13.

stock-based compensation and purchase plans

Stock-Based Compensation Plans

Under incentive compensation plans, the Company is authorized to make grants of stock options, restricted stock and performance share units to provide equity incentive compensation to key employees and directors. The stock award program offers employees and directors the opportunity to earn shares of our stock over time, rather than options that give the employees and directors the right to purchase stock at a set price. The Company has stock plans for directors, officers and certain key employees.

Total compensation cost recognized in income for equity based compensation awards was

$4.9

million,

$5.0

million, and

$5.1

million for the years ended

June 30, 2018,

2017,

and

2016,

respectively, primarily within Selling, General, and Administrative Expenses. The total income tax benefit recognized in the consolidated statement of operations for equity-based compensation plans was

$1.2

million,

$1.9

million, and

$1.8

million for the years ended

June 30, 2018,

2017

and

2016,

respectively.

There were

157,921

shares of common stock reserved for issuance under various compensation plans at

June 30, 2018.

Restricted Stock Awards

The Company

may

award shares of restricted stock to eligible employees and non-employee directors of the Company at

cost, giving them in most instances all of the rights of stockholders, except that they

may

not

sell, assign, pledge or otherwise encumber such shares and rights during the restriction period. Such shares and rights are subject to forfeiture if certain employment conditions are

not

met. During the restriction period, recipients of the shares are entitled to dividend equivalents on such shares, providing that such shares are

not

forfeited. Dividends are accumulated and paid out at the end of the restriction period. During

2018,

2017,

and

2016,

the Company granted

51,792,

51,563,

and

48,984

shares, respectively, of restricted stock to eligible participants. Restrictions on the stock awards generally lapse between fiscal

2018

and fiscal

2020.

For the years ended

June 30, 2018,

2017,

and

2016,

$3.7

million,

$3.6

million, and

$2.6

million, respectively, was recognized as compensation expense related to restricted stock awards. Substantially all awards are expected to vest.

A summary of restricted stock awards activity during the year ended

June 30, 2018

is as follows:

	Restricted Stock Awards
	Number			Aggregate
	of			Intrinsic
	Shares			Value
Outstanding, June 30, 2017		115,703		$	10,494,262
Granted		51,792
Exercised / vested		(37,970	)	$	757,216
Canceled		(9,515	)
Outstanding, June 30, 2018		120,010		$	12,258,515

Restricted stock awards granted during

2018,

2017

and

2016

had a weighted average grant date fair value of

$93.73,

$85.07,

and

$77.38,

respectively. The grant date fair value of restricted stock awards is determined based on the closing price of the Company’s common stock on the date of grant. The total intrinsic value of awards exercised during the years ended

June

30,

2018,

2017,

and

2016

was

$0.8

million,

$0.8

million, and

$1.1

million, respectively.

As of

June 30, 2018,

there was

$4.1

million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of

1.38

years.

Executive Compensation Program

The Company operates a compensation program for key employees. The plan contains both an annual component as well as a long-term component. Under the annual component, participants

may

elect to defer up to

50%

of their annual incentive compensation in restricted stock which is purchased at a discount to the market. Additionally, non-employee directors of the Company

may

defer a portion of their director’s fees in restricted stock units which is purchased at a discount to the market. During the restriction period, recipients of the shares are entitled to dividend equivalents on such units, providing that such shares are

not

forfeited. Dividend equivalents are accumulated and paid out at the end of the restriction period. The restrictions on the units expire after

three

years. At

June 30, 2018

and

2017,

respectively,

31,760

and

35,707

shares of restricted stock units are outstanding and subject to restrictions that lapse between fiscal

2018

and fiscal

2020.

The compensation expense associated with this incentive program is charged to income over the restriction period. The Company recorded compensation expense related to this program of

$0.3

million,

$0.4

million, and

$0.2

million for the years ended

June

30,

2018,

2017

and

2016,

respectively.

As of

June 30, 2018,

there was

$0.3

million of unrecognized compensation costs related to awards expected to be recognized over a weighted-average period of

1.21

years.

The fair value of the awards under the annual component of this incentive program is measured using the Black-Scholes option-pricing model. Key assumptions used to apply this pricing model are as follows:

	2018			2017			2016
Risk-free interest rates		1.55	%		0.71	%		1.10	%
Expected life of option grants (in years)		3			3			3
Expected volatility of underlying stock		25.6	%		25.7	%		26.6	%
Expected quarterly dividends (per share)	$	0.16		$	0.14		$	0.12

Under the long-term component, grants of performance share units (“PSUs”) are made annually to key employees and the share units are earned based on the achievement of certain overall corporate financial performance targets over the performance period. At the end of the performance period, the number of shares of common stock issued will be determined by adjusting upward or downward from the target in a range between

50%

and

200%.

shares will be issued if the minimum performance threshold is

not

achieved. The final performance percentage, on which the payout will be based, considering the performance metrics established for the performance period, will be certified by the Compensation Committee of the Board of Directors.

Beginning in

2017,

awards granted by the Committee provide that the PSUs will be converted to shares of common stock if the Company’s EBITDA (earnings before interest, taxes, depreciation and amortization) and return on invested capital meet specified levels approved by the Committee. A participant’s right to any shares that are earned will cliff vest in

three

years. An executive whose employment terminates prior to the vesting of any award for a reason other than death, disability, retirement, or following a change in control, will forfeit the shares represented by that award. In certain circumstances, such as death, disability, or retirement, PSUs are paid on a pro-rata basis. In the event of a change in control, vesting of the awards granted is accelerated.

A summary of the awards activity under the executive compensation program during the year ended

June 30, 2018

is as follows:

	Annual Component							Performance Stock Units
				Weighted
	Number			Average		Aggregate		Number			Aggregate
	of			Exercise		Intrinsic		of			Intrinsic
	Shares			Price		Value		Shares			Value
Non-vested, June 30, 2017		35,707		$	59.11	$	318,334		52,890		$	4,254,256
Granted		9,050		$	68.03				24,567
Vested		(10,930	)	$	55.76		428,893		(15,780	)	$	1,194,319
Forfeited		(2,067	)	$	60.62				(3,167	)
Non-vested, June 30, 2018		31,760		$	62.71		442,850		58,028		$	5,013,531

Restricted stock awards granted under the annual component of this program in fiscal

2018,

2017,

and

2016

had a grant date fair value of

$96.56,

$87.05,

and

$82.79,

respectively. The PSUs granted in fiscal

2018,

2017

and

2016

had a grant date fair value of

$91.75,

$83.92,

and

$76.61,

respectively. The total intrinsic value of awards vested under the executive compensation program during the years ended

June 30, 2018

was

$1.6

million, and

$2.3

million for the years ended

June

30,

2017

and

June 30, 2016.

The Company recognized compensation expense related to the PSUs of

$0.9

million,

$1.0

million, and

$2.3

million for the years ended

June 30, 2018,

2017

and

2016

respectively based on the probability of the performance targets being met. The total unrecognized compensation costs related to non-vested performance share units was

$2.0

million at

June 30, 2018,

which is expected to be recognized over a weighted average period of

1.3

years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan that allows employees to purchase shares of common stock of the Company at a discount from the market each quarter. The ESPP plan, which was effective as of

July 1, 2005,

provided employees the option to purchase Standex stock at a discount of

5%.

The Plan was modified, effective as of

April 1, 2017,

to increase the stock purchase discount to

15%

and is considered a compensatory Plan. Under this new Plan, shares of our stock

may

be purchased by employees quarterly at

85%

of the fair market value on the last day of each quarter. The

15%

discount is recorded as a component of SG&A in the Company’s Consolidated Statements of Operations. Shares of stock reserved for the plan were

81,315

June 30, 2018.

Shares purchased under this plan aggregated to

5,622,

3,742,

and

3,809

2018,

2017

and

2016,

respectively, at an average price of

$86.01,

$84.17,

and

$75.66,

respectively.