28.48	$	29

Granted	130,000	9.1		18.16		- -
Exercised	(1,200)	- -		14.93		6
Cancelled or expired	(109,396)	- -		28.82		- -
Outstanding at April 30, 2012	1,624,760	5.1	$	27.64	$	0

Granted	125,000	9.1		17.62		- -
Exercised	(251,799)	- -		23.35		1,868
Cancelled or expired	(96,148)	- -		31.03		- -
Outstanding at April 30, 2013	1,401,813	4.8	$	27.27	$	9,272

Vested and expected to vest in the future at April 30, 2013	1,375,039	4.7	$	27.43	$	8,871
Exercisable at April 30, 2013	1,156,809	4.0	$	29.17	$	5,509

The aggregate intrinsic value in the previous table of the outstanding options on April 30, 2013 represents the total pre-tax intrinsic value (the excess, if any, of the Company’s closing stock price on the last trading day of fiscal 2013 over the exercise price, multiplied by the number of in-the-money options) of the shares of the Company’s common stock that would have been received by the option holders had all option holders exercised their options on April 30, 2013. This amount changes based upon the fair market value of the Company’s common stock. The total fair value of options vested for the fiscal years ended April 30, 2013, 2012 and 2011 was $1.2 million, $2.4 million and $3.3 million, respectively.

As of April 30, 2013, there was $0.9 million of total unrecognized compensation expense related to unvested stock options granted under the Company’s stock-based compensation plans. This expense is expected to be recognized over a weighted-average period of 1.8 years.

Cash received from option exercises for the fiscal years ended April 30, 2013, 2012 and 2011, was an aggregate of $5.9 million, $0.0 million and $0.4 million, respectively. The actual tax benefit realized for the tax deduction from option exercises of stock option awards totaled $729,000, $3,000 and $84,000 for the fiscal years ended April 30, 2013, 2012 and 2011, respectively.

The following table summarizes information about stock options outstanding at April 30, 2013 (remaining lives in years and exercise prices are weighted-averages):


	OPTIONS OUTSTANDING				OPTIONS EXERCISABLE
OPTION PRICE		REMAINING	EXERCISE			EXERCISE
PER SHARE	OPTIONS	LIFE	PRICE		OPTIONS	PRICE
$17.62-$18.16	223,334	8.7	$	17.86	14,998	$	18.16
$20.87-$26.85	497,467	5.0		24.05	460,799		24.30
$28.97-$34.63	658,400	3.4		32.39	658,400		32.39
$38.37-$42.17	22,612	1.5		41.73	22,612		41.73
	1,401,813				1,156,809

Restricted Stock Unit Activity:

The Company’s RSUs granted to employees cliff-vest over a three-year period from date of grant, while RSUs granted to non-employee directors vest daily over a two-year period from date of grant. Directors were granted service-based RSUs only, while employees were awarded both service-based and performance-based RSUs (PBRSUs) in fiscal years 2013, 2012 and 2011. The PBRSUs granted in fiscal 2013 are earned based on achievement of a number of goals pertaining to the Company’s operational and financial performance during the performance period of fiscal 2013. Employees who satisfy the vesting criteria will receive a proportional amount of PBRSUs based upon the Compensation Committee’s assessment of the Company’s achievement of the performance criteria.

The following table contains a summary of the Company’s RSU activity for the fiscal years ended April 30, 2013, 2012 and 2011:


	PERFORMANCE-BASED RSUS	SERVICE-BASED RSUS	TOTAL RSUS	WEIGHTED AVERAGE GRANT DATE FAIR VALUE
Issued and outstanding, April 30, 2010	117,900	60,500	178,400	$	21.99

Granted	125,475	61,825	187,300	$	19.25
Cancelled due to non-achievement of performance goals	(63,145)	0	(63,145)	$	22.10
Settled in common stock	(364)	(260)	(624)	$	22.10
Forfeited	(5,296)	(2,965)	(8,261)	$	21.96
Issued and outstanding, April 30, 2011	174,570	119,100	293,670	$	20.25

Granted	134,250	64,750	199,000	$	17.00
Cancelled due to non-achievement of performance goals	(48,870)	0	(48,870)	$	19.81
Settled in common stock	(666)	(17,951)	(18,617)	$	21.15
Forfeited	(22,208)	(10,171)	(32,379)	$	19.30
Issued and outstanding, April 30, 2012	237,076	155,728	392,804	$	18.75

Granted	129,075	63,025	192,100	$	17.76
Cancelled due to non-achievement of performance goals	(24,311)	0	(24,311)	$	17.09
Settled in common stock	(49,546)	(58,328)	(107,874)	$	20.66
Forfeited	(13,189)	(5,425)	(18,614)	$	17.91
Issued and outstanding, April 30, 2013	279,105	155,000	434,105	$	17.96

As of April 30, 2013, there was $2.7 million of total unrecognized compensation expense related to unvested RSUs

granted under the Company’s stock-based compensation plans. This expense is expected to be recognized over a

weighted-average period of 1.7 years.

For the fiscal years ended April 30, 2013, 2012 and 2011 stock-based compensation expense was allocated as follows:


(in thousands)		2013		2012		2011
Cost of sales and distribution	$	606	$	531	$	735
Selling and marketing expenses		859		715		842
General and administrative expenses		2,044		2,167		2,418
Stock-based compensation expense, before income taxes	$	3,509	$	3,413	$	3,995