Annual report pursuant to Section 13 and 15(d)

Note 9 - Stock-based Compensation

v3.21.1
Note 9 - Stock-based Compensation
12 Months Ended
Mar. 28, 2021
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
Note
9
Stock-based Compensation
 
The Company has
two
incentive stock plans, the
2006
Omnibus Incentive Plan (the
“2006
Plan”) and the
2014
Omnibus Equity Compensation Plan (the
“2014
Plan”). As a result of the approval of the
2014
Plan by the Company's stockholders at the Company's
2014
annual meeting, grants
may
no
longer be issued under the
2006
Plan.
 
The Company believes that awards of long-term, equity-based incentive compensation will attract and retain directors, officers and employees of the Company and will encourage these individuals to contribute to the successful performance of the Company, which will lead to the achievement of the Company's overall goal of increasing stockholder value. Awards granted under the
2014
Plan
may
be in the form of incentive stock options, non-qualified stock options, shares of restricted or unrestricted stock, stock units, stock appreciation rights, or other stock-based awards. Awards
may
be granted subject to the achievement of performance goals or other conditions, and certain awards
may
be payable in stock or cash, or a combination of the two. The
2014
Plan is administered by the Compensation Committee of the Board (the “Compensation Committee”), which selects eligible employees, non-employee directors and other individuals to participate in the
2014
Plan and determines the type, amount, duration (such duration
not
to exceed a term of
ten
(
10
) years for grants of options) and other terms of individual awards. At
March 28, 2021,
183,000
shares of the Company's common stock were available for future issuance under the
2014
Plan, which
may
be issued from authorized and unissued shares of the Company's common stock or treasury shares.
 
Stock-based compensation is calculated according to FASB ASC Topic
718,
Compensation
Stock Compensation
, which requires stock-based compensation to be accounted for using a fair-value-based measurement. During fiscal years
2021
and
2020,
the Company recorded
$394,000
and
$297,000
of stock-based compensation, respectively. The Company records the compensation expense associated with stock-based awards granted to individuals in the same expense classifications as the cash compensation paid to those same individuals.
No
stock-based compensation costs were capitalized as part of the cost of an asset as of
March 28, 2021.
 
Stock Options:
The following table represents stock option activity for fiscal years
2021
and
2020:
 
   
Fiscal Year
 
   
2021
   
2020
 
   
Weighted-
   
 
 
 
 
Weighted-
   
 
 
 
   
Average
   
Number of
   
Average
   
Number of
 
   
Exercise
   
Options
   
Exercise
   
Options
 
   
Price
   
Outstanding
   
Price
   
Outstanding
 
Outstanding at Beginning of Period
  $
6.86
     
517,500
    $
7.45
     
457,500
 
Granted
   
5.81
     
185,000
     
4.76
     
125,000
 
Exercised
   
7.27
     
(135,000
)    
6.20
     
(10,000
)
Forfeited
   
-
     
-
     
7.07
     
(55,000
)
Outstanding at End of Period
   
6.84
     
567,500
     
6.86
     
517,500
 
Exercisable at End of Period
   
7.84
     
320,000
     
7.74
     
347,500
 
 
As of
March 28, 2021,
the intrinsic value of the outstanding and exercisable stock options was
$668,000
and
$139,000,
respectively. The Company did
not
receive any cash from the exercise of stock options during fiscal years
2021
or
2020.
Upon the exercise of stock options, participants
may
choose to surrender to the Company those shares from the option exercise necessary to satisfy the exercise amount and their income tax withholding obligations that arise from the option exercise. The effect on the cash flow of the Company from these “cashless” option exercises is that the Company remits cash on behalf of the participant to satisfy his or her income tax withholding obligations. The Company used cash to remit the required income tax withholding amounts from “cashless” option exercises of
$162,000
and
$3,000
during fiscal years
2021
and
2020,
respectively. As of
March 29, 2020,
none
of the outstanding or exercisable stock options held any intrinsic value.
 
To determine the estimated fair value of stock options granted, the Company uses the Black-Scholes-Merton valuation formula, which is a closed-form model that uses an equation to estimate fair value. The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options awarded to certain employees during fiscal years
2021
and
2020,
which options vest over a
two
-year period, assuming continued service.
 
   
Fiscal Year Ended
 
   
March 28, 2021
   
March 29, 2020
 
Number of options issued
   
110,000
     
75,000
     
125,000
 
Grant date
 
June 10, 2020
   
January 4, 2021
   
June 13, 2019
 
Dividend yield
   
6.50
%    
4.50
%    
6.72
%
Expected volatility
   
30.00
%    
35.00
%    
25.00
%
Risk free interest rate
   
0.275
%    
0.260
%    
1.810
%
Contractual term (years)
   
10.00
     
10.00
     
10.00
 
Expected term (years)
   
4.00
     
4.00
     
4.00
 
Forfeiture rate
   
5.00
%    
5.00
%    
5.00
%
Exercise price (grant-date closing price) per option
  $
4.92
    $
7.11
    $
4.76
 
Fair value per option
  $
0.56
    $
1.30
    $
0.39
 
 
For the fiscal years ended
March 28, 2021
and
March 29, 2020,
the Company recognized compensation expense associated with stock options as follows (in thousands):
 
   
Fiscal Year Ended March 28, 2021
 
   
Cost of
   
Marketing &
   
 
 
 
   
Products
   
Administrative
   
Total
 
Options Granted in Fiscal Year
 
Sold
   
Expenses
   
Expense
 
2019
  $
2
    $
3
    $
5
 
2020
   
10
     
15
     
25
 
2021
   
10
     
23
     
33
 
                         
Total stock option compensation
  $
22
    $
41
    $
63
 
 
   
Fiscal Year Ended March 29, 2020
 
   
Cost of
   
Marketing &
   
 
 
 
   
Products
   
Administrative
   
Total
 
Options Granted in Fiscal Year
 
Sold
   
Expenses
   
Expense
 
2018
  $
5
    $
1
    $
6
 
2019
   
10
     
8
     
18
 
2020
   
7
     
11
     
18
 
                         
Total stock option compensation
  $
22
    $
20
    $
42
 
 
A summary of stock options outstanding and exercisable as of
March 28, 2021
is as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-
   
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
 
 
Weighted-
   
Avg. Exercise
   
 
 
 
 
Avg. Exercise
 
 
 
 
 
 
Number
   
Avg. Remaining
   
Price of
   
Number
   
Price of
 
Exercise
   
of Options
   
Contractual
   
Options
   
of Options
   
Options
 
Price
   
Outstanding
   
Life in Years
   
Outstanding
   
Exercisable
   
Exercisable
 
$4.00
-
4.99
     
195,000
     
8.77
    $
4.85
     
22,500
    $
4.76
 
$5.00
-
5.99
     
30,000
     
5.21
    $
5.74
     
30,000
    $
5.74
 
$6.00
-
6.99
     
10,000
     
2.21
    $
6.14
     
10,000
    $
6.14
 
$7.00
-
7.99
     
207,500
     
6.74
    $
7.56
     
132,500
    $
7.81
 
$8.00
-
8.99
     
55,000
     
4.21
    $
8.38
     
55,000
    $
8.38
 
$9.00
-
9.99
     
70,000
     
5.20
    $
9.60
     
70,000
    $
9.60
 
 
 
 
     
567,500
     
6.84
    $
6.84
     
320,000
    $
7.84
 
 
As of
March 28, 2021,
total unrecognized stock-option compensation costs amounted to
$132,000,
which will be recognized as the underlying stock options vest over a weighted-average period of
9.0
months. The amount of future stock-option compensation expense could be affected by any future stock option grants and by the separation from the Company of any employee or director who has stock options that are unvested as of such individual's separation date.
 
Non-vested Stock Granted to Non-Employee Directors:
The Board granted the following shares of non-vested stock to the Company's non-employee directors:
 
 
Number
   
Fair Value
   
 
of Shares
   
per Share
 
Grant Date
    41,452     $
5.79
 
August 12, 2020
    46,512      
5.16
 
August 14, 2019
    28,000      
5.43
 
August 8, 2018
    28,000      
5.50
 
August 9, 2017
 
These shares vest over a
two
-year period, assuming continued service. The fair value of non-vested stock granted to the Company's non-employee directors was based on the closing price of the Company's common stock on the date of each grant. In
August 2020
and
August 2019,
37,256
and
28,000
shares that had been granted to the Company's non-employee directors vested, having an aggregate value on the respective vesting dates of
$179,000
and
$135,000,
respectively.
 
Non-vested Stock Granted to Employees:
The Board granted the following shares of non-vested stock to certain of the Company's employees:
 
 
Number
   
Fair Value
   
 
of Shares
   
per Share
 
Grant Date
    25,000     $
5.86
 
January 18, 2019
    20,000      
4.92
 
June 10, 2020
    10,000      
7.60
 
February 22, 2021
 
These shares vest on the
second
anniversary of each respective grant date, assuming continued service. The shares that were granted on
January 18, 2019
vested on
January 18, 2021,
with such shares having an aggregate value on the vesting date of
$182,000
.
 
Performance Bonus Plan:
On
June 9, 2020,
the Compensation Committee terminated the Company's
2012
Performance Bonus Plan (the
“2012
Plan”). Under the
2012
Plan, certain executive officers were eligible to receive awards of shares of common stock in the event that the aggregate average market value of the common stock during the relevant fiscal year, plus the amount of cash dividends paid in respect of the common stock during such period, increased.  These individuals
may
have instead been awarded cash, if and to the extent that an insufficient number of shares of common stock was available for issuance from all shareholder-approved, equity-based plans or programs of the Company then in effect. The
2012
Plan also imposed individual limits on awards and provided that shares of common stock that
may
have been awarded would vest over a
two
-year period. Thus, compensation expense associated with
2012
Plan awards were recognized over a
three
-year period – the fiscal year in which the award was earned, plus the
two
-year vesting period. There were
no
shares granted and
no
compensation expense was recorded during either of the fiscal years ended
March 28, 2021
or
March 29, 2020
in connection with the
2012
Plan. During fiscal year
2020,
21,125
shares that had been granted during fiscal year
2018
vested, with such shares having an aggregate value of
$109,000.
Individuals holding shares that had vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares, and the Company remitted
$17,000
to the appropriate taxing authorities on behalf of such individuals.
 
For the fiscal years ended
March 28, 2021
and
March 29, 2020,
the Company recognized compensation expense associated with non-vested stock grants, which is included in marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):
 
   
Fiscal Year Ended March 28, 2021
 
   
 
 
 
 
Non-employee
   
Total
 
Stock Granted in Fiscal Year
 
Employees
   
Directors
   
Expense
 
2019
  $
61
    $
26
    $
87
 
2020
   
-
     
120
     
120
 
2021
   
44
     
80
     
124
 
                         
Total stock grant compensation
  $
105
    $
226
    $
331
 
 
   
Fiscal Year Ended March 29, 2020
 
   
 
 
 
 
Non-employee
   
Total
 
Stock Granted in Fiscal Year
 
Employees
   
Directors
   
Expense
 
2018
  $
-
    $
26
    $
26
 
2019
   
73
     
76
     
149
 
2020
   
-
     
80
     
80
 
                         
Total stock grant compensation
  $
73
    $
182
    $
255
 
 
As of
March 28, 2021,
total unrecognized compensation expense related to the Company's non-vested stock grants was
$330,000,
which will be recognized over the remaining portion of the respective vesting periods associated with each block of grants, such grants having a weighted average vesting term of
11.2
months. The amount of future compensation expense related to non-vested stock grants could be affected by any future non-vested stock grants and by the separation from the Company of any individual who has unvested grants as of such individual's separation date.