STOCK-BASED COMPENSATION

9 Months Ended

Oct. 31, 2022

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 9 – STOCK-BASED COMPENSATION

On June 23, 2020, the Company’s stockholders approved the adoption of the 2020 Stock Plan (the “2020 Plan”), and the allocation of 500,000 shares of the Company’s common stock for issuance thereunder. The Company’s board of directors may make share-based awards under the 2020 Plan to officers, directors and key employees. The 2020 Plan replaced the 2011 Stock Plan (the “2011 Plan”); the Company’s authority to make awards pursuant to the 2011 Plan expired on July 19, 2021. Together, the 2020 Plan and the 2011 Plan are hereinafter referred to as the “Stock Plans.”

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 are documented in a written agreement between the Company and the awardee. All stock options awarded under the Stock Plans have exercise prices per share at least equal to the market value per share of the Company’s common stock on the date of grant. Stock options 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, 2022, there were 1,939,402 shares of common stock reserved for issuance under the Stock Plans; this number includes 236,146 shares of common stock available for future awards under the 2020 Plan.

Stock Options

A summary of stock option activity under the Stock Plans for the nine months ended October 31, 2022, 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, 2022	1,405	$	44.35	6.17	$	10.31
Granted	38	$	36.78
Exercised	(2)	$	32.68
Forfeited	(36)	$	48.98
Outstanding, October 31, 2022	1,405	$	44.04	5.61	$	10.17
Exercisable, October 31, 2022	1,188	$	44.76	5.11	$	10.69
Outstanding, October 31, 2021	1,381	$	44.64	6.32	$	10.46
Exercisable, October 31, 2021	1,053	$	45.51	5.66	$	11.18

The changes in the number of non-vested options to purchase shares of common stock for the nine months ended October 31, 2022, and the weighted average fair value per share for each number, are presented below (shares in thousands):

	Shares	Fair Value
Non-vested, February 1, 2022	295	$	7.80
Granted	38	$	6.68
Vested	(116)	$	8.32
Non-vested, October 31, 2022	217	$	7.33
Non-vested, October 31, 2021	328	$	8.13

The total intrinsic value related to the stock options exercised during the nine months ended October 31, 2021 was $0.6 million; the amount was not significant for the nine months ended October 31, 2022. The aggregate market value amounts of the shares of common stock subject to outstanding stock options and exercisable stock options that were “in-the-money” exceeded the aggregate exercise prices of such options at October 31, 2022 by $1.2 million and $1.1 million, respectively.

Restricted Stock Units

The Company awards restricted stock units to senior executives, members of the Company’s board of directors and certain other employees. Awardees earn the right to receive shares of common stock as certain performance goals are achieved and/or service periods are satisfied. Each restricted stock unit expires on the three-year anniversary of the award.

During the nine months ended October 31, 2022, the Company awarded performance-based restricted stock units covering 52,000 shares of common stock, renewable (energy) performance-based restricted stock units covering 7,500 shares of common stock, time-based restricted stock units covering 72,500 shares of common stock, and 2,604 shares based on the amount of cash dividends deemed paid on shares earned pursuant to the awards. During the nine months ended October 31, 2021, the Company awarded 49,000 performance-based restricted stock units, 10,000 renewable performance-based restricted stock units and 65,000 time-based restricted stock units.

The changes in the maximum number of shares of common stock issuable pursuant to outstanding restricted stock units for the nine months ended October 31, 2022, and the weighted average fair value per share for each restricted stock unit, are presented below (shares in thousands):

	Shares	Fair Value
Outstanding, February 1, 2022	222	$	31.48
Awarded	135	$	27.22
Issued	(37)	$	38.51
Forfeited	(22)	$	40.85
Outstanding, October 31, 2022	298	$	29.42
Outstanding, October 31, 2021	205	$	31.00

Fair Value

The fair value amounts of stock options and restricted stock units are recorded as stock compensation expense on a straight-line basis over the terms of the corresponding awards. Expense amounts related to stock awards were $1.1 million and $0.9 million for the three months ended October 31, 2022 and 2021, respectively. Expense amounts related to stock awards were $3.1 million and $2.5 million for the nine months ended October 31, 2022 and 2021, respectively. At October 31, 2022, there was $7.2 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 U.S. 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 common stock on the dates of award and, 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 (which is 50% of the maximum number) of shares on the award date. For the renewable performance-based restricted stock units, 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.