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Stock-Based Compensation Plans | 12 Months Ended
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Aug. 31, 2020
Stock-Based Compensation Plans [Abstract] |
Stock-Based Compensation Plans | ﻿ 12.STOCK-BASED COMPENSATION PLANS ﻿ Overview ﻿ We utilize various stock-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, restricted stock awards, stock options, fully-vested stock awards, and employee stock purchase plan (ESPP) shares. The Organization and Compensation Committee of the Board of Directors (the Compensation Committee) has responsibility for the approval and oversight of our stock-based compensation plans. ﻿ On January 25, 2019, our shareholders approved the Franklin Covey Co. 2019 Omnibus Incentive Plan (the 2019 Plan), which authorized an additional 700,000 shares of common stock for issuance to employees and members of the Board of Directors as stock-based payments. A more detailed description of the 2019 Plan is set forth in our Definitive Proxy Statement filed with the SEC on December 20, 2018. At August 31, 2020, the 2019 Plan had approximately 511,000 shares available for future grants. ﻿ Our employee stock purchase plan (ESPP) is administered under the terms of the Franklin Covey Co. 2017 Employee Stock Purchase Plan, which was approved by our shareholders at the annual meeting of shareholders held on January 26, 2018. For additional information regarding the Franklin Covey Co. 2017 Employee Stock Purchase Plan, please refer to our definitive Proxy Statement as filed with the SEC on December 22, 2017. At August 31, 2020, we had approximately 862,000 shares available for purchase by plan participants under the terms of the current shareholder-approved ESPP. ﻿ The total compensation expense of our stock-based compensation plans was as follows (in thousands):
﻿ |  |  |  |  |  |
﻿ |  |  |  |  |  |
﻿YEAR ENDED |  |  |  |  |  |
﻿AUGUST 31, |  | 2020 |  | 2019 |  | 2018
﻿Performance awards | $ | (1,518) | $ | 3,853 | $ | 2,034
﻿Restricted stock awards |  | 700 |  | 700 |  | 642
﻿Compensation cost of the ESPP |  | 185 |  | 176 |  | 155
﻿Fully vested stock awards |  | 60 |  | 60 |  | 15
﻿ | $ | (573) | $ | 4,789 | $ | 2,846
﻿ At each quarterly or annual reporting date, we evaluate number and probability of shares expected to vest in each of our performance-based long-term incentive plan (LTIP) awards and adjust our stock-based compensation expense to correspond with the number of shares expected to vest over the anticipated service period. Due to the significant impact of the COVID-19 pandemic on our results of operations in the third quarter of fiscal 2020 and the uncertainties surrounding the recovery of the world’s economies and our business, we determined that the LTIP award tranches which are based on qualified Adjusted EBITDA for our fiscal 2015, 2016, 2017, 2019, and 2020 LTIP awards would not vest before the end of the respective service periods. We therefore reversed the previously recognized stock-based compensation expense associated with these awards during fiscal 2020, which resulted in a credit to stock-based compensation for the year. ﻿ No stock-based compensation was capitalized during the fiscal years presented in this report. We recognize forfeitures of stock-based compensation instruments as they occur. During fiscal 2020, we issued 311,452 shares of our common stock from shares held in treasury for various stock-based compensation arrangements. Our stock-based compensation plans allow shares to be withheld from the award to pay statutory income tax liabilities. We withheld 109,896 shares of our common stock (Note 10) for statutory income taxes during fiscal 2020. ﻿ The following is a description of our stock-based compensation plans. ﻿ Performance Awards ﻿ The Compensation Committee has awarded various performance-based stock compensation awards to members of our senior management as long-term incentive plan (LTIP) compensation. These awards vest to the participants based upon the achievement of specified performance criteria. 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 are made on a cumulative basis at the date of the adjustment. We reevaluate the likelihood of shares vesting under performance awards at each reporting date. ﻿ No LTIP awards vested to participants during fiscal 2020 or fiscal 2019. The following is a description of our performance-based LTIP awards as of August 31, 2020. ﻿ Fiscal 2020 LTIP Award – On October 18, 2019, the Compensation Committee of the Board of Directors granted a new LTIP award to our executive officers and members of senior management. The fiscal 2020 LTIP award has three tranches, which consist of the following: 1) shares that vest after three years of service; 2) the achievement of specified levels of qualified Adjusted EBITDA; and 3) the achievement of specified levels of subscription service sales. Twenty-five percent of a participant’s award vests after three years of service, and the number of shares awarded in this tranche does not fluctuate based on financial measures. The number of shares granted in this tranche totals 25,101 shares. The remaining two tranches of the award are based on the highest rolling four-quarter levels of qualified Adjusted EBITDA and subscription service sales achieved in the three-year period ended August 31, 2022. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award (minimum award threshold) up to 200 percent of the participant’s award (maximum threshold). The maximum number of shares that may be awarded in connection with these tranches totals 150,630 shares. The fiscal 2020 LTIP has a three-year life and expires on August 31, 2022. ﻿ Fiscal 2019 LTIP Award – On October 1, 2018, the Compensation Committee granted a performance-based LTIP award to our executive officers and members of senior management, which is similar to the fiscal 2020 LTIP described above. The fiscal 2019 LTIP award has three tranches, which consist of the following: 1) shares that vest after three years of service; 2) the achievement of certain levels of qualified Adjusted EBITDA; and 3) the achievement of certain levels of subscription service sales. Twenty-five percent of a participant’s award vests after three years of service, and the number of shares awarded in this tranche will not fluctuate based on financial measures. The number of shares granted in this tranche totals 36,470 shares. The remaining two tranches of the fiscal 2019 award are based on the highest rolling four-quarter levels of qualified Adjusted EBITDA and subscription service sales achieved in the three-year period ended August 31, 2021. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award (minimum threshold) up to 200 percent of the participant’s award (maximum threshold). The maximum number of shares that may be awarded in connection with these tranches totals 218,818 shares. The fiscal 2019 LTIP has a three-year life and expires on August 31, 2021. ﻿ Fiscal 2019 Time-Based Award – On January 25, 2019, the Compensation Committee approved an incentive plan award for the Chief Executive Officer, Chief Financial Officer, and Chief People Officer that has a two-year time-based vesting (service) condition. A total of 11,915 shares were issued to the participants in connection with this award. The fair value of this award was calculated by multiplying the number of shares times the closing price of the Company’s common stock on the grant date, which was $24.54 per share. The fair value of this award totals $0.3 million, which is being expensed evenly over the two-year service period. ﻿ Fiscal 2018 LTIP Award – On November 14, 2017, the Compensation Committee granted a performance-based LTIP award to our executive officers and members of senior management. The fiscal 2018 LTIP award has three tranches, which consist of the following: 1) shares that vest after three years of service; 2) the achievement of specified levels of qualified Adjusted EBITDA; and 3) the achievement of specified levels of subscription service sales. Twenty-five percent of a participant’s award vests after three years of service, and the number of shares awarded in this tranche will not fluctuate based on financial measures. The number of shares granted in this tranche totals 42,883 shares. The remaining two tranches of the fiscal 2018 award are based on the highest rolling four-quarter levels of qualified Adjusted EBITDA and subscription service sales achieved in the three-year period ended August 31, 2020. The number of shares that will vest to participants for these two tranches is variable and may be 50 percent of the award up to 200 percent of the participant’s award. The maximum number of shares that may be awarded in connection with these tranches totals 257,300 shares. Based on financial results achieved in the three-year period ended August 31, 2020, a total of 221,067 shares were earned by participants in the fiscal 2018 LTIP. The shares earned in the fiscal 2018 LTIP were distributed to participants in the first quarter of fiscal 2021. ﻿ Fiscal 2017 LTIP Award – On October 18, 2016, the Compensation Committee granted performance-based awards for our executive officers and members of senior management. A total of 183,381 shares may be earned by the participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter Adjusted EBITDA and trailing four-quarter gross All Access Pass sales. As of August 31, 2020, four tranches of this award have vested, totaling 97,803 shares. The 2017 LTIP has a six-year life and expires on August 31, 2022. ﻿ Fiscal 2016 LTIP Award – The fiscal 2016 LTIP was granted on November 12, 2015, to our executive officers and members of senior management. A total of 231,276 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 increased sales of Organizational Development Suite (OD Suite) offerings. The OD Suite is defined as Leadership, Productivity, and Trust practice sales. As of August 31, 2020, four tranches of the fiscal 2016 LTIP have vested to participants, totaling 123,348 shares. The 2016 LTIP has a six-year life and expires on August 31, 2021. ﻿ ﻿ Fiscal 2015 LTIP Award – During fiscal 2015, the Compensation Committee granted a performance-based award for our executive officers and certain members of senior management. A total of 112,464 shares were eligible to be awarded to participants based on six individual vesting conditions that are divided into two performance measures, trailing four-quarter Adjusted EBITDA and increased sales of OD Suite sales. As of August 31, 2020, a total of 59,980 shares, or four tranches, of the fiscal 2015 LTIP vested to participants. The 2015 LTIP had a six-year life that concluded on August 31, 2020 and the remaining award tranches, totaling 52,484 shares, expired unvested to the participants. ﻿ Restricted Stock Awards ﻿ The annual Board of Director restricted stock award, which is administered under the terms of the Franklin Covey Co. 2019 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 $100,000 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 may not be voted or participate in any common stock dividends until they are vested. ﻿ We issued 21,420 shares, 28,525 shares, and 23,338 shares of our common stock to eligible members of the Board of Directors during fiscal 2020, fiscal 2019, and fiscal 2018 as restricted stock awards. The fair value of shares awarded to the directors was $0.7 million in each of fiscal 2020, fiscal 2019, and fiscal 2018 as calculated on the grant date of the awards. The corresponding compensation cost of each award is recognized over the service period of the award, which is one year. The cost of the common stock issued from treasury for these awards was $0.3 million in fiscal 2020, $0.4 million in fiscal 2019, and $0.3 million in fiscal 2018. The following information applies to our restricted stock awards for the fiscal year ended August 31, 2020: ﻿
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﻿ |  |  |  |
﻿ |  |  |  | Weighted-
﻿ |  |  |  | Average Grant-
﻿ |  |  |  | Date Fair
﻿ |  | Number of |  | Value Per
﻿ |  | Shares |  | Share
﻿Restricted stock awards at |  |  |  |
﻿August 31, 2019 |  | 28,525 | $ | 24.54
﻿Granted |  | 21,420 |  | 32.68
﻿Forfeited |  | - |  | -
﻿Vested |  | (28,525) |  | 24.54
﻿Restricted stock awards at |  |  |  |
﻿August 31, 2020 |  | 21,420 | $ | 32.68
﻿ At August 31, 2020, there was $0.2 million of unrecognized compensation cost on our restricted stock awards, which is expected to be recognized over the remaining service period of approximately four months. The total recognized income tax benefit from restricted stock awards totaled $0.2 million for each of the years ended August 31, 2020, 2019, and 2018. The intrinsic value of our restricted stock awards at August 31, 2020 was $0.4 millio n. ﻿ 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. At August 31, 2020, there was no remaining unrecognized compensation expense related to our stock options and the remaining stock options outstanding expire in January 2021. Information related to our stock option activity during the fiscal year ended August 31, 2020 is presented below:
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﻿ |  |  |  |  |  |  |  |
﻿ |  |  |  |  |  | Weighted |  |
﻿ |  |  |  | Weighted |  | Average |  |
﻿ |  |  |  | Avg. Exercise |  | Remaining |  | Aggregate
﻿ |  | Number of |  | Price Per |  | Contractual |  | Intrinsic Value
﻿ |  | Stock Options |  | Share |  | Life (Years) |  | (thousands)
﻿Outstanding at August 31, 2019 |  | 568,750 | $ | 11.67 |  |  |  |
﻿Granted |  | - |  | - |  |  |  |
﻿Exercised |  | (350,000) |  | 11.73 |  |  |  |
﻿Forfeited |  | - |  | - |  |  |  |
﻿Outstanding at August 31, 2020 |  | 218,750 | $ | 11.57 |  | 0.4 | $ | 1,787
﻿ |  |  |  |  |  |  |  |
﻿Options vested and exercisable at |  |  |  |  |  |  |  |
﻿August 31, 2020 |  | 218,750 | $ | 11.57 |  | 0.4 | $ | 1,787
﻿ The stock options exercised during fiscal 2020 were exercised on a net basis (no cash was paid to exercise the options) and we withheld 102,656 shares of our common stock for statutory income taxes, which had a fair value of $3.6 million. The intrinsic value of the exercised options totaled $8.0 million and we recognized an income tax benefit of $1.8 million from the exercise of these options. No options were exercised during either fiscal 2019 or 2018. ﻿ The following additional information applies to our stock options outstanding at August 31, 2020:
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﻿ |  |  |  |  |  |  |  |  |
﻿ |  |  |  | Weighted |  |  |  |  |
﻿ |  | Number |  | Average |  |  |  | Options |
﻿ |  | Outstanding |  | Remaining |  | Weighted |  | Exercisable at | Weighted
﻿ |  | at August 31, |  | Contractual |  | Average |  | August 31, | Average
﻿Exercise Prices |  | 2020 |  | Life (Years) |  | Exercise Price |  | 2020 | Exercise Price
﻿$9.00 |  | 31,250 |  | 0.4 |  | $9.00 |  | 31,250 | $9.00
﻿$10.00 |  | 62,500 |  | 0.4 |  | $10.00 |  | 62,500 | $10.00
﻿$12.00 |  | 62,500 |  | 0.4 |  | $12.00 |  | 62,500 | $12.00
﻿$14.00 |  | 62,500 |  | 0.4 |  | $14.00 |  | 62,500 | $14.00
﻿ |  | 218,750 |  |  |  |  |  | 218,750 |
﻿ Employee Stock Purchase Plan ﻿ We have 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. ESPP participants purchased a total of 41,409 shares, 43,073 shares, and 40,941 shares our stock during the fiscal years ended August 31, 2020, 2019, and 2018, which had a corresponding cost basis of $0.6 million each year. We received cash proceeds for these shares from ESPP participants totaling $1.0 million in fiscal 2020; $1.0 million during fiscal 2019; and $0.8 millio n in fiscal 2018. ﻿ Fully Vested Stock Awards ﻿ We have a stock-based incentive program that is designed to reward our client partners and training consultants for exceptional long-term performance. The program grants shares of our common stock to client partners who have achieved certain cumulative sales goals and to training consultants who have delivered a specified number of training days during their career. During fiscal 2020, four employees qualified for this award program; four individuals qualified in fiscal 2019; and one individual qualified for this award in fiscal 2018.

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