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Note 9 - Equity Compensation | 12 Months Ended
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Jun. 30, 2017
Notes to Financial Statements |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | NOTE 9 — EQUITY COMPENSATION Stock Options The Company has an equity compensation plan that was approved by shareholders in November 2012 and that covers all of its full-time employees, outside directors and certain advisors. This 2012 Stock Incentive Plan replaced all previous equity compensation plans. The options granted and stock awards made pursuant to this plan are granted at fair market value at the date of grant or award. Service-based options granted to non-employee directors become exercisable 25% every ninety days (cumulative) from the date of grant and options granted to employees generally become exercisable 25% per year (cumulative) beginning one year after the date of grant. Performance-based options granted to employees become exercisable 33.3% per year (cumulative) beginning one year after the date of grant. The maximum contractual term of the Company’s stock options is ten years. If a stock option holder’s employment with the Company terminates by reason of death, disability or retirement, as defined in the Plan, the Plan generally provides for acceleration of vesting. The number of shares reserved for issuance is 2,188,509 shares, all of which were available for future grant or award as of June 30, 2017. This plan allows for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted and unrestricted stock awards, performance stock awards, and other stock awards. Service based and performance based stock options were granted and restricted stock units (“RSUs”) were awarded in fiscal 2017 . Stock Warrants The Company issued 200,000 fully vested stock warrants in the third quarter of fiscal 2017 in conjunction with the acquisition of Atlas Lighting Products, Inc., with the fair value of the warrants being included in the purchase price of that company rather than being expensed. See further discussion in Note 16. These 200,000 stock warrants were outstanding as of June 3 0, 2017. The fair value of the warrants on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for the warrants.
|  | February 21 , |
|  | 2017 |
Dividend yield |  |  | 2.01 | %
Expected volatility |  |  | 39 | %
Risk-free interest rate |  |  | 1.80 | %
Expected life (in years) |  |  | 4.5 |
The stock warrants issued during the quarter ended March 31, 2017 had an exercise price of $9.95, and a fair value of $2.87. As of June 30, 2017, the warrants had a remaining contractual life of 4.7 years. Stock Options As of June 30, 2017, a total of 3,119,688 options for common shares were outstanding from this plan as well as one previous stock option plan (both of which have been approved by shareholders), and of these, a total of 1,277,561 options for common shares were vested and exercisable. As of June 30, 2017, the approximate unvested stock option expense that will be recorded as expense in future periods is $3,065,300. The weighted average time over which this expense will be recorded is approximately 2 years. The fair value of each option on the date of grant was estimated using the Black-Scholes option pricing model. The below listed weighted average assumptions were used for grants in the periods indicated.
|  | 2017 |  |  | 2016 |  |  | 2015 |
Dividend yield |  |  | 1.9 | % |  |  | 1.3 | % |  |  | 1.1 | %
Expected volatility |  |  | 42 | % |  |  | 44 | % |  |  | 55 | %
Risk-free interest rate |  |  | 1.3 | % |  |  | 1.7 | % |  |  | 1.6 | %
Expected life (in years) |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |
At June 30, 2017, the 1,332,623 options granted during fiscal 2017 to employees had exercise prices ranging from $9.15 to $11.06 per share, fair values ranging from $3.01 to $3.83 per share, and remaining contractual lives of between 9 years and 10 years. The performance metric for the 425,000 performance based stock options granted in fiscal 2017 was not achieved; therefore these stock options were forfeited in fiscal 2017. At June 30, 2016, the 1,026,800 options granted during fiscal 2016 to employees had exercise prices ranging from $8.84 to $11.87 per share, fair values ranging from $3.28 to $4.52 per share, and remaining contractual lives of between 9 years and 9.7 years. At June 30, 2015, the 734,323 options granted to employees during fiscal 2015 had exercise prices ranging from $5.96 to $8.23 per share, fair values ranging from $2.19 to $3.89 per share, and remaining contractual lives of between nine years five months and 9.8 years. The Company calculates stock option expense using the Black-Scholes model. Stock option expense is recorded on a straight line basis, or sooner if the grantee is retirement eligible as defined in the 2012 Stock Incentive Plan, with an estimated 3.1% forfeiture rate effective April 1, 2017. Previous estimated forfeiture rates were between 2.0% and 3.3% over the period January 1, 2013 through March 31, 2017. The expected volatility of the Company’s stock was calculated based upon the historic monthly fluctuation in stock price for a period approximating the expected life of option grants. The risk-free interest rate is the rate of a five year Treasury security at constant, fixed maturity on the approximate date of the stock option grant. The expected life of outstanding options is determined to be less than the contractual term for a period equal to the aggregate group of option holders’ estimated weighted average time within which options will be exercised. It is the Company’s policy that when stock options are exercised, new common shares shall be issued. The Company recorded $2,478,861, $2,519,092 and $1,238,897 of expense related to stock options in fiscal years 2017, 2016 and 2015, respectively. As of June 30, 2017, the Company had 3,067,295 stock options that were vested and that were expected to vest, with a weighted average exercise price of $9.11 per share, an aggregate intrinsic value of $2,322,190 and weighted average remaining contractual terms of 7.1 years. Information related to all stock options for the years ended June 30, 2017, 2016 and 2015 is shown in the following tables:
|  | Twelve Months Ended June 30, 2017 |
|  |  |  |  |  |  |  |  | Weighted |  |  |  |  |
|  |  |  |  |  | Weighted |  |  | Average |  |  |  |  |
|  |  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  |  |  |  |  | Exercise |  |  | Contractual Term |  |  | Intrinsic |
|  | Shares |  |  | Price |  |  | (in years) |  |  | Value |
Outstanding at 6/30/16 |  |  | 2,976,490 |  |  | $ | 8.97 |  |  |  | 6.6 |  |  | $ | 8,338,974 |
Granted |  |  | 1,332,623 |  |  | $ | 10.59 |  |  |  |  |  |  |  |  |
Forfeitures |  |  | (702,979 | ) |  | $ | 12.46 |  |  |  |  |  |  |  |  |
Exercised |  |  | (486,446 | ) |  | $ | 7.37 |  |  |  |  |  |  |  |  |
Outstanding at 6/30/17 |  |  | 3,119,688 |  |  | $ | 9.12 |  |  |  | 7.4 |  |  | $ | 2,332,324 |
Exercisable at 6/30/17 |  |  | 1,277,561 |  |  | $ | 8.75 |  |  |  | 5.0 |  |  | $ | 1,592,653 |
|  | Twelve Months Ended June 30, 2016 |
|  |  |  |  |  |  |  |  | Weighted |  |  |  |  |
|  |  |  |  |  | Weighted |  |  | Average |  |  |  |  |
|  |  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  |  |  |  |  | Exercise |  |  | Contractual Term |  |  | Intrinsic |
|  | Shares |  |  | Price |  |  | (in years) |  |  | Value |
Outstanding at 6/30/15 |  |  | 2,677,436 |  |  | $ | 8.85 |  |  |  | 6.1 |  |  | $ | 4,914,601 |
Granted |  |  | 1,026,800 |  |  | $ | 9.39 |  |  |  |  |  |  |  |  |
Forfeitures |  |  | (165,800 | ) |  | $ | 15.15 |  |  |  |  |  |  |  |  |
Exercised |  |  | (561,946 | ) |  | $ | 7.34 |  |  |  |  |  |  |  |  |
Outstanding at 6/30/16 |  |  | 2,976,490 |  |  | $ | 8.97 |  |  |  | 6.6 |  |  | $ | 8,338,974 |
Exercisable at 6/30/16 |  |  | 1,312,985 |  |  | $ | 9.75 |  |  |  | 4.0 |  |  | $ | 3,819,127 |
|  | Twelve Months Ended June 30, 2015 |
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value |
Outstanding at 6/30/14 |  |  | 2,677,464 |  |  | $ | 9.57 |  |  |  | 5.4 |  |  | $ | 1,674,010 |
Granted |  |  | 734,323 |  |  | $ | 6.83 |  |  |  |  |  |  |  |  |
Forfeitures |  |  | (571,275 | ) |  | $ | 10.26 |  |  |  |  |  |  |  |  |
Exercised |  |  | (163,076 | ) |  | $ | 6.70 |  |  |  |  |  |  |  |  |
Outstanding at 6/30/15 |  |  | 2,677,436 |  |  | $ | 8.8.5 |  |  |  | 6.1 |  |  | $ | 4,914,601 |
Exercisable at 6/30/15 |  |  | 1,597,238 |  |  | $ | 10.18 |  |  |  | 4.3 |  |  | $ | 2,250,093 |
The following table presents information related to unvested stock options:
|  |  |  |  |  | Weighted-Average |
|  |  |  |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Unvested at June 30, 2016 |  |  | 1,663,505 |  |  | $ | 3.39 |
Granted |  |  | 1,332,623 |  |  | $ | 3.67 |
Vested |  |  | (696,501 | ) |  | $ | 3.30 |
Forfeited |  |  | (457,500 | ) |  | $ | 3.81 |
Unvested at June 30, 2017 |  |  | 1,842,127 |  |  | $ | 3.52 |
The weighted average grant date fair value of options granted was $3.67, $3.64 and $3.27 per share in fiscal years 2017, 2016 and 2015, respectively. The aggregate intrinsic value of options exercised during the years ended June 30, 2017, 2016 and 2015 were $1,189,414, $1,695,213 and $212,106, respectively. The aggregate grant date fair value of options that vested during 2017, 2016 and 2015 was $2,298,114, $1,168,192 and $822,827, respectively. The Company received $2,945,946, $4,124,047 and $1,092,002 of cash from employees who exercised options in fiscal years 2017, 2016 and 2015, respectively. For the twelve months ended June 30, 2017, the $2,945,986 cash received from stock options was partially offset by $138,722 related to the tax effect of disqualifying dispositions of stock options. For the twelve months ended June 30, 2016, the $4,170,997 cash received from stock options was partially offset by $141,394 related to the tax effect of disqualifying dispositions of stock options. In the fiscal 2017 the Company recorded $505,879 as a reduction of federal income taxes payable, $261,694 as a decrease in common stock, $138,722 as a reduction of income tax expense, and $628,852 as a reduction of the deferred tax asset related to the issuance of RSUs and the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise. In fiscal 2016 the Company recorded $595,483 as a reduction of federal income taxes payable, $102,010 as a decrease in common stock, $141,349 as a reduction of income tax expense, and $556,144 as a reduction of the deferred tax asset related to the exercises of stock options in which the employees sold the common shares prior to the passage of twelve months from the date of exercise. Restricted Stock Units A total of 96,210 RSUs with a weighted average fair value of $10.84 per share were awarded to employees during the twelve months ended June 30, 2017. A total of 72,000 RSUs with a fair value of $9.39 per share were awarded to employees during the twelve months ended June 30, 2016. The Company determined the fair value of the awards based on the closing price of the Company stock on the date the RSUs were awarded. The RSUs have a four year ratable vesting period. The RSUs are non-voting, but accrue cash dividends at the same per share rate as those cash dividends declared and paid on LSI’s common stock. Dividends on RSUs in the amount of $30,067 and $10,625 were accrued as of June 30, 2017 and 2016, respectively. Accrued dividends are paid to the holder upon vesting of the RSUs and issuance of shares. The following table presents information related to RSUs:
|  |  |  |  |  | Weighted-Average |
|  |  |  |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Unvested at June 30, 2016 |  |  | 62,500 |  |  | $ | 9.39 |
Awarded |  |  | 96,210 |  |  | $ | 10.84 |
Shares Issued |  |  | (25,375 | ) |  | $ | 9.69 |
Unvested at June 30, 2017 |  |  | 133,335 |  |  | $ | 10.38 |
As of June 30, 2017, the 133,335 outstanding RSUs had a remaining weighted average contractual life of 6.0 years. The Company recorded $570,178 of expense related to RSUs during fiscal year 2017. Of the 133,335 RSUs outstanding as of June 30, 2017, 128,859 are vested or expected to vest in the future. The approximate unvested stock compensation expense that will be recorded as expense in future periods for the RSUs is $234,320. The weighted average time over which this expense will be recorded is approximately 32 months. An estimated forfeiture rate of 3.4% was used in the calculation of expense related to the RSUs. As of June 30, 2016, the 62,500 outstanding RSUs had a remaining weighted average contractual life of 3.0 years. The Company recorded $383,483 of expense related to RSUs during fiscal year 2016. Of the 62,500 RSUs outstanding as of June 30, 2016, 60,794 were vested or expected to vest in the future. An estimated forfeiture rate of 3.3% was used in the calculation of expense related to the RSUs. Director and Employee Stock Compensation Awards The Company awarded a total of 40,092 common shares in fiscal 2017, a total of 23,838 common shares in fiscal 2016, and a total of 26,850 common shares in fiscal 2015 as stock compensation awards. These common shares were valued at their approximate $409 ,000, $248,000 and $191,000 fair market values based on their stock price at dates of issuance multiplied by the number of common shares awarded, respectively, pursuant to the compensation programs for non-employee directors who receive a portion of their compensation as an award of Company stock and for employees who receive a nominal recognition award in the form of common stock. Stock compensation awards are made in the form of newly issued common shares of the Company. Deferred Compensation Plan The Company has a non-qualified deferred compensation plan providing for both Company contributions and participant deferrals of compensation. This plan is fully funded in a Rabbi Trust. All plan investments are in common shares of the Company. As of June 30, 2017, there were 33 participants, all with fully vested account balances. A total of 257,898 common shares with a cost of $2,456,875, and 228,100 common shares with a cost of $2,167,717 were held in the plan as of June 30, 2017 and 2016, respectively, and, accordingly, have been recorded as treasury shares. The change in the number of shares held by this plan is the net result of share purchases and sales on the open stock market for compensation deferred into the plan and for distributions to terminated employees. The Company does not issue new common shares for purposes of the nonqualified deferred compensation plan. The Company used approximately $492,400 and $363,400 to purchase 50,579 and 36,685 common shares of the Company in the open stock market during fiscal years 2017 and 2016, respectively, for either employee salary deferrals or Company contributions into the nonqualified deferred compensation plan. For fiscal year 2018, the Company estimates the Rabbi Trust for the Nonqualified Deferred Compensation Plan will make net repurchases, deposits of newly issues shares, and issuances in the range of 85,000 to 95,000 common shares of the Company. The Company does not currently repurchase its own common shares for any other purpose.

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