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STOCKHOLDERS' EQUITY

12 Months Ended

Jun. 30, 2021

STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY

9. STOCKHOLDERS’ EQUITY

Stock-based Compensation

As of June 30, 2021, we maintained the Amended and Restated 2012 Incentive Award Plan (the “2012 Plan”) and the Amended and Restated 2006 Equity Participation Plan (the “ 2006 Plan”) as stock-based employee compensation plans. No further grants may be made under the 2006 Plan. The 2012 Plan and the 2006 Plan are collectively referred to as the “OSI Plans.”

We recorded stock-based compensation expense in the consolidated statements of operations as follows (in thousands):


		2019			2020			2021
Cost of goods sold		$	732		$	708		$	760
Selling, general and administrative			23,876			22,546			25,457
Research and development			643			563			554
Stock-based compensation expense		$	25,251		$	23,817		$	26,771

As of June 30, 2021, total unrecognized compensation cost related to share-based compensation grants under the OSI Plans were estimated at $0.5 million for stock options and $13.9 million for restricted stock units (“RSUs”). We expect to recognize these costs over a weighted-average period of 1.9 years with respect to the stock options and 2.1 years for grants of RSUs.

OSI Plans

Awards are granted in the form of incentive options, nonqualified options, restricted stock awards, stock appreciation rights, RSUs, performance shares and stock bonuses, amongst other forms of equity, to qualified employees, directors and consultants.

Under the OSI Plans, the exercise price of nonqualified options and incentive stock options may not be less than the fair market value of our Common Stock on the date of grant. The exercise price of nonqualified options and incentive stock options granted to individuals who own more than 10% of our voting stock may not be less than 110% of the fair market value of our Common Stock on the date of grant. Stock options granted under the OSI Plans typically vest over three years based on continued service. Restricted stock

and RSUs typically vest over three to four years based on continued service. Certain restricted stock awards granted to senior management vest based on the achievement of pre-established performance criteria.

Stock Option Fair Value Estimation Assumptions. We estimate the fair value of our stock options at the date of grant using the Black-Scholes option-pricing valuation model. Our valuation model is affected by our stock price as well as weighted average assumptions for a number of subjective variables described below.

Expected Dividend. Expected dividend is based on historical patterns and our anticipated dividend payments over the expected holding period.

Risk-Free Interest Rate. The risk-free interest rate for stock options is based on U.S. Treasuries for a maturity matching the expected holding period.

Expected Volatility. Expected volatility is based on our historical share price volatility matching the expected holding period. No single method of estimating volatility is proper under all circumstances and to the extent that a company can derive implied volatility based on the trading of its financial instruments on a public market, it may be appropriate to use both implied and historical volatility in its assumptions. We have certain financial instruments that are publicly traded from which we can derive the implied volatility. Therefore, we use implied and historical volatility for valuing our stock options. We believe that implied and historical volatility is a better indicator of expected volatility because it is generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility.

Expected Holding Period. We use historical stock option exercise data to estimate the expected holding period.

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.


		2019		2020		2021
Expected dividend		—		—		—
Risk-free interest rate		2.6	%	1.6	%	0.4	%
Expected volatility		28.0	%	26.0	%	26.0	%
Expected holding period (in years)		4.5		4.5		4.5

The following summarizes stock option activity for fiscal years 2019, 2020 and 2021:


				Weighted-
				Average			Weighted-Average		Aggregate
		Number of		Exercise			Remaining Contractual		Intrinsic Value
		Options		Price			Term		(in thousands)
Outstanding at June 30, 2018		677,525			32.80
Granted		19,259			73.37
Exercised		(169,799)			32.11
Expired or forfeited		(11,101)			70.50
Outstanding at June 30, 2019		515,884		$	33.74
Granted		13,263			101.31
Exercised		(201,150)			20.48
Expired or forfeited		(1,693)			81.79
Outstanding at June 30, 2020		326,304		$	44.41
Granted		22,171			82.17
Exercised		(88,657)			35.19
Expired or forfeited		(4,598)			80.46
Outstanding at June 30, 2021		255,220		$	50.24		2.5 years		$	13,118
Exercisable at June 30, 2021		221,090		$	44.80		1.5 years		$	12,567

The per-share weighted-average grant-date fair value of stock options granted under the OSI Plans was $20.45, $24.88 and $18.37 for fiscal 2019, 2020 and 2021, respectively. The total intrinsic value of options exercised during fiscal 2021 was $3.9 million.

Restricted Stock Units—A summary of RSU activity for the periods indicated was as follows:


				Weighted-
				Average
		Shares		Fair Value
Nonvested at June 30, 2018		526,377		$	71.56
Granted		375,580			74.40
Vested		(364,410)			70.92
Forfeited		(16,407)			74.13
Nonvested at June 30, 2019		521,140		$	73.97
Granted		308,431			87.88
Vested		(390,613)			68.63
Forfeited		(15,368)			83.36
Nonvested at June 30, 2020		423,590		$	88.68
Granted		339,311			80.40
Vested		(313.892)			86.12
Forfeited		(13,084)			85.78
Nonvested at June 30, 2021		435,925		$	84.16

The per-share weighted average grant-date fair value of RSUs granted under the OSI Plans was $74.40, $87.88, and $80.40 for fiscal 2019, 2020 and 2021, respectively. The total fair value of shares vested during fiscal 2019, 2020 and 2021 was $25.8 million, $26.8 million, and $27.0 million, respectively.

In December 2020, our shareholders authorized an increase of 1.65 million shares for the 2012 Plan resulting in a maximum pool of 7.1 million shares. As of June 30, 2021, there were approximately 2.1 million shares available for grant under the 2012 Plan. Under the terms of the 2012 Plan, RSUs and restricted stock granted from the pool of shares available for grant reduce the pool by 1.87 shares for each award granted. RSUs and restricted stock forfeited and returned to the pool of shares available for grant increase the pool by 1.87 shares for each award forfeited.

We granted 97,514, 81,621, and 136,242 performance-based awards during fiscal 2019, 2020 and 2021, respectively. These performance-based RSU awards are contingent on the achievement of certain performance metrics. The payout related to these awards can range from zero to 400% of the original number of shares or units awarded.

Employee Stock Purchase Plan

We have an employee stock purchase plan under which eligible employees may purchase a limited number of shares of Common Stock at a discount of up to 15% of the market value of such stock at pre-determined, plan-defined dates. During the three years ended June 30, 2019, 2020 and 2021, employees purchased 70,857, 69,399, and 63,499 shares, respectively. As of June 30, 2021, there were 537,935 shares of our Common Stock available for issuance under the plan.

Stock Repurchase Program

During fiscal 2019, 2020 and 2021, we repurchased 288,316 shares, 562,707 shares and 452,005 shares, respectively, of Common Stock under our then current programs.

In April 2020, the Board of Directors authorized a new share repurchase program of up to 1,000,000 shares of Common Stock. In August 2020, the Board of Directors increased the maximum number of shares to 3,000,000 shares authorized under the stock repurchase program. Repurchases may be made from time to time under the program through open-market purchases or privately-negotiated transactions at our discretion. Upon repurchase, the shares are restored to the status of authorized but unissued shares, and we record them as a reduction in the number of shares of Common Stock issued and outstanding in our consolidated financial statements. As of June 30, 2021, 2,547,995 shares were available for repurchase under the current program.

Dividends

We have not paid any cash dividends since the consummation of our initial public offering in 1997 and we do not currently intend to pay any cash dividends in the foreseeable future. Our Board of Directors will determine the payment of future cash dividends, if any. Certain of our current bank credit facilities restrict the payment of cash dividends and future borrowings may contain similar restrictions.