| Share-Based Compensation | (7) Share-Based Compensation
Astro-Med has two equity incentive plans – the 2007 Equity
Incentive Plan (the “2007 Plan”) and the 2015 Equity
Incentive Plan (the “2015 Plan”). Under these plans,
the Company may grant incentive stock options, non-qualified stock
options, stock appreciation rights, time or performance based
restricted stock units (“RSUs”), restricted stock
awards (“RSAs”), and other stock-based awards to
executives, key employees, directors and other eligible
individuals. At August 1, 2015, 107,874 shares were available
for grant under the 2007 Plan, of which 100,000 are reserved for
stock options that the Company is obligated to issue to its CEO in
fiscal years 2017 and 2018 pursuant to an Equity Incentive Award
Agreement dated as of November 24, 2014 (the “CEO Equity
Incentive Agreement”). The 2007 Plan will expire in May 2017.
The 2015 Plan was approved by the Company’s shareholders at
the 2015 annual meeting. The 2015 Plan authorizes the issuance of
up to 500,000 shares (subject to adjustment for stock dividends and
stock splits) and will expire in May 2025. At August 1, 2015,
240,000 shares were available for grant under the 2015 Plan.
Options granted to employees under both Plans vest over four years
and expire after ten years. The exercise price of each stock option
will be established at the discretion of the Compensation
Committee; however, any incentive stock options granted under the
2007 Plan, and all options granted under the 2015 Plan, must be at
an exercise price of not less than the fair market value of the
Company’s common stock on the date of grant.
In March 2012 (fiscal year 2013), a portion of the Company’s
executives’ long-term incentive compensation was awarded in
the form of RSUs (“2013 RSUs”). The 2013 RSUs were
earned based on the Company achieving specific thresholds of net
sales and annual operating income as established under the fiscal
2013 Domestic Management Bonus Plan, and vested fifty percent on
the first anniversary of the grant date and fifty percent on the
second anniversary of the grant date provided that the grantee was
employed on each vesting date by Astro-Med or an affiliate company.
All such 2013 RSUs were earned and vested as of March 2014.
In April 2013 (fiscal year 2014), the Company granted options and
RSUs to officers (“2014 RSUs”). The 2014 RSUs will be
earned and vest as follows: twenty-five percent vest on the third
anniversary of the grant date, fifty percent vest upon the Company
achieving its cumulative budgeted net sales target for fiscal years
2014 through 2016 (the “Measurement Period”), and
twenty-five percent vest upon the Company achieving a target
average annual ORONA (operating income return on net assets as
calculated under the Domestic Management Bonus Plan) for the
Measurement Period. The grantee may not sell, transfer or otherwise
dispose of more than fifty percent of the common stock issued upon
vesting of the 2014 RSUs until the first anniversary of the vesting
date. On February 1, 2014, the Company accelerated the vesting
of 4,166 of the 2014 RSUs held by Everett Pizzuti in connection
with his retirement. None of the remaining 2014 RSUs, have vested
as of August 1, 2015.
In March 2015 (fiscal year 2016), the Company granted 50,000
options and 537 RSAs to its CEO pursuant to the CEO Equity
Incentive Agreement, and 35,000 options to other key employees. The
options and RSAs vest in four equal annual installments commencing
on the first anniversary of the grant date.
In May 2015 (fiscal year 2016), the Company granted an aggregate of
80,000 time-based and 155,000 performance-based RSUs (“2016
RSUs”) to certain officers of the Company. The time-based
2016 RSUs will vest in four equal annual installments commencing on
the first anniversary of the grant date. The performance-based 2016
RSUs will vest over three years based upon the increase in net
sales, if any, achieved each fiscal year relative to a three-year
net sales increase goal. Performance-based 2016 RSUs that are
earned based on organic revenue growth will be fully vested when
earned, while those earned based on revenue growth via acquisitions
will vest annually over a three-year period following the fiscal
year in which the revenue growth occurs. Any performance-based 2016
RSUs that have not been earned at the end of the three-year
performance period will be forfeited.
Under the Plans, each non-employee director receives an automatic
annual grant of ten-year options to purchase 5,000 shares of stock
upon the adjournment of each shareholders meeting. Each such option
is exercisable at the fair market value of the Company’s
common stock as of the grant date, and vests immediately prior to
the next succeeding shareholders’ meeting. During the second
quarter of fiscal 2016, 25,000 options in total were granted to the
non-employee directors. In addition to the automatic option grant,
the Company has a Non-Employee Director Annual Compensation Program
(the “Program”) which provides that each non-employee
director is entitled to an annual cash retainer of $7,000 (the
“Annual Cash Retainer”), plus $500 for each Board and
committee meeting attended. In addition, the Chairman of the Board
also receives an annual retainer of $6,000, and the Chairs of the
Audit and Compensation Committees each receive an annual retainer
of $4,000 (“Chair Retainer”). The non-employee
directors may elect, for any fiscal year, to receive all or a
portion of the Annual Cash Retainer and/or Chair Retainer
(collectively the “Cash Retainer”) in the form of
common stock of the Company, which will be issued under one of the
Plans. If a non-employee director elects to receive all or a
portion of the Cash Retainer in the form of common stock, such
shares shall be issued in four quarterly installments on the first
day of each fiscal quarter, and the number of shares of common
stock to be issued shall be based on the fair market value of the
Company’s common stock on the date such installment is
payable. The common stock received in lieu of such Cash Retainer
will be fully vested. However, a non-employee director who receives
common stock in lieu of all or a portion of the Cash Retainer may
not sell, transfer, assign, pledge or otherwise encumber the common
stock prior to the first anniversary of the date on which such
shares were issuable. In the event of the death or disability of a
nonemployee director, or a change in control of the Company, any
shares of common stock issued in lieu of such Cash Retainer, shall
no longer be subject to such restrictions on transfer. During the
first and second quarters of fiscal 2016, 698 and 722 shares,
respectively, were awarded to non-employee directors in lieu of the
Cash Retainer.
In addition, under the Program, each non-employee director receives
RSAs with a value equal to $20,000 (the “Equity
Retainer”) upon adjournment of each annual
shareholders’ meeting. If a non-employee director is first
appointed or elected to the Board of Directors effective on a date
other than at the annual shareholders’ meeting, on the date
of such appointment or election, the director shall receive a pro
rata award of restricted common stock having a value based on the
number of days remaining until the next annual meeting. The Equity
Retainer will vest on the earlier of 12 months after the grant date
or the date immediately prior to the next annual meeting of the
shareholders following the meeting at which such RSAs were granted.
However, a non-employee director may not sell, transfer, assign,
pledge or otherwise encumber the vested common stock prior to the
second anniversary of the vesting date. In the event of the death
or disability of a non-employee director, or a change in control of
the Company, the RSAs shall immediately vest and shall no longer be
subject to such restrictions on transfer. During the second quarter
of fiscal 2016, 7,115 shares were awarded as the Equity Retainer to
the non-employee directors.
We account for compensation cost related to share-based payments
based on the estimated fair value of the equity award. We estimate
the fair value of each option on the date of grant using the
Black-Scholes option-pricing model. Our estimate requires a number
of complex and subjective assumptions including our stock price
volatility, employee exercise patterns (expected life of the
options), the risk-free interest rate and the Company’s
expected future dividend yield. The stock price volatility
assumption is based on the historical weekly price of our common
stock over a period equivalent to the weighted average expected
life of our options. Management evaluated whether there were
factors during that period which were unusual and would distort the
volatility figure if used to estimate future volatility and
concluded that there were no such factors. In determining the
expected life of the option grants, the Company has observed the
actual terms of prior grants with similar characteristics and the
actual vesting schedule of the grant and has assessed the expected
risk tolerance of different option groups. The risk-free interest
rate is based on the actual U.S. Treasury zero coupon rates for
bonds matching the expected term of the option as of the option
grant date. The dividend assumption is based upon the prior
year’s average dividend yield. Reductions in compensation
expense associated with forfeited options are estimated at the date
of grant, and this estimated forfeiture rate is adjusted
periodically based on actual forfeiture experience. Our accounting
for share-based compensation for RSUs and RSAs is also based on the
fair value method. The fair value of RSUs and RSAs is based on the
closing market price of the Company’s common stock on the
grant date.
Share-based compensation expense was recognized as follows:
Three Months Ended Six Months Ended
August 1, August 2, August 1, August 2,
(In thousands)
Stock Options $ 70 $ 59 $ 144 $ 112
Restricted Stock Awards and Restricted Stock Units 228 67 296 144
Employee Stock Purchase Plan 3 2 4 3
Total $ 301 $ 128 $ 444 $ 259
Stock Options
The fair value of stock options granted during the six months ended
August 1, 2015 and August 2, 2014 was estimated using the
following assumptions:
August 1, August 2,
Risk Free Interest Rate 1.6 % 1.6 %
Expected Volatility 22.7 % 26.8 %
Expected Life (in years) 5.0 5.0
Dividend Yield 2.0 % 2.0 %
The weighted average fair value per share for options granted was
$2.43 and $2.44 during the first and second quarters of fiscal
2016, respectively, compared to $2.93 and $2.84 during the first
and second quarters of fiscal 2015.
Aggregated information regarding stock options granted under the
Plans for the six months ended August 1, 2015 is summarized
below:
Number of Options Weighted Average Weighted Average Aggregate Intrinsic
Outstanding at January 31, 2015 656,011 $ 10.01 4.2 $ 3,225,000
Granted 110,000 13.98
Exercised (20,979 ) 8.24
Expired or canceled (2,093 ) 7.93
Forfeited (700 ) 12.61
Outstanding at August 1, 2015 742,239 $ 10.65 6.1 $ 2,396,104
Exercisable at August 1, 2015 475,776 $ 9.41 4.6 $ 2,109,647
As of August 1, 2015, there was $577,000 of unrecognized
compensation expense related to unvested options, which may be
recognized through March 2019.
Restricted Stock Units (RSUs) and Restricted Stock Awards
(RSAs)
Aggregated information regarding RSUs and RSAs granted under the
Plan for the six months ended August 1, 2015 is summarized
below:
RSAs & RSUs Weighted Average
Unvested at January 31, 2015 72,245 $ 9.70
Granted 244,072 14.05
Vested (8,665 ) 13.95
Forfeited (2,800 ) 10.07
Unvested at August 1, 2015 304,852 $ 13.06
As of August 1, 2015, there was $1,658,000 of unrecognized
compensation expense related to unvested RSUs and RSAs which may be
recognized through May 2019.
Employee Stock Purchase Plan
Astro-Med has an Employee Stock Purchase Plan allowing eligible
employees to purchase shares of common stock at a 15% discount from
fair value on the date of purchase. A total of 247,500 shares were
reserved for issuance under this plan. During the quarters ended
August 1, 2015 and August 2, 2014, there were 1,293 and
1,592 shares, respectively, purchased under this plan. As of
August 1, 2015, 54,980 shares remain available for purchase
under the plan. |
