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Note 15 - Stock Plans | 12 Months Ended
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Oct. 31, 2019
Notes to Financial Statements |
Share-based Payment Arrangement [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, 2019, 2018 and 2017: risk free interest rate of 1.99%, 2.80% and 2.05%, respectively; dividend yield of zero; historical volatility factor of the expected market price of our common stock of 0.56, 0.50 and 0.53, respectively; a weighted-average expected life of the option of 7.98 years, 8.0 years and 7.64 years, respectively; and an estimated forfeiture rate of 7.84%, 9.90% and 9.92%, respectively. For the years ended October 31, 2019, 2018 and 2017, total stock-based compensation expense was $0.7 million, $3.7 million ( $2.0 million post tax) and $0.6 million, respectively. Included in this total stock-based compensation expense was expense from stock options of $0.8 million, $0.7 million and $0.5 million for the years ended October 31, 2019, 2018 and 2017, respectively. The fiscal 2019 expense includes income of $2.6 million from previously recognized expense of certain performance based restricted stock grants for which the performance metrics are no longer expected to be satisfied. This income was offset by the vesting of restricted stock of $2.4 million during the year ended October 31, 2019. The fiscal 2017 expense includes income of $2.0 million from previously recognized expense of certain performance based restricted stock grants for which the performance metrics are no longer expected to be satisfied. This income was offset by the vesting of restricted stock of $2.1 million during the year ended October 31, 2017. 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 delegate 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. Stock options granted to officers and associates 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. At the time of our annual stock grant in the third quarter of fiscal 2019, each of the six of our existing non-employee directors of the Company were given the choice to receive stock options or a reduced number of shares of restricted stock units subject to a two -year post-vesting holding period, or a combination thereof, with restricted stock units based on the fair market value on the date of grant and stock options based on grant date Black-Scholes value. All such directors elected to receive restricted stock units. Non-employee directors’ stock options and restricted stock units 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:
|  | October 31, 2019 |  |  | Weighted- Average Exercise Price |  |  | October 31, 2018 |  |  | Weighted- Average Exercise Price |  |  | October 31, 2017 |  |  | Weighted- Average Exercise Price |
Options outstanding at beginning of period |  | 278,569 |  |  | $73.76 |  |  | 274,423 |  |  | $85.22 |  |  | 294,950 |  |  | $100.80 |
Granted |  | 110,975 |  |  | $9.44 |  |  | 37,825 |  |  | $56.30 |  |  | 9,450 |  |  | $58.47 |
Exercised |  | - |  |  | $- |  |  | 1,210 |  |  | $49.91 |  |  | 1,930 |  |  | $51.85 |
Forfeited |  | 2,038 |  |  | $53.96 |  |  | 2,000 |  |  | $64.25 |  |  | 18,093 |  |  | $146.28 |
Expired |  | 56,025 |  |  | $64.41 |  |  | 30,469 |  |  | $156.95 |  |  | 9,954 |  |  | $416.94 |
Options outstanding at end of period |  | 331,481 |  |  | $53.93 |  |  | 278,569 |  |  | $73.76 |  |  | 274,423 |  |  | $85.22 |
Options exercisable at end of period |  | 147,019 |  |  |  |  |  | 191,748 |  |  |  |  |  | 210,360 |  |  |  |
The total intrinsic value of options exercised during fiscal 2018 and 2017 was $26 thousand and $12 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, 2019, there were no options exercisable which had an intrinsic value. Exercise prices for options outstanding at October 31, 2019 ranged from $7.85 to $157.00. The weighted-average fair value of grants made in fiscal 2019, 2018 and 2017 was $4.46, $27.09 and $33.28 per share, respectively. Based on the fair value at the time they were granted, the weighted-average fair value of options vested in fiscal 2019, 2018 and 2017 was $36.07, $69.56 and $65.24 per share, respectively. The following table summarizes the exercise price range and related number of options outstanding at October 31, 2019:
|  |  |  |  | Number |  |  | Weighted- Average |  |  | Weighted- Average Remaining Contractual |
Range of Exercise Prices |  |  | Outstanding |  |  | Exercise Price |  |  | Life |
| $7.85 | – | $38.50 |  |  |  |  | 111,575 |  |  | $9.60 |  |  | 9.61 |
| $38.75 | – | $60.25 |  |  |  |  | 102,530 |  |  | $50.00 |  |  | 5.26 |
| $61.00 | – | $110.25 |  |  |  |  | 65,197 |  |  | $73.55 |  |  | 4.99 |
| $118.25 | – | $157.00 |  |  |  |  | 52,179 |  |  | $131.91 |  |  | 1.67 |
|  |  |  |  |  |  |  | 331,481 |  |  | $53.93 |  |  | 6.11 |
The following table summarizes the exercise price range and related number of exercisable options at October 31, 2019:
|  |  |  |  |  |  |  | Number |  |  | Weighted- Average |  |  | Weighted- Average Remaining Contractual |
Range of Exercise Prices |  |  | Exercisable |  |  | Exercise Price |  |  | Life |
| $7.85 | – | $38.50 |  |  |  |  | 300 |  |  | $38.50 |  |  | 6.66 |
| $38.75 | – | $60.25 |  |  |  |  | 52,029 |  |  | $48.59 |  |  | 3.28 |
| $61.00 | – | $110.25 |  |  |  |  | 42,511 |  |  | $79.75 |  |  | 3.13 |
| $118.25 | – | $157.00 |  |  |  |  | 52,179 |  |  | $131.91 |  |  | 1.67 |
|  |  |  |  |  |  |  | 147,019 |  |  | $87.15 |  |  | 2.67 |
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 granted to officers and associates generally vest in four equal installments on the second, third, fourth and fifth anniversaries 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, 2019, 2018 and 2017, we granted 107,650 (including 103,612 units to certain of our non-employee directors), 20,292 (including 15,904 units to certain of our non-employee directors) and 14,662 (including 11,937 units to certain of our non-employee directors) restricted stock units, respectively, and also issued 8,380, 5,936 and 4,055 units, relating to awards granted in prior fiscal years, respectively. During the years ended October 31, 2019 and 2017, 656 and 18,100 restricted stock units were forfeited, respectively. For the year ended October 31, 2019 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 income of $0.2 million. For the years ended October 31, 2018 and 2017 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 $2.8 million and $21 thousand, respectively. In addition to nonvested share awards summarized in the following table, there were 33,643, 21,609 and 12,497 vested share awards at October 31, 2019, 2018 and 2017, respectively, which were deferred at the participants' election. A summary of the Company’s nonvested Time-Based share awards for the years ended October 31, 2019, 2018, and 2017 are as follows:
|  | October 31, 2019 |  |  | Weighted-Average Grant Date Fair Value |  |  | October 31, 2018 |  |  | Weighted-Average Grant Date Fair Value |  |  | October 31, 2017 |  |  | Weighted-Average Grant Date Fair Value |
Nonvested Time-Based at beginning of period |  | 105,594 |  |  | $61.77 |  |  | 96,091 |  |  | $60.50 |  |  | 100,300 |  |  | $63.70 |
Granted |  | 164,050 |  |  | $7.66 |  |  | 37,888 |  |  | $54.95 |  |  | 32,349 |  |  | $60.31 |
Vested |  | 21,329 |  |  | $45.52 |  |  | 22,821 |  |  | $55.19 |  |  | 15,511 |  |  | $75.78 |
Forfeited |  | 17,106 |  |  | $86.96 |  |  | 5,564 |  |  | $20.87 |  |  | 21,047 |  |  | $64.30 |
Nonvested Time-Based at end of period |  | 231,210 |  |  | $23.01 |  |  | 105,594 |  |  | $61.77 |  |  | 96,091 |  |  | $60.50 |
A summary of the Company’s nonvested Performance-Based share awards for the years ended October 31, 2019, 2018, and 2017 are as follows:
|  | October 31, 2019 |  |  | Weighted-Average Grant Date Fair Value |  |  | October 31, 2018 |  |  | Weighted-Average Grant Date Fair Value |  |  | October 31, 2017 |  |  | Weighted-Average Grant Date Fair Value |
Nonvested Performance-Based at beginning of period |  | 101,407 |  |  | $69.28 |  |  | 150,881 |  |  | $50.26 |  |  | 189,275 |  |  | $64.43 |
Granted |  | 56,400 |  |  | $10.10 |  |  | 47,277 |  |  | $70.41 |  |  | 17,000 |  |  | $70.88 |
Vested |  | 8,655 |  |  | $42.69 |  |  | 5,390 |  |  | $72.52 |  |  | 33,147 |  |  | $148.05 |
Forfeited |  | 12,836 |  |  | $93.31 |  |  | 91,361 |  |  | $38.27 |  |  | 22,247 |  |  | $40.84 |
Nonvested Performance-Based at end of period |  | 136,316 |  |  | $44.22 |  |  | 101,407 |  |  | $69.28 |  |  | 150,881 |  |  | $50.26 |
Included in the above table are awards for the share portion of long-term incentive plans (“LTIPs”) for certain officers and associates, which are performance based plans. This includes 30,277 target 2018 LTIP shares which were granted during fiscal year 2018. This also includes the remaining 4,439 2016 LTIP shares which were granted during fiscal 2016 and based on performance outcomes between 2016 and 2018. LTIP shares vest in the third, fourth and fifth fiscal years after grant date, subject to certain performance metrics. Also included in the tables above are 98,550 target Time-based and 101,600 Performance-based Market Share Units (“MSUs”) of which 56,400 of each Time-based and Performance-based were granted to certain officers in fiscal 2019. Also MSU grants from fiscal years 2014 through 2017 were adjusted by 16,450 Time-based and 12,836 Performance-based in fiscal 2019, as certain performance conditions at measurement periods were not met and only a portion of the shares were vested, resulting in the reversal of $2.6 million of expense during the period. Additionally, 1,158 from the 2016 MSUs net shares were issued during fiscal 2019. 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 200% 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, three years after the MSU grant date (for example, January 1, 2022 for the 2019 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 ( 1 ) for the 2019 MSU grants, specified community count improvement (as to 25% of the MSU amount) and pre-tax profit (as to 25% of the MSU amount) goals comparing the fiscal year of the grant date and the second fiscal year following the grant date (fiscal 2020 compared to fiscal 2018 ), ( 2 ) for the 2017 and 2016 MSU grants, specified gross margin improvement (as to 25% of the MSU amount) and debt reduction (as to 25% of the MSU amount) goals comparing the fiscal year of the grant date and the second fiscal year following the grant date (fiscal 2019 compared to fiscal 2017 ). 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:
| ● | The expected volatility is based on our stock’s historical volatility commensurate with the life 2 years, 2.6 years, 3 years, 4 years and 5 years.
| ● | The risk-free interest rate is based on the U.S. Treasury rate assumption ranging from 2 - 5 years.
| ● | The expected dividend yield is not applicable since we do not currently pay dividends.
The following assumptions were used for 2019 MSU grants: historical volatility factor of the expected market price of our common stock of 62.51%, 59.60%, 57.04%, 60.03% and 56.86% for the 2 year, 2.6 year, 3 year, 4 year and 5 year vesting tranches, respectively and the concluded risk free rate assumptions of 1.80% and 1.81% equals the continuously compounded 2.55 year and 4 year yield, respectively and dividend yield of zero for all time periods. The following assumptions were used for 2018 MSU Grants: historical volatility factor of the expected market price of our common stock of 48.41%, 51.92%, 56.11%, 52.59% and 49.57% for the 2 year, 2.6 year, 3 year, 4 year and 5 year vesting tranches, respectively; the concluded risk free rate assumptions of 2.56% and 2.68% equals the continuously compounded 2.56 year and 4 year yield, respectively and dividend yield of zero for all time periods. The following assumptions were used for 2017 MSU grants: historical volatility factor of the expected market price of our common stock of 57.93%, 54.61%, 52.66%, 48.85% and 50.78% for the 2 year, 2.6 year, 3 year, 4 year and 5 year vesting tranches, respectively; risk free interest rates of 1.35%, 1.43%, 1.49%, 1.63% and 1.76% for each vesting tranche, respectively; and dividend yield of zero for all time periods. Based on the terms of our equity compensation plans, awards that are forfeited become available to us for future grants under the plan. As of October 31, 2019, we had 22 thousand shares authorized and remaining for future issuance under our equity compensation plans. In addition, as of October 31, 2019, there were $4.2 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 1.8 years.

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