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Note 15 - Stock Plans

12 Months Ended

Oct. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

15. Stock Plans

The fair value of option awards is established at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the years ended October 31, 2015, 2014 and 2013: risk free interest rate of 2.03%, 2.60% and 2.14%, respectively; dividend yield of zero; historical volatility factor of the expected market price of our common stock of 0.58 for the year ended 2015, 0.70 for the year ended 2014, and 0.96 for the year ended 2013; a weighted-average expected life of the option of 7.22 years for 2015, 7.42 years for 2014 and 7.30 years for 2013; and an estimated forfeiture rate of 8.84% for fiscal 2015, 14.59% for fiscal 2014 and 18.17% for fiscal 2013.

For the years ended October 31, 2015, 2014 and 2013, total stock-based compensation expense was $8.8 million ($6.5 million post tax), $10.3 million (pre and post tax) and $6.8 million (pre and post tax), respectively. Included in this total stock-based compensation expense was expense for stock options of $2.2 million, $3.9 million and $4.0 million for the years ended October 31, 2015, 2014 and 2013, respectively.

We have a stock incentive plan for certain officers and key employees and directors. Options are granted by a committee appointed by the Board of Directors or its delegee in accordance with the stock incentive plan. The exercise price of all stock options must be at least equal to the fair market value of the underlying shares on the date of the grant. Options granted before June 8, 2007 generally vest in four equal installments on the third, fourth, fifth and sixth anniversaries of the date of the grant. Options granted on or after June 8, 2007 generally vest in four equal installments on the second, third, fourth and fifth anniversaries of the date of the grant. All options expire 10 years after the date of the grant. During the year ended October 31, 2015, each of the five non-employee directors of the Company were given the choice to receive stock options or a reduced number of shares of restricted stock. All five selected to receive restricted stock units. Non-employee directors’ options or restricted stock vest in three equal installments on the first, second and third anniversaries of the date of the grant. Stock option transactions are summarized as follows:


					Weighted-Average						Weighted-Average						Weighted-Average
		October 31, 2015			Exercise Price			October 31, 2014			Exercise Price			October 31, 2013			Exercise Price
Options outstanding at beginning of period		6,720,251			$5.23			6,591,054			$5.74			6,019,070			$5.97
Granted		173,750			$2.47			376,822			$4.41			887,500			$6.28
Exercised		18,125			$2.48			42,375			$2.74			44,812			$2.67
Forfeited		203,436			$3.78			56,375			$2.66			76,500			$3.06
Expired		278,564			$15.04			148,875			$27.42			194,204			$16.92
Options outstanding at end of period		6,393,876			$4.78			6,720,251			$5.23			6,591,054			$5.74
Options exercisable at end of period		4,566,290						4,100,413						3,161,952

The total intrinsic value of options exercised during fiscal 2015, 2014 and 2013 was $15 thousand, $105 thousand and $167 thousand, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

At October 31, 2015, 0.5 million options outstanding and exercisable had an intrinsic value of $66 thousand. Exercise prices for options outstanding at October 31, 2015 ranged from $1.66 to $32.33.

The weighted-average fair value of grants made in fiscal 2015, 2014 and 2013 was $1.47, $3.06 and $5.14 per share, respectively. Based on the fair value at the time they were granted, the weighted-average fair value of options vested in fiscal 2015, 2014, and 2013 was $2.78, $2.09 and $2.72 per share, respectively.

The following table summarizes the exercise price range and related number of options outstanding at October 31, 2015:

				Number			Weighted- Average			Weighted- Average Remaining Contractual
Range of Exercise Prices				Outstanding			Exercise Price			Life
$1.66	–	$5.00		4,515,001			$3.03			5.37
$5.01	–	$10.00		1,611,750			$6.36			5.29
$10.01	–	$20.00		-			$-			-
$20.01	–	$30.00		187,375			$21.78			1.59
$30.01	–	$40.00		79,750			$32.33			0.55
				6,393,876			$4.78			5.18

The following table summarizes the exercise price range and related number of exercisable options at October 31, 2015:

				Number			Weighted- Average			Weighted- Average Remaining Contractual
Range of Exercise Prices				Exercisable			Exercise Price			Life
$1.66	–	$5.00		3,432,415			$3.04			4.74
$5.01	–	$10.00		866,750			$6.44			3.28
$10.01	–	$20.00		-			$-			-
$20.01	–	$30.00		187,375			$21.78			1.59
$30.01	–	$40.00		79,750			$32.33			0.55
				4,566,290			$4.96			4.26

Officers and key associates who are eligible to receive equity grants may elect to receive either a stated number of stock options, or a reduced number of shares of restricted stock units, or a combination thereof. Shares underlying restricted stock units vest 25% each year beginning on the second anniversary of the grant date. Participants aged 60 years or older, or aged 58 with 15 years of service, are eligible to vest in their equity awards on an accelerated basis on their retirement (which in the case of the restricted stock units only applies to a retirement that is at least one year after the date of grant). During the years ended October 31, 2015, 2014 and 2013, we granted 1,018,558 (including 155,433 shares to certain of our non-employee directors), 168,161 (including 85,035 shares to certain of our non-employee directors) and 104,944 (including 63,694 shares to certain of our non-employee directors) restricted stock units, respectively, and also issued 97,854, 67,804 and 46,393 shares, relating to awards granted in prior fiscal years, respectively. During the years ended October 31, 2015, 2014 and 2013, 5,811, 12,000 and 500 restricted stock units were forfeited, respectively.

Through fiscal 2008, for certain associates, a portion of their bonus was paid by issuing a deferred right to receive our common stock. The number of shares is calculated for each bonus year by dividing the portion of the bonus subject to the deferred right award by our average stock price for the year or the stock price at year-end, whichever is lower. Twenty-five percent of the deferred right award will vest and shares will be issued one year after the year end and then 25% a year for the next three years. Participants with 20 years of service or who were over 58 years of age vest immediately. No deferred rights in lieu of bonus payments were awarded during fiscal 2015, 2014 or 2013. During the year ended October 31, 2013, we issued 68,390 relating to awards granted in prior fiscal years.

For the years ended October 31, 2015, 2014 and 2013 total compensation cost recognized in the Consolidated Statement of Operations for the annual restricted stock unit grants, market share unit grants (discussed below), and the stock portion of the long term incentive plan (also discussed below) was $6.5 million, $6.2 million and $2.7 million, respectively. In addition to nonvested share awards summarized in the following table, there were 538,892 vested share awards at October 31, 2015, and 534,143 vested share awards at October 31, 2014 and 2013 which were deferred at the participants' election.

A summary of the Company’s nonvested share awards as of and for the year ended October 31, 2015, is as follows:

		Shares			Weighted-Average Grant Date Fair Value
Nonvested at beginning of period		2,459,138			$5.02
Granted		1,818,558			$2.66
Vested		626,190			$4.59
Forfeited		50,737			$5.53
Nonvested at end of period		3,600,769			$4.16

Included in the above table are awards for the share portion of long term incentive plans for certain associates, which are performance based plans. The awards included above for these plans are based on our best estimate of the outcome for the performance criteria. At October 31, 2015, the final measurement period was reached for the Company’s 2013 Long Term Incentive Plan (“2013 LTIP”). The performance metrics for the 2013 LTIP were achieving specified pre-tax profit goals and specified improvements in the Company’s capital structure through refinancings of, or reductions in, homebuilding debt over specified dates during the performance period. At the end of fiscal 2015, the Company’s pre-tax profit was less than $50 million and refinancings and/or reductions of existing homebuilding debt equaled approximately $82.0 million. During the 2013 LTIP performance period, the Company also successfully completed $400.0 million in new issuances of homebuilding debt. The proceeds from these financings could have been used to refinance/reduce existing homebuilding debt within the 2013 LTIP performance period. However, the Company and the Board of Directors concluded that, due to the high make-whole cost of retiring existing homebuilding debt prior to maturity, it was more beneficial to the Company and its stockholders to implement the Company’s strategic initiatives, including land acquisition and land development, and wait to retire or refinance debt at the next scheduled maturity dates in January and May 2016. The $259.0 million aggregate principal amount of these future debt reductions along with the $82.0 million achieved during the 2013 LTIP performance period exceeded $325.0 million, the high end of the target performance level for the 2013 LTIP. In recognition of the fact that management’s action advanced the long-term financial interest of the Company and its shareholders and to avoid an inequitable compensation outcome as a result of taking such action above their personal interest, the Compensation Committee of the Board of Directors determined to treat the new issuances as having refinanced or reduced existing homebuilding debt for purposes of calculating the 2013 LTIP award so as not to disadvantage the executives for putting the interests of the Company and its shareholders above their personal interests. This interpretation resulted in the achievement of 90% of the target award. Therefore, at the time of this conclusion, the value of the 2013 LTIP award was remeasured, resulting in a reduction of compensation expense during the period.

Also included in the table above are 1.6 million target Market Share Units (“MSUs”) of which 800,000 were granted to certain officers in both fiscal 2015 and fiscal 2014. Fifty percent of the MSUs will vest in four equal annual installments, commencing on the second anniversary of the grant date subject to stock price performance conditions, pursuant to which the actual number of shares issuable with respect to vested MSUs may range from 0% to 175% of the target number of shares covered by the MSU awards, generally depending on the growth in the 60-day average trading price of the Company’s shares during the period between the grant date and the relevant vesting dates. The remaining fifty percent of the MSUs are also subject to financial performance conditions in addition to the stock price performance conditions applicable to all MSUs. These additional performance-based MSUs vest in four equal installments with the first installment vesting on January 1, 2018 for the 2015 MSU Grant and January 1, 2017 for the 2014 MSU Grant and the remaining annual installments commencing on the third anniversary of the grant date, except that no portion of the award will vest unless the Committee determines that the Company achieved specified total revenue growth goals in fiscal 2017 compared to fiscal 2015 for the 2015 MSU Grant and that the Company achieved specified total revenue growth goals in fiscal 2016 compared to fiscal 2014 for the 2014 MSU Grant.

The fair value of the MSU grants is determined using the Monte-Carlo simulation model, which simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. This model uses the average closing trading price of the Company’s Class A Common Stock on the New York Stock Exchange over the 60 calendar day period ending on the grant date. This model also incorporates the following ranges of assumptions:

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The expected volatility is based on our stock’s historical volatility commensurate with the life 2 year, 2.5 year, 3 year, 4 year and 5 years.

●

The risk –free interest rate is based on the U.S. Treasury rate assumption ranging from 2-5 years.

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The expected dividend yield is not applicable since we do not currently pay dividends.

The following assumptions were used for fiscal 2015 MSU Grants: historical volatility factors of the expected market price of our common stock of 38.28%, 42.01%, 45.73%, 59.08% and 57.77% for the 2 year, 2.5 year, 3 year, 4 year and 5 year vesting traunches, respectively; risk free interest rates of 0.74%, 0.95%, 1.12%, 1.44% and 1.75% for each vesting traunche, respectively; and dividend yield of zero for all time periods. The following assumptions were used for October 31, 2014 MSU Grants: historical volatility factor of the expected market price of our common stock of 47.52%, 58.07%, 63.79%, 61.12% and 64.67% for the 2 year, 2.5 year, 3 year, 4 year and 5 year, respectively; risk free interest rates of 0.45%, 0.71%, 0.93%, 1.32% and 1.70% for the 2-5 years, respectively; and dividend yield of zero.

As of October 31, 2015, we had 3.9 million shares authorized for future issuance under our equity compensation plans. In addition, as of October 31, 2015, there were $4.9 million of total unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of two years.