Stock-Based Compensation

3 Months Ended

Jul. 01, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 3. Stock-Based Compensation

The Company's selling, general and administrative expenses for the three months ended July 1, 2012 and June 26, 2011 includes $337,800 and $821,300, respectively, of non-cash stock-based compensation expense. Stock-based compensation expense is primarily related to our Performance Stock Unit (PSU) Program. In addition, the Company recorded an excess tax benefit directly to shareholders' equity of $2,140,200 and $336,800, primarily related to the PSUs which vested during the three months ended July 1, 2012 and June 26, 2011, respectively.

Performance Stock Units: The following table summarizes the activity under the Company's PSU program for the first three months of fiscal 2013:

	Three Months Ended July 1, 2012			Weighted Average Fair Value at Grant Date
Unvested shares available for issue under outstanding PSUs, beginning of period		604,844		$	9.81
Granted		151,200			19.30
Vested		(258,186	)		8.87
Forfeited/cancelled		(2,800	)		10.89
Unvested shares available for issue under outstanding PSUs, end of period		495,058		$	13.19

Of the 495,058 shares available for issuance under outstanding PSUs but not yet vested as of July 1, 2012, 343,858 shares have been earned, and assuming the respective participants remain employed by or associated with the Company on these dates, the shares earned in respect of each measurement year will vest and be issued in  installments beginning on or about May 1 of the year following the applicable measurement year and continuing on or about May 1 of each of the three immediately following years.

The PSUs cancelled during fiscal 2013 related to the fiscal 2012 grant of PSUs, which had a 1-year measurement period (fiscal 2012). The PSUs were cancelled because the applicable fiscal 2012 performance targets were not fully satisfied. Per the provisions of the 1994 Plan, the shares related to these forfeited and cancelled PSUs were added back to the 1994 Plan and became available for future issuance.

During fiscal 2013, the Compensation Committee of the Board of Directors, with the concurrence of the full Board of Directors, granted additional PSUs to select key employees, providing them with the opportunity to earn up to 151,200 additional shares of the Company's common stock in the aggregate, depending upon whether certain threshold or goal earnings per share targets are met, and subject to individual performance. These PSUs have one measurement year (fiscal 2013), with any shares earned at the end of fiscal 2013 to vest and be issued ratably on or about May 1 of each of 2013, 2014, 2015 and 2016, provided that the respective participants remain employed by the Company on each such date.

If the maximum number of PSUs granted in fiscal 2013 is assumed to be earned, total unrecognized compensation costs, on these and all earned but unvested PSU's would be approximately $4.2 million, net of estimated forfeitures, as of July 1, 2012, and would be expensed through fiscal 2016. To the extent the actual forfeiture rate is different from what is anticipated, stock-based compensation related to these awards will be different from the Company's expectations.

Restricted Stock: In fiscal 2007, the Company granted 225,000 shares of the Company's common stock to its Chairman and Chief Executive Officer as a restricted stock award under the 1994 Plan. These shares are issued and vest (subject to the risk of forfeiture) ratably over ten fiscal years based on service, beginning on the last day of fiscal 2007 and ending on the last day of fiscal 2016, subject, however, to the terms applicable to the award, including terms providing for possible acceleration of vesting upon death, disability, change in control or certain other events. The fair value for these shares at the grant date was $10.56. As of July 1, 2012, 90,000 shares remained unvested, and there was no activity related to these restricted shares during the first three months of fiscal 2013. As of July 1, 2012, there was approximately $0.9 million of total unrecognized compensation costs, net of estimated forfeitures, related to this issuance of restricted stock. Unrecognized compensation costs are expected to be recognized ratably over a remaining period of approximately four years.

On April 25, 2011 and May 3, 2012, an aggregate of 36,000 and 20,100 restricted stock awards were granted to the non-employee directors of the Company. These awards provide for the issuance of shares of the Company's common stock in accordance with a four year annual vesting schedule, provided that the director remains associated with the Company (or meets other criteria as prescribed in the applicable award agreement) on each such date.  As of July 1, 2012, there was approximately $0.6 million of total unrecognized compensation cost, net of estimated forfeitures, related to the issuance of these restricted stock awards.

PSUs and RSUs are expensed based on the grant date fair value, calculated as the closing price of TESSCO common stock as reported by NASDAQ on the date of grant minus the present value of dividends expected to be paid on the common stock before the award vests, because dividends or dividend-equivalent amounts do not accrue and are not paid on unvested PSUs and RSUs.

To the extent the actual forfeiture rates are different from what is estimated, stock-based compensation related to the restricted awards will be different from the Company's expectations.