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EQUITY-BASED INCENTIVE AWARDS
 9 Months Ended
Jun. 30, 2012
EQUITY-BASED INCENTIVE AWARDS  
EQUITY-BASED INCENTIVE AWARDS

9. EQUITY-BASED INCENTIVE AWARDS

 

Omnibus Plan

 

The Company has an Omnibus Incentive Plan (“the Omnibus Plan”) which provides for equity incentives to employees. The Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plan permits the issuance of up to 150,000 shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash. The number of shares issuable under the Omnibus Plan is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock.  At June 2012, awards with respect to a total of 109,800 shares, net of forfeitures, had been awarded pursuant to the Omnibus Plan and awards with respect to another 40,200 shares may be awarded under the plan.

 

Stock Options

 

During the nine month period ended June 2012, the Company issued 6,500 incentive stock options to various employees pursuant to the provisions of the Company’s Omnibus Plan. These awards vest in equal installments over a five year service period and had an estimated fair value of approximately $0.1 million using the Black-Scholes option pricing model. The following assumptions were used in connection with the Black-Scholes option pricing calculation:

 

 

 

Stock Option Pricing
Assumptions

 

Risk-free interest rate

 

2.39

%

Dividend yield

 

1.10

%

Expected volatility

 

27.90

%

Expected life in years

 

6

 

 

The stock options issued by the Company expire ten years from the grant date and include graded vesting schedules up to five years in length.  Stock options issued and outstanding at June 2012 are summarized as follows:

 

 

 

 

 

 

 

Remaining

 

 

 

Exercisable

 

 

 

Exercise
Price

 

Number
Outstanding

 

Weighted-Average
Contractual Life

 

Weighted-Average
Exercise Price

 

Number
Exercisable

 

Weighted-Average
Exercise Price

 

Fiscal 2003

 

$28.80

 

42

 

0.32 years

 

$

28.80

 

42

 

$

28.80

 

Fiscal 2007

 

$18.00

 

25,000

 

4.45 years

 

$

18.00

 

25,000

 

$

18.00

 

Fiscal 2010

 

$51.50

 

5,500

 

7.83 years

 

$

51.50

 

2,200

 

$

51.50

 

Fiscal 2012

 

$53.80 - $65.97

 

6,500

 

9.33 years

 

$

54.74

 

—

 

$

—

 

 

 

 

 

37,042

 

 

 

$

29.43

 

27,242

 

$

20.72

 

 

The following is a summary of stock options activity for the nine months ended June 2012:

 

 

 

Number
of
Shares

 

Weighted
Average
Exercise
Price

 

Outstanding at September 2011

 

30,583

 

$

24.05

 

Granted

 

6,500

 

54.74

 

Exercised

 

(41

)

28.80

 

Forfeited/Expired

 

—

 

—

 

Outstanding at June 2012

 

37,042

 

$

29.43

 

 

Restricted Stock Units

 

Restricted stock units issued and outstanding at June 2012 are as follows:

 

 

 

Restricted Stock Units (1)

 

Restricted Stock Units (2)

 

Restricted Stock Units (3)

 

Date of award:

 

November 22, 2010

 

November 22, 2010

 

October 26, 2011

 

Original number of awards issued:

 

38,400

 

12,000

 

15,900

 

Service period:

 

24 months

 

36 months

 

36 months

 

Estimated fair value of award at grant date:

 

$

2,765,000

 

$

864,000

 

$

855,000

 

Awards outstanding at June 2012

 

 

12,800

 

 

8,000

 

 

15,900

 

Fair value of non-vested awards at June 2012:

 

$

719,000

 

$

450,000

 

$

894,000

 

 

 

(1)

25,600 of the restricted stock unit awards were vested as of Q3 2012. The remaining 12,800 restricted stock units will vest on October 26, 2012.

 

 

(2)

4,000 of the restricted stock units were vested as of Q3 2012. The remaining 8,000 restricted stock units will vest in equal amounts (4,000 per year) on November 22, 2012 and November 22, 2013.

 

 

(3)

The 15,900 restricted stock units will vest in equal amounts (5,300 per year) on October 25, 2012, October 25, 2013 and October 25, 2014.

 

There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The recipients of the restricted stock units are entitled to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock.  All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.

 

The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Company’s shares, at the time of vesting.  Based on these award provisions, the compensation expense recorded in the Company’s Condensed Statement of Operations reflects the amortization of these awards over their respective service life.  The awards and their related compensation and amortization expense are also adjusted to fair value at each reporting date until vested.  The following summarizes restricted stock unit activity under the Omnibus Plan for the nine months ended June 2012:

 

 

 

Number
of
Shares

 

Weighted Average
Fair Value

 

Nonvested restricted stock units at September 2011

 

37,600

 

$

57.00

 

Granted

 

15,900

 

$

53.80

 

Vested

 

(16,800

)

$

56.58

 

Expired

 

—

 

$

—

 

Nonvested restricted stock units at June 2012

 

36,700

 

$

64.40

 

 

All Equity-Based Awards (stock options and restricted stock units)

 

For the three and nine months ended June 2012, net income before income taxes included compensation expense of $0.3 million and $0.9 million, respectively, related to the amortization of all equity-based compensation awards. Total unamortized compensation expense for these awards at June 2012 was approximately $1.4 million.