Annual report pursuant to Section 13 and 15(d)

Stock-based Compensation

v2.4.0.8
Stock-based Compensation
 12 Months Ended
Jun. 29, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-based Compensation
STOCK-BASED COMPENSATION
On November 11, 2010, the Delta Apparel, Inc. shareholders approved the Delta Apparel, Inc. 2010 Stock Plan ("2010 Stock Plan"). Upon shareholder approval of the 2010 Stock Plan, no additional awards have been or will be granted under either the Delta Apparel Stock Option Plan ("Option Plan") or the Delta Apparel Incentive Stock Award Plan ("Award Plan"); instead, all stock awards have and will be granted under the 2010 Stock Plan. We account for these plans pursuant to ASC 718, SAB 107 and SAB 110. Shares are generally issued from treasury stock upon exercise of the options or the vesting of the restricted stock units and performance units. ASC 718 requires that cash flows from tax benefits attributable to tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) be classified as financing cash flows. Total stock-based compensation expense was $1.2 million, $1.6 million and $2.1 million in 2013, 2012, and 2011, respectively. Associated with the compensation cost are income tax benefits recognized of $0.5 million, $0.6 million and $0.8 million in fiscal years 2013, 2012 and 2011, respectively.
2010 Stock Plan
Under the 2010 Stock Plan, the Compensation Committee of our Board of Directors has the authority to determine the employees and directors to whom awards may be granted and the size and type of each award and manner in which such awards will vest. The awards available consist of stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units, and cash awards. The aggregate number of shares of common stock that may be delivered under the 2010 Stock Plan is 500,000 plus any shares of common stock subject to outstanding awards under the Option Plan or Award Plan that are subsequently forfeited or terminated for any reason before being exercised. The 2010 Stock Plan limits the number of shares that may be covered by awards to any participant in a given calendar year and also limits the aggregate awards of restricted stock, restricted stock units and performance stock granted in any given calendar year. If a participant dies or becomes disabled (as defined in the 2010 Stock Plan) while employed by or serving as a director, all unvested awards become fully vested. The Compensation Committee is authorized to establish the terms and conditions of awards granted under the 2010 Stock Plan, to establish, amend and rescind any rules and regulations relating to the 2010 Stock Plan, and to make any other determinations that it deems necessary.
Compensation expense is recorded on the cost of sales and selling, general and administrative expense line items in our Statements of Operations over the vesting periods.
Stock Options
Stock options were granted with an average exercise price of $13.47. All outstanding options granted by us have vested and are exercisable.
A summary of the stock option activity during fiscal years 2013, 2012 and 2011 is presented below:
 
Fiscal Year 2013
 
Fiscal Year 2012
 
Fiscal Year 2011
 
Shares
Weighted Average Exercise Price
 
Shares
Weighted Average Exercise Price
 
Shares
Weighted Average Exercise Price
Stock options outstanding, beginning of fiscal year
50,000

$
13.47

 
50,000

$
13.47

 
—

—

Stock options granted
—

—

 
—

—

 
50,000

$
13.47

Stock options exercised
—

—

 
—

—

 
—

—

Stock options forfeited
—

—

 
—

—

 
—

—

Stock options outstanding, end of fiscal year
50,000

$
13.47

 
50,000

$
13.47

 
50,000

$
13.47

Stock options outstanding and exercisable, end of fiscal year
50,000

$
13.47

 
50,000

$
13.47

 
25,000

$
13.47


The following table summarizes the weighted average grant date fair values and assumptions that were used to estimate the grant date fair values using the Black-Scholes option-pricing model of the options granted during fiscal year 2011:
 
 
 
 
 
2011
Risk-free interest rate
 
 
 
 
2
%
Expected life
 
 
 
 
4.0 yrs

Expected volatility
 
 
 
 
63
%
Expected dividend yield
 
 
 
 
—
%
Weighted-average per share fair value of options granted
 
 
 
 
$
6.25


The risk-free interest rate for the periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Due to minimal exercising of stock options historically, in 2011 we estimated the expected life of options granted to be the midpoint between the average vesting term and the contractual term as permitted under SAB 107 and SAB 110. The expected volatility for the periods of the expected life of the option is determined using historical volatilities based on historical stock prices. The expected dividend yield is based on our expected annual dividend in relation to our historical average stock price.
The aggregate intrinsic value for options outstanding and exercisable as of June 29, 2013 was approximately $1.2 million. The following table summarizes information about our stock options outstanding, all of which are exercisable as of June 29, 2013:
Date of Option Grant
Number of Options Outstanding and Exercisable
Exercise Price
Grant-Date Fair Value
Expiration Date
February 2, 2011
25,000

$
13.86

$
6.15

February 18, 2018
February 2, 2011
25,000

$
13.07

$
6.35

February 18, 2018
 
50,000

 
 
 

Restricted Stock Units and Performance Units
The following table summarizes the restricted stock units and performance units award activity during fiscal years 2013, 2012 and 2011:
 
Fiscal Year 2013
 
Fiscal Year 2012
 
Fiscal Year 2011
 
Number of Units
Weighted average grant date fair value
 
Number of Units
Weighted average grant date fair value
 
Number of Units
Weighted average grant date fair value
Units outstanding, beginning of fiscal year
337,700

$
16.05

 
—

—

 
—

—

Units granted
10,000

$
13.66

 
390,900

$
16.04

 
—

—

Units forfeited
(122,830
)
$
17.10

 
(53,200
)
$
(16.00
)
 
—

—

Units outstanding, end of fiscal year
224,870

$
15.37

 
337,700

$
16.05

 
—

—


During fiscal years 2013 and 2012, restricted stock units representing 5,000 and 91,450 shares of our common stock, respectively, were granted. These restricted stock units are service-based and vest upon the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013. The restricted stock units are payable in the common stock of Delta Apparel, Inc. and are therefore accounted for under the equity method pursuant to ASC 718.
During fiscal year 2013 and 2012, performance units representing 5,000 and 91,450 shares of our common stock, respectively, were granted. The performance units are based on the achievement of certain performance criteria for the two-year period ended June 29, 2013, payable in the common stock of Delta Apparel, Inc. and vest with the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013, subject to the achievement of the performance goals. We accounted for these performance units under the equity method pursuant to ASC 718. During the second quarter of fiscal year 2013, we determined that the ability to achieve the performance criteria was not probable. As a result, we reversed the $0.4 million of related share-based expense previously recognized. The performance criteria was not met and the performance units were forfeited on June 29, 2013.
During fiscal year 2012, performance units representing 52,000 shares of our common stock were also granted. These performance units were based on the achievement of certain performance criteria for the fiscal year ended June 30, 2012, and would have vested upon the filing of our Annual Report on Form 10-K for fiscal year 2012; however, the performance criteria was not met and the performance units were forfeited on June 30, 2012.
In addition, during fiscal year 2012, performance units representing 156,000 shares of our common stock were granted. These units are based on the achievement of one-year performance criteria for each of the fiscal years 2013, 2014 and 2015, with one third of such units eligible to vest with the filing of our Annual Report on Form 10-K for each of the fiscal years. Upon achievement of the performance goals, one-half are payable in the common stock of Delta Apparel, Inc. and are therefore accounted for under the equity method pursuant to ASC 718 and one-half are payable in cash and are therefore accounted for under the liability method pursuant to ASC 718. Based upon the performance achieved during fiscal year 2013, 39,520 units of the 52,000 units granted vest upon the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013 and 12,480 units were forfeited on June 29, 2013.
As of June 29, 2013, there was $1.1 million of total unrecognized compensation cost related to non-vested restricted stock units and performance units under the 2010 Stock Plan. This cost is expected to be recognized over a period of 2.3 years.
The following table summarizes information about the unvested restricted stock units and performance units as of June 29, 2013.
Restricted Stock Units/Performance Units
Number of Units
Average Market Price on Date of Grant
Vesting Date
Fiscal year 2012 Restricted Stock Units
76,350

$
17.60

August 2013
Fiscal year 2012 Performance Units
39,520

$
14.25

August 2013
Fiscal year 2012 Performance Units
52,000

$
14.25

August 2014
Fiscal year 2012 Performance Units
52,000

$
14.25

August 2015
Fiscal year 2013 Restricted Stock Units
5,000

$
13.66

August 2013
 
224,870

 
 

Option Plan
Prior to expiration of the Option Plan, the Compensation Committee of our Board of Directors had the discretion to grant options for up to 2,000,000 shares of common stock to officers and key and middle level executives for the purchase of our stock at prices not less than fifty percent of the fair market value of the shares on the dates of grant, with an exercise term (as determined by the Compensation Committee) not to exceed 10 years. The Compensation Committee determined the vesting period for the stock options, which generally became exercisable over three to four years. Certain option awards in the Option Plan provided for accelerated vesting upon meeting specific retirement, death or disability criteria.
Compensation expense was recorded on the cost of sales and selling, general and administrative expense line items in our Statements of Operations on a straight-line basis over the vesting periods.
A summary of our stock option activity during fiscal years 2013, 2012 and 2011 is presented below:
 
Fiscal Year 2013
 
Fiscal Year 2012
 
Fiscal Year 2011
 
Shares
Weighted Average Exercise Price
 
Shares
Weighted Average Exercise Price
 
Shares
Weighted Average Exercise Price
Stock options outstanding, beginning of fiscal year
799,834

$
12.22

 
851,167

$
12.16

 
1,024,500

11.89

Stock options exercised
(139,334
)
11.14

 
(25,333
)
8.11

 
(118,667
)
11.64

Stock options forfeited
(60,000
)
15.91

 
(26,000
)
14.48

 
(54,666
)
8.16

Stock options outstanding, end of fiscal year
600,500

$
12.09

 
799,834

$
12.22

 
851,167

$
12.16

Stock options outstanding and exercisable, end of fiscal year
600,500

$
12.09

 
799,834

$
12.22

 
777,168

$
12.55


The total intrinsic value of options exercised during fiscal years 2013, 2012 and 2011 was $0.7 million, $0.2 million and $0.6 million respectively. During fiscal years 2013, 2012 and 2011, exercised options resulted in excess tax benefits of $34 thousand, $529 thousand and $84 thousand, respectively. All outstanding options were vested as of June 30, 2012.
The following table summarizes information about our stock options outstanding, all of which are exercisable as of June 29, 2013:
Date of Option Grant
Number of Options Outstanding and Exercisable
Exercise Price
Grant-Date Fair Value
Expiration Date
June 28, 2004
82,500

$
11.28

$
4.23

June 28, 2014
July 4, 2005
358,000

$
13.35

$
5.18

July 4, 2015
July 27, 2006
30,000

$
17.24

$
6.20

July 27, 2016
February 8, 2008
120,000

$
8.30

$
2.95

February 8, 2018
March 16, 2009
10,000

$
4.01

$
2.00

February 18, 2018
 
600,500

 
 
 

Award Plan
Under the Award Plan, the Compensation Committee of our Board of Directors had the discretion to grant awards for up to an aggregate maximum of 800,000 shares of our common stock. The Award Plan authorized the Compensation Committee to grant to our officers and key and middle level executives rights to acquire shares at a cash purchase price of $0.01 per share. The Award Plan contained provisions for cash payments equal to the taxes due when the shares vest. Therefore, pursuant to ASC 718, the underlying stock grant was accounted for as an equity award and the associated cash payment as a liability award.
In fiscal year 2011, prior to the adoption of the 2010 Stock Plan, awards for up to 7,000 shares of our common stock were granted. The award was comprised of 4,200 shares which were service-based and vested upon the filing on our Annual Report of Form 10-K for the fiscal year ended July 2, 2011. The remaining 2,800 shares were performance awards and were based on the achievement of performance criteria for the two-year period ended July 2, 2011 and vested upon the filing of our Annual Report of Form 10-K for the fiscal year ended July 2, 2011, subject to the performance criteria.
Compensation expense was recorded on the cost of sales and selling, general and administrative expense line items in our Statements of Operations over the vesting period. There were no outstanding awards under the Award Plan as of June 29, 2013.