Stock-Based Compensation

12 Months Ended

May 03, 2020

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

16.	STOCK-BASED COMPENSATION

Equity Incentive Plan Description

On September 16, 2015, our shareholders approved an equity incentive plan titled the Culp, Inc. 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan authorizes the grant of stock options intended to qualify as incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and other equity and cash related awards as determined by our Compensation Committee. An aggregate of 1,200,000 shares of common stock were authorized for issuance under the 2015 Plan, with certain sub-limits that would apply with respect to specific types of awards that may be issued as defined in the 2015 Plan.

At May 3, 2020, there were 690,163 shares available for future equity-based grants under the company’s 2015 Plan.

Stock Options

The following tables summarize stock option activity during fiscal 2020, 2019, and 2018:

			2020				2019					2018
			Weighted-				Weighted-					Weighted-
			Average				Average					Average
			Exercise				Exercise					Exercise
	Shares		Price		Shares		Price		Shares			Price
outstanding at beginning of year		—	$	—		—	$	—		15,600		$	7.14
exercised		—		—		—		—		(15,600	)		7.14
outstanding at end of year		—		—		—		—		—			—

At May 3, 2020, there were no options for shares of common stock outstanding and exercisable. Therefore, there was no unrecognized compensation cost related to incentive stock option awards at May 3, 2020. No compensation expense was recorded for incentive or non-qualified stock options during fiscal 2020, 2019, and 2018, respectively.

The aggregate intrinsic value for options exercised during fiscal 2018 was $393,000.

Time-Based Restricted Stock Awards

The following table summarizes the time-based restricted stock unit activity during fiscal years 2020, 2019, and 2018:

	2020		2019			2018
	Shares		Shares			Shares
outstanding at beginning of year		10,000		1,200			1,200
granted		34,399		10,000			1,200
vested		—		(1,200	)		(1,200	)
outstanding at end of year		44,399		10,000			1,200

The following table summarizes information related to our grants of time-based restricted stock unit awards associated with certain senior executives and key members of management during fiscal years 2020, 2019 and 2018:

			(1)
	Restricted		Price		Vesting
Date of Grant	Stock Awarded		Per Share		Period
July 18, 2019		34,399	$	18.49	3 years
August 2, 2018		10,000	$	24.35	5 years
June 13, 2017		1,200	$	32.50	1 year

(1)	Price per share represents closing price of our common stock on the date the respective award was granted.

The following table summarizes information related to our time-based restricted stock units that vested during the fiscal 2020, 2019, and 2018:

	Common		(1)		(2)
	Stock Shares		Weighted Average		Price Per
Fiscal Year	Vested		Fair Value		Share
Fiscal 2020		—	$	—	$	—
Fiscal 2019		1,200	$	21	$	17.36
Fiscal 2018		1,200	$	37	$	30.90

(1)	Dollar amounts are in thousands.

(2)	Price per share represents closing price of our common stock on the date the respective award vested.

Overall

We recorded compensation expense of $220,000, $43,000, and $38,000 within selling, general, and administrative expense for time vested restricted stock units in fiscal 2020, 2019, and 2018, respectively.

At May 3, 2020, the remaining unrecognized compensation cost related to our time vested restricted stock units were $622,000, which is expected to be recognized over a weighted average vesting period of 2.4 years. At May 3, 2020, our time vested restricted stock unit awards that were expected to vest had a fair value totaling $307,000.

Performance Based Restricted Stock Units

Senior Executives

We grant performance-based restricted stock units to certain senior executives which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-fiscal year performance period as defined in the related restricted stock unit agreements. The number of shares of common stock that are earned based on the performance targets that have been achieved will be adjusted based on a market-based total shareholder return component as defined in the related restricted stock unit agreements.

Compensation cost for share-based awards is measured based on the fair market value on the date of grant. The fair market value per share was determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock for the performance-based component.

The following table provides assumptions used to determine the fair market value of the market-based total shareholder return component using the Monte Carlo simulation model on the grant dates of July 18, 2019, August 2, 2018, and July 13, 2017:

	July 18,			August 2,			July 13,
	2019			2018			2017
Closing price of our common stock	$	18.49		$	24.35		$	32.50
Expected volatility of our common stock		30.0	%		33.5	%		31.0	%
Expected volatility of peer companies (1) (2)	29.9% - 82.3%				16.0	%		16.5	%
Risk-free interest rate		1.73	%		2.74	%		1.56	%
Dividend yield		2.10	%		1.35	%		1.66	%
Correlation coefficient of peer companies (1) (2)	0.00 - 0.43				0.47			0.46

(1)

The expected volatility and correlation coefficient of our peer companies for fiscal 2020 were based on peer companies that were approved by the Compensation Committee of our board of directors as an aggregate benchmark for determining the market-based total shareholder return component. Therefore, we disclosed ranges of the expected volatility and correlation coefficient for the companies that represented this peer group.

(2)

The expected volatility and correlation coefficient of our peer companies for fiscal 2019 and 2018 were based on the Russell 2000 Index, which was approved by the Compensation Committee of our board of directors as the benchmark for determining the market-based total shareholder return component. Since the Russell 2000 Index was the only benchmark for determining the market-based total shareholder return component, no ranges were disclosed for these assumptions.

Key Employees and a Non-Employee

We grant performance-based restricted stock units which could earn up to a certain number of shares of common stock if certain performance targets are met over a three-year performance period as defined in the related restricted stock unit agreements.

Our performance-based restricted stock units granted to key employees were measured based on the fair market value (the closing price of our common stock) on the date of grant. No market-based total shareholder return component was included in these awards. Our performance-based restricted stock units granted to a non-employee, which vested during the first quarter of fiscal 2020, were measured based on the fair market value (the closing price of our common stock) on the date when the performance criteria was met.

Overall

The following table summarizes information related to our grants of performance based restricted stock units associated with certain senior executives and key employees that were unvested at May 3, 2020:

			(4)
	(3)		Restricted Stock
	Restricted Stock		Units Expected		Price Per			Vesting
Date of Grant	Units Awarded		to Vest		Share			Period
July 18, 2019 (1)		93,653		—	$	19.04	(5)	3 years
July 18, 2019 (2)		29,227		—	$	18.49	(8)	3 years
August 2, 2018 (1)		86,599		—	$	18.51	(6)	3 years
August 2, 2018 (2)		47,800		—	$	24.35	(8)	3 years
July 13, 2017 (1)		60,504		3,277	$	31.85	(7)	3 years
July 13, 2017 (2)		37,600		4,365	$	32.50	(8)	3 years

(1)	Performance-based restricted stock units awarded to certain senior executives.

(2)	Performance-based restricted stock units awarded to key employees.

(3)	Amounts represent the maximum number of common stock shares that could be earned if certain performance targets are met as defined in the related restricted stock unit agreements.

(4)

Compensation cost is based on an assessment each reporting period of the probability that certain performance goals will be met and in turn, the number of shares that are expected to be awarded during the vesting period. These amounts represent the number of shares that are expected to vest based on our assessment as of May 3, 2020.

(5)

Price per share represents the fair market value per share ($1.03 per $1 or an increase of $0.55 to the closing price of our common stock on the date of grant) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($18.49) for the performance-based component of the performance-based restricted stock units granted to certain senior executives on July 18, 2019.

(6)

Price per share represents the fair market value per share ($0.76 per $1 or a reduction of $5.84 to the closing price of our common stock) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($24.35) for the performance-based component of the performance-based restricted stock units granted to certain senior executives on August 2, 2018.

(7)

Price per share represents the fair market value per share ($0.98 per $1 or a reduction of $0.65 to the closing price of our common stock) determined using the Monte Carlo simulation model for the market-based total shareholder return component and the closing price of our common stock ($32.50) for the performance-based component of the performance-based restricted stock units granted to certain senior executives on July 13, 2017.

(8)	Price per share represents the closing price of our common stock on the date of grant.

The following table summarizes information related to our performance based restricted stock units that vested during the fiscal 2020, 2019, and 2018:

			(3)
	Common		Weighted		Weighted
	Stock Shares		Average		Average Price
Fiscal Year	Vested		Fair Value		Per Share
Fiscal 2020 (1)		11,351	$	197	$	17.36	(4)
Fiscal 2020 (2)		4,961	$	86	$	17.36	(4)
Fiscal 2019 (1)		128,632	$	3,754	$	29.19	(4)
Fiscal 2019 (2)		10,364	$	320	$	30.90	(4)
Fiscal 2018 (1)		102,845	$	3,342	$	32.50	(4)
Fiscal 2018 (2)		16,000	$	520	$	32.50	(4)

(1)	Certain senior executives and key employees.

(2)	Non-employee

(3)	Dollar amounts are in thousands.

(4)	The weighted average price per share is derived from the closing prices of our common stock on the dates the respective performance based restricted stock units vested.

We recorded a charge or a (credit) to compensation expense totaling $114,000, $(53,000), and $2.0 million within selling, general, and administrative expense associated with our performance based restricted stock units for fiscal years 2020, 2019, and 2018, respectively.

At May 3, 2020, the remaining unrecognized compensation cost related to the performance based restricted stock units was $11,000, which is expected to be recognized over a weighted average vesting period of 0.2 years. At May 3, 2020, our performance based restricted stock units that are expected to vest had a fair value totaling $53,000.

Common Stock Awards

The following table summarizes information related to our grants of common stock to our outside directors during fiscal 2020, 2019, and 2018:

	Common		(1)
	Stock		Price Per		Vesting
Date of Grant	Awarded		Share		Period
April 1, 2020 - Fiscal 2020		10,511	$	6.66	Immediate
January 2, 2020 - Fiscal 2020		4,972	$	14.08	Immediate
October 1, 2019 - Fiscal 2020		4,519	$	15.49	Immediate
July 1, 2019 - Fiscal 2020		3,659	$	19.21	Immediate
April 1, 2019 - Fiscal 2019		2,948	$	19.18	Immediate
October 1, 2018 - Fiscal 2019		3,600	$	23.45	Immediate
October 2, 2017 - Fiscal 2018		4,800	$	33.20	Immediate

(1)	Price per share represents closing price of our common stock on the date of grant.

We recorded $280,000, $140,000, and $159,000, of compensation expense within selling, general, and administrative expense for these common stock awards for fiscal 2020, 2019, and 2018, respectively.