EQUITY-BASED INCENTIVE AWARDS

3 Months Ended

Dec. 31, 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.  At December 2011, awards with respect to a total of 108,425 shares had been awarded and currently outstanding pursuant to the Omnibus Plan and awards with respect to another 41,575 shares may be awarded under the plan.

Stock Options

During Q1 2012, the Company issued 6,000 incentive stock options to various employees pursuant to the provisions of the Company’s Omnibus Plan. These awards vest in equal installments over a five year service period and have an exercise price of $53.80 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	2.39	%
Dividend yield	1.10	%
Expected volatility	27.90	%
Expected life in years	6

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 December 2011 are summarized as follows:

				Remaining			Exercisable
	ExercisePrice		NumberOutstanding	Weighted-AverageContractual Life	Weighted-AverageExercise Price		NumberExercisable	Weighted-AverageExercise Price
Fiscal 2003	$	28.80	42	0.82 years	$	28.80	42	$	28.80
Fiscal 2007	$	18.00	25,000	4.95 years	$	18.00	25,000	$	18.00
Fiscal 2010	$	51.50	5,500	8.33 years	$	51.50	1,100	$	51.50
Fiscal 2012	$	53.80	6,000	9.82 years	$	53.80	—	—
			36,542		$	28.93	26,142	$	19.43

The following is a summary of stock options activity for the three months ended December 2011:

	NumberofShares		WeightedAverageExercisePrice
Outstanding at September 2011	30,583		$	24.05
Granted	6,000		53.80
Exercised	(41	)	28.80
Forfeited/Expired	—		—
Outstanding at December 2011	36,542		$	28.93

Restricted Stock Units

During Q1 2012, the Company issued 15,900 restricted stock unit awards to members of its management team pursuant to the provisions of the Company’s Omnibus Plan.  Restricted stock units issued and outstanding at December 2011 are as follows:

	Restricted Stock Units (1)		Restricted Stock Units (2)		Restricted Stock Units (3)
Date of award:	November 22, 2010		November 22, 2010		October 26, 2011
Original number of awards issued:	38,400		12,000		15,900
Service period:	24 months		36 months		36 months
Estimated fair value of award at grant date:	$	2,765,000	$	864,000	$	855,000
Fair value of non-vested awards at December 2011:	$	824,000	$	515,000	$	1,024,000

(1)	12,800 of the restricted stock unit awards vested during Q1 2012. The remaining 12,800 restricted stock units will vest on October 26, 2012.
(2)	4,000 of the restricted stock units vested during Q1 2012. The remaining 8,000 restricted stock units will vest in equal amounts (4,000 per year) on November 22, 2012 and November 22, 2013.
(3)	The 15,900 restricted stock units will vest in equal amounts (5,300 per year) on October 25, 2012, October 25, 2013, and October 25, 2014.

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 amortization of these awards over their respective service life. The awards and their related compensation and amortization expense are also adjusted to fair value at each reporting date until vested. The following summarizes restricted stock unit activity under the Omnibus Plan for the three months ended December 2011:

	NumberofShares		Weighted AverageFair Value
Nonvested restricted stock units at September 2011	37,600		$	57.00
Granted	15,900		$	53.80
Vested and exercised	(16,800	)	$	56.58
Expired	—		$	—
Nonvested restricted stock units at December 2011	36,700		$	64.40

All Equity-Based Awards (stock options and restricted stock units)

During Q1 2012, net income before income taxes included compensation expense of $0.3 million related to the amortization of all equity-based compensation awards.  Total unamortized compensation expense for these awards at December 2011 was approximately $2.3 million.