Stock-Based Compensation

9 Months Ended

Jun. 30, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 3. Stock-Based Compensation

In February 2007, the Company adopted the 2007 Long Term Incentive and Stock Option Plan (the 2007 Plan). The 2007 Plan permits the granting of “incentive stock options” meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended and nonqualified options that do not meet the requirements of Section 422. Stock appreciation rights, restricted stock awards, and restricted stock units may also be granted under the 2007 Plan. A total of 500,000 shares of the Company’s common stock were originally reserved for issuance pursuant to equity awards under the 2007 Plan. Subsequently, 1,000,000 shares were approved for addition to the 2007 Plan at the 2009 Annual Shareholders Meeting. The 2007 Plan has an evergreen provision in which the maximum number of shares that may be issued under the 2007 Plan shall be cumulatively increased on January 1, 2008 and on each January 1 thereafter for nine years by the lesser of (i) 500,000 Common Shares, (ii) 3% of the Company’s outstanding Common Shares, on an as-converted basis, as of the preceding December 31 and (iii) a number of Common Shares determined by the Board or Committee. The Company has 727,078 shares authorized and available for future equity awards as of June 30, 2011.

Stock Options

The Company accounts for share-based employee compensation plans under the provisions of ASC 718 — Compensation — Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values.

The fair value of each option is estimated at the grant date using the Black-Scholes option-pricing model. Generally, the options that are granted under the 2007 Plan are exercisable for a period of ten years from the date of grant and vest over a period of up to three years from the date of grant. The weighted average fair value at the date of grant and the assumptions used to determine such values are indicated in the following (number of shares in thousands):

	For the Three Months Ended						For the Nine Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Number of shares granted		164			9			921			468
Fair value per share	$	0.90		$	1.41		$	1.18		$	1.31
Risk-free interest rate		2.61	%		3.07	%		2.70	%		3.06	%
Expected volatility		41.57	%		39.50	%		41.33	%		42.35	%
Expected life (in years)		6.00			6.00			5.92			5.94
Dividend yield		—			—			—			—

The Company estimates the volatility of the common stock at the date of grant based on a historical volatility rate, consistent with ASC 718. The decision to use historical volatility was based upon the lack of traded common stock options. The expected term is estimated consistent with the simplified method, as identified in ASC 718-10 — Compensation — Stock Compensation — Overall, for share-based awards granted during fiscal 2011 and 2010. The simplified method calculates the expected term as the average of the vesting and contractual terms of the award. The risk-free interest rate assumption is based on observed interest rates appropriate for the term of the options. The Company uses historical data to estimate pre-vesting option forfeitures and records share-based compensation expense only for those awards that are expected to vest. The fair value of options are amortized over the vesting period of the awards utilizing a straight-line method.

The following table summarizes information relating to stock option activity for fiscal 2010 and for the nine month period ended June 30, 2011 (number of shares in thousands):

				Weighted
				Average
				Exercise
	Shares			Price
Options outstanding at September 30, 2009		1,905		$	3.73
Granted		503			2.89
Exercised		(2	)		2.00
Cancelled:
Expired		(25	)		5.23
Forfeited		(154	)		3.42
Options outstanding at September 30, 2010		2,227			3.55
Granted		921			2.71
Exercised		(18	)		2.00
Cancelled:
Expired		(394	)		4.02
Forfeited		(224	)		2.64
Options outstanding at June 30, 2011		2,512		$	3.25

There were 17,917 options exercised during the nine months ended June 30, 2011. Total intrinsic value of stock options exercised during the three and nine months ended June 30, 2011 was $9,900. There was no intrinsic value of the stock options outstanding and stock options outstanding and exercisable as of June 30, 2011.

Information regarding options outstanding and exercisable at June 30, 2011 is as follows (number of shares in thousands):

	Options Outstanding						Options Exercisable
			Weighted						Weighted
			Average		Weighted				Average		Weighted
			Remaining		Average				Remaining		Average
Range of	Number of		Contractual		Exercise		Number of		Contractual		Exercise
exercise price	Shares		Life (Years)		Price		Shares		Life (Years)		Price
$2.00 - $2.99		1,822		8.6	$	2.59		660		7.7	$	2.50
3.00 - 3.99		93		7.9		3.31		76		7.7		3.31
4.33 - 4.98		35		5.1		4.64		35		5.1		4.64
5.03 - 5.40		562		5.4		5.31		562		5.4		5.31
		2,512		7.8	$	3.25		1,333		6.6	$	3.79

As of June 30, 2011, there was approximately $1.1 million of total unrecognized compensation costs related to stock option awards. The Company will recognize this cost over the remaining vesting periods of these options. The weighted average period over which the costs will be recognized is 1.6 years.

Restricted Stock Awards

The Company grants restricted shares of common stock as part of its long-term incentive compensation to employees. Fair market values of restricted stock awards are determined based on the closing market price on the date of grant. Restricted stock awards vest over a period of one to three years and stock may be sold once vested. Restricted stock awards granted to directors vest immediately.

The following table summarizes information relating to restricted stock activity for fiscal 2010 and for the nine month period ended June 30, 2011 (number of shares in thousands):

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Restricted stock outstanding at September 30, 2009		156		$	3.93
Granted		18			3.06
Vested		(92	)		3.75
Forfeited		(4	)		3.21
Restricted stock outstanding at September 30, 2010		78			3.96
Granted		35			2.85
Vested		(102	)		3.42
Restricted stock outstanding at June 30, 2011		11		$	5.40

The total fair value of shares vested was $13,500 and $0.1 million for of the three months ended June 30, 2011 and 2010, respectively. The total fair value of shares vested was $0.2 million and $0.3 million during the nine months ended June 30, 2011 and 2010, respectively. There were no restricted stock awards granted during the three months ended June 30, 2011 and 2010. The weighted average grant date fair value of restricted stock awards granted during the nine months ended June 30, 2011 and 2010 was $2.85 and $3.00, respectively.

At June 30, 2011, there was approximately $31,000 of total unrecognized compensation costs related to restricted stock awards. The Company will recognize this cost over the remaining vesting periods of these awards. The weighted average period over which the costs will be recognized is 0.9 years.

Restricted Stock Units

The Company currently grants restricted units of common stock as part of its long-term incentive compensation to employees. The fair value of restricted stock units is determined based on the closing market price of the Company’s stock on the date of grant. Restricted stock units vest over a period of three years for employees.

The following table summarizes information relating to restricted stock unit activity for fiscal 2010 and the nine month period ended June 30, 2011 (number of units in thousands):

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Restricted stock units outstanding at September 30, 2009		241		$	2.00
Granted		174			2.87
Settled		(201	)		2.20
Cancelled:
Forfeited		(29	)		2.31
Restricted stock units outstanding at September 30, 2010		185			2.55
Granted		257			2.66
Settled		—			—
Cancelled:
Forfeited		(61	)		2.58
Restricted stock units outstanding at June 30, 2011		381		$	2.62

There were no restricted stock units vested during the three months ended June 30, 2011. The total fair value of restricted stock units vested during the nine months ended June 30, 2011 was approximately $5,600.

In February 2010, the Company had a change in control, as defined in the employee Restricted Stock Unit agreements, due to the issuance of the Series G preferred stock. This change in control was a triggering event for the acceleration of the vesting and settlement of a portion of the Company’s outstanding restricted stock units. As a result, the Company accelerated the related cost of $0.2 million during the quarter ended June 30, 2010.

At June 30, 2011, there was approximately $1.5 million of total unrecognized compensation costs related to restricted stock units. The Company will recognize this cost over the remaining vesting periods of these units. The weighted average period over which the costs will be recognized is 1.9 years.