Equity Matters

9 Months Ended

Jul. 31, 2013

Equity [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Equity Matters

For the Company, FASB ASC Topic 718 “Compensation – Stock Compensation” affects the stock options that have been granted and requires the Company to expense share-based payment (“SBP”) awards with compensation cost for SBP transactions measured at fair value. The Company has elected to use the simplified method of calculating the expected term of the stock options and historical volatility to compute fair value under the Black-Scholes option-pricing model. The risk-free rate for periods within the contractual life of the option is based on the U.S. zero coupon Treasury yield in effect at the time of grant. Forfeitures have been estimated based upon the Company’s historical experience.

1993 Key Employee Stock Incentive Plan

The Company maintains the Amended and Restated 1993 Key Employee Stock Incentive Program (as amended and restated December 12, 2002 and December 10, 2009) (the “Incentive Plan”), which authorizes grants to officers and other key employees of the Company and its subsidiaries of (i) stock options that are intended to qualify as incentive stock options, (ii) nonqualified stock options and (iii) restricted stock awards. An aggregate of 2,700,000 shares of Common Stock, subject to adjustment upon occurrence of certain events to prevent dilution or expansion of the rights of participants that might otherwise result from the occurrence of such events, has been reserved for issuance pursuant to the Incentive Plan. An individual’s award of stock options is limited to 500,000 shares in a five-year period.

Non-qualified stock options and incentive stock options have been granted to date and all options have been granted at the market price at the date of grant. Options expire over a period not to exceed ten years from the date of grant and vest ratably over a three year period. In December 2011, options to purchase 56,500 shares were awarded to several officers and employees at an exercise price of $8.10. These stock options are intended to qualify as incentive stock options. The fair values of these options were estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants awarded during fiscal year 2012:

	2012
Risk-free interest	1.20	%
Dividend yield	0.00	%
Volatility factor—market	88.26	%
Expected life of options—years	6.00

Activity in the Company’s stock option plan for the nine months ended July 31, 2013 and 2012 was as follows:

	Fiscal 2013					Fiscal 2012
	Number of Shares		Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value	Number of Shares		Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Options outstanding at November 1	362,085		$9.99			520,185		$8.54
Options:
Granted	—		$0.00			56,500		$8.10
Exercised	(28,334	)	$5.69			(99,075	)	$3.19
Canceled	(78,149	)	$12.45			(49,587	)	$10.98
Outstanding at July 31	255,602		$9.71	6.27	$863	428,023		$9.36	6.71	$1,010
Options exercisable at July 31	198,937		$9.62	5.77	$694	199,168		$10.40	5.51	$408

At July 31, 2013 and 2012, the exercise price of some of the Company’s stock option grants was higher than the market value of the Company’s stock. These grants are excluded from the computation of aggregate intrinsic value of the Company’s outstanding and exercisable stock options.

In September 2012, 80,257 shares of restricted stock were granted to the newly appointed chief executive officer as part of his compensation package.

For the three and nine months ended July 31, 2013, the Company recorded compensation expense related to stock options currently vesting, effectively reducing income before taxes by $114 and $342, respectively. For the three and nine months ending July 31, 2012, the Company recorded compensation expense related to stock options currently vesting, effectively reducing income before taxes by $203 and $616, respectively. The impact on earnings per share was a reduction of $0.01 per share basic and diluted in the third quarter of both fiscal 2013 and 2012. The impact on earnings per share was a reduction of $0.02 for the nine months ended July 31, 2013 and July 31, 2012. The total compensation cost related to unvested awards not yet recognized is expected to be a combined total of $279 over the next two fiscal years. For the three and nine months ended July 31, 2013, the total compensation cost related to the restricted stock currently vested is $73 and $219, respectively. The total estimated compensation cost related to the non-vested restricted stock is $574 over the next three fiscal years.

Earnings per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of shares of Common Stock outstanding during the period. In addition, the shares of Common Stock issuable pursuant to stock options outstanding under the Incentive Plan are included in the diluted earnings per share calculation to the extent they are dilutive. For the three and nine months ended July 31, 2013, 51,123 and 58,260, respectively, stock options were excluded from the computation of diluted earnings per share because they were anti-dilutive. For the three and nine months ended July 31, 2012, 100,904 and 145,536, respectively, stock options were excluded from the computation of diluted earnings per share because they were anti-dilutive. The following is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation for net income per share:

(Shares in thousands)	Three Months Ended July 31,				Nine Months Ended July 31,
	2013		2012		2013		2012
Net income available to common stockholders	$	5,282	$	2,416	$	15,115	$	9,899
Basic weighted average shares	17,007		16,856		16,998		16,821
Effect of dilutive securities:
Stock options	44		71		47		82
Diluted weighted average shares	17,051		16,927		17,045		16,903
Basic income per share	$	0.31	$	0.14	$	0.89	$	0.59
Diluted income per share	$	0.31	$	0.14	$	0.89	$	0.59

Comprehensive Income

Comprehensive income for the nine months ended July 31, 2013 and 2012 was $15,115 and $9,899, respectively. As the pension plan is remeasured on an annual basis during the fourth quarter, comprehensive income does not include any effect of adjustments to estimated deferred taxes associated with the pension adjustments included in accumulated other comprehensive income.