Annual report pursuant to Section 13 and 15(d)

Stock-based Compensation

v2.4.0.6
Stock-based Compensation
 12 Months Ended
Jun. 30, 2012
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.
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 on a straight-line basis over the vesting periods. In fiscal year 2012 we expensed $1.3 million in conjunction with our 2010 Stock Plan.

Stock Options
During fiscal year 2011, non-qualified stock options were granted for 50,000 shares of our common stock.
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 the fiscal year ended 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 have 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.
A summary of our stock option activity for the fiscal year ended June 30, 2012 under the 2010 Stock Plan is as follows:
 
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic Value
(thousands)
Outstanding at July 2, 2011
50,000

 
$
13.47

 
 
 
 
Granted
—

 
—

 
 
 
 
Exercised
—

 
—

 
 
 
 
Forfeited
—

 
—

 
 
 
 
Expired
—

 
—

 
 
 
 
Outstanding at June 30, 2012
50,000

 
13.47

 
5.6 yrs
 
—

Exercisable at June 30, 2012
50,000

 
13.47

 
5.6 yrs
 
—


The weighted-average per share grant date fair value of options granted during the fiscal year 2011 was $6.25 per option. Shares are generally issued from treasury stock upon exercise of the options. 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. During fiscal year 2012 no options under the 2010 Stock Plan were exercised. A summary of the status of our non-vested stock options under the 2010 Stock Plan as of June 30, 2012, and changes during the fiscal year ended June 30, 2012, is presented below:
 
Shares
 
Weighted-
Average
Grant-Date
Fair Value
Nonvested at July 2, 2011
25,000

 
$
6.25

Granted
—

 
—

Vested
(25,000
)
 
6.25

Forfeited
—

 
—

Expired
—

 
—

Nonvested at June 30, 2012
—

 
—



Restricted Stock Units and Performance Units
During fiscal year 2012, restricted stock units representing 91,450 shares of our common stock were granted. These restricted stock units are serviced based and will vest upon the filing of our Annual Report on Form 10-K for the fiscal year ended June 29, 2013.
During fiscal year 2012, performance units representing 299,450 shares of our common stock were granted. Of this amount, 52,000 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. An additional 91,450 units are based on the achievement of certain performance criteria for the two years period ended June 29, 2013 and will vest with the filing of our Annual Report on Form 10-K for fiscal year 2013, subject to the achievement of the performance goals. These performance units will be payable in the common stock of Delta Apparel, Inc. and are therefore accounted for under the equity method pursuant to ASC 718.
The remaining 156,000 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.
A summary of the status of our nonvested restricted stock units and performance units under the 2010 Stock Plan as of June 30, 2012, and changes during the year ended June 30, 2012, is presented below:
 
Units
Nonvested at July 2, 2011
—

Granted
390,900

Vested
—

Forfeited
(53,200
)
Nonvested at June 30, 2012
337,700


As of June 30, 2012, there was $3.5 million of total unrecognized compensation cost related to non-vested stock options under the 2010 Stock Plan. This cost is expected to be recognized over a period of 3 years.

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. No options were granted under the Option Plan during fiscal years 2012 or 2011. During fiscal year 2010, we granted non-qualified options for 28,000 shares of our common stock.
Compensation expense is 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. In fiscal years 2012, 2011 and 2010, we expensed $0.3 million, $0.2 million and $0.1 million, respectively, in conjunction with our Option Plan. Associated with the compensation cost for the Option Plan are recognized tax benefits of $0.1 million, $0.1 million, and $0.3 million for each of fiscal years 2012, 2011 and 2010, respectively.
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 the fiscal year ended 2010:
 
2012
 
2011
 
2010
Risk-free interest rate
N/A
 
N/A
 
3
%
Expected life
N/A
 
N/A
 
6.0 yrs

Expected volatility
N/A
 
N/A
 
51
%
Expected dividend yield
N/A
 
N/A
 
—
%
Weighted-average per share fair value of options granted
N/A
 
N/A
 
$
3.53


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 2010 and 2009, we have 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 annual dividend in relation to our historical average stock price.
A summary of our stock option activity under the Option Plan for the fiscal year ended June 30, 2012 under the Option Plan is as follows:
 
Shares
 
Weighted
Average
Exercise Price
 
Weighted
Average
Remaining
Contractual
Term
 
Aggregate
Intrinsic Value
(thousands)
Outstanding at July 2, 2011
851,167

 
$
12.16

 
 
 
 
Granted
—

 
—

 
 
 
 
Exercised
(25,333
)
 
8.11

 
 
 
 
Forfeited
(26,000
)
 
14.49

 
 
 
 
Expired
—

 
—

 
 
 
 
Outstanding at June 30, 2012
799,834

 
12.22

 
4.4 yrs
 
—

Exercisable at June 30, 2012
799,834

 
12.22

 
4.4 yrs
 
—


The weighted-average per share grant date fair value of options granted during the fiscal year 2010 was $3.53 per option. The total intrinsic value of options exercised during fiscal years 2012 and 2011 was $0.2 million and $0.6 million, respectively. Shares are generally issued from treasury stock upon exercise of the options. 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. During fiscal years 2012 and 2011, exercised options under the Option Plan resulted in excess tax benefits of $529 thousand and $84 thousand, respectively. No options were exercised during fiscal year 2010.
A summary of the status of our non-vested stock options as of June 30, 2012, and changes during the fiscal year ended June 30, 2012, is presented below:
 
Shares
 
Weighted-
Average
Grant-Date
Fair Value
Nonvested at July 2, 2011
74,005

 
2.95

Granted
—

 
—

Vested
(71,338
)
 
2.93

Forfeited
(2,667
)
 
2.95

Expired
—

 
—

Nonvested at June 30, 2012
—

 
—


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 contains provisions for cash payments equal to the taxes due when the shares vest. Therefore, pursuant to ASC 718, the underlying stock grant is 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 ending 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.
In fiscal year 2010, awards for up to 186,000 shares of our common stock were granted. The outstanding awards are comprised of 135,600 shares which are service based and 50,400 shares which are performance based. Within the service awards, 30,000 shares vested upon the filing of our Annual Report on Form 10-K for fiscal year ended July 3, 2010. The remaining 105,600 service based shares vested upon the filing of our Annual Report on Form 10-K for the fiscal year ended July 2, 2011. The performance awards representing 50,400 shares are based on the achievement of performance criteria for the two year period ending July 2, 2011, and vested upon the filing of our Annual Report for the year ended July 2, 2011, subject to the performance criteria. No awards were granted in fiscal year 2009. Awards provide for accelerated vesting upon meeting specific retirement, death or disability criteria.
Compensation expense recorded under the Award Plan was $0.1 million, $1.8 million and $1.6 million in fiscal years 2012, 2011 and 2010, respectively. Compensation expense is recorded on the cost of sales and selling, general and administrative expense line items of our statements of income as incurred.
A summary of the status of our nonvested awards as of June 30, 2012, and changes during the year ended June 30, 2012, is presented below:
 
Shares
 
Weighted
Average
Exercise
Price
Nonvested at July 2, 2011
151,680

 
0.01

Granted
—

 
—

Vested
(151,680
)
 
0.01

Forfeited
—

 
—

Performance adjustment
—

 
—

Nonvested at June 30, 2012
—

 
—