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Note 13 - Stock-based Compensation and Purchase Plans

12 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Text Block]

13. stock-based compensation and purchase plans

Stock-Based Compensation Plans

Under incentive compensation plans, the Company is authorized to make grants of stock options, restricted stock and performance share units to provide equity incentive compensation to key employees and directors. The stock award program offers employees and directors the opportunity to earn shares of our stock over time, rather than options that give the employees and directors the right to purchase stock at a set price. The Company has stock plans for directors, officers and certain key employees.

Total compensation cost recognized in income for equity based compensation awards was $7.0 million, $4.4 million, and $5.0 million for the years ended June 30, 2020, 2019, and 2018, respectively, primarily within Selling, General, and Administrative Expenses. The total income tax benefit recognized in the consolidated statement of operations for equity-based compensation plans was $1.9 million, $1.1 million, and $1.2 million for the years ended June 30, 2020, 2019 and 2018, respectively.

There were 365,330 shares of common stock reserved for issuance under various compensation plans at June 30, 2020.

Restricted Stock Awards

The Company may award shares of restricted stock to eligible employees and non-employee directors of the Company at no cost, giving them, in most instances, all of the rights of stockholders, except that they may not sell, assign, pledge or otherwise encumber such shares and rights during the restriction period. Such shares and rights are subject to forfeiture if certain employment conditions are not met. During the restriction period, recipients of the shares are entitled to dividend equivalents on such shares, providing that such shares are not forfeited. Dividends are accumulated and paid out at the end of the restriction period. During 2020, 2019, and 2018, the Company granted 75,505, 70,085, and 51,792 shares respectively of restricted stock to eligible participants. Restrictions on the stock awards generally lapse between fiscal 2021 and fiscal 2023. For the years ended June 30, 2020, 2019, and 2018, $4.2 million, $3.7 million, and $3.7 million, respectively, was recognized as compensation expense related to restricted stock awards. Substantially all awards are expected to vest.

A summary of restricted stock awards activity during the year ended June 30, 2020 is as follows:

	Restricted Stock Awards
	Number			Aggregate
	of			Intrinsic
	Shares			Value
Outstanding, June 30, 2019		128,042		$	9,365,632
Granted		75,505
Exercised / vested		(32,953	)	$	(528,957	)
Canceled		(24,579	)
Outstanding, June 30, 2020		146,015		$	8,403,221

Restricted stock awards granted during 2020, 2019 and 2018 had a weighted average grant date fair value of $71.38, $102.74, and $93.73, respectively. The grant date fair value of restricted stock awards is determined based on the closing price of the Company’s common stock on the date of grant. The total intrinsic value of awards exercised during the years ended June 30, 2020, 2019, and 2018 was ($0.5) million, $0.9 million, and $0.8 million, respectively.

As of June 30, 2020, there was $5.2 million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of 1.48 years.

Executive Compensation Program

The Company operates a compensation program for key employees. The plan contains both an annual component as well as a long-term component. Under the annual component, participants may elect to defer up to 50% of their annual incentive compensation in restricted stock which is purchased at a discount to the market. Additionally, non-employee directors of the Company may defer a portion of their director’s fees in restricted stock units which is purchased at a discount to the market. During the restriction period, recipients of the shares are entitled to dividend equivalents on such units, providing that such shares are not forfeited.

Dividend equivalents are accumulated and paid out at the end of the restriction period. The restrictions on the units expire after three years. At June 30, 2020 and 2019, respectively, 32,387 and 34,950 shares of restricted stock units are outstanding and subject to restrictions that lapse between fiscal 2021 and fiscal 2023. The compensation expense associated with this incentive program is charged to income over the restriction period. The Company recorded compensation expense related to this program of $0.3 million, $0.3 million, and $0.3 million for the years ended June 30, 2020, 2019 and 2018, respectively.

As of June 30, 2020, there was $0.4 million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of 1.3 years.

The fair value of the awards under the annual component of this incentive program is measured using the Black-Scholes option-pricing model. Key assumptions used to apply this pricing model are as follows:

	2020			2019			2018
Risk-free interest rates		1.42	%		2.63	%		1.55	%
Expected life of option grants (in years)		3			3			3
Expected volatility of underlying stock		32.0	%		25.1	%		25.6	%
Expected quarterly dividends (per share)	$	0.20		$	0.18		$	0.16

Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and the share units are earned based on the achievement of certain overall corporate financial performance targets over the performance period. At the end of the performance period, the number of shares of common stock issued will be determined by adjusting upward or downward from the target in a range between 50% and 200%. No shares will be issued if the minimum performance threshold is not achieved. The final performance percentage, on which the payout will be based considering the performance metrics established for the performance period, will be certified by the Compensation Committee of the Board of Directors.

A participant’s right to any shares that are earned will cliff vest in three years. An executive whose employment terminates prior to the vesting of any award for a reason other than death, disability, retirement, or following a change in control, will forfeit the shares represented by that award. In certain circumstances, such as death, disability, or retirement, PSUs are paid on a pro-rata basis. In the event of a change in control, vesting of the awards granted is accelerated.

A summary of the awards activity under the executive compensation program during the year ended June 30, 2020 is as follows:

	*Annual Component*								*Performance Stock Units*
				*Weighted*
	*Number*			*Average*		*Aggregate*			*Number*			*Aggregate*
	of			*Exercise*		*Intrinsic*			of			*Intrinsic*
	*Shares*			*Price*		*Value*			*Shares*			*Value*
Non-vested, June 30, 2019		34,950		$	69.07	$	(496,674	)		69,052		$	6,529,012
Granted		14,883			51.56					42,976
Vested		(17,108	)		62.86	$	7,471			(12,225	)	$	1,025,922
Forfeited		(338	)		66.10					(20,491	)
Non-vested, June 30, 2020		32,387		$	64.33	$	(685,647	)		79,312		$	6,731,430

Restricted stock awards granted under the annual component of this program in fiscal 2020, 2019, and 2018 had a grant date fair value of $74.37, $110.22, and $96.56, respectively. The PSUs granted in fiscal 2020, 2019 and 2018 had a grant date fair value of $70.37, $106.65, and $91.75, respectively. The total intrinsic value of awards vested under the executive compensation program during the years ended June 30, 2020, 2019, and 2018 was ($1.0) million, $0.9 million, and $1.6 million respectively.

The Company recognized compensation expense related to the PSUs of $2.9 million, $0.3 million, and $0.9 million for the years ended June 30, 2020, 2019 and 2018 respectively based on the probability of the performance targets being met. The total unrecognized compensation costs related to non-vested performance share units was $2.9 million at June 30, 2020, which is expected to be recognized over a weighted average period of 1.3 years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan that allows employees to purchase shares of common stock of the Company at a discount from the market each quarter. The ESPP plan, which was effective as of July 1, 2005, provided employees the option to purchase Standex stock at a discount of 5%. The Plan was modified, effective as of April 1, 2017, to increase the stock purchase discount to 15% and is considered a compensatory Plan. Under this amendment, shares of Company stock may be purchased by employees quarterly at 85% of the fair market value on the last day of each quarter. The 15% discount is recorded as a component of SG&A in the Company’s Consolidated Statements of Operations. Shares of stock reserved for the plan were 62,484 at June 30, 2020. Shares purchased under this plan aggregated to 11,132 in fiscal year 2020, 7,698 in 2019, and 5,622 in 2018, at an average price of $52.57, $65.63, and $86.01, respectively.