Crown Crafts, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 4 - Stock-based Compensation

Note 4 - Stock-based Compensation

12 Months Ended

Mar. 29, 2015

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 4

–

Stoc

k-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, which selects eligible employees, non-employee directors and other individuals to participate in the 2014 Plan and determines the type, amount, duration and other terms of individual awards. At March 29, 2015, 1.2 million shares of the Company’s common stock were available for future issuance under the 2014 Plan.

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. The Company recorded $862,000 and $604,000 of stock-based compensation during fiscal years 2015 and 2014, 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 29, 2015.

ock Options:

The following table represents stock option activity for fiscal years 2015 and 2014:

	Fiscal Year Ended					Fiscal Year Ended
	March 29, 2015					March 30, 2014
	Weighted-					Weighted-
	Average		Number of			Average		Number of
	Exercise		Options			Exercise		Options
	Price		Outstanding			Price		Outstanding
Outstanding at Beginning of Period	$	5.76		185,000		$	5.23		145,000
Granted		7.90		165,000			6.14		100,000
Exercised		5.78		(20,000	)		5.12		(60,000	)
Outstanding at End of Period		6.83		330,000			5.76		185,000
Exercisable at End of Period		5.59		115,000			5.16		35,000

The total intrinsic value of the stock options exercised during fiscal years 2015 and 2014 was $42,000 and $126,000, respectively. As of March 29, 2015, the intrinsic value of the outstanding and exercisable stock options was $321,000 and $243,000, respectively.

The Company received no cash from the exercise of stock options during either fiscal year 2015 or 2014. 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 of $17,000 and $49,000 to remit the required income tax withholding amounts from “cashless” option exercises during fiscal years 2015 and 2014, respectively.

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 that fair value, and the resulting grant-date fair value per option, of the non-qualified stock options which were awarded to certain employees during fiscal years 2015 and 2014, which options vest over a two-year period, assuming continued service.

	2015			2014
Options issued		165,000			100,000
Grant date	June 18, 2014			June 14, 2013
Dividend yield		4.05	%		5.21	%
Expected volatility		30.00	%		35.00	%
Risk free interest rate		0.95	%		0.49	%
Contractual term (years)		10.00			10.00
Expected term (years)		3.00			3.00
Forfeiture rate		5.00	%		5.00	%
Exercise price (grant-date closing price) per option	$	7.90		$	6.14
Fair value per option	$	1.19		$	0.98

For the fiscal year ended March 29, 2015, the Company recognized compensation expense associated with stock options as follows (in thousands):

	Cost of		Other Marketing
	Products		& Administrative		Total
Options Granted in Fiscal Year	Sold		Expenses		Expense
2013	$	12	$	12	$	24
2014		24		24		48
2015		39		32		71

Total stock option compensation	$	75	$	68	$	143

For the fiscal year ended March 30, 2014, the Company recognized compensation expense associated with stock options as follows (in thousands):

	Cost of		Other Marketing
	Products		& Administrative		Total
Options Granted in Fiscal Year	Sold		Expenses		Expense
2012	$	13	$	11	$	24
2013		46		46		92
2014		18		18		36

Total stock option compensation	$	77	$	75	$	152

A summary of stock options outstanding and exercisable at March 29, 2015 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
$	4.81		15,000		6.20	$	4.81		15,000	$	4.81
$	5.42		60,000		7.21	$	5.42		60,000	$	5.42
$	6.14		90,000		8.21	$	6.14		40,000	$	6.14
$	7.90		165,000		9.22	$	7.90		-		-
			330,000		8.44	$	6.83		115,000	$	5.59

As of March 29, 2015, total unrecognized stock-option compensation costs amounted to $138,000, which will be recognized as the underlying stock options vest over a weighted-average period of 7.2 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
	28,000	$	7.97	August 11, 2014
	28,000		6.67	August 14, 2013
	42,000		5.62	August 15, 2012
	30,000		4.44	August 10, 2011

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 2014 and 2013, 28,000 and 36,000 shares, respectively, that had been granted to the Company’s non-employee directors vested, having an aggregate value of $223,000 and $244,000, respectively.

Non-vested Stock Granted to Employees:

During the three-month period ended June 27, 2010, the Board awarded 345,000 shares of non-vested stock to certain employees in a series of grants, each of which will vest only if (i) the closing price of the Company’s common stock is at or above certain target levels for any ten trading days out of any period of 30 consecutive trading days and (ii) the respective employees remain employed through July 29, 2015. The Company, with the assistance of an independent third party, determined that the aggregate grant date fair value of the awards amounted to $1.2 million.

As set forth below, the Board approved amendments to the grants that had been awarded to E. Randall Chestnut, Chairman, Chief Executive Officer and President of the Company and Nanci Freeman, Chief Executive Officer and President of CCIP. With the closing price conditions having been met for these awards, the original grants were amended to provide for the immediate vesting of a portion of the shares originally granted. The vesting of these awards was accelerated in order to preserve the deductibility of the associated compensation expense by the Company for income tax purposes. As a result of the acceleration of the vesting of these grants, the Company recognized the remaining compensation expense associated with the accelerated grants of $12,000 and $14,000 during the three-month periods ended December 28, 2014 and December 29, 2013, respectively. These amounts would otherwise have been recognized by the Company ratably through July 29, 2015. Mr. Chestnut and Ms. Freeman surrendered to the Company the shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares, and the Company paid $111,000 and $47,000 during the three-month periods ended December 28, 2014 and December 29, 2013, respectively, to the appropriate taxing authorities on their behalf.

										Shares
		Closing		Shares						Surrendered
		Price		Awarded				Aggregate		to Satisfy
		per Share		in				Value of		Income Tax
		Condition		Original		Shares		Shares		Withholding
Amendment Date	Grantee	of Grant		Grant		Vested		Vested		Obligations
November 24, 2014	E. Randall Chestnut	$	6.00		75,000		10,000	$	72,000		4,795
November 24, 2014	Nanci Freeman	$	5.00		20,000		20,000	$	145,000		10,516
November 5, 2013	E. Randall Chestnut	$	5.00		75,000		13,000	$	98,000		6,234

Performance Bonus Plan:

The Company maintains a performance bonus plan for certain executive officers that provides for awards of cash or 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, increases. These individuals may instead be awarded cash, if and to the extent that an insufficient number of shares of common stock are available for issuance from all shareholder-approved, equity-based plans or programs of the Company in effect. The performance bonus plan also imposes individual limits on awards and provides that shares of common stock that may be awarded will vest over a two-year period. Thus, compensation expense associated with performance bonus plan awards are recognized over a three-year period – the fiscal year in which the award is earned, plus the two-year vesting period.

In connection with the performance bonus plan, during fiscal year 2015, the Company, in respect of fiscal year 2014, granted to certain executive officers 188,232 shares of common stock at a fair value of $5.65 per share. In connection with these awards, the Company recognized compensation expense of $354,000 during each of fiscal years 2014 and 2015, and will recognize $354,000 in compensation expense during fiscal year 2016.

In connection with the performance bonus plan, during fiscal year 2014, the Company, in respect of fiscal year 2013, granted to certain executive officers 17,048 shares of common stock with a fair value of $5.47 per share and a cash award of $258,000. Of the total compensation expense of $351,000, $196,000 and $155,000 were recognized during fiscal years 2014 and 2013, respectively. Although there are restrictions as to the subsequent transfer of the shares of stock awarded, ownership in the stock was vested upon issuance. To satisfy the income tax withholding obligations that arose from the issuance of the shares, the employees surrendered 8,549 shares to the Company and the Company paid $54,000 to the appropriate taxing authorities on their behalf.

For the fiscal year ended March 29, 2015, the Company recognized compensation expense associated with non-vested stock grants, which is included in other marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):

			Non-employee		Total
Stock Granted in Fiscal Year	Employees		Directors		Expense
2011	$	170	$	-	$	170
2013		-		26		26
2014		-		94		94
2015		354		75		429

Total stock grant compensation	$	524	$	195	$	719

For the fiscal year ended March 30, 2014, the Company recognized compensation expense associated with non-vested stock grants, which is included in other marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):

			Non-employee		Total
Stock Granted in Fiscal Year	Employees		Directors		Expense
2011	$	182	$	-	$	182
2012		-		22		22
2013		-		92		92
2014		93		63		156

Total stock grant compensation	$	275	$	177	$	452

As of March 29, 2015, total unrecognized compensation expense related to the Company’s non-vested stock grants was $583,000, 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 5.2 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.

- 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 + Details