EQUITY-BASED INCENTIVE AWARDS

9 Months Ended

Jun. 30, 2011

EQUITY-BASED INCENTIVE AWARDS

EQUITY-BASED INCENTIVE AWARDS

9. EQUITY-BASED INCENTIVE AWARDS

Omnibus Plan

The Company has an Omnibus Incentive Plan (“the Omnibus Plan”) which provides for equity incentives to employees. The Omnibus Plan was designed with the intent of encouraging employees to acquire a vested interest in the growth and performance of the Company. The Omnibus Plan permits the issuance of up to 150,000 shares of the Company’s common stock in the form of stock options, restricted stock awards, restricted stock units, performance share awards as well as awards such as stock appreciation rights, performance units, performance shares, bonus shares, and dividend share awards payable in the form of common stock or cash.  The number of shares issuable under the Omnibus Plan is subject to customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock.  As of June 2011, awards with respect to a total of 87,900 shares had been awarded pursuant to the Omnibus Plan and awards with respect to another 62,100 shares may be awarded under the plan.

Stock Options

During the Company’s third fiscal quarter of 2010, the Compensation Committee of the Board of Directors awarded various employees of the Company incentive stock options to purchase 6,000 shares of the Company’s common stock.  These awards vest in equal installments over a five year service period and have an exercise price of $51.50 per share.

The Company has estimated that the fair value of the incentive stock option awards was approximately $0.1 million using the Black-Scholes option pricing model. This amount is being amortized to compensation expense on a straight-line basis over the five year service period.  The following assumptions were used in connection with the Black-Scholes option pricing calculation:

	Stock Option Pricing Assumptions
Risk-free interest rate	3.04	%
Dividend yield	1.30	%
Expected volatility	49.30	%
Expected life in years	7

The stock options issued by the Company expire ten years from the grant date and include graded vesting schedules up to five years in length.  Stock options issued and outstanding at June 2011 are summarized as follows:

				Remaining			Exercisable
	Exercise Price		Number Outstanding	Weighted-Average Contractual Life	Weighted-Average Exercise Price		Number Exercisable	Weighted-Average Exercise Price
2003 Options	$	28.80	84	1.32 years	$	28.80	84	$	28.80
2007 Options	$	18.00	25,000	5.45 years	$	18.00	25,000	$	18.00
2010 Options	$	51.50	5,500	8.83 years	$	51.50	1,100	$	51.50
			30,584		$	24.05	26,184	$	19.44

The following is a summary of stock options activity for the nine months ended June 2011:

	NumberofShares		WeightedAverageExercisePrice
Outstanding at September 2010	31,918		$	24.56
Granted	—		$	—
Exercised	(834	)	$	26.94
Forfeited/Expired	(500	)	$	51.50
Outstanding at June 2011	30,584		$	24.05

At June 2011, total unamortized compensation expense related to stock options was approximately $0.1 million. This unamortized compensation expense is expected to be amortized over approximately the next 46 months.

Restricted Stock Units

During the first fiscal quarter of 2011, the Compensation Committee of the Board of Directors authorized and approved the following restricted stock units awards to members of the Company’s management team pursuant to the provisions of the Company’s Omnibus Plan:

	Restricted Stock Units (1)		Restricted Stock Units (2)
Date of award:	November 22, 2010		November 22, 2010
Number of shares:	38,400		12,000
Service period:	24 months		36 months
Estimated fair value of award at grant date:	$	2,765,000	$	864,000
Fair value of outstanding (non-vested) awards at June 2011:	$	2,667,000	$	833,000

(1)	12,800 of the restricted stock unit awards vested were vested at Q3 2011. The remaining 25,600 restricted stock units will vest in equal amounts (12,800 per year) on October 26, 2011 and October 26, 2012.
(2)	The 12,000 restricted stock units will vest in equal amounts (4,000 per year) on November 22, 2011, November 22, 2012, and November 22, 2013.

There is no direct cost to the recipients of the restricted stock units, except for any applicable taxes. The recipients of the restricted stock units are entitled to the customary adjustments in the event of stock splits, stock dividends, and certain other distributions on the Company’s common stock.  All cash dividends and/or distributions payable to restricted stock recipients will be held in escrow until all the conditions of vesting have been met.

The restricted stock units provide that the recipients can elect, at their option, to receive either common stock in the Company, or a cash settlement based upon the closing price of the Company’s shares, at the time of vesting.  Based on these award provisions, the compensation expense recorded in the Company’s Condensed Statement of Operations reflects the straight-line amortized fair value based on the period end closing price.

For the three and nine months ended June 2011, net income before income taxes included compensation expense of $0.2 million and $1.7 million, respectively, related to the amortization of the Company’s restricted stock unit awards.  Total unamortized compensation expense for these awards based on the June 2011 closing price was approximately $1.9 million. This unamortized compensation expense, plus any changes in the fair value of the awards through the settlement date, are expected to be amortized over approximately the next 12 months (the weighted-average period). The following summarizes restricted stock unit activity under the Omnibus Plan for the nine months ended June 2011:

	NumberofShares		Weighted Average Fair Value
Nonvested restricted stock units at September 2010	—		$	—
Granted	50,400		$	72.01
Vested	(12,800	)	$	72.50
Expired	—		$	—
Nonvested restricted stock units at June 2011	37,600		$	69.45