STOCK-BASED COMPENSATION

3 Months Ended

Apr. 30, 2021

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 9 – STOCK-BASED COMPENSATION

The Company’s board of directors may make share-based 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. 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 April 30, 2021, there were approximately 2,090,929 shares of the Company’s common stock reserved for issuance under the Stock Plans; this number includes 493,528 shares of common stock available for future awards.

Stock Options

A summary of stock option activity under the Company’s approved Stock Plans for the three months ended April 30, 2021, along with corresponding weighted average per share amounts, is presented below (shares in thousands):

		Exercise		Remaining
	Shares	Price		Term (years)	Fair Value
Outstanding, February 1, 2021	1,405	$	44.17	6.90	$	10.39
Granted	32	$	54.60
Exercised	(26)	$	39.37
Forfeited	(3)	$	42.31
Outstanding, April 30, 2021	1,408	$	44.50	6.77	$	10.44
Exercisable, April 30, 2021	1,029	$	45.47	6.01	$	11.24
Outstanding, April 30, 2020	1,431	$	43.69	7.33	$	10.45
Exercisable, April 30, 2020	874	$	45.78	6.17	$	11.74

The change in the number of non-vested options to purchase shares of common stock for the three months ended April 30, 2021, and the weighted average fair value per share for each number, is presented below (shares in thousands):

	Shares	Fair Value
Non-vested, February 1, 2021	467	$	8.01
Granted	32	$	11.12
Vested	(117)	$	8.06
Forfeitures	(3)	$	8.67
Non-vested, April 30, 2021	379	$	8.25
Non-vested, April 30, 2020	557	$	8.42

The total intrinsic value amount of the stock options exercised during the three-month period ended April 30, 2021 and 2020 was $0.3 million for both periods. At April 30, 2021, 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 $12.5 million and $9.2 million, respectively.

Restricted Stock Units

The changes in the maximum number of restricted stock units for the three months ended April 30, 2021, and the weighted average fair value per share for each number, are presented below (shares in thousands):

	Shares	Fair Value
Outstanding, February 1, 2021	117	$	17.71
Awarded	113	$	38.91
Issued	(40)	$	20.64
Outstanding, April 30, 2021	190	$	29.73
Outstanding, April 30, 2020	117	$	17.71

Performance-Based Restricted Stock Units

Pursuant to the terms of the Stock Plans and as described in the corresponding agreements with the executives, the Company awarded performance-based restricted stock units to four senior executives in April 2021 and two senior executives in 2020, covering up to 49,000 and 45,000 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 issuance of the number of shares earned under the agreements, free of related 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.

During the three months ended April 30, 2021, the three-year vesting period for the restricted stock units awarded in April 2018 concluded and it was determined that 40,471 shares of common stock, including shares attributable to cash dividends, were earned pursuant to the performance criteria and other terms of the 2011 Plan and the applicable award agreements. These shares were issued to the awardees in April 2021.

Renewable Performance-Based Restricted Stock Units

In April 2021, the Company awarded renewable performance-based restricted stock units to two senior executives at GPS pursuant to the terms of the Stock Plans and as described in the corresponding agreements with the executives. Each award covers 5,000 shares of the Company’s common stock 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 issuance of the shares, free of restrictions, shall be based on the success of GPS in increasing the amount of RUPO related to renewable energy projects, as defined, during certain periods within the three-year term of each award. The awards establish RUPO hurdle amounts for separate periods of time defined in the awards, and assign a certain portion of the award shares to each hurdle. If a RUPO hurdle is exceeded (each is mutually exclusive), the number of shares earned based on the achievement of the applicable hurdle will be issued to the executives at the end of the corresponding period. If a RUPO hurdle amount is not achieved within the period of time defined in the awards, the award shares assigned to the hurdle are forfeited. 

Time-Based Restricted Stock Units

In April 2021, the Company also awarded time-based restricted stock units covering 49,500 shares of common stock to senior executives and other employees pursuant to the terms of the Stock Plans and as described in the corresponding agreements with each awardee. The shares will vest in equal installments on each of the first three anniversaries of the award date. Accordingly, at each vesting date, one-third of the award shares plus a number of shares to be determined based on the amount of cash dividends deemed paid on shares earned pursuant to the awards will be issued to each awardee.

Fair Value

The fair values of stock options and restricted stock units are recorded as stock compensation expense over the terms of the corresponding awards. Expense amounts related to stock awards were $0.7 million and $0.6 million for the three months ended April 30, 2021 and 2020, respectively. At April 30, 2021, there was $7.4 million in unrecognized compensation cost related to outstanding stock awards that the Company expects to expense over the next three years.

The Company estimates the weighted average fair value of stock options on the date of award using a Black-Scholes option pricing model. 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 for the performance-based restricted stock units have been 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 end of each three-year term, and by computing the weighted average of the outcome amounts. For each award, 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. For the renewable performance-based restricted stock units, which were awarded for the first time in April 2021, the fair value of each award was determined to be 50% of the aggregate market value of the shares of common stock covered by the award on the date of the award. For the time-based restricted stock units, the fair value of each award equals the aggregate market price for the number of shares covered by each award on the date of award.