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Note 9 - Equity Compensation | 12 Months Ended
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Jun. 30, 2018
Notes to Financial Statements |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | NOTE 9 — EQUITY COMPENSATION Stock Options The Company’s equity compensation plan, the 2012 Stock Incentive Plan (“the 2012 Plan”), was approved by shareholders in November 2012. The 2012 Plan covers all of its full-time employees, outside directors and certain advisors and replaced all previous equity compensation plans. In November 2016, the Company’s shareholders approved an amendment to the 2012 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 full value share awarded by the Company as stock compensation. The 2012 Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards, and other stock-based awards. Stock option grants or stock awards made pursuant to the 2012 Plan are granted at fair market value at the date of option grant or stock award. Stock option grants may be service-based or performance-based. Service-based options granted during fiscal 2017 and prior fiscal years generally have a four year ratable vesting period beginning one year after the date of grant. Service-based options granted during fiscal 2018 have a three year ratable vesting period beginning one year after the date of grant. Performance-based options have a three year ratable vesting period beginning one year after the date of grant. The maximum exercise period of stock options granted under the 2012 Plan 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 under the 2012 Plan is 1,436,303 shares, all of which were available for future grant or award as of June 30, 2018. Service-based and performance-based stock options were granted and restricted stock units (“RSUs”) were awarded during fiscal 2018. As of June 30, 2018, a total of 3,298,677 stock options were outstanding under the 2012 Plan (as well as one previous stock option plan which was also approved by shareholders), of which, a total of 1,824,552 stock options were vested and exercisable. As of June 30, 2018, the approximate unvested stock option expense that will be recorded as expense in future periods is $1,052,342. The weighted average time over which this expense will be recorded is approximately 20 months. Additionally, as of June 30, 2018, a total of 169,397 RSUs were outstanding. The approximate unvested stock compensation expense that will be recorded as expense in future periods for the RSUs is $246,301. The weighted average time over which this expense will be recorded is approximately 21 months. Stock Warrants The Company has 200,000 stock warrants fully vested and outstanding as of June 30, 2018. 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. The stock warrants issued during fiscal year 2017 have an exercise price of $9.95, and a fair value of $2.87. As of June 30, 2018, the warrants had a remaining contractual life of 3.7 years.
|  | February 21, |
|  | 2017 |
Dividend yield |  |  | 2.01 | %
Expected volatility |  |  | 39 | %
Risk-free interest rate |  |  | 1.80 | %
Expected life (in years) |  |  | 4.5 |
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.
|  | 2018 |  |  | 2017 |  |  | 2016 |
Dividend yield |  |  | 3.3 | % |  |  | 1.9 | % |  |  | 1.3 | %
Expected volatility |  |  | 41 | % |  |  | 42 | % |  |  | 44 | %
Risk-free interest rate |  |  | 1.8 | % |  |  | 1.3 | % |  |  | 1.7 | %
Expected life (in years) |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |
At June 30, 2018, the 794,537 options granted during fiscal 2018 to employees had exercise prices ranging from $5.92 to $6.54 per share, fair values ranging from $1.71 to $1.96 per share, and remaining contractual lives of between 9 years and 10 years. The performance metric for the 345,560 performance based stock options granted in fiscal 2018 was not achieved; therefore these stock options were forfeited in fiscal 2018. 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. 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 Plan, with an estimated 8.70% forfeiture rate effective April 1, 2018. Previous estimated forfeiture rates were between 2.00% and 8.79% between the periods January 1, 2013 through March 31, 2018. 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 $2,147,423, $2,478,861 and $2,519,092 of expense related to stock options in fiscal years 2018, 2017 and 2016, respectively. Included in the $2,147,423 of expense related to stock options for fiscal 2018, the Company recorded stock-based compensation expense related to the acceleration of service-based stock options and RSUs in conjunction with the Company’s transition agreement with the former CEO of $954,000. As of June 30, 2018, the Company had 2,918,382 stock options that were vested and that were expected to vest, with a weighted average exercise price of $8.33 per share, an aggregate intrinsic value of $8,037 and weighted average remaining contractual terms of 6.7 years. Information related to all stock options for the years ended June 30, 2018, 2017 and 2016 is shown in the following tables:
|  | Twelve Months Ended June 30, 2018 |
|  |  |  |  |  |  |  |  | Weighted |  |  |  |  |
|  |  |  |  |  | Weighted |  |  | Average |  |  |  |  |
|  |  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  |  |  |  |  | Exercise |  |  | Contractual Term |  |  | Intrinsic |
|  | Shares |  |  | Price |  |  | (in years) |  |  | Value |
Outstanding at 6/30/17 |  |  | 3,119,688 |  |  | $ | 9.12 |  |  |  | 7.4 |  |  | $ | 2,332,324 |
Granted |  |  | 794,537 |  |  | $ | 5.98 |  |  |  |  |  |  |  |  |
Exercised |  |  | (42,939 | ) |  | $ | 6.66 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (467,609 | ) |  | $ | 9.11 |  |  |  |  |  |  |  |  |
Expired |  |  | (105,000 | ) |  | $ | 19.62 |  |  |  |  |  |  |  |  |
Outstanding at 6/30/18 |  |  | 3,298,677 |  |  | $ | 8.06 |  |  |  | 7.0 |  |  | $ | 8,037 |
Exercisable at 6/30/18 |  |  | 1,824,552 |  |  | $ | 8.22 |  |  |  | 5.8 |  |  | $ | 39,011 |
|  | 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 |  |  |  |  |  |  |  |  |
Exercised |  |  | (486,446 | ) |  | $ | 7.37 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (702,979 | ) |  | $ | 12.46 |  |  |  |  |  |  |  |  |
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 |  |  |  |  |  |  |  |  |
Exercised |  |  | (561,946 | ) |  | $ | 7.34 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (165,800 | ) |  | $ | 15.15 |  |  |  |  |  |  |  |  |
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 |
The following table presents information related to unvested stock options:
|  |  |  |  |  | Weighted-Average |
|  |  |  |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Unvested at June 30, 2017 |  |  | 1,842,127 |  |  | $ | 3.52 |
Granted |  |  | 794,537 |  |  | $ | 1.73 |
Vested |  |  | (942,905 | ) |  | $ | 3.39 |
Forfeited |  |  | (219,634 | ) |  | $ | 3.43 |
Unvested at June 30, 2018 |  |  | 1,474,125 |  |  | $ | 2.65 |
The weighted average grant date fair value of options granted during fiscal years 2018, 2017, and 2016, was $1.73, $3.67 and $3.64 per share, respectively. The aggregate intrinsic value of options exercised during the years ended June 30, 2018, 2017 and 2016 were $39,011, $1,189,414 and $1,695,213, respectively. The aggregate grant date fair value of options that vested during 2018, 2017 and 2016 was $3,192,672, $2,298,114 and $1,168,192, respectively. The Company received $285,875, $2,945,986, and $4,124,047, of cash from employees who exercised options in fiscal years 2018, 2017 and 2016, respectively. For year ended June 30, 2018, exercised options resulted in an income tax benefit of $116,602. Pursuant to the implementation of ASU 2016 - 09, the Company recognized a discrete tax expense of $292,000 to reduce deferred tax assets for cancelled awards and for detriments compared to the current year tax deduction. A discrete tax benefit of $10,767 was recognized for disqualifying dispositions of incentive stock options. For the year ended June 30, 3017, exercised options resulted in an income tax benefit of $505,879. The Company reduced common stock by $261,694 to reduce deferred tax assets for cancelled awards and for detriments compared to the current year tax deduction. A discrete tax benefit of $138,722 was recognized for disqualifying dispositions of incentive stock options. For the year ended June 30, 2016, exercised options resulted in an income tax benefit of $595,483. The company reduced common stock by $102,010 to reduce deferred tax assets for cancelled awards and for detriments compared to the current year tax deduction. A discrete tax benefit of $141,349 was recognized for disqualifying dispositions of incentive stock options. Restricted Stock Units A total of 91,490 RSUs with a weighted average fair value of $5.92 per share were awarded to employees during fiscal, 2018. 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. The service-based RSUs awarded during fiscal 2017 and in prior fiscal years have a four year ratable vesting period beginning one year after the date of award. 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 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 $50,621 and $30,067 were accrued as of June 30, 2018 and 2017, 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, 2017 |  |  | 133,335 |  |  | $ | 10.38 |
Awarded |  |  | 91,490 |  |  | $ | 5.92 |
Vested |  |  | (43,803 | ) |  | $ | 10.32 |
Forfeited |  |  | (11,625 | ) |  | $ | 9.82 |
Unvested at June 30, 2018 |  |  | 169,397 |  |  | $ | 8.03 |
The Company recorded $879,613 of expense related to RSUs during fiscal year 2018. As of June 30, 2018, the 169,397 RSUs outstanding have a weighted average remaining contractual life of 4.5 years. Of the 169,397 RSUs outstanding as of June 30, 2018, 165,680 RSUs 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 RSU’s is $246,302. The weighted average time over which this expense will be recorded is approximately 21 months. An estimated forfeiture rate of 8.3% was used in the calculation of expense related to the RSUs. 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. An estimated forfeiture rate of 3.4% was used in the calculation of expense related to the RSUs. Director and Employee Stock Compensation Awards The Company awarded a total of 41,388, 40,092, and 23,838 common shares in fiscal years 2018, 2017, and 2016, respectively, as stock compensation awards. These common shares were valued at their approximate $312,000, $409,000 and $248,000 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 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 June 30, 2018, there were 32 participants, all with fully vested account balances. A total of 241,996 common shares with a cost of $2,110,248, and 257,898 common shares with a cost of $2,456,875 were held in the plan as of June 30, 2018 and 2017, 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; shares newly issued for compensation deferred into the plan, and for distributions to terminated employees. The Company issued 67,138 new common shares for purposes of the non-qualified deferred compensation plan during fiscal 2018 and the company did not issue new common shares for the plan in fiscal years 2017 and 2016. The Company used approximately $106,537 and $492,400 to purchase 15,225 and 50,579 common shares of the Company in the open stock market during fiscal years 2018 and 2017, respectively, for either employee salary deferrals or Company contributions into the nonqualified deferred compensation plan. The Company’s non-qualified deferred compensation is no longer funded by purchases in the open market of LSI stock as of September 30, 2017. This plan is now solely funded by newly issued shares that are authorized from the Company’s 2012 Stock Incentive Plan.

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