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Stockholders' Equity
 6 Months Ended
Dec. 31, 2013
Stockholders' Equity  
Stockholders' Equity

Note 5 — Stockholders’ Equity

 

Common Stock

 

During the six months ended December 31, 2013 we issued (i) 1,008,657 shares of our common stock upon the exercise of incentive stock options (ISOs), receiving cash proceeds totaling $2.1 million, and (ii) 2,622,723 of our common shares upon cashless exercises of nonqualified stock options (NQSOs) and incentive warrants, all being exercised on a net basis, except for 50,956 of previously acquired shares owned by option holders that were swapped in payment of the exercise price.  The weighted average cost of these swapped shares was $12.14.

 

Additional paid-in capital increased $4.2 million, due to $1.1 million of stock compensation amortization ($0.4 million of which in the restructuring charge), $2.8 million from the exercise of stock options and warrants listed in (i) and (ii) above, and $0.4 million from tax benefits associated with stock compensation (i.e. windfall tax benefit).

 

Additional paid-in capital decreased by $2.8 million, due to the retirement of 801,889 shares of treasury stock acquired in previous fiscal years at a cost of approximately $1 million, and our purchase of 144,462 shares of Treasury Stock from employees and directors at a cost of $12.09 per share or $1.7 million.  93,506 of such shares were in satisfaction of payroll tax liabilities from exercises and restricted stock vestings (requiring cash outlays by us) and 50,956 shares were received from option holders in “swap” cashless stock option exercises, using stock previously owned by the option holder.  These acquisitions reduced the number of our common shares outstanding by 946,351 shares.

 

In December 2013 retained earnings were reduced by the $3.2 million of cash dividends we made to our common shareholders as the result of a common stock dividend policy approved by the Board of Directors in November 2013.  Since we expect the windfall tax benefit created by the recent exercise of warrants and NQSOs will drive our tax earnings and profits account into a deficit at June 30, 2014, all cash dividends on common shares paid in December 2013 will be treated for tax purposes as a return of capital and not as dividend income to the shareholder.

 

Recovery of Stockholder Short Swing Profit

 

In September 2013, an executive officer of the Company paid $6,850 to the Company, representing the disgorgement of short swing profits under Section 16(b) under the Exchange Act. The amount was recorded as additional paid-in capital.

 

Series A Cumulative Perpetual Preferred Stock

 

At December 31, 2013, there were 317,319 shares of the Company’s 8.5% Series A Cumulative (perpetual) Preferred Stock outstanding.  The Series A Cumulative Preferred Stock has a liquidation preference of $25.00 per share and cannot be converted into our common stock.  There are no sinking fund or redemption rights available to holders thereof.  Optional redemption can only be made by us on or after July 1, 2014 for the stated liquidation value of $25.00 per share plus accrued dividends, or earlier by an acquirer under a change of control at a redemption price of $25.25 per share.  With respect to dividend rights and rights upon our liquidation, winding-up or dissolution, the Series A Preferred Stock ranks senior to our common shareholders, but subordinate to any of our existing and future debt.  Dividends on the Series A Cumulative Preferred Stock accrue and accumulate at a fixed rate of 8.5% per annum on the $25.00 per share liquidation preference, payable monthly at $0.177083 per share, as, if and when declared by our Board of Directors.

 

During the six months ended December 31, 2013  we paid $337,151 of cash dividends to holders of our Series A Preferred Stock.  Since we expect the windfall tax benefit created by the recent exercise of warrants and NQSOs will drive our tax earnings and profits account into a deficit at June 30, 2014, cash dividends for the six months ended December 31, 2013 will be treated for tax purposes as a return of capital and not as dividend income to the shareholder.