Stock Based Compensation and Stock Options

6 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Based Compensation and Stock Options

Note B — Stock Based Compensation and Stock Options

Under the Company’s Restated Omnibus Incentive Plan (formerly the Restated 1988 Executive Stock Option Plan) (“the Plan”) as in effect at September 30, 2013, options for up to 19,365,500 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 stock at the date of grant. Options granted under the Plan are non-statutory stock options and generally vest 25% one year from date of grant and the remaining 75% vesting ratably each month for the next 36 months. The options granted to employees and the board of directors expire at the end of five years and ten years from date of grant, respectively.

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 option life, and the expected forfeiture rate. 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. Based upon the historical experience of options cancellations, the Company has estimated an annualized forfeiture rate of 11.86% and 12.73% for the three months ended September 30, 2012 and 2013, respectively. Forfeiture rates will be adjusted over the requisite service period when actual forfeitures differ, or are expected to differ, from the estimate. The following assumptions were used to estimate the fair value of options granted during the three months ended September 30, 2012 and 2013 using the Black-Scholes option-pricing model:

	Three Months Ended September 30,
	2012			2013
Risk-free interest rate		0.61	%		1.50	%
Expected volatility		47	%		47	%
Expected dividend yield		0.00	%		0.00	%
Expected forfeiture rate		11.86	%		12.73	%
Expected weighted average life of option in years		4.5 years			4.4 years

All options granted in the six months ended September 30, 2012 and 2013 were granted at fair market value and are non-statutory stock options.

For the three months ended September 30, 2012 and 2013, the Company recorded share-based compensation expense of $89,000 and $465,000, respectively. For the six months ended September 30, 2012 and 2013, the Company recorded share-based compensation expense of $387,000 and $870,000, respectively. The table below shows the amounts recognized in the financial statements for stock compensation expense for time based options and performance based options during the three and six months ended September 30, 2012 and 2013, respectively.

	Three Months Ended
	September 30, 2012			September 30, 2013
Cost of revenues	$	115,000		$	161,000
General and administrative		(26,000	)		304,000
Total cost of stock-based compensation included in income before income tax provision		89,000			465,000
Amount of income tax benefit recognized		(35,000	)		(198,000	)
Amount charged against net income	$	54,000		$	267,000
Effect on diluted net income per share	$	—		$	(0.01	)

	Six Months Ended September 30,
	September 30, 2012			September 30, 2013
Cost of revenues	$	228,000		$	297,000
General and administrative		159,000			573,000
Total cost of stock-based compensation included in income before income tax provision		387,000			870,000
Amount of income tax benefit recognized		(150,000	)		(370,000	)
Amount charged against income	$	237,000		$	500,000
Effect on diluted income per share	$	(0.01	)	$	(0.02	)

Summarized information for all stock options for the three and six months ended September 30, 2012 and 2013 follows:

	Three Months Ended September 30, 2012					Three Months Ended September 30, 2013
	Shares			Average Price		Shares			Average Price
Options outstanding, beginning		1,303,806		$	17.30		1,199,630		$	19.60
Options granted		41,100			22.07		48,100			34.77
Options exercised		(72,212	)		12.28		(53,279	)		15.62
Options cancelled		(8,164	)		22.53		(3,200	)		19.72
Options outstanding, ending		1,264,530		$	17.71		1,191,251		$	20.39
	Six Months Ended September 30, 2012					Six Months Ended September 30, 2013
	Shares			Average Price		Shares			Average Price
Options outstanding, beginning		1,502,646		$	17.10		1,100,952		$	18.65
Options granted		63,400			21.53		240,000			25.73
Options exercised		(203,358	)		12.57		(119,051	)		14.45
Options cancelled		(98,158	)		21.54		(30,650	)		23.07
Options outstanding, ending		1,264,530		$	17.71		1,191,251		$	20.39

The following table summarizes the status of stock options outstanding and exercisable at September 30, 2013:

									Exercisable
			Weighted		Outstanding		Exercisable		Options –
			Average		Options –		Options –		Weighted
			Remaining		Weighted		Number of		Average
	Number of		Contractual		Average		Exercisable		Exercise
Range of Exercise Price	Outstanding Options		Life		Exercise Price		Options		Price
$7.78 to $15.00		300,645		2.41	$	11.73		290,645	$	11.78
$15.01 to $22.98		320,138		4.09	$	20.21		162,073	$	19.10
$22.99 to $23.35		267,551		3.77	$	23.10		36,607	$	23.11
$23.36 to $34.77		302,917		3.93	$	26.77		23,647	$	25.27
Total		1,191,251		3.56	$	20.39		512,972	$	15.52

A summary of the status for all outstanding options at September 30, 2013, and changes during the three months then ended, is presented in the table below:

						Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value as of September 30, 2013
	Number of Options			Weighted Average Exercise Per Share
Options outstanding at July 1, 2013		1,199,630		$	19.60
Granted		48,100			34.77
Exercised		(53,279	)		15.62
Cancelled – forfeited		(2,295	)		22.56
Cancelled – expired		(905	)		15.01
Ending outstanding		1,191,251		$	20.39		3.56	$	19,754,434
Ending vested and expected to vest		1,046,821		$	19.78		3.45	$	17,989,878
Ending exercisable at September 30, 2013		512,972		$	15.52		2.77	$	11,001,874

The weighted-average grant-date fair value of options granted during the three months ended September 30, 2012 and 2013, was $8.67 and $13.89, respectively.

Included in the above-noted stock option grants and stock compensation expense are performance-based stock options under which vesting occurs only upon the Company achieving certain revenue or earnings per shares 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-vesting options. However, the Company only recognizes stock compensation to the extent that the targets are determined to be achieved which allow the performance options to vest. The Company recognized $0 and $82,000 of stock compensation expense for the three months ended September 30, 2012 and 2013, respectively, for performance-based stock options.