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Stock Options and Stock-Based Compensation
 12 Months Ended
Mar. 31, 2024
Share-Based Payment Arrangement [Abstract]  
Stock Options and Stock-Based Compensation

Note 3 — Stock Options and Stock-Based Compensation

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”) as in effect at March 31, 2024, options exercisable for up to 20,615,000 shares of the Company’s common stock may be granted over the life of the Plan to key employees, non-employee directors, and consultants at exercise prices not less than the fair market value of the common stock on the date of grant. Options granted under the Plan are non-statutory stock options and generally vest 25% one year from the date of grant, with the remaining 75% vesting ratably each month for the next 36 months. The options granted to employees and the Company’s Board of Directors expire at the end of five years and ten years from date of grant, respectively. All options granted in fiscal 2024 and 2023 were granted with an exercise price equal to the fair value of the Company’s common stock on the grant date.

The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model with the assumptions included in the table below. The Company uses historical data, among other factors, to estimate the expected volatility, the expected dividend yield, and the expected option life. The Company accounts for forfeitures as they occur, rather than estimate expected forfeitures. The risk-free rate is based on the interest rate paid on a U.S. Treasury issue with a term similar to the estimated life of the option.

The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model. The following weighted average assumptions were used for the fiscal years ended March 31, 2024, 2023 and 2022:

 

 

 

Fiscal 2024

 

 

Fiscal 2023

 

 

Fiscal 2022

 

Expected volatility

 

 

34

%

 

 

36

%

 

 

36

%

Risk free interest rate

 

3.91% to 4.65%

 

 

2.73% to 4.36%

 

 

0.71% to 1.66%

 

Dividend yield

 

 

0.0

%

 

 

0.0

%

 

 

0.0

%

Weighted average option life

 

4.0 to 4.1 years

 

 

4.2 to 4.3 years

 

 

4.3 to 4.4 years

 

 

For the fiscal years ended March 31, 2024, 2023 and 2022, the Company recorded share-based compensation expense of $4,982,000, $5,559,000, and $5,198,000, respectively. The table below shows the amounts recognized in the financial statements for the fiscal years ended March 31, 2024, 2023 and 2022.

 

 

 

Fiscal 2024

 

 

Fiscal 2023

 

 

Fiscal 2022

 

Cost of revenue

 

$

2,797,000

 

 

$

2,566,000

 

 

$

2,063,000

 

General and administrative

 

 

2,185,000

 

 

 

2,993,000

 

 

 

3,135,000

 

Total cost of stock-based compensation
   included in income before income taxes

 

 

4,982,000

 

 

 

5,559,000

 

 

 

5,198,000

 

Amount of income tax benefit recognized

 

 

(987,000

)

 

 

(1,210,000

)

 

 

(1,119,000

)

Amount charged to net income

 

$

3,995,000

 

 

$

4,349,000

 

 

$

4,079,000

 

Effect on basic earnings per share

 

$

0.23

 

 

$

0.25

 

 

$

0.23

 

Effect on diluted earnings per share

 

$

0.23

 

 

$

0.25

 

 

$

0.23

 

 

The following table summarizes information for all stock options for the fiscal years March 31, 2024, 2023 and 2022:

 

 

 

Fiscal 2024

 

 

Fiscal 2023

 

 

Fiscal 2022

 

Options outstanding – beginning of fiscal year

 

 

651,857

 

 

 

723,876

 

 

 

937,158

 

Options granted

 

 

59,900

 

 

 

168,300

 

 

 

130,200

 

Options exercised

 

 

(201,293

)

 

 

(209,301

)

 

 

(298,570

)

Options cancelled/forfeited

 

 

(20,737

)

 

 

(31,018

)

 

 

(44,912

)

Options outstanding – end of fiscal year

 

 

489,727

 

 

 

651,857

 

 

 

723,876

 

During the fiscal year, weighted average exercise
   price of:

 

 

 

 

 

 

 

 

 

Options granted

 

$

206.76

 

 

$

159.43

 

 

$

161.95

 

Options exercised

 

$

80.30

 

 

$

63.21

 

 

$

55.44

 

Options cancelled/forfeited

 

$

157.84

 

 

$

140.38

 

 

$

79.30

 

At the end of fiscal year:

 

 

 

 

 

 

 

 

 

Price range of outstanding options

 

$33.16-$235.34

 

 

$33.16-$197.16

 

 

$22.07-$197.16

 

Weighted average exercise price per share

 

$

129.39

 

 

$

108.10

 

 

$

84.55

 

Options available for future grants

 

 

618,809

 

 

 

657,972

 

 

 

805,097

 

Exercisable options

 

 

269,253

 

 

 

319,703

 

 

 

354,460

 

 

 

The following table summarizes the status of stock options outstanding and exercisable at March 31, 2024:

 

Range of
Exercise Prices

 

Number of
Outstanding
Options

 

 

Weighted
Average
Remaining
Contractual
Life

 

 

Outstanding
Options –
Weighted
Average
Exercise Price

 

 

Exercisable
Options –
Number of
Exercisable
Options

 

 

Exercisable
Options –
Weighted
Average
Exercise Price

 

$33.16 to $87.49

 

 

133,743

 

 

 

2.55

 

 

$

62.80

 

 

 

127,559

 

 

$

62.15

 

$87.50 to $148.89

 

 

127,254

 

 

 

2.04

 

 

 

111.95

 

 

 

89,078

 

 

 

103.10

 

$148.90 to $189.02

 

 

137,885

 

 

 

4.23

 

 

 

161.24

 

 

 

37,873

 

 

 

160.12

 

$189.03 to $235.34

 

 

90,845

 

 

 

4.02

 

 

 

203.48

 

 

 

14,743

 

 

 

197.16

 

Total

 

 

489,727

 

 

 

3.16

 

 

$

129.39

 

 

 

269,253

 

 

$

96.87

 

 

The following table summarizes the status of all outstanding options at March 31, 2024, and changes during the fiscal year then ended:

 

 

 

Number of
Options

 

 

Weighted
Average
Exercise
Price per
Share

 

 

Weighted Average
Remaining
Contractual Life
(Years)

 

 

Aggregate
Intrinsic Value
as of March 31, 2024

 

Options outstanding, March 31, 2023

 

 

651,857

 

 

$

108.10

 

 

 

 

 

 

 

Granted

 

 

59,900

 

 

 

206.76

 

 

 

 

 

 

 

Exercised

 

 

(201,293

)

 

 

80.30

 

 

 

 

 

 

 

Cancelled – forfeited

 

 

(20,538

)

 

 

158.25

 

 

 

 

 

 

 

Cancelled – expired

 

 

(199

)

 

 

110.66

 

 

 

 

 

 

 

Options outstanding, March 31, 2024

 

 

489,727

 

 

$

129.39

 

 

 

3.16

 

 

$

65,414,479

 

Options vested and expected to vest

 

 

430,808

 

 

$

122.90

 

 

 

3.10

 

 

$

60,445,126

 

Ending exercisable

 

 

269,253

 

 

$

96.87

 

 

 

2.51

 

 

$

44,719,800

 

 

The weighted average fair value of options granted during fiscal 2024, 2023 and 2022 was $75.49, $56.34, and $50.29, respectively. The total intrinsic value of options exercised during fiscal years 2024, 2023 and 2022 was $29,230,000, $21,094,000, and $27,615,000 respectively.

Included in the above-noted stock option grants and stock compensation expense are performance-based stock options which vest only upon the Company’s achievement of certain earnings per share targets on a calendar year basis, as determined by the Company’s Board of Directors. These options were valued in the same manner as the time-based options. However, the Company only recognizes stock compensation expense to the extent that the targets are determined to be probable of being achieved, which triggers the vesting of the performance options. During the fiscal years ended March 31, 2024, 2023 and 2022, the Company recognized stock compensation expense for performance-based options in the amount of $1,199,000, $1,961,000, and $2,280,000, respectively.

The Company received $9,266,000, $10,856,000, and $9,906,000 of cash receipts from the exercise of stock options during fiscal 2024, 2023 and 2022, respectively. As of March 31, 2024, $8,178,000 of total unrecognized compensation costs related to stock options is expected to be recognized over a weighted average period of 3 years.