Stock Option Plan and Stock Based Compensation

9 Months Ended

Nov. 30, 2012

Stock Option Plan and Stock Based Compensation [Abstract]

Stock Option Plan and Stock Based Compensation

11. 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 November 30, 2012, the Company had 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 (the “Plan”). The Company has 937,854 shares of unissued common stock reserved under the Plan for issuance. The exercise price of each stock option granted under the Plan equals a referenced price of the Company’s common stock as reported on the New York Stock Exchange 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 November 30, 2012 and 2011, the Company included in selling, general and administrative expenses, compensation expense related to share based compensation of $0.4 million ($0.3 million net of tax), and $0.3 million ($0.2 million net of tax), respectively. For the nine months ended November 30, 2012 and 2011, the Company included in selling, general and administrative expenses, compensation expense related to share based compensation of $1.1 million ($0.7 million net of tax), and $0.8 million ($0.5 million net of tax), respectively.

Stock Options

The Company had the following stock option activity for the nine months ended November 30, 2012:

	Number of Shares (exact quantity)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in  years)		Aggregate Intrinsic Value(a) (in thousands)
Outstanding at February 29, 2012		310,193		$	15.60		6.6	$	626
Granted		72,707			15.48
Terminated		(2,500	)		13.28
Exercised		(4,000	)		8.94
Outstanding at November 30, 2012		376,400		$	15.66		6.6	$	439
Exercisable at November 30, 2012		205,196		$	15.66		5.0	$	298

(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 nine months ended November 30, 2012 and 2011:

	November 30,
	2012			2011
Expected volatility		37.02	%		43.76	%
Expected term (years)		3			3
Risk free interest rate		0.43	%		1.16	%
Dividend yield		4.42	%		3.66	%
Weighted average grant-date fair value	$	2.83		$	4.24

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

	Three months ended November 30,				Nine months ended November 30,
	2012		2011		2012		2011
Total cash received	$	9	$	—	$	35	$	200
Income tax benefits		—		—		—		—
Total grant-date fair value		1		—		6		35
Intrinsic value		6		—		23		156

A summary of the status of the Company’s unvested stock options at February 29, 2012, and changes during the nine months ended November 30, 2012 is presented below:

				Weighted
				Average
	Number			Grant Date
	of Options			Fair Value
Unvested at February 29, 2012		169,411		$	3.31
New grants		72,707			2.83
Vested		(70,914	)		3.13
Forfeited		—			—
Unvested at November 30, 2012		171,204		$	3.18

As of November 30, 2012, there was $0.4 million 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 1.6 years. The total fair value of shares underlying the options vested during the nine months ended November 30, 2012 was $1.1 million.

Restricted Stock

The Company had the following restricted stock grant activity for the nine months ended November 30, 2012:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value
Outstanding at February 29, 2012		131,333		$	17.09
Granted		92,293			15.46
Terminated		—			—
Vested		(36,578	)		16.05
Outstanding at November 30, 2012		187,048		$	16.49

As of November 30, 2012, the total remaining unrecognized compensation cost related to unvested restricted stock granted under the Plan was approximately $2.0 million. The weighted average remaining requisite service period of the unvested restricted stock awards was 1.8 years.