Stock-Based Compensation

3 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

3. Stock-Based Compensation:

Successor

The Sterling Holdco Board of Directors adopted a stock incentive plan in February 2012, or the 2012 Plan, that authorizes the issuance of up to 58,169 shares of common stock of Sterling Holdco in the form of options. Under the 2012 Plan, key employees, nonemployee directors and consultants of the Company may be granted a combination of service and performance options. The performance options are considered market-based for accounting purposes. The Company utilizes the Black-Scholes-Merton model to value the service options and the binomial lattice model to value the performance options.

The service options generally vest in five equal installments subject to the option holder’s continued employment or service with the Company. The performance options vest at the time of a change in control based upon the cash return to the PEP Funds from its investment in the Company. The service and performance options expire ten years from the date of grant.

Stock Option & Restricted Stock Activity

As of September 30, 2012, a total of 26,460 service options were outstanding, and 5,268 had vested and were exercisable. During the three months ended September 30, 2012, there were no service options granted or forfeited. The weighted-average exercise price is $1,000 and the weighted-average fair value per service option granted, calculated based on the Black-Scholes-Merton model, was $340.93.

As of September 30, 2012, a total of 27,060 performance options were outstanding. No performance options vested or were exercisable at September 30, 2012, as they cannot be exercised until a change in control. During the three months ended September 30, 2012, there were no performance options granted or forfeited. The weighted-average exercise price is $1,000 and the weighted-average fair value per performance option granted, calculated based on the binomial lattice model, was $187.58.

There were no restricted stock grants or forfeitures during the three months ended September 30, 2012. As of September 30, 2012, 1,000 shares of restricted stock have been granted and 200 shares vested with a weighted-average grant-date fair value of $1,000.

The Company recognized stock-based compensation expense related to the stock options and restricted stock of $1.2 million for the three months ended September 30, 2012. The tax benefit recognized for stock-based compensation cost was $0.5 million for the same period. The total amount of unrecognized compensation expense related to unvested stock-based compensation arrangements was $10.2 million as of September 30, 2012 and is expected to be amortized over 4.0 years. The compensation expense will be recognized on a straight-line basis over the requisite service period.

Predecessor

The Predecessor maintained the SRA International, Inc. 2010 Incentive Plan, which provided for awards of cash, stock options, restricted stock, restricted stock units, performance awards and other stock-based awards. Historically, the Company recognized the fair value of all stock-based awards granted to employees and directors in exchange for services as compensation expense on a straight line basis over the requisite service period which was typically four years. The Company estimated the fair value of stock options on the date of grant using the Black-Scholes-Merton option pricing model. The Company recorded $0.6 million of stock-based compensation expense in the period from July 1, 2011 through July 20, 2011. In addition, in the period from July 1, 2011 through July 20, 2011, the Company recorded a charge for stock compensation of approximately $20.2 million as a result of the acceleration of vesting of all options and restricted stock in connection with the Transaction. The Company terminated the 2010 Incentive Plan in connection with the Transaction.