Stock-Based Compensation and Stock Options | Note 3 — Stock-Based Compensation and Stock Options Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”) as in effect at December 31, 2022 , options exercisable for up to 20,615,000 shares of the Company’s common stock may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant. Options granted under the Plan are non-statutory stock options and generally vest 25 % one year from the date of grant with the remaining 75 % vesting ratably each month for the next 36 months. The options granted to employees and the Company’s Board of Directors expire at the end of five years and ten years from the date of grant, respectively. All options granted in the nine months ended December 31, 2022 and 2021 were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date and are non-statutory stock options. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses historical data, among other factors, to estimate the expected volatility, the expected dividend yield and the expected option life. The Company accounts for forfeitures as they occur, rather than estimating expected forfeitures. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option. The following assumptions were used to estimate the fair value of options granted during the three months ended December 31, 2022 and 2021 using the Black-Scholes option-pricing model: Three Months Ended December 31, 2022 December 31, 2021 Risk-free interest rate 4.36 % 1.27 % Expected volatility 36 % 36 % Expected dividend yield 0.00 % 0.00 % Expected weighted average life of option in years 4.3 years 4.4 years For the three months ended December 31, 2022 and 2021 , the Company recorded share-based compensation expense of $ 1,698,000 and $ 1,183,000 , respectively. For the nine months ended December 31, 2022 and 2021, the Company recorded share-based compensation expense of $ 4,027,000 and $ 3,884,000 , respectively. The table below shows the amounts recognized in the unaudited consolidated financial statements for stock compensation expense for time-based options and performance-based options during the three and nine mo nths ended December 31, 2022 and 2021, respectively. Three Months Ended December 31, 2022 December 31, 2021 Cost of revenues $ 670,000 $ 487,000 General and administrative 1,028,000 696,000 Total cost of stock-based compensation included in 1,698,000 1,183,000 Amount of income tax benefit recognized ( 410,000 ) ( 256,000 ) Amount charged against net income $ 1,288,000 $ 927,000 Effect on basic earnings per share $ ( 0.07 ) $ ( 0.05 ) Effect on diluted earnings per share $ ( 0.07 ) $ ( 0.05 ) Nine Months Ended December 31, 2022 December 31, 2021 Cost of revenues $ 1,879,000 $ 1,539,000 General and administrative 2,148,000 2,345,000 Total cost of stock-based compensation included in 4,027,000 3,884,000 Amount of income tax benefit recognized ( 895,000 ) ( 765,000 ) Amount charged against net income $ 3,132,000 $ 3,119,000 Effect on basic earnings per share $ ( 0.18 ) $ ( 0.17 ) Effect on diluted earnings per share $ ( 0.18 ) $ ( 0.17 ) The following table summarizes information for all stock options for the three and nine months ended December 31, 2022 and 2021: Three Months Ended December 31, 2022 Three Months Ended December 31, 2021 Shares Weighted Shares Weighted Options outstanding, beginning 706,728 $ 96.14 778,982 $ 72.17 Options granted 69,200 155.99 50,200 197.16 Options exercised ( 18,210 ) 67.63 ( 25,917 ) 62.78 Options cancelled/forfeited ( 1,256 ) 126.62 ( 6,407 ) 81.62 Options outstanding, ending 756,462 $ 102.25 796,858 $ 80.27 Nine Months Ended December 31, 2022 Nine Months Ended December 31, 2021 Shares Weighted Shares Weighted Options outstanding, beginning 723,876 $ 84.55 937,158 $ 64.28 Options granted 149,400 155.69 110,450 163.54 Options exercised ( 101,896 ) 51.17 ( 212,588 ) 53.27 Options cancelled/forfeited ( 14,918 ) 128.65 ( 38,162 ) 78.87 Options outstanding, ending 756,462 $ 102.25 796,858 $ 80.27 The following table summarizes the status of stock options outstanding and exercisable at December 31, 2022: Range of Exercise Price Number of Weighted Outstanding Exercisable Exercisable $ 33.16 to $ 70.24 204,302 2.09 $ 52.49 187,542 $ 52.17 $ 70.25 to $ 87.69 248,327 2.92 83.32 111,749 82.64 $ 87.70 to $ 155.99 209,534 4.30 138.56 30,938 108.20 $ 156.00 to $ 197.16 94,299 4.85 179.20 7,330 174.40 Total 756,462 3.32 $ 102.25 337,559 $ 70.05 The following table summarizes the status of all outstanding options at December 31, 2022, and changes during the three months then ended: Number Weighted Weighted Aggregate Intrinsic Options outstanding at October 1, 2022 706,728 $ 96.14 Granted 69,200 155.99 Exercised ( 18,210 ) 67.63 Cancelled – forfeited ( 1,225 ) 121.76 Cancelled – expired ( 31 ) 121.96 Ending outstanding 756,462 $ 102.25 3.32 $ 36,912,256 Ending vested and expected to vest 662,773 $ 99.55 3.34 $ 33,500,567 Ending exercisable at December 31, 2022 337,559 $ 70.05 2.54 $ 25,647,949 The weighted-average grant-date fair value of options granted during the three months ended December 31, 2022 and 2021 , was $ 55.15 and $ 60.55 , respectively. Included in the above-noted stock option grants and stock compensation expense are performance-based stock options that vest only upon the Company’s achievement of certain earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in the same manner as the time-based options. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. The Company recognized $ 749,000 and $ 481,000 of stock compensation expense for the three months ended December 31, 2022 and 2021 , respectively, for performance-based stock options. The Company recognized $ 1,404,000 and $ 1,702,000 of stock compensation expense for the nine months ended December 31, 2022 and 2021, respectively, for performance-based stock options. |