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STOCK-BASED COMPENSATION | 12 Months Ended
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Apr. 29, 2012
STOCK-BASED COMPENSATION |
13. | STOCK-BASED COMPENSATION
Equity Incentive Plan Description On September 20, 2007, our shareholders approved an equity incentive plan entitled the Culp, Inc. 2007 Equity Incentive Plan (the “2007 Plan”). The types of equity based awards available for grant under the 2007 Plan include stock options, stock appreciation rights, restricted stock and restricted stock units, performance units, and other discretionary awards as determined by our Compensation Committee. An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2007 Plan. In conjunction with the approval of the 2007 Plan, our 2002 Stock Option Plan was terminated (with the exception of currently outstanding options) and no additional options will be granted under the 2002 Stock Plan. At April 29, 2012 there were 795,811 shares available for future equity based grants under the company’s 2007 Plan. Stock Options Under our 2007 Plan, employees, directors, and others associated with the company may be granted options to purchase shares of common stock at the fair market value on the date of grant. No options were granted to employees in fiscal 2012, 2011 or 2010, respectively. No options were granted to outside directors during fiscal 2012 or 2011. During fiscal 2010, outside directors were granted 6,000 option shares. Options granted to outside directors vest immediately on the date of grant (October each fiscal year) and expire ten years after the date of grant. The company recorded compensation expense of $134,000, $145,000, and $338,000 within selling, general, and administrative expense for incentive stock options in fiscal 2012, 2011, and 2010, respectively. The fair value of stock options granted to outside directors at each grant date during fiscal 2010 was $4.44, using the following assumptions:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Risk-free interest rate |  |  | - |  |  |  | - |  |  |  | 3.21 | %
Dividend yield |  |  | - |  |  |  | - |  |  |  | 0.00 | %
Expected volatility |  |  | - |  |  |  | - |  |  |  | 69.06 | %
Expected term (in years) |  |  | - |  |  |  | - |  |  |  | 10 |
The fair value of the above option award was estimated on the date of grant using a Black-Scholes option-pricing model. The assumptions utilized in the model are evaluated and revised, as necessary, to reflect market conditions, actual historical experience, and groups of participants that have similar exercise patterns that are considered separately for valuation purposes. The risk-free interest rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The dividend yield is calculated based on the company’s annual dividend as of the option grant date. The expected volatility is derived using a term structure based on historical volatility and the volatility implied by exchange-traded options on the company’s common stock. The expected term of the options is based on the contractual term of the stock options, expected participant exercise and post-vesting employment termination trends. The following table summarizes stock option activity for fiscal 2012, 2011, and 2010:
|  |  |  |  | 2012 |  |  |  |  |  | 2011 |  |  |  |  |  | 2010 |
|  |  |  |  | Weighted- |  |  |  |  |  | Weighted- |  |  |  |  |  | Weighted- |
|  |  |  |  | Average |  |  |  |  |  | Average |  |  |  |  |  | Average |
|  |  |  |  | Exercise |  |  |  |  |  | Exercise |  |  |  |  |  | Exercise |
|  | Shares |  |  | Price |  |  | Shares |  |  | Price |  |  | Shares |  |  | Price |
outstanding at beginning of year |  |  | 268,875 |  |  | $ | 6.81 |  |  |  | 498,849 |  |  | $ | 5.87 |  |  |  | 735,765 |  |  | $ | 5.85 |
granted |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,000 |  |  |  | 5.79 |
exercised |  |  | (59,400 | ) |  |  | 5.50 |  |  |  | (229,974 | ) |  |  | 4.77 |  |  |  | (144,916 | ) |  |  | 4.64 |
canceled/expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (98,000 | ) |  |  | 7.56 |
outstanding at end of year |  |  | 209,475 |  |  |  | 7.22 |  |  |  | 268,875 |  |  |  | 6.81 |  |  |  | 498,849 |  |  |  | 5.87 |
|  |  | Options Outstanding |  | Options Exercisable |
|  |  | Number |  |  | Weighted-Avg. |  |  |  |  | Number |  |  |  |
Range of |  |  | Outstanding |  |  | Remaining |  | Weighted-Avg. |  |  | Exercisable |  |  | Weighted-Avg. |
Exercise Prices |  |  | at 4/29/12 |  |  | Contractual Life |  | Exercise Price |  |  | at 4/29/12 |  |  | Exercise Price |
$ | 1.88 - $ 1.88 |  |  |  | 40,000 |  |  | 7.0 | years |  | $ | 1.88 |  |  |  | 24,000 |  |  | $ | 1.88 |
$ | 4.59 - $ 5.41 |  |  |  | 6,000 |  |  |  | 3.8 |  |  | $ | 4.86 |  |  |  | 6,000 |  |  | $ | 4.86 |
$ | 7.08 - $ 7.27 |  |  |  | 27,125 |  |  |  | 5.4 |  |  | $ | 7.12 |  |  |  | 17,125 |  |  | $ | 7.14 |
$ | 8.75 - $ 10.11 |  |  |  | 136,350 |  |  |  | 4.6 |  |  | $ | 8.91 |  |  |  | 111,150 |  |  | $ | 8.94 |
|  |  |  |  | 209,475 |  |  |  | 5.1 |  |  | $ | 7.22 |  |  |  | 158,275 |  |  | $ | 7.52 |
At April 29, 2012, outstanding options to purchase 158,275 shares were exercisable, had a weighted average exercise price of $7.52 per share, an aggregate intrinsic value of $558,000, and a weighted average contractual term of 4.8 years. At April 29, 2012, the aggregate intrinsic value for options outstanding was $802,000 with a weighted average contractual term of 5.1 years. The aggregate intrinsic value for options exercised was $220,000, $1.1 million, and $982,000 in fiscal 2012, 2011, and 2010, respectively. The remaining unrecognized compensation costs related to unvested awards at April 29, 2012 was $62,000 which is expected to be recognized over a weighted average period of 1 year. Time Vested Restricted Stock Awards On July 1, 2009 (fiscal 2010), two executive officers were granted 80,000 shares of time vested restricted common stock. This time vested restricted stock award vests in equal one-third installments on July 1, 2012, 2013, and 2014. The fair value (the closing price of the company’s common stock) of this restricted stock award is measured at the date of grant (July 1, 2009) and was $5.08 per share. On January 7, 2009 (fiscal 2009), certain key management employees and a non-employee were granted 115,000 shares of time vested restricted common stock. Of these 115,000 shares, 105,000 and 10,000 were granted to employees and a non-employee, respectively. This time vested restricted stock award vests in equal one-third installments on May 1, 2012, 2013, and 2014. The fair value of this restricted stock award for key management employees is measured at the date of grant (January 7, 2009) and was $1.88 per share. The fair value of this restricted stock award for the non-employee is measured at the end of each reporting period and was $11.05 per share at April 29, 2012. The following table summarizes the time vested restricted stock activity for fiscal 2012, 2011, and 2010:
|  | 2012 |  |  | 2011 |  |  | 2010 |
|  | Shares |  |  | Shares |  |  | Shares |
outstanding at beginning of year |  |  | 195,000 |  |  |  | 195,000 |  |  |  | 115,000 |
granted |  |  | - |  |  |  | - |  |  |  | 80,000 |
vested |  |  | (10,000 | ) |  |  | - |  |  |  | - |
outstanding at end of year |  |  | 185,000 |  |  |  | 195,000 |  |  |  | 195,000 |
During fiscal 2012, 10,000 shares of time vested restricted stock were vested due to disability and had a weighted average fair value of $18,800 or $1.88 per share. At April 29, 2012, there were 185,000 shares of time vested restricted stock and unvested. Of the 185,000 shares outstanding and unvested, 105,000 shares were granted on January 7, 2009 and 80,000 shares were granted on July 1, 2009. At April 29, 2012, the weighted average fair value of these outstanding and unvested shares was $3.76 per share. At May 1, 2011, there were 195,000 shares of time vested restricted stock outstanding and unvested. Of the 195,000 shares outstanding and unvested, 115,000 shares were granted on January 7, 2009 and 80,000 shares were granted on July 1, 2009. At May 1, 2011, the weighted average fair value of these outstanding and unvested shares was $3.61 per share. At April 29, 2012, the remaining unrecognized compensation cost related to the unvested restricted stock awards was $164,000, which is expected to be recognized over a weighted average vesting period of 1.6 years. We recorded compensation expense of $189,000, $172,000 and $174,000 within selling, general, and administrative expense for time vested restricted stock awards in fiscal 2012, 2011 and fiscal 2010, respectively. Performance Based Restricted Stock Units We did not grant any performance based restricted stock units during fiscal 2012, 2011, and 2010 respectively. On January 7, 2009 (fiscal 2009), certain key management employees and a non-employee were granted 120,000 shares of performance based restricted stock units. This award contingently vested in one third increments, if in any discrete period of two consecutive quarters from February 2, 2009 through April 30, 2012, certain performance goals were met, as defined in the agreement. As of August 1, 2010 (our fiscal 2011), the performance goals as defined in the agreement were met and as a result, all of the performance based restricted stock units were vested. The fair value (the closing price of the company’s common stock) of the performance based restricted stock units granted to key management employees was measured at the date of grant (January 7, 2009) and was $1.88 per share. The fair value (the closing price of the company’s common stock) of the performance based restricted stock units granted to a non-employee was measured at the earlier date of when the performance criteria was met or the end of the respective reporting period. The performance based restricted stock units granted to the non-employee vested in one-third increments on August 2, 2009, January 31, 2010, and August 1, 2010, and were measured at $6.59, $13.01, and $10.42 per share, respectively, which represented the closing price of the company’s common stock at the date on which the performance criteria was met. We recorded compensation expense of $12,000 and $322,000 within selling, general, and administrative expense for performance based restricted stock units in fiscal 2011 and fiscal 2010 respectively. No compensation expense was recorded for performance based restricted stock units in fiscal 2012 as the performance based restricted stock units granted in fiscal 2009 were fully vested in fiscal 2011 and no performance based restricted stock units were granted in fiscal years 2010 through 2012. Of the 120,000 vested shares, 105,000 and 15,000 shares pertained to key management employees and a non-employee, respectively. Of the 120,000 vested shares, 40,000 and 80,000 shares were vested in fiscal 2011 and 2010, respectively. The total fair value of the 40,000 performance based restricted stock units that vested during fiscal 2011 was $117,900 and had a weighted average grant date fair value of $2.95 per share. The total fair value of the 80,000 performance based restricted stock units that vested during fiscal 2010 was $230,000 and had a weighted average grant date fair value of $2.97 per share. Common Stock Awards On October 1, 2011, we granted a total of 3,075 shares of common stock to our board of directors. These shares of common stock vested immediately and were measured at $8.45 per share, which represents the closing price of the company’s common stock at the date of grant. On October 1, 2010, we granted a total of 3,114 shares of common stock to our board of directors. These shares of common stock vested immediately and were measured at a fair value of $10.02 per share, which represents the closing price of our common stock at the date of grant. We recorded $26,000 and $31,000 of compensation expense within selling, general, and administrative expense for these common stock awards for fiscal 2012 and 2011, respectively. There were not any common stock awards for fiscal 2010 and, therefore, no compensation was recorded for fully vested common stock awards for this fiscal year. Other Share-Based Arrangements The company had a stock-based compensation agreement with a non-employee that required us to settle in cash and was indexed by shares of our common stock as defined in the agreement. The cash settlement was based on a 30-day average closing price of our common stock at the time of payment. During fiscal 2011, this agreement was terminated and settled for a cash payment of $644,000 that was indexed on 68,260 shares of our common stock at $9.44 per share. The $9.44 per share represents the closing price of our common stock on the date this agreement was settled. Effective May 2, 2011, we entered into an agreement in which we granted a non-employee a stock appreciation right that is indexed on 70,000 shares of our common stock. This agreement requires us to settle in cash an amount equal to $35,000, plus the excess, if any, over a stock appreciation right value of $700,000 at May 2, 2011. This stock appreciation right value of $700,000 represents the 70,000 indexed shares of common stock noted above measured at the closing price per share of $10.00 at May 2, 2011. The cash settlement in connection with the stock appreciation right value would represent the difference between a stock appreciation right value that is indexed on the 70,000 shares of common stock noted above and based on the highest closing price per share of our common stock for the period May 2, 2011 through June 30, 2012 (limited to $12.00 per share) and the $700,000 stock appreciate right value at May 2, 2011. This award will vest over the period May 2, 2011 through June 30, 2012 as this represents the non-employee’s required service period. The fair value of this agreement was included in accrued expenses and was $134,000 at April 29, 2012. We recorded $134,000 of compensation expense within selling, general, and administrative expense for this agreement during fiscal 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 SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 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 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 AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: 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 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: 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 + Details
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