Annual report pursuant to Section 13 and 15(d)

Note 5 - Stock-based Compensation

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Note 5 - Stock-based Compensation
12 Months Ended
Apr. 03, 2016
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 5
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 (such duration not to exceed a term of ten (10) years for grants of options) and other terms of individual awards. At April 3, 2016, 1.0 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 $906,000 and $862,000 of stock-based compensation during fiscal years 2016 and 2015, 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 April 3, 2016.
 
St
ock Options:
The following table represents stock option activity for fiscal years 2016 and 2015:
 
 
 
Fiscal Year Ended
April 3, 2016
 
 
Fiscal Year Ended
March 29, 2015
 
 
 
Weighted-
Average
Exercise
Price
 
 
Number of
Options
Outstanding
 
 
Weighted-
Average
Exercise
Price
 
 
Number of
Options
Outstanding
 
Outstanding at Beginning of Period
  $ 6.83       330,000     $ 5.76       185,000  
Granted
    8.38       110,000       7.90       165,000  
Exercised
    6.27       (135,000 )     5.78       (20,000 )
Outstanding at End of Period
    7.64       305,000       6.83       330,000  
Exercisable at End of Period
    6.72       112,500       5.59       115,000  
 
The total intrinsic value of the stock options exercised during fiscal years 2016 and 2015 was $300,000 and $42,000, respectively. As of April 3, 2016, the intrinsic value of the outstanding and exercisable stock options was $532,000 and $300,000, respectively.
 
 
The Company received no cash from the exercise of stock options during either fiscal year 2016 or 2015. 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 $118,000 and $17,000 to remit the required income tax withholding amounts from “cashless” option exercises during fiscal years 2016 and 2015, 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 the fair value of the non-qualified stock options which were awarded to certain employees during fiscal years 2016 and 2015, which options vest over a two-year period, assuming continued service.
 
 
 
2016
 
 
2015
 
Options issued
    110,000       165,000  
Grant date
    June 12, 2015       June 18, 2014  
Dividend yield
    3.82 %     4.05 %
Expected volatility
    20.00 %     30.00 %
Risk free interest rate
    1.12 %     0.95 %
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
  $ 8.38     $ 7.90  
Fair value per option
  $ 0.77     $ 1.19  
 
For the fiscal years ended April 3, 2016 and March 29, 2015, the Company recognized compensation expense associated with stock options as follows (in thousands):
 
 
 
Fiscal Year Ended April 3, 2016
 
Options Granted in Fiscal Year
 
Cost of
Products
Sold
 
 
Other Marketing
& Administrative
Expenses
 
 
Total
Expense
 
2014
  $ 7     $ 7     $ 14  
2015
    54       45       99  
2016
    17       14       31  
                         
Total stock option compensation
  $ 78     $ 66     $ 144  
 
 
 
 
Fiscal Year Ended March 29, 2015
 
Options Granted in Fiscal Year
 
Cost of
Products
Sold
 
 
Other Marketing
& Administrative
Expenses
 
 
 
Total
Expense
 
2013
  $ 12     $ 12     $ 24  
2014
    24       24       48  
2015
    39       32       71  
                         
Total stock option compensation
  $ 75     $ 68     $ 143  
 
A summary of stock options outstanding and exercisable at April 3, 2016 is as follows:
 
Exercise
Price
 
 
Number
of Options
Outstanding
 
 
Weighted-
Avg. Remaining
Contractual
Life in Years
 
 
Weighted-
Avg. Exercise
Price of
Options
Outstanding
 
 
Number
of Options
Exercisable
 
 
Weighted-
Avg. Exercise
Price of
Options
Exercisable
 
$ 4.81       10,000       5.19     $ 4.81       10,000     $ 4.81  
$ 5.42       20,000       6.19     $ 5.42       20,000     $ 5.42  
$ 6.14       30,000       7.20     $ 6.14       30,000     $ 6.14  
$ 7.90       135,000       8.21     $ 7.90       52,500     $ 7.90  
$ 8.38       110,000       9.19     $ 8.38       -       -  
          305,000       8.23     $ 7.64       112,500     $ 6.72  
 
 
As of April 3, 2016, total unrecognized stock-option compensation costs amounted to $79,000, which will be recognized as the underlying stock options vest over a weighted-average period of 5.8 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
of Shares
   
Fair Value
per Share
 
 
Grant Date
28,000     $ 8.20  
August 12, 2015
28,000       7.97  
August 11, 2014
28,000       6.67  
August 14, 2013
42,000       5.62  
August 15, 2012
 
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 each of August 2015 and 2014, 28,000 shares that had been granted to the Company’s non-employee directors vested, having an aggregate value of $226,000 and $223,000, 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.
 
With the closing price conditions having been met for these awards, the Board at various times approved the acceleration of the vesting of 105,000 shares from these grants. The vesting of these awards was accelerated in order to maximize the deductibility of the compensation expense associated with the grants by the Company for income tax purposes. On July 29, 2015, the remaining 240,000 of these shares vested, with such shares having an aggregate value of $1.9 million. Each of the individuals holding shares that 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 $948,000 to the appropriate taxing authorities on behalf of such individuals.
 
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 2016, the Company, in respect of fiscal year 2015, granted to certain executive officers 58,532 shares of common stock at a fair value of $7.18 per share.  In connection with these awards, the Company recognized compensation expense of $140,000 during each of fiscal years 2015 and 2016, and will recognize $140,000 in compensation expense during fiscal year 2017. On March 29, 2016, 29,267 of these shares vested, with such shares having an aggregate value of $275,000. Each of the individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the share vesting, and the Company remitted $138,000 to the appropriate taxing authorities on behalf of such individuals.
 
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, 2015 and 2016. On each of March 30, 2015 and March 30, 2016, 94,116 of these shares vested, with such shares having an aggregate value of $735,000 and $883,000, respectively. Each of the individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the share vesting, and the Company, in respect of the shares that vested on March 30, 2015 and March 30, 2016, remitted $429,000 and $360,000, respectively, to the appropriate taxing authorities on behalf of such individuals.
 
 
For the fiscal years ended April 3, 2016 and 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):
 
 
 
Fiscal Year Ended April 3, 2016
 
Stock Granted in Fiscal Year
 
Employees
 
 
Non-employee
Directors
 
 
Total
Expense
 
2011
  $ 49     $ -     $ 49  
2014
    -       31       31  
2015
    354       112       466  
2016
    140       76       216  
                         
Total stock grant compensation
  $ 543     $ 219     $ 762  
 
 
 
 
Fiscal Year Ended March 29, 2015
 
Stock Granted in Fiscal Year
 
Employees
 
 
Non-employee
Directors
 
 
Total
Expense
 
2011
  $ 170     $ -     $ 170  
2013
    -       26       26  
2014
    -       94       94  
2015
    354       75       429  
                         
Total stock grant compensation
  $ 524     $ 195     $ 719  
 
As of April 3, 2016, 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 7.2 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.