Stock-Based Compensation Plans | 3 Months Ended |
Aug. 30, 2014 |
Stock Based Compensation Plans [Abstract] | ' |
Stock Based Compensation Plans | ' |
7. Stock-Based Compensation Plans |
Stock Options and Restricted Stock |
As of August 30, 2014, the Company had outstanding award grants under the 2004 Plan and the 1999 Long Term Incentive Plan (“1999 Plan”). The 2004 Plan serves as the successor to the 1999 Plan. At inception, a total of 7,500,000 new shares of common stock were made available for awards under the 2004 Plan to employees and non-employee directors. Awards under the 2004 Plan may include, but are not limited to, stock options and restricted stock grants. Outstanding awards under the 1999 Plan that expire or terminate without having been exercised roll over to the 2004 Plan. Stock option grants generally vest in equal annual installments over four years and terminate ten years from the date of grant. Restricted stock award vesting is determined on an individual grant basis. |
The 2004 Plan and 1999 Plan (the “Prior Stock Plans”) expired on September 3, 2014. After the expiration, no additional awards may be granted under the Prior Stock Plans but previously granted awards will remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of the Prior Stock Plans. Our stockholders will vote at the 2014 Annual Meeting of Stockholders on October 23, 2014 on the Resources Connection, Inc. 2014 Performance Incentive Plan (the “2014 Plan”), which was adopted, subject to stockholder approval, by the Board of Directors on September 3, 2014. The key features of the 2014 Plan include: 1) 2,400,000 shares will be available for award grant purposes; 2) outstanding awards under the Prior Stock Plans that expire or terminate without having been exercised will roll over to the 2014 Plan; 3) repricing of options cannot occur without shareholder approval; 4) shares surrendered, expired, or returned to the Company solely to satisfy the exercise price or tax withholding obligations for stock options cannot be reissued; and 5) net share counting is not allowed for options or dividend equivalent rights. |
As of August 30, 2014, there were 184,000 shares that potentially could rollover to the 2014 Plan as available for future award grants if shareholders approve the 2014 Plan. Awards of restricted stock under the 2014 Plan will be counted against the available share limit as two and a half shares for every one share actually issued in connection with the award. The Company’s policy is to issue shares from its authorized shares upon the exercise of stock options. The following table summarizes the stock option activity for the three months ended August 30, 2014 (number of shares under option and intrinsic value in thousands): |
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| | Number of | | | Weighted | | Weighted Average | | | |
| | Shares | | | Average | | Remaining | | | Aggregate |
| | Under | | | Exercise | | Contractual Life | | | Intrinsic |
| | Option | | | Price | | (in years) | | | Value |
Options outstanding at May 31, 2014 | | 7,696 | | $ | 18.93 | | 5.21 | | $ | 1,611 |
Granted, at fair market value | | 1,387 | | | 12.22 | | | | | |
Exercised | | -128 | | | 12.44 | | | | | |
Forfeited | | -32 | | | 12.53 | | | | | |
Expired | | -24 | | | 20.03 | | | | | |
Options outstanding at August 30, 2014 | | 8,899 | | $ | 18.00 | | 5.66 | | $ | 12,216 |
Exercisable at August 30, 2014 | | 5,846 | | $ | 20.87 | | 3.99 | | $ | 2,902 |
Vested and expected to vest at August 30, 2014 | | 8,420 | | $ | 18.34 | | 5.45 | | $ | 10,679 |
The aggregate intrinsic value in the table above represents the total pretax intrinsic value, which is the difference between the Company’s closing stock price on the last trading day of the first quarter of fiscal 2015 and the exercise price multiplied by the number of shares that would have been received by the option holders if they had exercised their “in the money” options on August 30, 2014. This amount will change based on the fair market value of the Company’s common stock. The aggregate intrinsic value of stock options exercised for the three months ended August 30, 2014 and August 24, 2013 was $347,000 and $289,000, respectively. |
Stock-Based Compensation Expense |
As of August 30, 2014, there was $11.1 million of total unrecognized compensation cost related to non-vested employee stock options granted. That cost is expected to be recognized over a weighted-average period of 35 months. Stock-based compensation expense included in selling, general and administrative expenses for the three months ended August 30, 2014 and August 24, 2013 was $1.5 million and $1.7 million, respectively; this consisted of stock-based compensation expense related to employee stock options, employee stock purchases made via the Company’s ESPP and restricted stock awards. There were no capitalized share-based compensation costs during the three months ended August 30, 2014 and August 24, 2013. |
The weighted average estimated fair value per share of employee stock options granted during the three months ended August 30, 2014 was $3.87 using the Black-Scholes valuation model with the following assumptions: |
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| | For the Three Months Ended | | | | | | | |
| | 30-Aug-14 | | | | | | | | |
Expected volatility | | 37.7% - 42.1% | | | | | | | | |
Risk-free interest rate | | 1.7% - 2.2% | | | | | | | | |
Expected dividends | | 2.10% | | | | | | | | |
Expected life | | 5.5 - 7.5 years | | | | | | | | |
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The Company granted 6,314 and 5,141 shares of restricted stock during the three months ended August 30, 2014 and August 24, 2013, respectively. Stock-based compensation expense for restricted stock awards for the three months ended August 30, 2014 and August 24, 2013 was $123,000 and $85,000, respectively. There were 85,907 unvested restricted shares, with approximately $860,000 of remaining unrecognized compensation cost, as of August 30, 2014. |
The Company recognizes compensation expense for only the portion of stock options and restricted stock that is expected to vest, rather than recording forfeitures when they occur. If the actual number of forfeitures differs from that estimated by management, additional adjustments to compensation expense may be required in future periods. |
The Company reflects, in its Consolidated Statements of Cash Flows, the tax impact resulting from tax deductions in excess of expense recognized in its Consolidated Statements of Operations as a financing cash flow, which will impact the Company’s future reported cash flows from operating activities. Gross excess tax benefits totaled $14,000 and $1,000 for the three months ended August 30, 2014 and August 24, 2013, respectively. |
Employee Stock Purchase Plan |
The Company’s ESPP allows qualified employees (as defined in the ESPP) to purchase designated shares of the Company’s common stock at a price equal to 85% of the lesser of the fair market value of common stock at the beginning or end of each semi-annual stock purchase period. A total of 4,400,000 shares of common stock may be issued under the ESPP. The Company issued 171,000 and 348,000 shares of common stock pursuant to the ESPP for the three months ended August 30, 2014 and the year ended May 31, 2014, respectively. There were 268,000 shares of common stock available for issuance under the ESPP as of August 30, 2014. |
At the 2014 Annual Meeting of Stockholders on October 23, 2014, stockholders will be asked to approve an amendment to the ESPP to extend the term of the ESPP through October 16, 2024, and increase the maximum number of shares of the Company’s common stock authorized for issuance under the plan by an additional 1,500,000 shares. The amendment was adopted, subject to stockholder approval, by the Board of Directors on September 3, 2014. |
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