Stockholders' Equity

6 Months Ended

Dec. 31, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 12 – Stockholders' Equity

Stock Repurchase Program

From time to time, the Company has made repurchases of its stock, as authorized by the various stock repurchase programs established by the Company's Board of Directors, and through equity incentive plan transactions. On June 16, 2010, the Company announced that its Board of Directors had approved a stock repurchase program allowing the Company to repurchase up to a total of $30.0 million of its issued and outstanding shares of Common Stock. This program was completed prior to the Company's second quarter ended December 31, 2010, and accordingly, as of December 31, 2011, there were no amounts remaining to repurchase shares of Common Stock under that stock repurchase program.

During the prior fiscal year, for the three months ended December 31, 2010, the Company repurchased and retired a total of 139,969 shares of Common Stock that were settled at a cost of $4,152, or an average price per share of $29.66, using available cash. An additional 53,333 shares were repurchased in September 2010, but settled in October 2010 at a cost of $1,577, or an average price per share of $29.58.

During the prior fiscal year, for the six months ended December 31, 2010, the Company repurchased and retired a total of 1,175,738 shares of Common Stock that were settled at a cost of $30,000, or an average price per share of $25.52, using available cash. Included in these totals were 34,400 shares that were repurchased in June 2010, but settled in July 2010 at a cost of $811, or an average price per share of $23.58.

Share-Based Compensation

The Company accounts for its share-based compensation plans in accordance with FASB ASC Topic 718, "Compensation – Stock Compensation" (ASC 718). Compensation expense related to share-based awards is classified on the Condensed Consolidated Statements of Operations within the same line items as salary or consulting expense with respect to the award recipients, and is recorded over the awards' relevant vesting periods. Compensation expense related to share-based awards granted to the members of the Board of Directors is recorded as a component of Selling, general and administrative expense on the Condensed Consolidated Statements of Operations.

On December 7, 2011, the Company held its 2011 Annual Meeting of Stockholders at which the stockholders of the Company considered and approved the Company's Ninth Amended and Restated Kensey Nash Corporation Employee Incentive Compensation Plan (the Amended Plan). The Amended Plan became effective immediately upon the stockholders' approval. The Amended Plan authorized an additional 600,000 shares of the Company's Common Stock for issuance under the Amended Plan of which only 85,000 shares may be issued as nonvested stock, bonus stock or stock-based awards other than stock options or cash-settled stock appreciation rights (SARs).

The following table provides additional information related to the Company's share-based compensation:

	Three Months  Ended December 31,					Estimated Unrecognized Share-based Compensation as of December 31,		Weighted Average Period Remaining of Share-based Compensation as of December 31,
	2011		2010			2011		2011
Stock options	$	644	$	999		$	3,197		1.43
Non-vested stock awards		127		151			1,047		2.15
SARs		131		(70	)		1,566		2.75
Total share-based compensation	$	902	$	1,080		$	5,810

	Six Months Ended December 31,
	2011		2010
Stock options	$	1,549	$	1,855
Non-vested stock awards		249		290
SARs		156		99
Total share-based compensation	$	1,954	$	2,244

The income tax benefit recognized in the Condensed Consolidated Statements of Operations for share-based compensation expense for the three and six months ended December 31, 2011 was $315 and $684, respectively. The income tax benefit recognized in the Condensed Consolidated Statements of Operations for share-based compensation expense for the three and six months ended December 31, 2010 was $378 and $785, respectively.

Stock Options

Stock options have historically been granted to executive officers, other employees and members of the Board of Directors of the Company, as well as non-employee outside consultants (collectively referred to as participants), under the Amended Plan and prior versions of this incentive compensation plan (collectively, the Employee Plan). The Company also has a Non-employee Directors' Stock Option Plan (the Directors' Plan). No shares are available for new awards under the Directors' Plan, and any awards of the type granted previously under the Directors' Plan are now granted under the Employee Plan. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model.

For its fiscal 2012 annual grants to employees, the Company granted cash-settled stock appreciation rights to employees of the Company under the Employee Plan. See Cash-Settled Stock Appreciation Rights (SARs) below. The Company may, from time to time, grant additional share-based compensation under the Employee Plan to new and existing employees.

For the six months ended December 31, 2011, the Company granted options to a participant under the Employee Plan, with an exercise price equal to the fair market value of the Company's Common Stock on the respective grant date, to purchase an aggregate of 1,000 shares of the Company's Common Stock. The total options granted were valued at $10.82 per share on the grant date under the Black-Scholes option-pricing model, using the fair value assumptions noted in the table below and are being expensed over the three-year vesting period.

During the six months ended December 31, 2010, the Company granted options to employees of the Company under the Employee Plan, with exercise prices equal to the fair market values of the Company's Common Stock on the respective grant dates, to purchase an aggregate of 385,825 shares of the Company's Common Stock, which included 2,200 shares underlying unvested stock options that were modified. The total options granted were valued at a weighted average value of $11.15 per share on the grant date under the Black-Scholes option-pricing model, using the fair value assumptions noted in the table below and are being expensed over the three-year vesting period applicable to all of these options.

	Six Months Ended December 31,
	2011			2010
Dividend yield		0	%	0%
Expected volatility		36	%	35% - 39%
Weighted average volatility		36	%	37.60%
Risk-free interest rate		1.408	%	.13% - 2.255%
Expected term (years)		6.37		0.25 - 7.75

Options are exercisable over a maximum term of 10 years from the date of grant and typically vest over periods of zero to four years from the grant date. Expected volatilities are based on historical volatility of the Company's Common Stock and other factors. The Company uses historical data to estimate option exercise and employee termination activity within the valuation model; disparate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected terms of granted options are derived from historical exercise behavior and represent the periods of time that granted options are expected to be outstanding.

A summary of the stock option activity under the Employee Plan for the six months ended December 31, 2011 is as follows:

	Employee Plan							Directors' Plan
	Shares			Weighted  Avg Exercise Price		Aggregate Intrinsic  Value		Shares			Weighted  Avg Exercise Price		Aggregate Intrinsic  Value
Balance at June 30, 2011		1,665,937		$	28.09	$	1,873		141,000		$	23.86	$	437
Granted		1,000		$	28.50				—		$	—
Cancelled		(24,900	)	$	29.35				(9,000	)	$	32.00
Exercised		(14,500	)	$	14.58				(39,000	)	$	21.57
Balance at December 31, 2011		1,627,537		$	28.19	$	674		93,000		$	24.04	$	8
Shares vested + expected to vest		1,616,070		$	28.19	$	673		93,000		$	24.04	$	8
Exercisable portion		1,266,621		$	28.15	$	641		93,000		$	24.04	$	8
Available for future grant at December 31, 2011		1,133,655							—

Nonvested Stock Awards

Nonvested stock awards have historically been granted to the non-employee members of the Board of Directors, executive officers, certain other management of the Company and a non-employee outside consultant, pursuant to the Employee Plan, and generally vest in three equal annual installments based solely on continued employment or service, as applicable, with the Company. Nonvested stock awards are commonly referred to as restricted stock, but ASC 718 reserves that term for fully vested and outstanding shares, the sale of which is contractually or governmentally prohibited for a specified period of time. Fair value is based upon the closing price of the Company's Common Stock on the date of grant. The following table outlines the nonvested stock awards activity for the six months ended December 31, 2011.

	Nonvested Stock Awarded  Under the Employee Plan
	Shares			Weighted Average Price Per Share
Balance at June 30, 2011		48,729		$	22.89
Granted:
Non-employee Directors		21,377			26.08
Issued:
Non-employee Directors		(18,299	)		22.32
Forfeited:
Non-employee Directors		(5,518	)		20.84
Balance at December 31, 2011		46,289		$	24.83

Cash-Settled Stock Appreciation Rights (SARs)

Cash-settled SARs awards are granted to executive officers and other eligible employees, providing each participant with the right to receive payment in cash, upon exercise, for the appreciation in market value of a specified number of shares of the Company's Common Stock over the award's exercise price. The per-share exercise price of a cash-settled SAR is equal to the closing market price of a share of the Company's Common Stock on the date of grant.

On September 20, 2011, the Company granted cash-settled SARs awards to executive officers and other eligible employees. The Company granted a total of 484,900 cash-settled SARs, which are to vest over a period of three years, with a maximum term of seven years, in each case from the date of grant. On the date of grant, the per share fair market value was $7.72. The number of cash-settled SARs awarded refers to the number of shares underlying the awards.

As of December 31, 2011, the average per share fair market value of the cash-settled SARs from the September 20, 2011 grant was $3.74 and the related liability for these cash-settled SARs was $161. These cash-settled SARs will continue to be remeasured at each reporting period until all awards are settled. The Company cannot predict the market value of its Common Stock at the time of exercise for these grants, nor the magnitude of exercises at any particular time over the terms of these grants. Cash-settled SARs are classified as liability awards as a component of Other non-current liabilities on the Condensed Consolidated Balance Sheets, with fluctuations in the fair market value recorded as increases or decreases in compensation cost.

During the fiscal year ended June 30, 2007, the Company had granted cash-settled SARs to eligible employees and executive officers. These awards expired in October 2011, and as of December 31, 2011, there was no remaining liability associated with these grants.

The following table outlines the cash-settled SAR activity for the six months ended December 31, 2011.

	Shares			Weighted Average  Price Per Share
Balance at June 30, 2011		94,700		$	31.35
Granted:
Executive officers		180,430			25.64
Eligible employees		304,470			25.64
Expired:
Executive officers		(94,000	)		31.36
Eligible employees		(700	)		29.88
Forfeited:
Eligible employees		(5,500	)		25.64
Balance at December 31, 2011		479,400		$	25.64

The fair value of each cash-settled SAR award is remeasured at each reporting period using the Black-Scholes option-pricing model with the assumptions noted in the following table for the six months ended December 31, 2011 and 2010.

	Six Months Ended December 31,
	2011	2010
Dividend yield	0%	0%
Expected volatility	35%	35%
Risk-free interest rate	0.703% - 0.892%	0.230% - 0.333%
Expected term (years)	4.25 - 4.50	0.91 - 1.13

Expected volatilities are based on historical volatility of the Company's Common Stock and other factors. The Company uses historical data to estimate employee termination behavior within the valuation model; disparate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. As the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected life, it uses the "simplified method" as permitted by ASC 718-10. The "simplified method" calculates the expected life of an equity award equal to the time from grant to the midpoint between the vesting date and contractual term, taking into account all vesting tranches. The risk-free rate for periods within the contractual life of the cash-settled SAR is based on U.S. treasuries with constant maturities in effect at the time of grant.