STOCKHOLDERS' EQUITY

12 Months Ended

Feb. 28, 2017

Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 10 – STOCKHOLDERS' EQUITY

Stock Repurchase

In June 2016, the Company’s Board of Directors authorized a $25 million stock repurchase program, under which the Company repurchased 1.8 million of its outstanding common stock shares during the period from June 2016 to January 2017 at an average cost of $14.20 per share. The Company financed the purchases with existing cash balances, and all of the stock repurchases were paid for as of February 28, 2017. All common stock shares repurchased were retired prior to February 28, 2017.

Equity Awards

Under the Company's 2004 Incentive Stock Plan (the 2004 Plan), which was adopted on July 30, 2004 and was amended on various dates since that time, various types of equity awards can be made, including stock options, stock appreciation rights, restricted stock, performance stock units (PSUs), restricted stock units (RSUs), phantom stock and bonus stock. To date, stock options, restricted stock, PSUs, RSUs and bonus stock have been granted under the 2004 Plan. Options are generally granted with exercise prices equal to market value on the date of grant. All option grants expire 10 years after the date of grant.

Equity awards to officers and other employees become exercisable on a vesting schedule established by the Compensation Committee of the Board of Directors at the time of grant, generally over a four-year period. The Company treats an equity award with multiple vesting tranches as a single award for expense attribution purposes and recognizes compensation cost on a straight-line basis over the requisite service period of the entire award.

Under the 2004 Plan, on the day of the annual stockholders meeting each non-employee director receives an equity award of up to 20,000 award units. Annual equity awards granted to non-employee directors vest on the date of the next annual stockholders meeting or one year from the date of grant, whichever is earlier. In addition, under the Company’s current director compensation program, new non-employee directors receive a restricted stock award that vests in full on the third anniversary of the grant date with a grant date fair value equal to the fair value of the most recent annual equity award made to other non-employee directors, as well as a prorated annual equity award that vests 12 months from the grant date.

The following table summarizes stock option activity for fiscal years 2017, 2016 and 2015 (options in thousands):

			Weighted
	Number of		Average
	Options		Exercise Price
Outstanding at February 28, 2014	1,093		$	5.04
Granted	61			17.47
Exercised	(143	)		5.01
Forfeited or expired	(4	)		6.88
Outstanding at February 28, 2015	1,007			5.80
Granted	82			17.54
Exercised	(228	)		5.62
Forfeited or expired	(1	)		1.80
Outstanding at February 28, 2016	860			6.96
Granted	227			14.49
Exercised	(125	)		7.67
Forfeited or expired	(7	)		15.70
Outstanding at February 28, 2017	955		$	8.60
Exercisable at February 28, 2017	624		$	5.03

The weighted average fair value for stock options granted in fiscal years 2017, 2016 and 2015 was $6.69, $9.39 and $11.02, respectively. The fair value of options at the grant date was determined using the Black-Scholes option pricing model with the following assumptions:

	Year Ended February 28,
Black-Scholes Valuation Assumptions	2017		2016		2015
Expected life (years) (1)	6		6		6
Expected volatility (2)	48	%	56	%	70	%
Risk-free interest rates (3)	1.3	%	1.8	%	1.9	%
Expected dividend yield	0	%	0	%	0	%

(1)	The expected life of stock options is estimated based on historical experience.
(2)	The expected volatility is estimated based on historical volatility of the Company's stock price.
(3)	Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of the stock options.

The weighted average remaining contractual term and the aggregate intrinsic value of outstanding options as of February 28, 2017 was 5.5 years and $7.5 million, respectively. The weighted average remaining contractual term and the aggregate intrinsic value of exercisable options as of February 28, 2016 was 4.7 years and $9.7 million, respectively.

Changes in the Company's outstanding restricted stock shares, PSUs and RSUs during fiscal years 2017, 2016 and 2015 were as follows (shares, PSUs and RSUs in thousands):

	Number of
	Restricted		Weighted
	Shares,		Average Grant
	PSUs and		Date Fair
	RSUs		Value
Outstanding at February 28, 2014	1,024		$	8.02
Granted	365			17.92
Vested	(471	)		6.28
Forfeited	(32	)		11.69
Outstanding at February 28, 2015	886			12.90
Granted	517			17.75
Vested	(407	)		9.97
Forfeited	(43	)		15.55
Outstanding at February 28, 2016	953			16.66
Granted	766			14.63
Vested	(382	)		15.18
Forfeited	(98	)		15.64
Outstanding at February 28, 2017	1,239		$	15.94

The Company retained 121,608 shares, 147,335 shares and 175,176 shares of the vested restricted stock and RSUs to cover the minimum required statutory amount of withholding taxes in fiscal years 2017, 2016 and 2015, respectively.

Stock-based compensation expense during fiscal years 2017, 2016 and 2015 is included in the following captions of the consolidated statements of comprehensive income (loss) (in thousands):

	Year Ended February 28,
	2017		2016		2015
Cost of revenues	$	374	$	229	$	241
Research and development		1,033		781		613
Selling		1,655		1,208		591
General and administrative		4,771		3,636		2,655
	$	7,833	$	5,854	$	4,100

As of February 28, 2017, there was $16.9 million of total unrecognized stock-based compensation cost related to nonvested equity awards. That cost is expected to be recognized over a weighted-average remaining vesting period of 2.8 years.

As of February 28, 2017, there were 1,258,772 award units in the 2004 Plan that were available for grant.

Tax Benefits from Exercise of Stock Options and Vesting of Restricted Stock and RSU Awards

Total cash received as a result of option exercises was $961,000, $1,283,000 and $718,000 in fiscal years 2017, 2016 and 2015, respectively. The aggregate fair value of options exercised and vested restricted stock and RSU awards as of the exercise date or vesting date was $6,349,000, $9,078,000 and $9,900,000 for fiscal years 2017, 2016 and 2015, respectively. In connection with these option exercises and vested restricted stock and RSU awards, the excess stock compensation tax deductions were $0, $4,531,000 and $6,515,000 for fiscal years 2017, 2016 and 2015, respectively. The Company has elected a policy of applying the “with-and-without” approach to determine the realized tax benefits for financial reporting purposes. Under this policy, none of the current year excess deductions are deemed to reduce regular taxes payable because the Company’s NOL carryforwards are deemed to reduce taxes payable prior to the utilization of any excess tax deductions from the exercise of stock options and vesting of restricted stock and RSU awards. The excess tax deductions when realized by the Company for financial reporting purposes under the with-and-without approach will be recorded as an increase in additional paid-in capital in the consolidated balance sheet and will be classified as cash flows from financing activities rather than cash flows from operating activities in the consolidated cash flow statement. As discussed in Note 1, the Company will adopt ASU 2016-09 on March 1, 2017, the beginning of its fiscal 2018. At the time of adoption, the Company will record previously unrecognized deferred income tax assets of $11.7 million with an offsetting reduction to the accumulated deficit.

55