Stock-Based Compensation

12 Months Ended

Sep. 30, 2022

Stock-Based Compensation

Stock-Based Compensation

Note 12.  Stock-based Compensation

Restricted Stock Plan

On March 1, 2016, the Company adopted the 2016 Incentive Compensation Plan which provides for grants of restricted stock, restricted stock units and performance shares, among other awards.  Up to 275,000 shares of restricted stock, restricted stock units and performance shares may be granted in the aggregate under this plan.  Following the adoption of the 2016 Incentive Compensation Plan, the Company ceased granting awards from the 2009 restricted stock plan, although awards remain outstanding thereunder.  On January 24, 2020, the Company adopted the 2020 Incentive Compensation Plan which provides for grants of restricted stock, restricted stock units and performance shares, among other awards.  Up to 250,000 shares of restricted stock, restricted stock units and performance shares were authorized to be granted in the aggregate under this plan which was subsequently amended on February 25, 2022 to allow for an aggregate of 575,000 authorized shares of restricted stock, restricted stock units and performance shares to be granted.  Following the adoption of the 2020 Incentive Compensation Plan, the Company ceased granting awards from the 2016 Incentive Compensation Plan, although awards remain outstanding thereunder.

Grants of restricted stock are comprised 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. Employees earn and receive dividends from the restricted stock during this vesting period.  

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 Company’s plans provide 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.

The shares of time-based restricted stock granted to employees vest on the third anniversary of their grant date if the recipient is still an employee of the Company on such date.  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 following table summarizes the activity under the 2016 restricted stock plan and the 2020 Incentive Compensation Plan with respect to restricted stock for the year ended September 30, 2022:

		Weighted
		Average Fair
	Number of	Value At
	Shares	Grant Date
Unvested at September 30, 2021	142,269	$	26.78
Granted	32,204	$	43.98
Forfeited / Canceled	(6,522)	$	28.79
Vested	(71,415)	$	25.63
Unvested at September 30, 2022	96,536	$	33.23
Expected to vest	96,536	$	33.23

Compensation expense related to restricted stock for the years ended September 30, 2020, 2021 and 2022 was $1,160, $2,024, and $1,474, respectively. The remaining unrecognized compensation expense related to restricted stock at September 30, 2022 was $1,239, to be recognized over a weighted average period of 0.99 years. During fiscal 2022, the Company repurchased 25,386 shares of stock from employees at an average purchase price of $40.78 to satisfy required withholding taxes upon vesting of restricted stock-based compensation.

Deferred Restricted Stock

On November 20, 2017, the Company adopted a deferred compensation plan that allows directors and officers the option to defer receipt of cash and stock compensation.  Beginning in fiscal 2018, the Company has granted shares of restricted stock from the 2016 and 2020 Incentive Compensation Plans with respect to which elections have been made by certain individuals to defer receipt to a future period.  Such shares vest in accordance with the parameters of the 2016 and 2020 Incentive Compensation Plans, however, receipt of the shares and any corresponding dividends are deferred until the end of the deferral period.  In the event the deferred shares are forfeited prior to the vesting date, deferred dividends pertaining to those shares will also be forfeited.  During the deferral period, the participants who elected to defer shares will not have voting rights with respect to those shares.  

The following table summarizes the activity under the 2016 Incentive Compensation Plan and the 2020 Incentive Compensation Plan with respect to deferred restricted stock for the year ended September 30, 2022.  

		Weighted
		Average Fair
	Number of	Value At
	Shares	Grant Date
Unvested and deferred at September 30, 2021	7,398	$	22.64
Granted	3,801	$	44.07
Vested and deferred	(7,398)	$	22.64
Unvested and deferred at September 30, 2022	3,801	$	44.07
Vested and deferred at September 30, 2022	20,050	$	29.23

Compensation expense related to deferred restricted stock for the year ended September 30, 2020, 2021 and 2022 was $271, $188 and $168, respectively.  The remaining unrecognized compensation expense related to restricted stock at September 30, 2022 was $28, to be recognized over a weighted average period of 0.17 years.

Performance Shares

In November 2019, the Company granted to certain employees, target numbers of performance shares under the 2016 Incentive Compensation Plan.  The number of performance shares that will ultimately be earned, as well as the number of shares that will be distributed in settling those earned performance shares, if any, will not be determined until the end of the performance period.   Performance shares earned will depend on the calculated total shareholder return of

the Company at the end of the three-year period commencing from the beginning of the fiscal year in which the award was granted as compared to the total shareholder return of the Company’s peer group, as defined by the Compensation Committee for this purpose.  The fair value of the performance shares is estimated as of the date of the grant using a Monte Carlo simulation model.  

The following table summarizes the activity under the 2016 and 2020 Incentive Compensation Plans with respect to performance shares for the twelve months ended September 30, 2022.  

		Weighted
		Average Fair
	Number of	Value At
	Shares	Grant Date
Unvested at September 30, 2021	87,193	$	37.24
Granted	21,520	$	61.04
Vested	(24,121)	$	43.42
Forfeited / Canceled	(8,172)	$	42.97
Unvested at September 30, 2022	76,420	$	41.37

Compensation expense related to the performance shares for the years ended September 30, 2020, 2021 and 2022 was $849, $1,082 and $1,021, respectively.  The remaining unrecognized compensation expense related to performance shares at September 30, 2022 was $1,242, to be recognized over a weighted average period of 1.54 years.

Stock Option Plans

The Company’s 2020 Incentive Compensation Plan and its previous stock option plans authorize, or formerly authorized, the granting of non-qualified stock options and stock appreciation rights to certain key employees and non-employee directors for the purchase of shares of the Company’s common stock.  For the 2020 Incentive Compensation Plan, the maximum number of shares granted subject to options is 350,000 which was subsequently amended on February 25, 2022 to allow for a maximum number of shares granted subject to options in the amount of 400,000.  Following the adoption of the 2020 Incentive Compensation Plan, the Company ceased granting awards from its previous stock option plan, although awards remain outstanding from previous plans.  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 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 Company has elected to use the Black-Scholes option pricing model to estimate fair value, which incorporates various assumptions including volatility, expected life, risk-free interest rates 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 dividend yield assumption is based on the Company’s history and expectations regarding dividend payouts at the time of the grant. The following assumptions were used for grants during fiscal 2020, 2021 and 2022:

	Fair		Dividend		Risk-free		Expected		Expected
Grant Date	Value		Yield		Interest Rate		Volatility		Life
November 23, 2021	$	15.02	2.00	%	1.22	%	45	%	5	years
November 24, 2020	$	5.91	3.89	%	0.39	%	43	%	5	years
November 19, 2019	$	9.66	2.38	%	1.65	%	35	%	5	years

The stock-based employee compensation expense for stock options for the years ended September 30, 2020, 2021 and 2022 was $1,038, $1,180 and $937, respectively. The remaining unrecognized compensation expense at September 30, 2022 was $717, to be recognized over a weighted average vesting period of 1.03 years.

The following table summarizes the activity under the stock option plans for the year ended September 30, 2022:

						Weighted
		Aggregate		Weighted		Average
		Intrinsic		Average		Remaining
	Number of	Value		Exercise		Contractual
	Shares	(000s)		Prices		Life
Outstanding at September 30, 2021	702,576			$	34.68
Granted	42,080			$	44.07
Exercised	(14,558)			$	36.83
Forfeited/Canceled	(32,878)			$	44.36
Outstanding at September 30, 2022	697,220	$	2,281	$	34.75	6.17	yrs.
Vested or expected to vest	669,846	$	2,101	$	34.92	6.10	yrs.
Exercisable at September 30, 2022	534,296	$	1,103	$	36.07	5.55	yrs.