STOCK-BASED COMPENSATION

9 Months Ended

Oct. 31, 2020

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 9 – STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under the 2011 Stock Plan (the “2011 Plan”) or the 2020 Stock Plan (the “2020 Plan”) to officers, directors and key employees (together, the “Stock Plans”). On June 23, 2020, the Company’s stockholders approved the adoption of the 2020 Plan, and the allocation of 500,000 shares of the Company’s common stock for issuance thereunder, which had been established by the Company’s board of directors earlier in the current year. The 2020 Plan will serve to replace the 2011 Plan; the Company’s authority to make awards pursuant to the 2011 Plan will expire on July 19, 2021.

The features of the 2020 Plan are similar to those included in the 2011 Plan. Awards may include nonqualified stock options, incentive stock options,  and restricted or unrestricted stock. The specific provisions for each award made pursuant to the terms of the Stock Plans are documented in a written agreement between the Company and the awardee. All stock options awarded under the Stock Plans shall have an exercise price per share at least equal to the common stock’s market value on the date of grant. Stock options shall have terms no longer than ten years. Typically, stock options are awarded with one-third of each stock option vesting on each of the first three anniversaries of the corresponding award date. As of October 31, 2020, there were approximately 2,170,400 shares of the Company’s common stock reserved for issuance under the Stock Plans; this number includes 688,999 shares of common stock available for future awards.

Summaries of stock option activity under the Company’s approved stock option plans for the nine months ended October 31, 2020 and 2019, along with corresponding weighted average per share amounts, are presented below (shares in thousands):

		Exercise		Remaining
	Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2020	1,271	$	44.83	7.18	$	11.06
Granted	172	$	33.81
Exercised	(55)	$	22.69
Forfeited	(24)	$	55.61
Outstanding, October 31, 2020	1,364	$	44.14	6.96	$	10.52
Exercisable, October 31, 2020	865	$	46.40	5.97	$	11.76
		Exercise		Remaining
	Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2019	1,140	$	44.01	7.54	$	11.22
Granted	168	$	46.67
Exercised	(59)	$	26.36
Forfeited	(38)	$	46.34
Outstanding, October 31, 2019	1,211	$	45.18	7.28	$	11.27
Exercisable, October 31, 2019	753	$	45.81	6.25	$	10.22

The changes in the number of non-vested options to purchase shares of common stock for the nine months ended October 31, 2020 and 2019, and the weighted average fair value per share for each number, are presented below (shares in thousands):

	Shares	Fair Value
Non-vested, February 1, 2020	448	$	9.74
Granted	172	$	5.68
Vested	(112)	$	9.81
Forfeitures	(9)	$	8.08
Non-vested, October 31, 2020	499	$	8.35
	Shares	Fair Value
Non-vested, February 1, 2019	375	$	10.05
Granted	168	$	10.32
Vested	(57)	$	9.28
Forfeitures	(28)	$	10.47
Non-vested, October 31, 2019	458	$	10.22

Pursuant to the terms of the 2011 Plan and as described in the corresponding agreements with the executives, the Company awarded performance-based restricted stock units to two senior executives in April 2020, 2019 and 2018 covering  45,000, 36,000 and 36,000 maximum total numbers of shares of common stock, respectively, plus a number of shares to be determined based on the amount of cash dividends deemed paid on shares earned pursuant to the awards. The release of the stock restrictions depends on the total return performance of the Company’s common stock measured against the performance of a peer-group of common stocks over three-year periods. The fair value amounts for restricted stock units were determined by using the per share market price of the Company’s common stock on the dates of award and the target number of shares for the awards (50% of the maximum number), by assigning equal probabilities to the thirteen possible payout outcomes at the ends of the three-year vesting periods, and by computing the weighted average of the outcome amounts. For each case, the estimated fair value amount was calculated to be 88.5% of the aggregate market value of the target number of shares on the award date.

The fair values of stock options and restricted stock units are recorded as stock compensation expense over the vesting periods of the corresponding awards. Expense amounts related to stock awards were $0.8 million and $0.6 million for the three months ended October 31, 2020 and 2019, respectively. Expense amounts related to stock awards were $2.2 million

and $1.5 million for the nine months ended October 31, 2020 and 2019, respectively. At October 31, 2020, there was $3.8 million in unrecognized compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

The total intrinsic value amounts of the stock options exercised during the nine months ended October 31, 2020 and 2019 were $1.2 million and $1.4 million, respectively. At October 31, 2020, the aggregate market value amounts of the shares of common stock subject to outstanding and exercisable stock options that were “in-the-money” exceeded the aggregate exercise prices of such options by $4.7 million and $3.3 million, respectively.

The Company estimates the weighted average fair value of stock options on the date of award using a Black-Scholes option pricing model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company believes that its past stock option exercise activity is sufficient to provide it with a reasonable basis upon which to estimate the expected life of newly awarded stock options. Risk-free interest rates are determined by blending the rates for three to five year US Treasury notes. The dividend yield is based on the Company’s current annual regular dividend amount. The calculations of the expected volatility factors are based on the monthly closing prices of the Company’s common stock for the five-year periods preceding the dates of the corresponding awards.

The fair value amounts of stock options granted during the nine months ended October 31, 2020 and 2019 were estimated on the corresponding dates of the awards using the Black-Scholes option-pricing model reflecting the following weighted average assumptions:

	Nine Months Ended October 31,
	2020		2019
Dividend yield	3.0	%	2.2	%
Expected volatility	30.0	%	33.1	%
Risk-free interest rate	0.5	%	2.0	%
Expected life (in years)	3.4		3.3