Note 10. Stock-Based Compensation

Restricted Stock Plan

On February 23, 2009, the Company adopted a restricted stock plan that reserved 400,000 shares of common stock for issuance. Grants of restricted stock are grants of shares of the Company’s common stock subject to transfer restrictions, which vest in accordance with the terms and conditions established by the Compensation Committee. The Compensation Committee may set vesting requirements based on the achievement of specific performance goals or the passage of time.

Restricted shares are subject to forfeiture if employment or service terminates prior to the vesting date or if any applicable performance goals are not met. The Company will assess, on an ongoing basis, the probability of whether the performance criteria will be achieved. The Company will recognize compensation expense over the performance period if it is deemed probable that the goals will be achieved. The fair value of the Company’s restricted stock is determined based upon the closing price of the Company’s common stock on the trading day immediately preceding the grant date. The plan provides for the adjustment of the number of shares covered by an outstanding grant and the maximum number of shares for which restricted stock may be granted in the event of a stock split, extraordinary dividend or distribution or similar recapitalization event.

On November 24, 2015, the Company granted 54,310 shares of restricted stock to certain key employees and non-employee directors. The time-based shares of restricted stock granted to employees will vest on the third anniversary of their grant date if the recipient is still an employee of the Company on such date. The performance-based shares will vest in equal installments on the first, second and third anniversaries of their grant date provided that (a) the recipient is still an employee of the Company on such date and (b) the Company has met certain annual net income performance goals, provided that, if the Company has exceeded a total net income performance goal for the three year period, restricted shares that did not vest due to the Company’s failure to meet the annual net income performance goals will vest at the end of such three year period. The shares of restricted stock granted to non-employee directors will vest on the earlier of (a) the first anniversary of the date of grant or (b) the failure of such non-employee director to be re-elected at an annual meeting of the stockholders of the Company as a result of such non-employee director being excluded from the nominations for any reason other than cause. The fair value of the grants was $37.75 per share, the closing price of the Company’s common stock on the trading day immediately preceding the day of the applicable grant.

The following table summarizes the activity under the restricted stock plan for the three months ended December 31, 2015:


		Weighted
		Average Fair
	Number of	Value At
	Shares	Grant Date
Unvested at September 30, 2015	111,450	$	49.07
Granted	54,310	$	37.75
Forfeited / Canceled	(11,100)	$	47.98
Vested	(33,250)	$	47.56
Unvested at December 31, 2015	121,410	$	44.52
Expected to vest	109,310	$	43.61

Compensation expense related to restricted stock for the three months ended December 31, 2014 and 2015 was $330 and $451, respectively. The remaining unrecognized compensation expense related to restricted stock at December 31, 2015 was $3,286, to be recognized over a weighted average period of 1.16 years. During the first quarter of fiscal 2016, the Company repurchased 7,661 shares of stock from employees and directors at an average purchase price of $37.72 to satisfy required withholding taxes upon vesting of restricted stock-based compensation.

Stock Option Plans

The Company has two stock option plans that authorize the granting of non-qualified stock options to certain key employees and non-employee directors for the purchase of a maximum of 1,500,000 shares of the Company’s common stock. The first option plan was adopted in August 2004 and provides for the grant of options to purchase up to 1,000,000 shares of the Company’s common stock. In January 2007, the Company’s Board of Directors adopted a second option plan that provides for options to purchase up to 500,000 shares of the Company’s common stock. Each plan provides for the adjustment of the maximum number of shares for which options may be granted in the event of a stock split, extraordinary dividend or distribution or similar recapitalization event. Unless the Compensation Committee determines otherwise, options granted under the option plans are exercisable for a period of ten years from the date of grant and vest 331/3% per year over three years from the grant date. The amount of compensation cost recognized in the financial statements is measured based upon the grant date fair value.

The fair value of option grants was estimated as of the date of the grant. The Company has elected to use the Black-Scholes option pricing model, which incorporates various assumptions including volatility, expected life, risk-free interest rates, expected forfeitures and dividend yields. The volatility is based on historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the stock option granted. The Company uses historical volatility because management believes such volatility is representative of prospective trends. The expected term of an award is based on historical exercise data. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the awards. The expected forfeiture rate is based upon historical experience. The dividend yield assumption is based on the Company’s history and expectations regarding dividend payouts at the time of the grant. Valuation of future grants under the Black-Scholes model will include a dividend yield. The following assumptions were used for grants in the first quarter of fiscal 2016:


	Fair		Dividend		Risk-free		Expected		Expected
Grant Date	Value		Yield		Interest Rate		Volatility		Life
November 24, 2015	$	8.37	2.33	%	1.70	%	30	%	5	years

On November 24, 2015, the Company granted 79,800 options at an exercise price of $37.75, the fair market value of the Company’s common stock the day of the grant. During the first quarter of fiscal 2016, no options were exercised.

The stock-based employee compensation expense for stock options for the three months ended December 31, 2014 and 2015 was $126 and $133, respectively. The remaining unrecognized compensation expense at December 31, 2015 was $1,146 to be recognized over a weighted average vesting period of 1.72 years.

The following tables summarize the activity under the stock option plans for the three months ended December 31, 2015 and provide information regarding outstanding stock options:


						Weighted
		Aggregate		Weighted		Average
		Intrinsic		Average		Remaining
	Number of	Value		Exercise		Contractual
	Shares	(000s)		Prices		Life
Outstanding at September 30, 2015	358,601			$	50.37
Granted	79,800			$	37.75
Exercised	—			$	—
Canceled	—			$	—
Outstanding at December 31, 2015	438,401	$	318	$	48.07	6.10	yrs.
Vested or expected to vest	409,336	$	318	$	48.27	5.95	yrs.
Exercisable at December 30, 2015	289,453	$	318	$	50.93	4.42	yrs.


			Remaining	Outstanding	Exercisable
	Exercise Price		Contractual	Number of	Number of
Grant Date	Per Share		Life in Years	Shares	Shares
March 31, 2006		31.00	0.25	10,000	10,000
March 30, 2007		72.93	1.25	45,500	45,500
March 31, 2008		54.00	2.25	55,500	55,500
October 1, 2008		46.83	2.75	20,000	20,000
March 31, 2009		17.82	3.25	12,084	12,084
January 8, 2010		34.00	4.00	12,400	12,400
November 24, 2010		40.26	4.92	19,667	19,667
November 25, 2011		55.88	5.92	19,700	19,700
November 20, 2012		47.96	6.92	35,600	35,600
December 10, 2012		48.39	6.92	1,800	1,800
November 26, 2013		52.78	7.92	45,250	30,168
November 25, 2014		46.72	8.92	81,100	27,034
November 24, 2015		37.75	9.92	79,800	—
				438,401	289,453