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Stock Based Compensation
 3 Months Ended
Jun. 30, 2011
Stock Based Compensation  
Stock Based Compensation

2.              Stock Based Compensation

 

We account for share-based compensation awards made to employees and directors using the fair value based methodology prescribed by ASC 718 Share-Based Payments (“ASC 718”).  Compensation costs for award grants are valued at fair value and recognized on a straight line basis over the service periods of each award.  We estimated forfeiture rates for the year based on historical experience.

 

Amounts recognized in the financial statements related to stock-based compensation are as follows:

 

(Dollars in thousands except earnings per share)

 

Three Months Ended
June 30, 2011

 

Three Months Ended
June 30, 2010

 

Total cost of stock-based compensation charged against income before income taxes

 

$

96

 

$

66

 

Amount of income tax benefit recognized in earnings

 

$

35

 

$

25

 

Amount charged against net income

 

$

61

 

$

41

 

 

 

 

 

 

 

 

 

Impact on net income per common share:

 

 

 

 

 

Basic

 

$

0.02

 

$

0.01

 

Diluted

 

$

0.02

 

$

0.01

 

 

Stock-based compensation expense was reflected as selling, general and administrative expense and cost of goods sold expense in the statements of income.

 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). We use historical data to estimate the expected price volatility, the expected option life and expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period. The following assumptions were used to estimate the fair value of options granted during the first three months of fiscal 2012 and 2011 using the Black-Scholes model:

 

 

 

Three Months Ended June 30

 

 

 

2011

 

2010

 

Stock options:

 

 

 

 

 

Volatility

 

33.4

%

36.2

%

Risk-free interest rate

 

2.24-3.56

%

2.04-3.89

%

Expected option life (years)

 

5-10

 

5-10

 

Dividend yield

 

1.74

%

1.78

%

 

A summary of the option activity for the first three months of fiscal 2012 is as follows:

 

 

 

Number of
Shares

 

Weighted-
average Exercise
Price per Share

 

Weighted-
average
Remaining
Contractual
Term

 

Aggregate
Intrinsic
Value (000)

 

Outstanding at March 31, 2011

 

443,642

 

$

20.10

 

4.0

 

 

 

Options granted

 

97,780

 

29.20

 

6.2

 

 

 

Options forfeited

 

(3,200

)

25.33

 

—

 

 

 

Options expired

 

(1,020

)

14.91

 

—

 

 

 

Options exercised

 

(44,872

)

18.14

 

—

 

 

 

Outstanding at June 30, 2011

 

492,330

 

$

22.07

 

4.4

 

$

4,687

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2011

 

188,940

 

$

18.90

 

3.4

 

$

2,398

 

 

The weighted average grant date fair value based on the Black-Scholes model for options granted in the first three months of fiscal 2012 was $8.23, and $7.66 in the first three months of fiscal 2011. The Company issues new shares of common stock upon exercise of stock options.  The total intrinsic value of options exercised was $495,000 and $344,000 during the first three months of fiscal 2012 and 2011, respectively.

 

A summary of the status of our unvested option shares as of June 30, 2011 is as follows:

 

 

 

Number of
Shares

 

Weighted-average
Grant-Date
Fair Value

 

Unvested at March 31, 2011

 

291,425

 

$

6.46

 

Options granted

 

97,780

 

$

8.23

 

Options forfeited

 

(2,805

)

$

7.33

 

Options vested

 

(83,010

)

$

6.04

 

Unvested at June 30, 2011

 

303,390

 

$

7.08

 

 

As of June 30, 2011, there was approximately $1,500,000 of total unrecognized compensation cost related to unvested share-based compensation granted under our plans. That cost is expected to be recognized over a weighted-average period of 2.8 years.