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Share-Based Compensation | 12 Months Ended
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Aug. 31, 2014
Share-Based Compensation [Abstract] |
Share-Based Compensation | 11.SHARE-BASED COMPENSATION PLANS Overview We utilize various share-based compensation plans as integral components of our overall compensation and associate retention strategy. Our shareholders have approved various stock incentive plans that permit us to grant performance awards, unvested share awards, stock options, and employee stock purchase plan (ESPP) shares. In addition, our Board of Directors and shareholders may, from time to time, approve fully vested share awards. The Organization and Compensation Committee of the Board of Directors (the Compensation Committee) has responsibility for the approval and oversight of our share-based compensation plans. At August 31, 2014, our stock option incentive plan, which permits the granting of performance awards, unvested stock awards to non-employee members of the Board of Directors and employees, and incentive stock options had approximately 409,000 shares available for granting. Our ESPP had approximately 532,000 shares remaining for purchase by plan participants as of August 31, 2014. The total compensation expense of our share-based compensation plans for the fiscal years ended August 31, 2014, 2013, and 2012 were as follows (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2014 |  | 2013 |  | 2012
Performance awards | $ | 2,716 | $ | 2,504 | $ | 3,188
Fully vested share awards |  | 371 |  | 112 |  | 62
Unvested share awards |  | 334 |  | 383 |  | 340
Compensation cost of the ESPP |  | 113 |  | 92 |  | 77
Management stock loans |  | - |  | 498 |  | -
Stock options |  | - |  | - |  | 168
| $ | 3,534 | $ | 3,589 | $ | 3,835
The compensation expense of our share-based compensation plans was included in selling, general, and administrative expenses in the accompanying consolidated income statements, and no share-based compensation was capitalized during fiscal years 2014, 2013, or 2012. During fiscal 2014, we issued approximately 698,000 shares of our common stock from shares held in treasury for our share-based compensation plans. Our share-based compensation plans allow recipients to have shares withheld from the award to pay minimum statutory tax liabilities. We withheld approximately 222,000 shares of common stock from participant awards that had a total value of $4.4 million in fiscal 2014. The following is a description of our share-based compensation plans. Performance Awards Common Stock Price Performance Award – On July 15, 2011, the Compensation Committee approved a share-based compensation plan that would allow certain members of our management team to receive shares of the Company’s common stock if the closing price of our common stock averaged specified levels over a five-day period. If the price of our common stock achieved the specified levels within three years of the grant date, 100 percent of the awarded shares would vest. If the price of our common stock reached the specified levels between three and five years from the grant date, only 50 percent of the performance shares would vest. No shares would vest to participants if the specified price targets were met after five years from the grant date. This award was designed to grant approximately one-half of the total award shares in fiscal 2011, approximately one-fourth of the award shares in fiscal 2012, and approximately one-fourth in fiscal 2013. Additional supplemental awards were made to three employees during fiscal 2014 as shown on the table below. This award program was designed to increase shareholder value as shares would only be awarded to participants if our share price increased significantly over a relatively short period of time. During fiscal 2014 the specified common share prices for all grants were achieved and all tranches of the award as described below vested to the participants. Since this performance award had market-based vesting conditions, the fair value and derived service periods of the grants within this award were determined using Monte Carlo simulation valuation models. The following table presents key information related to the tranches granted in this award.
Model Input |  | Fiscal 2014 Grant 2 | Fiscal 2014 Grant 1 | Fiscal 2013 Grant | Fiscal 2012 Grant | Fiscal 2011 Grant
Number of shares |  | 13,477 | 8,352 | 120,101 | 177,616 | 294,158
Vesting price per share |  | $18.05; 22.00 | $ 22.00 | $ 22.00 | $ 18.05 | $ 17.00
Grant date price per share |  | $ 20.01 | $ 19.68 | $ 16.03 | $ 9.55 | $ 11.34
Volatility |  | 47.1% | 52.8% | 54.2% | 54.6% | 49.8%
Dividend yield |  | 0.0% | 0.0% | 0.0% | 0.0% | 0.0%
Risk-free rate |  | 1.70% | 1.39% | 1.37% | 0.62% | 1.48%
Grant date |  | April 16, 2014 | Nov. 22, 2013 | July 18, 2013 | July 19, 2012 | July 15, 2011
Fair value of award (thousands) |  | $ 265 | $ 155 | $ 1,651 | $ 1,188 | $ 2,647
Derived service period (years) |  | 0.2 | 0.2 | 0.6 | 1.4 | 0.9
Unrecognized compensation expense at 8/31/2014 (thousands) |  | $- | $- | $- | $- | $-
The April 2014 grant shown above included 9,557 shares with a vesting price of $18.05 per share (equal to the fiscal 2012 grant vesting price) and 3,920 shares with a $22.00 per share vesting price. Since our share price on the grant date was greater than the vesting price for the 9,557 shares granted, the fair value of these shares was determined by multiplying the number of shares by the grant date price per share, which resulted in $0.2 million of share-based compensation expense. The $0.2 million of compensation expense for these shares was recorded on the summary share-based compensation table above as a component of fully vested share award expense. Fiscal 2014 Long-Term Incentive (LTIP) Award – During the first quarter of fiscal 2014, the Compensation Committee granted new performance-based equity awards for our executive officers. A total of 89,418 shares may be awarded to the participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter adjusted earnings before interest, taxes, depreciation, and amortization (Adjusted EBITDA) and trailing four-quarter increased sales of courses related to The 7 Habits of Highly Effective People (the 7 Habits). The following information applies to the fiscal 2014 LTIP award as of August 31, 2014.
| Adjusted EBITDA |  |  | 7 Habits Increased Sales
| Award |  |  |  |  | Award |  |
| Goal | Number of | Tranche |  |  | Goal | Number of | Tranche
| (millions) | Shares | Status |  |  | (millions) | Shares | Status
$ | 37.0 | 20,864 | not vested |  | $ | 5.0 | 8,942 | vested
$ | 43.0 | 20,864 | not vested |  | $ | 10.0 | 8,942 | not vested
$ | 49.0 | 20,864 | not vested |  | $ | 12.5 | 8,942 | not vested
|  | 62,592 |  |  |  |  | 26,826 |
Each of the LTIP performance awards have a maximum life of six years and compensation expense is recognized as we determine it is probable that the shares will vest. Adjustments to compensation expense to reflect the timing of and the number of shares expected to be awarded will be made on a cumulative basis at the date of the adjustment. Fiscal 2013 LTIP Award – During the first quarter of fiscal 2013, the Compensation Committee granted a new performance-based equity award for the Chief Executive Officer (CEO), Chief Financial Officer (CFO), and the Chief People Officer (CPO). A total of 68,085 shares may be issued to the participants based on six individual vesting conditions that are divided into two performance measures, Adjusted EBITDA and Productivity Practice sales. The following information applies to the fiscal 2013 LTIP award as of August 31, 2014.
| Adjusted EBITDA |  |  | Productivity Practice Sales
| Award |  |  |  |  | Award |  |
| Goal | Number of | Tranche |  |  | Goal | Number of | Tranche
| (millions) | Shares | Status |  |  | (millions) | Shares | Status
$ | 33.0 | 15,887 | vested |  | $ | 23.5 | 6,808 | vested
$ | 40.0 | 15,887 | not vested |  | $ | 26.5 | 6,808 | not vested
$ | 47.0 | 15,887 | not vested |  | $ | 29.5 | 6,808 | not vested
|  | 47,661 |  |  |  |  | 20,424 |
Fiscal 2012 LTIP Award - During fiscal 2012, the Compensation Committee granted a performance-based equity award for the CEO, CFO, and CPO similar to the fiscal 2013 executive award described above. A total of 106,101 shares may be issued to the participants based on six individual vesting conditions that are divided into two performance measures, Adjusted EBITDA and Productivity Practice sales. The following information applies to the fiscal 2012 LTIP award as of August 31, 2014.
| Adjusted EBITDA |  |  | Productivity Practice Sales
| Award |  |  |  |  | Award |  |
| Goal | Number of | Tranche |  |  | Goal | Number of | Tranche
| (millions) | Shares | Status |  |  | (millions) | Shares | Status
$ | 26.0 | 24,757 | vested |  | $ | 20.5 | 10,610 | vested
$ | 33.0 | 24,757 | vested |  | $ | 23.5 | 10,610 | vested
$ | 40.0 | 24,757 | not vested |  | $ | 26.5 | 10,610 | not vested
|  | 74,271 |  |  |  |  | 31,830 |
Fiscal 2010 LTIP Award – Under the terms of the fiscal 2010 LTIP, participants were entitled to receive common shares based upon the achievement of specified financial performance objectives during the defined performance period. Adjustments to the number of shares awarded, and to the corresponding compensation expense, were made on a cumulative basis at the adjustment date based upon the revised estimated probable number of common shares to be issued. The key terms of the fiscal 2010 LTIP award were as follows:
| · |  | Vesting Dates – August 31, 2012, March 2, 2013, and August 31, 2013
| · |  | Grant Date Fair Value of Common Stock – $5.28 per share
The fiscal 2010 LTIP had a four-year performance period with three potential vesting dates if certain financial measures were achieved. We recorded compensation expense over the service period of the award based on the estimated number of shares expected to be issued at each of the vesting dates. Based on financial performance over the life of the award, plan participants received 171,414 shares for performance through August 31, 2012; 18,003 shares for performance through March 2, 2013; and 12,524 shares for performance through August 31, 2013. Management Common Stock Loans During the second quarter of fiscal 2013, we determined that the breakeven price for management stock loans with shares held in escrow was achieved (Note 17). Accordingly, we transferred 3.3 million shares of common stock held by management loan participants in escrow to our transfer agent as full payment on the loans. Since these loans were accounted for as share-based instruments, we recorded $0.5 million of share-based compensation expense for the value of the common stock retained by management stock loan participants that was in excess of the breakeven value on the date the loans were repaid. Unvested Stock Awards The annual Board of Director unvested stock award, which is administered under the terms of the Franklin Covey Co. Second Amended and Restated 1992 Stock Incentive Plan, is designed to provide our non-employee directors, who are not eligible to participate in our employee stock purchase plan, an opportunity to obtain an interest in the Company through the acquisition of shares of our common stock. Each eligible director is entitled to receive a whole-share grant equal to $50,000 with a one-year vesting period, which is generally granted in January (following the Annual Shareholders’ Meeting) of each year. Shares granted under the terms of this annual award are ineligible to be voted or participate in any common stock dividends until they are vested. Under the terms of this program, we issued 14,616 shares, 30,672 shares, and 37,975 shares of our common stock to eligible members of the Board of Directors during the fiscal years ended August 31, 2014, 2013, and 2012. The fair value of shares awarded to the directors was $0.3 million in fiscal 2014 and $0.4 million for each of fiscal 2013 and 2012 as calculated on the grant date of the awards. The corresponding compensation cost is recognized over the vesting period of the awards, which is one year. The cost of the common stock issued from treasury for these awards was $0.2 million, $0.4 million, and $0.5 million for the fiscal years ended August 31, 2014, 2013, and 2012. The following information applies to our unvested stock awards for the fiscal year ended August 31, 2014:
|  |  |  | Weighted-
|  |  |  | Average Grant-
|  |  |  | Date Fair
|  | Number of |  | Value Per
|  | Shares |  | Share
Unvested stock awards at |  |  |  |
August 31, 2013 |  | 30,672 | $ | 13.04
Granted |  | 14,616 |  | 20.53
Forfeited |  | - |  | -
Vested |  | (30,672) |  | 13.04
Unvested stock awards at |  |  |  |
August 31, 2014 |  | 14,616 | $ | 20.53
At August 31, 2014, there was $0.1 million of unrecognized compensation cost related to unvested stock awards, which is expected to be recognized over the remaining weighted-average vesting period of approximately three months. The total recognized tax benefit from unvested stock awards totaled $0.1 million for each of the fiscal years ended August 31, 2014, 2013, and 2012, respectively. The intrinsic value of our unvested stock awards at August 31, 2014 was $0.3 million. Stock Options We have an incentive stock option plan whereby options to purchase shares of our common stock may be issued to key employees at an exercise price not less than the fair market value of the Company’s common stock on the date of grant. Information related to our stock option activity during the fiscal year ended August 31, 2014 is presented below:
|  |  |  |  |  | Weighted |  |
|  |  |  | Weighted |  | Average |  |
|  |  |  | Avg. Exercise |  | Remaining |  | Aggregate
|  | Number of |  | Price Per |  | Contractual |  | Intrinsic Value
|  | Stock Options |  | Share |  | Life (Years) |  | (thousands)
Outstanding at August 31, 2013 |  | 675,000 | $ | 11.25 |  |  |  |
Granted |  | - |  | - |  |  |  |
Exercised |  | (43,750) |  | 9.00 |  |  |  |
Forfeited |  | - |  | - |  |  |  |
Outstanding at August 31, 2014 |  | 631,250 | $ | 11.41 |  | 5.8 | $ | 4,838
Options vested and exercisable at |  |  |  |  |  |  |  |
August 31, 2014 |  | 631,250 | $ | 11.41 |  | 5.8 | $ | 4,838
Our stock options awarded in fiscal 2011 and fiscal 2010 are divided into four equal tranches with exercise prices of $9.00 per share, $10.00 per share, $12.00 per share, and $14.00 per share. These options vested during fiscal 2013 in conjunction with the resolution of the management common stock loan program. The vesting requirement was determined to be a market vesting condition based upon our common stock price. Accordingly, the fair value of these stock options was determined using a Monte Carlo simulation with an embedded Black-Scholes valuation model. At August 31, 2014, there was no remaining unrecognized compensation expense related to our stock options and no options were exercised during fiscal 2013 or fiscal 2012. The s tock options exercised during fiscal 2014 were exercised on a net share basis during our first fiscal quarter and had an aggregate intrinsic value of $0.5 million. The following additional information applies to our stock options outstanding at August 31, 2014:
|  |  |  | Weighted |  |  |  |  |
|  | Number |  | Average |  |  |  | Options |
|  | Outstanding |  | Remaining |  | Weighted |  | Exercisable at | Weighted
|  | at August 31, |  | Contractual |  | Average |  | August 31, | Average
Exercise Prices |  | 2014 |  | Life (Years) |  | Exercise Price |  | 2014 | Exercise Price
$9.00 |  | 125,000 |  | 5.9 |  | $9.00 |  | 125,000 | $9.00
$10.00 |  | 168,750 |  | 5.8 |  | $10.00 |  | 168,750 | $10.00
$12.00 |  | 168,750 |  | 5.8 |  | $12.00 |  | 168,750 | $12.00
$14.00 |  | 168,750 |  | 5.8 |  | $14.00 |  | 168,750 | $14.00
|  | 631,250 |  |  |  |  |  | 631,250 |
Fully Vested Stock Awards Client Partner and Consultant Award – During fiscal 2011 we implemented a new fully vested share-based award program that is designed to reward client partners and consultants for exceptional long-term performance. The program grants shares of our common stock to each client partner who has sold over $20.0 million in cumulative sales or consultant who has delivered over 1,500 days of consulting during their career. During fiscal 2013 the award was changed from 2,000 shares of our common stock to $15,000 of common stock. During fiscal 2014, 12 individuals qualified for the award, six individuals qualified for the award in fiscal 2013, and three individuals qualified for the award in fiscal 2012. Due to the immateriality of expected awards to be earned in future periods, we did not record an obligation for future fully vested awards at August 31, 2014 or August 31, 2013. Employee Stock Purchase Plan The Company has an employee stock purchase plan that offers qualified employees the opportunity to purchase shares of our common stock at a price equal to 85 percent of the average fair market value of our common stock on the last trading day of each quarter. A total of 36,761 shares, 45,845 shares, and 55,423 shares were issued to ESPP participants during the fiscal years ended August 31, 2014, 2013, and 2012, which had a corresponding cost basis of $0.5 million, $0.6 million, and $0.8 million, respectively. We received cash proceeds from ESPP participants totaling $0.6 million, $0.5 million, and $0.4 million during the fiscal years ended August 31, 2014, 2013, and 2012.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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