SPEC » Topics » Stock-Based Compensation

This excerpt taken from the SPEC 10-K filed Feb 27, 2006.

Stock-Based Compensation

 

Stock options granted by the Company are accounted for in accordance with the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations. The exercise price of employee stock options equals the market price of the underlying stock on the date of option grant. Once granted, an option’s exercise price and number of shares to be issued remain fixed throughout the option term. Accordingly, in accordance with APB 25, no stock-based compensation expense has been recognized in the accompanying financial statements.

 

42


Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

The Company has adopted the “disclosure only” provisions of Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”). SFAS No. 148 uses the fair value method of accounting for stock-based employee compensation. If the Company had elected to recognize the compensation cost of its stock option plans based on the fair value method of accounting for the years ended November 30, 2005, 2004, and 2003, net income and earnings per common share would have decreased to the pro forma amounts below (in thousands, except per share data):

 

     2005

   2004

   2003

Net income, as reported

   $ 4,605    $ 4,166    $ 854

Less: Stock-based employee compensation expense determined under fair value method, net of related tax effect

     1,722      666      690
    

  

  

Pro forma net income

   $ 2,883    $ 3,500    $ 164
    

  

  

Earnings per common share:

                    

Basic, as reported

   $ 0.35    $ 0.32    $ 0.07

Basic, pro forma

     0.22      0.27      0.01

Diluted, as reported

     0.35      0.32      0.07

Diluted, pro forma

     0.22      0.27      0.01

 

For SFAS No. 148 purposes, the fair value of each option granted under the Company’s stock option plans is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the years ended November 30, 2005, 2004, and 2003:

 

     2005

    2004

    2003

 

Expected volatility

   20.00 %   32.00 %   50.00 %

Risk-free interest rate

   2.46 %   2.00 %   2.00 %

Expected dividend yield

   0.00 %   0.00 %   0.00 %

Expected option life in years

   5.00     5.00     5.00  

 

This excerpt taken from the SPEC 10-K filed Feb 23, 2005.

Stock-Based Compensation

 

Stock options granted by the Company are accounted for in accordance with the intrinsic value method of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related Interpretations. The exercise price of employee stock options equals the market price of the underlying stock on the date of option grant. Once granted, an option’s exercise price and number of shares to be issued remain fixed throughout the option term. Accordingly, in accordance with APB 25, no stock-based compensation expense has been recognized in the accompanying financial statements.

 

The Company has adopted the “disclosure only” provisions of Statement of Financial Accounting Standards No. 123, “Accounting and Disclosure of Stock-Based Compensation” (“SFAS No. 123”). SFAS No. 123, as amended, uses the fair value method of accounting for stock-based employee compensation. If the Company had elected to recognize the compensation cost of its stock option plans based on the fair value method of accounting for the years ended November 30, 2004, 2003, and 2002, net income (loss) and earnings (loss) per common share would have increased (decreased) to the pro forma amounts below (in thousands, except per share data):

 

     2004

   2003

   2002

 

Net income (loss), as reported

   $ 4,166    $ 854    $ (737 )

Less: Stock-based employee compensation expense determined under fair value method, net of related tax effect

     666      690      549  
    

  

  


Pro forma net income (loss)

   $ 3,500    $ 164    $ (1,286 )
    

  

  


Earnings (loss) per common share:

                      

Basic, as reported

   $ 0.32    $ 0.07    $ (0.06 )

Basic, pro forma

     0.27      0.01      (0.10 )

Diluted, as reported

     0.32      0.07      (0.06 )

Diluted, pro forma

     0.27      0.01      (0.10 )

 

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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

 

For SFAS No. 123 purposes, the fair value of each option granted under the Company’s stock option plans is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions for the years ended November 30, 2004, 2003, and 2002:

 

     2004

    2003

    2002

 

Expected volatility

   32.00 %   50.00 %   58.00 %

Risk-free interest rate

   2.00 %   2.00 %   2.00 %

Expected dividend yield

   0.00 %   0.00 %   0.00 %

Expected option life in years

   5.00     5.00     5.00  

 

The pro forma amounts disclosed above may not be representative of future disclosures because the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. In addition, the Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The pricing model also requires the use of assumptions, such as the expected volatility of the market price of the Company’s Common Stock and the expected option life, and changes in these subjective assumptions may result in materially different fair value estimates.

 

EXCERPTS ON THIS PAGE:

10-K
Feb 27, 2006
10-K
Feb 23, 2005
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