Note 6 - Share-Based Compensation

9 Months Ended

Jul. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

6. SHARE-BASED COMPENSATION

Share-based award plans.  In December 2012, our board of directors adopted and, in March 2013, our shareholders approved the 2012 Stock Incentive Plan (the “2012 Plan”). The approved plan replaced all previous plans.  The 2012 Plan included 6.7 million new awards available for grant as well as the shares available for grant or subject to outstanding awards under the prior plans.

The 2012 Plan includes a variety of forms of awards, including stock options, stock appreciation rights, restricted stock, restricted stock units and dividend equivalents.  Stock options may not be granted at an exercise price less than the market value of our common stock on the date of grant.  Each share issued in connection with an award granted, other than stock options and stock appreciation rights, will be counted against the 2012 Plan's share reserve as 1.67 shares for every one share issued in connection with such award (and shall be counted as 1.67 shares for each one share that is returned or deemed not to have been issued from the 2012 Plan). Any shares covered by an award which is forfeited, canceled or expired shall be deemed not to have been issued for purposes of determining the maximum number of shares which may be issued under the 2012 Plan. As of July 31, 2013, under the 2012 Plan, there were 7.4 million shares available for grant.  

A summary of activity related to stock options is presented below:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(In thousands, except per share amount)
Outstanding at November 1, 2012		3,010		$	14.68
Granted		532			13.18
Exercised		(482	)		9.18
Forfeited		(24	)		12.25
Expired		(405	)		25.92
Outstanding at July 31, 2013		2,631		$	13.68		6.2	$	26,781
Fully vested and expected to vest at July 31, 2013		2,594		$	13.69		6.2	$	26,414
Exercisable at July 31, 2013		1,504		$	15.00		4.5	$	14,567

The weighted average grant date fair value of stock options granted during the nine months ended July 31, 2013 and 2012 was $6.56 and $6.26, respectively. The total intrinsic value of the stock options exercised for the nine months ended July 31, 2013 and 2012, was $3.8 million and $6.2 million, respectively.

During the nine months ended July 31, 2013 and 2012, 0.5 million and 1.5 million options were exercised, respectively. For the nine months ended July 31, 2013 and 2012, the tax effect/benefit from stock option exercises affected our deferred tax asset or income tax payable as well as our additional paid-in capital by an equal amount and had no effect on our income tax provision. As of July 31, 2013, there was a total of $5.4 million of unamortized compensation related to stock options, which expense is expected to be recognized over a weighted-average period of 1.8 years or immediately upon a change in control as defined in the 2012 Plan.
 

During the nine months ended July 31, 2013 and 2012, we granted 0.5 million and 0.4 million stock options, respectively, with a grant date fair value of $3.5 million and $2.8 million, respectively.

Option valuation models require the input of certain assumptions and changes in assumptions used can materially affect the fair value estimate. Expected volatility is based on the historical volatility of our common stock. Expected term represents the estimated weighted-average time between grant date and its exercise date and is based on historical factors. Expected dividend yield is based on our expectation that dividends will not be paid within the average expected life of existing options. Risk-free interest rate is based on U.S. Treasury rates appropriate for the expected term. There were no stock awards during the three months ended July 31, 2013. We estimate the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the weighted-average assumptions noted in the following table:

	Three Months Ended July 31, 2013	Nine Months Ended July 31, 2013
Option valuation assumptions:
Expected dividend yield	N/A	None
Expected volatility	N/A		63.1	%
Risk-free interest rate	N/A		0.6	%
Expected term (in years)	N/A		4.4

A summary of activity related to restricted stock is presented below:

	Shares			Weighted Average Grant-Date Fair Value		Remaining Vesting Period		Aggregate Intrinsic Value
	(In thousands, except per share amount)
Non-vested at November 1, 2012		652		$	11.79
Granted		415			14.88
Vested		(226	)		12.06
Forfeited		(18	)		12.82
Non-vested at July 31, 2013		823		$	13.25		1.5	$	18,727
Expected to vest		794		$	13.21		1.5	$	18,066

During the nine months ended July 31, 2013 and 2012, we issued 0.4 million and 0.5 million shares of restricted stock, respectively, with an aggregate fair value of $6.2 million and $5.6 million, respectively. The weighted average grant date fair value of non-vested shares granted during the nine months ended July 31, 2013 and 2012 was $14.88 and $12.35, respectively. The total value of each restricted stock grant, based on the fair market value of the stock on the date of grant, is amortized to compensation expense over the related vesting period.

In the current year certain restricted stock awards containing market-based conditions were issued. The market-based conditions affect the number of shares to vest, which varies based on the Company’s stock price compared to several peers and competitors. For restricted stock subject to market-based conditions, the Company uses a Monte-Carlo simulation pricing model to determine the grant date fair value. The Monte-Carlo simulation pricing model takes into account the same input assumptions as the Black-Scholes model; however, it also further incorporates into the fair value determination the possibility that the market condition may not be satisfied and impact of the possible differing stock price paths. There were no restricted stock awards with market conditions granted during the three months ended July 31, 2013. The following assumptions were used in the Monte-Carlo pricing model:

	Three Months Ended July 31, 2013	Nine Months Ended July 31, 2013
Monte-Carlo valuation assumptions:
Expected dividend yield	N/A	None
Expected volatility	N/A		43.5	%
Risk-free interest rate	N/A		0.4	%
Expected term (in years)	N/A		2.8

As of July 31, 2013, there was $8.8 million of unamortized compensation expense related to restricted stock, which is expected to be recognized over a weighted-average period of 1.8 years or immediately upon a change in control as defined in the 2012 Plan.

Recognition of compensation expense.  The following table shows information about compensation costs recognized:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2013			2012			2013			2012
	(In thousands)
Compensation costs:
Stock options	$	602		$	363		$	1,737		$	1,366
Restricted stock		1,054			651			2,806			1,697
Total compensation cost	$	1,656		$	1,014		$	4,543		$	3,063
Related tax benefit	$	(584	)	$	(375	)	$	(1,596	)	$	(1,088	)