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Share-Based Compensation | 12 Months Ended
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Aug. 31, 2015
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. On January 23, 2015 our shareholders approved the 2015 Omnibus Incentive Plan (the 2015 Plan), which authorized an additional 1.0 million shares of common stock for issuance to employees and members of the Board of Directors as share-based payments. We believe that the 2015 Plan will provide sufficient available shares to grant awards over the next several years, based on current expectations of grants in future periods. A more detailed description of the 2015 Plan is set forth in the Company’s Proxy Statement filed with the SEC on December 22, 2014. At August 31, 2015, the 2015 Plan had approximately 964,000 shares available for future grants and our ESPP had approximately 490,000 shares remaining for purchase by plan participants. The total compensation expense of our share-based compensation plans for the fiscal years ended August 31, 2015, 2014, and 2013 were as follows (in thousands):
YEAR ENDED |  |  |  |  |  |
AUGUST 31, |  | 2015 |  | 2014 |  | 2013
Performance awards | $ | 1,890 | $ | 2,716 | $ | 2,504
Fully vested share awards |  | 125 |  | 371 |  | 112
Unvested share awards |  | 400 |  | 334 |  | 383
Compensation cost of the ESPP |  | 121 |  | 113 |  | 92
Management stock loans |  | - |  | - |  | 498
| $ | 2,536 | $ | 3,534 | $ | 3,589
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 2015, 2014, or 2013. During fiscal 2015, we issued 134,614 shares of our common stock from shares held in treasury for 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 17,935 shares of common stock from participant awards that had a total value of $0.3 million in fiscal 2015. The following is a description of our share-based compensation plans. Performance Awards In fiscal 2015, the Compensation Committee approved a modification to exclude the effects of foreign exchange on the measurement of performance criteria on the outstanding tranches of our long-term incentive plan (LTIP) awards. Accordingly, we calculated incremental compensation expense based upon the fair value of (closing price) our common stock on the modification date, which totaled $0.7 million. We recognized $0.5 million of the incremental compensation expense during fiscal 2015 for service provided in the current and previous fiscal years associated with the modification. Fiscal 2015 LTIP Award – During fiscal 2015, the Compensation Committee granted a new performance-based award for our executive officers and certain members of senior management. A total of 112,464 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 increased sales of Leadership, Productivity, and Trust practice sales (the Practice Sales) as shown below.
| Adjusted EBITDA |  |  | Practice Sales
| Award |  |  |  |  | Award |  |
| Goal | Number of | Tranche |  |  | Goal | Number of | Tranche
| (millions) | Shares | Status |  |  | (millions) | Shares | Status
$ | 39.6 | 26,241 | not vested |  | $ | 107.0 | 11,247 | not vested
$ | 45.5 | 26,241 | not vested |  | $ | 118.0 | 11,247 | not vested
$ | 52.3 | 26,241 | not vested |  | $ | 130.0 | 11,247 | not vested
|  | 78,723 |  |  |  |  | 33,741 |
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 2014 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 EBITDA and trailing four-quarter increased sales of courses related to The 7 Habits of Highly Effective People (the 7 Habits). During fiscal 2015, the second tranche of the 7 Habits increased sales award vested to participants. The following information applies to the fiscal 2014 LTIP award as of August 31, 2015.
| 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 | vested
$ | 49.0 | 20,864 | not vested |  | $ | 12.5 | 8,942 | not vested
|  | 62,592 |  |  |  |  | 26,826 |
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. No tranches of this award vested during fiscal 2015. The following information applies to the fiscal 2013 LTIP award as of August 31, 2015.
| 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. No tranches of this award vested during fiscal 2015. The following information applies to the fiscal 2012 LTIP award as of August 31, 2015.
| 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 |
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 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 19). 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. 2015 Omnibus 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 $75,000 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 24,210 shares, 14,616 shares, and 30,672 shares of our common stock to eligible members of the Board of Directors during the fiscal years ended August 31, 2015, 2014, and 2013. The fair value of shares awarded to the directors was $0.5 million in fiscal 2015, $0.3 million in fiscal 2014, and $0.4 million in fiscal 2013 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 $0.3 million, $0.2 million, and $0.4 million for the fiscal years ended August 31, 2015, 2014, and 2013. The following information applies to our unvested stock awards for the fiscal year ended August 31, 2015:
|  |  |  | Weighted-
|  |  |  | Average Grant-
|  |  |  | Date Fair
|  | Number of |  | Value Per
|  | Shares |  | Share
Unvested stock awards at |  |  |  |
August 31, 2014 |  | 14,616 | $ | 20.53
Granted |  | 24,210 |  | 18.59
Forfeited |  | - |  | -
Vested |  | (14,616) |  | 20.53
Unvested stock awards at |  |  |  |
August 31, 2015 |  | 24,210 | $ | 18.59
At August 31, 2015, there was $0.2 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, 2015, 2014, and 2013, respectively. The intrinsic value of our unvested stock awards at August 31, 2015 was $0.4 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, 2015 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, 2014 |  | 631,250 | $ | 11.41 |  |  |  |
Granted |  | - |  | - |  |  |  |
Exercised |  | - |  | - |  |  |  |
Forfeited |  | - |  | - |  |  |  |
Outstanding at August 31, 2015 |  | 631,250 | $ | 11.41 |  | 4.8 | $ | 3,361
Options vested and exercisable at |  |  |  |  |  |  |  |
August 31, 2015 |  | 631,250 | $ | 11.41 |  | 4.8 | $ | 3,361
Our stock options were awarded in fiscal 2011 and fiscal 2010 and 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. During fiscal 2014, we had 43,750 stock options exercised on a net share basis, which had an aggregate intrinsic value of $0.5 million. At August 31, 2015, there was no remaining unrecognized compensation expense related to our stock options and no options were exercised during the fiscal years ended August 31, 2015 or August 31, 2013. The following additional information applies to our stock options outstanding at August 31, 2015:
|  |  |  | Weighted |  |  |  |  |
|  | Number |  | Average |  |  |  | Options |
|  | Outstanding |  | Remaining |  | Weighted |  | Exercisable at | Weighted
|  | at August 31, |  | Contractual |  | Average |  | August 31, | Average
Exercise Prices |  | 2015 |  | Life (Years) |  | Exercise Price |  | 2015 | Exercise Price
$9.00 |  | 125,000 |  | 4.9 |  | $9.00 |  | 125,000 | $9.00
$10.00 |  | 168,750 |  | 4.8 |  | $10.00 |  | 168,750 | $10.00
$12.00 |  | 168,750 |  | 4.8 |  | $12.00 |  | 168,750 | $12.00
$14.00 |  | 168,750 |  | 4.8 |  | $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 2015, five individuals qualified for this award; 12 individuals qualified for the award in fiscal 2014; and six individuals qualified for the award in fiscal 2013. In the fourth quarter of fiscal 2015 the Compensation Committee approved a fully vested award equal to $10,000 for each general manager or area director that achieved a specified sales goal. Five individuals achieved their sales goals and qualified for the award. This award was only for fourth quarter fiscal 2015 sales performance and no additional awards may be granted under the terms of this award. 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, 2015 or August 31, 2014. 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. We issued a total of 42,687 shares, 36,761 shares, and 45,845 shares to ESPP participants during the fiscal years ended August 31, 2015, 2014, and 2013, which had a corresponding cost basis of $0.6 million, $0.5 million, and $0.6 million, respectively. We received cash proceeds for these shares from ESPP participants totaling $0.7 million, $0.6 million, and $0.5 million during the fiscal years ended August 31, 2015, 2014, and 2013.

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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 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: 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 3: 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 4: 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 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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