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Note 10 - Equity Compensation | 6 Months Ended
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Dec. 31, 2016
Notes to Financial Statements |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | NOTE 10 - EQUITY COMPENSATION Stock Based Compensation 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 Company’s shareholders approved an amendment to the 2012 Stock Incentive Plan that added 1,600,000 shares to the plan and implemented the use of a fungible share ratio that consumes 2.5 available shares for every 1 full value share awarded by the Company as stock compensation. The options granted or 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% each 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 2,364,601 shares, all of which were available for future grant or award as of December 31, 2016. This plan allows for the grant of incentive stock options, non-qualified 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 (“RSU’s”) were awarded during the six months ended December 31, 2016. As of December 31, 2016, a total of 3,625,372 options for common shares were outstanding from this plan as well as one previous stock option plan (which has also been approved by shareholders), and of these, a total of 1,700,025 options for common shares were vested and exercisable. As of December 31, 2016, the approximate unvested stock option expense that will be recorded as expense in future periods is $2,622,788. The weighted average time over which this expense will be recorded is approximately 27 months. Additionally, as of December 31, 2016, a total of 118,575 RSU’s were outstanding. The approximate unvested stock compensation expense that will be recorded as expense in future periods for the RSU’s is $608,468. The weighted average time over which this expense will be recorded is approximately 33 months. Stock Options 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.
|  | Three Months Ended |  |  | Six Months Ended |
|  | December 31 |  |  | December 31 |
|  | 2016 |  |  | 2015 |  |  | 2016 |  |  | 2015 |
Dividend yield |  |  | 2.07 | % |  |  | 1.33 | % |  |  | 1.81 | % |  |  | 1.28 | %
Expected volatility |  |  | 41 | % |  |  | 43 | % |  |  | 43 | % |  |  | 44 | %
Risk-free interest rate |  |  | 2.06 | % |  |  | 1.38 | % |  |  | 1.00 | % |  |  | 1.67 | %
Expected life (in years) |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |
At December 31, 2016, the 834,320 options granted during the first six months of fiscal 2017 to employees had exercise prices ranging from $9.65 to $11.06 per share, fair values ranging from of $3.29 to $3.83 per share, and remaining contractual lives of between 9.5 and 10 years. At December 31, 2015, the 1,016,800 options granted during the first six months of fiscal 2016 to employees had exercise prices ranging from $8.84 to $11.82 per share, fair values ranging from of $3.28 to $4.48 per share, and remaining contractual lives of between 9.5 and 9.9 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 3.51% forfeiture rate effective October 1, 2016. Previous estimated forfeiture rates were between 2.0% and 3.4% between the periods January 1, 2013 through September 30, 2016. 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 a reduction of expense of $142,434 in the three months ended December 31, 2016 and recorded $342,134 of expense in the three months ended December 31, 2015, related to stock options. The reduction of stock option expense in the three months ended December 31, 2016 was the result of expectations that the performance criteria related to incentive based options will not be met. The Company recorded $1,296,009 and $1,830,707 of expense related to stock options in the six months ended December 31, 2016 and 2015, respectively. As of December 31, 2016, the Company had 3,159,692 stock options that were vested and that were expected to vest, with a weighted average exercise price of $8.92 per share, an aggregate intrinsic value of $4,620,655 and weighted average remaining contractual terms of 6.7 years. Information related to all stock options for the six months ended December 31, 2016 and 2015 is shown in the following tables:
|  | Six Months Ended December 31, 2016 |
|  |  |  |  |  |  |  |  |  | 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 |  |  | 834,320 |  |  | $ | 11.05 |  |  |  |  |  |  |  |  |
Forfeitures |  |  | (147,375 | ) |  | $ | 16.03 |  |  |  |  |  |  |  |  |
Exercised |  |  | (38,063 | ) |  | $ | 7.75 |  |  |  |  |  |  |  |  |
Outstanding at 12/31/16 |  |  | 3,625,372 |  |  | $ | 9.18 |  |  |  | 7.1 |  |  | $ | 4,648,729 |
Exercisable at 12/31/16 |  |  | 1,700,025 |  |  | $ | 8.73 |  |  |  | 5.1 |  |  | $ | 3,216,899 |
|  | Six Months Ended December 31, 2015 |
|  |  |  |  |  |  |  |  |  | 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 |  |  | 1,016,800 |  |  | $ | 9.38 |  |  |  |  |  |  |  |  |
Forfeitures |  |  | (55,050 | ) |  | $ | 11.65 |  |  |  |  |  |  |  |  |
Exercised |  |  | (298,724 | ) |  | $ | 7.20 |  |  |  |  |  |  |  |  |
Outstanding at 12/31/15 |  |  | 3,340,462 |  |  | $ | 9.11 |  |  |  | 6.8 |  |  | $ | 12,661,470 |
Exercisable at 12/31/15 |  |  | 1,628,976 |  |  | $ | 9.95 |  |  |  | 4.5 |  |  | $ | 6,032,985 |
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 |  |  | 834,320 |  |  | $ | 3.83 |
Vested |  |  | (546,978 | ) |  | $ | 3.25 |
Forfeited |  |  | (25,500 | ) |  | $ | 3.50 |
Unvested at December 31, 2016 |  |  | 1,925,347 |  |  | $ | 3.62 |
The weighted average grant date fair value of options granted during the six month periods ended December 31, 2016 and 2015 was $3.83 and $3.63, respectively. The aggregate intrinsic value of options exercised during the six months ended December 31, 2016 and 2015 was $99,883 and $852,596, respectively. The aggregate grant date fair value of options that vested during the six months ended December 31, 2016 and 2015 was $1,779,490 and $1,035,041, respectively. The Company received $295,030 and $2,149,606 of cash from employees who exercised options in the six month periods ended December 31, 2016 and 2015, respectively. In the first six months of fiscal 2017 the Company recorded $95,443 as a reduction of federal income taxes payable, $124,056 as a decrease in common stock, $22,073 as a reduction of income tax expense, and $197,427 as a reduction of the deferred tax asset related to the issuance of RSU’s 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 the first six months of fiscal 2016 the Company recorded $300,868 as a reduction of federal income taxes payable, $46,066 as an increase in common stock, $84,781 as a reduction of income tax expense, and $170,021 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 71,700 restricted stock units with a fair value of $11.06 per share were awarded to employees during the six months ended December 31, 2016. A total of 72,000 RSU’s with a fair value of $9.39 per share were awarded to employees during the six months ended December 31, 2015. The Company determined the fair value of the awards based on the closing price of the Company stock on the date the RSU’s were awarded. The RSU’s have a four year ratable vesting period. The RSU’s 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 RSU’s in the amount of $19,826 and $4,690 were accrued as of December 31, 2016 and 2015, respectively. Accrued dividends are paid to the holder upon vesting of the RSU’s and issuance of shares. The following table presents information related to RSU’s:
|  |  |  |  |  | Weighted-Average |
|  |  |  |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Unvested at June 30, 2016 |  |  | 62,500 |  |  | $ | 9.39 |
Awarded |  |  | 71,700 |  |  | $ | 11.06 |
Shares Issued |  |  | (15,625 | ) |  | $ | 9.39 |
Unvested at December 31, 2016 |  |  | 118,575 |  |  | $ | 10.40 |
As of December 31, 2016, the 118,575 RSU’s had a remaining contractual life of between 2.5 and 3.5 years. Of the 118,575 RSU’s outstanding as of December 31, 2016, 114,531 are vested or expected to vest in the future. An estimated forfeiture rate of 3.4% was used in the calculation of expense related to the RSU’s. The Company recorded $89,896 and $392,197 of expense related to RSU’s in the three and six month periods ended December 31, 2016, respectively. As of December 31, 2015, the 67,000 outstanding RSU's had a remaining contractual life of 3.5 years. Of the 67,000 RSU’s outstanding as of December 31, 2015, 64,434 were expected to vest. An estimated forfeiture rate of 3.3% was used in the calculation of expense related to the RSU’s. The Company recorded $33,276 and $319,533 of expense related to RSU’s in the three and six month periods ended December 31, 2015, respectively. Director and Employee Stock Compensation Awards The Company awarded a total of 21,199 and 12,590 common shares in the six months ended December 31, 2016 and 2015, respectively, as stock compensation awards. These common shares were valued at their approximate $228,000 and $113,400 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 received a nominal recognition award in the form of Company 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 December 31, 2016, there were 30 participants, all with fully vested account balances. A total of 263,506 common shares with a cost of $2,514,106, and 228,103 common shares with a cost of $2,167,717 were held in the plan as of December 31, 2016 and June 30, 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 non-qualified deferred compensation plan. The Company used approximately $390,288 and $276,800 to purchase 39,487 and 29,021 common shares of the Company in the open stock market during the six months ended December 31, 2016 and 2015, respectively, for either employee salary deferrals or Company contributions into the non-qualified deferred compensation plan. For fiscal year 2017, the Company estimates the Rabbi Trust for the Nonqualified Deferred Compensation Plan will make net repurchases in the range of 45,000 to 50,000 common shares of the Company. The Company does not currently repurchase its own common shares for any other purpose.

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