Stock Option Plan and Stock Based Compensation

6 Months Ended

Aug. 31, 2011

Stock Option Plan and Stock Based Compensation [Abstract]

Stock Option Plan and Stock Based Compensation

10. Stock Option Plan and Stock Based Compensation

The Company grants stock options and restricted stock to key executives and managerial employees and non-employee directors. At August 31, 2011, the Company has one stock option plan: the 2004 Long-Term Incentive Plan of Ennis, Inc., as amended and restated as of June 30, 2011, formerly the 1998 Option and Restricted Stock Plan amended and restated as of May 14, 2008 (“Plan”). The Company has 1,097,854 shares of unissued common stock reserved under the plan for issuance to officers and directors, and supervisory employees of the Company and its subsidiaries. The exercise price of each stock option granted equals the quoted market price of the Company’s common stock on the date of grant, and an option’s maximum term is ten years. Stock options and restricted stock may be granted at different times during the year and vest ratably over various periods, from grant date up to five years. The Company uses treasury stock to satisfy option exercises and restricted stock awards.

The Company recognizes compensation expense for stock options and restricted stock grants on a straight-line basis over the requisite service period. For the three months ended August 31, 2011 and 2010, the Company included in selling, general and administrative expenses, compensation expense related to share based compensation of $267,000 ($170,000 net of tax), and $191,000 ($121,000 net of tax), respectively. For the six months ended August 31, 2011 and 2010, the Company had compensation expenses related to share based compensation of $499,000 ($318,000 net of tax), and $607,000 ($385,000 net of tax), respectively.

Stock Options

The Company had the following stock option activity for the six months ended August 31, 2011:

						Weighted
	Number			Weighted		Average		Aggregate
	of			Average		Remaining		Intrinsic
	Shares			Exercise		Contractual		Value(a)
	(exact quantity)			Price		Life(in years)		(in thousands)
Outstanding at February 28, 2011		261,900		$	14.31		6.5	$	757
Granted		82,743			17.57
Terminated		—			—
Exercised		(20,700	)		9.66
Outstanding at August 31, 2011		323,943		$	15.44		6.9	$	579
Exercisable at August 31, 2011		154,532		$	15.38		4.7	$	267

(a) Intrinsic value is measured as the excess fair market value of the Company’s Common Stock as reported on the New York Stock Exchange over the applicable exercise price.

The following is a summary of the assumptions used and the weighted average grant-date fair value of the stock options granted during the six months ended August 31, 2011 and 2010:

	August 31,
	2011			2010
Expected volatility		43.76	%		34.63	%
Expected term (years)		3			3
Risk free interest rate		1.16	%		1.58	%
Dividend yield		3.66	%		4.24	%
Weighted average grant-date fair value	$	4.24		$	3.35

A summary of the stock options exercised and tax benefits realized from stock based compensation is presented below (in thousands):

	Three months ended				Six months ended
	August 31,				August 31,
	2011		2010		2011		2010
Total cash received	$	49	$	—	$	200	$	—
Income tax benefits		—		—		—		—
Total grant-date fair value		9		—		35		—
Intrinsic value		22		—		156		—

A summary of the status of the Company’s unvested stock options at February 28, 2011, and changes during the six months ended August 31, 2011 is presented below:

				Weighted
				Average
	Number			Grant Date
	of Options			Fair Value
Unvested at February 28, 2011		133,750		$	2.41
New grants		82,743			4.24
Vested		(47,082	)		2.36
Forfeited		—			—
Unvested at August 31, 2011		169,411		$	3.31

As of August 31, 2011, there was $468,000 of unrecognized compensation cost related to unvested stock options granted under the Plan. The weighted average remaining requisite service period of the unvested stock options was 2.1 years. The total fair value of shares underlying the options vested during the six months ended August 31, 2011 was $747,000.

Restricted Stock

The Company had the following restricted stock grant activity for the six months ended August 31, 2011:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Outstanding at February 28, 2011		80,823		$	15.59
Granted		93,959			17.57
Terminated		—			—
Vested		(43,449	)		15.34
Outstanding at August 31, 2011		131,333		$	17.09

As of August 31, 2011, the total remaining unrecognized compensation cost related to unvested restricted stock was approximately $1.9 million. The weighted average remaining requisite service period of the unvested restricted stock awards was 2.3 years.