Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v2.4.0.8
Stock-Based Compensation
 12 Months Ended
Mar. 31, 2014
Share-based Compensation [Abstract]  
Stock-Based Compensation
Stock-based Compensation:
Employee Stock Incentive Plans
In September 2010, stockholders approved the amendment and restatement of the Westell Technologies, Inc. 2004 Stock Incentive Plan (the 2004 SIP Plan) that permits the issuance of restricted Class A Common Stock, nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock units and performance stock units share awards to selected officers, employees, and non-employee directors of the Company. There are a total of 3,131,192 shares available for issuance under this plan as of March 31, 2014. Certain awards provide for accelerated vesting if there is a change in control (as defined in the 2004 SIP Plan) or when provided within individual employment contracts. The Company issues new shares of stock for awards under the 2004 SIP Plan.
Stock-Based Compensation Expense
Total stock-based compensation, excluding the impact of discontinued operations, is reflected in the Consolidated Statements of Operations as follows:
 
Fiscal Year Ended March 31,
(in thousands)
2014
 
2013
 
2012
Cost of revenue
$
53

 
$
27

 
$
55

Sales and marketing
337

 
190

 
173

Research and development
338

 
115

 
58

General and administrative
1,143

 
1,075

 
915

Stock-based compensation expense
1,871

 
1,407

 
1,201

Income tax benefit
—

 
—

 
(61
)
Total stock-based compensation expense after taxes
$
1,871

 
$
1,407

 
$
1,140


Stock Options
Stock options that have been granted by the Company have an exercise price that is equal to the reported value of the Company’s stock on the grant date. Options usually vest annually from the date of grant over a period of 4 years. The Company’s options have a contractual term of 7 or 10 years. Compensation expense is recognized on a straight-line basis over the vesting period for the award.
The Company uses the Black-Scholes model to estimate the fair value of employee stock options on the date of grant. That model employs parameters for which the Company has made estimates according to the assumptions noted below. Expected volatilities were based on historical volatilities of the Company’s stock. The expected option lives represent the period of time that options granted are expected to be outstanding based on historical trends. The risk-free interest rates were based on the United States Treasury yield curve for the expected term at the time of grant. The dividend yield was based on expected dividends at the time of grant, which has always been zero.
The Company recorded expense of $0.2 million, $0.2 million, and $0.3 million in the twelve months ended March 31, 2014, 2013 and 2012, respectively, related to stock options. The Company received proceeds from the exercise of stock options of $1.7 million, $0.1 million, and $1.7 million in fiscal years 2014, 2013 and 2012, respectively. The total intrinsic value of options exercised during the years ended March 31, 2014, 2013 and 2012 was $1.3 million, $0.2 million, and $1.3 million, respectively.
Option activity for the twelve months ended March 31, 2014 is as follows:
 
Shares
 
Weighted-
Average
Exercise
Price Per
Share
 
Weighted-
Average
Remaining
Contractual
Term (in
years)
 
Aggregate
Intrinsic
Value(a)
(in thousands)
Outstanding on March 31, 2013
2,114,446

 
$
2.07

 
 
 
 
Granted
630,000

 
$
2.45

 
 
 
 
Exercised
(807,568
)
 
$
2.08

 
 
 
 
Forfeited
(7,333
)
 
$
1.57

 
 
 
 
Expired
(94,100
)
 
$
5.62

 
 
 
 
Outstanding on March 31, 2014
1,835,445

 
$
2.02

 
3.7
 
$
3,110

Vested or expected to vest as of March 31, 2014
1,791,580

 
$
2.01

 
3.7
 
$
3,052

Exercisable on March 31, 2014
974,695

 
$
1.71

 
1.8
 
$
1,969

(a) The intrinsic value for the stock options is calculated based on the difference between the exercise price of the underlying awards and the Westell Technologies’ close stock price as of the reporting date.
As of March 31, 2014, there was $0.6 million of pre-tax stock option compensation expense related to non-vested awards not yet recognized, including estimated forfeitures, which is expected to be recognized over a weighted-average period of 2.9 years.
The fair value of each option was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
 
Fiscal Year Ended March 31
 
2014
 
2013
 
2012
Input assumptions:
 
 
 
 
 
Expected volatility
42
%
 
49
%
 
70
%
Risk-free interest rate
1.1
%
 
0.7
%
 
1.4
%
Expected life
5 years

 
5 years

 
5 years

Expected dividend yield
—
%
 
—
%
 
—
%
Output weighted-average grant-date fair value
$
0.91

 
$
0.89

 
$
1.93


Restricted Stock
Vesting of restricted stock is subject to continued employment with the Company. During fiscal years 2014, 2013 and 2012, non-employee directors received grants of 90,000, 70,000 and 70,000 shares, respectively, that each vests annually over 4 years. The Company recognizes compensation expense on a straight-line basis over the vesting periods for the award based on the market value of Westell Technologies stock on the date of grant adjusted for estimated forfeitures.
The following table sets forth restricted stock activity for the twelve months ended March 31, 2014:
 
Shares
 
Weighted-Average
Grant Date Fair
Value
Non-vested as of March 31, 2013
738,500

 
$
1.65

Granted
90,000

 
$
2.33

Vested
(358,000
)
 
$
1.53

Forfeited
(63,000
)
 
$
1.43

Non-vested as of March 31, 2014
407,500

 
$
1.94

The Company recorded $0.5 million, $0.6 million, and $0.5 million of expense in the twelve months ended March 31, 2014, 2013 and 2012, respectively, related to restricted stock. As of March 31, 2014, there was $0.3 million of pre-tax unrecognized compensation expense, including estimated forfeitures, related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of 2.3 years. The total intrinsic fair value of shares vested during the years ended March 31, 2014, 2013, and 2012, was $0.7 million, $0.8 million, and $0.1 million, respectively.
Restricted Stock Units (RSUs)
In fiscal years 2014, 2013 and 2012, 1,182,000, 530,000 and 500,000 shares, respectively, of RSUs were awarded to certain key employees. These awards convert into shares of Class A Common Stock on a one-for-one basis upon vesting and vest in equal annual installments over 4 years from the grant dates. The Company recognizes compensation expense on a straight-line basis over the vesting for the award based on the market value of Westell Technologies stock on the date of grant adjusted for estimated forfeitures.
The Company recorded stock-based compensation expense of $0.9 million, $0.6 million and $0.3 million for RSUs in fiscal years 2014, 2013 and 2012, respectively. As of March 31, 2014, there was approximately $4.0 million of pre-tax unrecognized compensation expense, including estimated forfeitures, related to the RSUs, which is expected to be recognized over a weighted-average period of 3.2 years. The total intrinsic fair value of RSUs vested during the years ended March 31, 2014, 2013, and 2012, was $0.5 million, $0.3 million, and $0.5 million, respectively.
The following table sets forth the RSUs activity for the twelve months ended March 31, 2014:
 
Shares
 
Weighted-Average
Grant Date Fair
Value
Non-vested as of March 31, 2013
875,000

 
$
2.68

Granted
1,182,000

 
$
3.30

Vested
(210,000
)
 
$
2.85

Forfeited
(168,000
)
 
$
2.72

Non-vested as of March 31, 2014
1,679,000

 
$
3.09


Performance-based RSUs (PSUs)
In fiscal year 2014, certain executives were granted a total of 285,000 PSUs. The PSUs vest in annual increments based on the achievement of pre-established Company performance goals measured over a four year period and continued employment. The number of PSUs earned, can range from 0% to 200% of the target amount, depending on actual performance for fiscal years 2014 through 2017. In May 2014, the first measurement occurred resulting in achievement of 94% of the target amount and 25% vesting. Upon vesting, the PSUs convert into shares of Class A Common Stock on a one-for-one basis. The Company recognizes compensation expense on a straight-line basis for each annual performance measurement vesting period of the awards based on the market value of Westell Technologies stock on the date of grant adjusted for estimated forfeitures.
The Company recorded stock-based compensation expense of $0.3 million for PSUs in fiscal years 2014. There was no PSU expense in fiscal years 2013 and 2012. As of March 31, 2014, there was approximately $0.4 million of pre-tax unrecognized compensation expense, including estimated forfeitures, related to the PSUs, which is expected to be recognized over a weighted-average period of 2.1 years . The total intrinsic fair value of PSUs vested during the year ended March 31, 2012, was $0.7 million. There were no PSUs that vested in fiscal years 2014 or 2013.
The following table sets forth the PSUs activity for the twelve months ended March 31, 2014:
 
Shares
 
Weighted-Average
Grant Date Fair
Value
Non-vested as of March 31, 2013
—

 
$
—

Granted
285,000

 
$
2.45

Vested
—

 
$
—

Forfeited
—

 
$
—

Non-vested as of March 31, 2014
285,000

 
$
2.45


Non-qualified Non-public Discontinued Subsidiary Stock Options
The Company’s ConferencePlus subsidiary had a stock option plan for the purchase of ConferencePlus stock. There were no options granted since fiscal year 2009. As a result of the sale of ConferencePlus, during the third quarter of fiscal year 2012, the Company purchased all outstanding ConferencePlus options with a fair market value above strike price. The purchase price for each option was equal to the difference between the fair market value of a share of ConferencePlus stock and the strike price for each option, resulting in an aggregate purchase price of $117,000 for the options. All remaining outstanding options were forfeited.