Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v2.4.0.6
Stock-Based Compensation
 12 Months Ended
Mar. 31, 2013
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 4,824,090 shares available for issuance under this plan as of March 31, 2013.
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)
2013
 
2012
 
2011
Cost of goods sold
$
27

 
$
55

 
$
50

Sales and marketing
190

 
173

 
273

Research and development
115

 
58

 
95

General and administrative
1,075

 
915

 
463

Stock-based compensation expense
1,407

 
1,201

 
881

Income tax benefit
—

 
(61
)
 
—

Total stock-based compensation expense after taxes
$
1,407

 
$
1,140

 
$
881


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 ratably over the vesting period. Certain options 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 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 were derived from the output of the options valuation model and 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 same term as the expected term in effect 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, $0.3 million, and $0.4 million in the twelve months ended March 31, 2013, 2012 and 2011, respectively, related to stock options. The Company received proceeds from the exercise of stock options of $0.1 million, $1.7 million, and $2.6 million in fiscal years 2013, 2012 and 2011, respectively. The total intrinsic value of options exercised during the years ended March 31, 2013, 2012 and 2011 was $0.2 million, $1.3 million, and $0.9 million, respectively.
Option activity for the twelve months ended March 31, 2013 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, 2012
2,254,103

 
$
2.04

 
3.3
 
$
1,483

Granted
340,000

 
$
2.15

 
 
 
 
Exercised
(157,807
)
 
$
0.55

 
 
 
 
Forfeited
(80,440
)
 
$
2.06

 
 
 
 
Expired
(241,410
)
 
$
2.90

 
 
 
 
Outstanding on March 31, 2013
2,114,446

 
$
2.07

 
2.8
 
$
868

Vested or expected to vest as of March 31, 2013
2,089,420

 
$
2.07

 
2.8
 
$
867

Exercisable on March 31, 2013
1,650,683

 
$
2.15

 
2.2
 
$
726

(a) The intrinsic value for the stock options is calculated based on the difference between the exercise price of the underlying awards and the average of the high and low Westell Technologies’ stock price as of the reporting date.
As of March 31, 2013, there was $0.2 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 2.7 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
 
2013
 
2012
 
2011
Input assumptions:
 
 
 
 
 
Expected volatility
49
%
 
70
%
 
71
%
Risk-free interest rate
0.7
%
 
1.4
%
 
1.6
%
Expected life
5 years

 
5 years

 
5 years

Expected dividend yield
—
%
 
—
%
 
—
%
Output weighted-average grant-date fair value
$
0.89

 
$
1.93

 
$
1.12


The Company issues new shares of stock when stock options are exercised.
Restricted Stock
Vesting of restricted stock is subject to continued employment with the Company. During fiscal years 2013, 2012 and 2011, non-employee directors received grants of 70,000, 70,000 and 90,000 shares, respectively, that each vest annually over 4 years.
The Company recognizes compensation expense on a straight-line basis over the vesting periods of the awards 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, 2013:
 
Shares
 
Weighted-Average
Grant Date Fair
Value
Non-vested as of March 31, 2012
1,045,000

 
$
1.54

Granted
70,000

 
$
2.36

Vested
(352,500
)
 
$
1.49

Forfeited
(24,000
)
 
$
1.43

Non-vested as of March 31, 2013
738,500

 
$
1.65

The Company recorded $0.6 million, $0.5 million, and $0.1 million of expense in the twelve months ended March 31, 2013, 2012 and 2011, respectively, related to restricted stock. As of March 31, 2013, there was $0.7 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 1.6 years.
Restricted Stock Units (“RSUs”) and Performance-based RSUs ("PSUs")
In fiscal years 2013 and 2012, 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.
In fiscal year 2011, certain executives were granted 620,000 RSUs with time-based vesting conditions, which converted into shares of Class A Common Stock during the first quarter of fiscal year 2012. Of these units, 25% vested on April 1, 2011, and the remaining shares vest 25% annually each April 1 thereafter. In addition, executives received 620,000 PSUs which converted to shares of restricted Class A Common Stock at the maximum rate of 140% during the first quarter of fiscal year 2012. The conversion rate was based upon fiscal year 2011 achievement against a return on assets ("ROA") metric. The actual conversion rate was 140%. On May 18, 2011, the first 25% of the PSUs vested and the remaining awards are scheduled to vest 25% annually on each subsequent April 1.
The Company recorded stock-based compensation expense of $0.6 million, $0.3 million and $0.4 million for RSUs and PSUs in fiscal years 2013, 2012 and 2011, respectively. As of March 31, 2013, there was approximately $1.8 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 2.6 years.
The following table sets forth the RSUs activity for the twelve months ended March 31, 2013:
 
Shares
 
Weighted-Average
Grant Date Fair
Value
Non-vested as of March 31, 2012
500,000

 
$
3.25

Granted
530,000

 
$
2.25

Vested
(125,000
)
 
$
3.25

Forfeited
(30,000
)
 
$
2.36

Non-vested as of March 31, 2013
875,000

 
$
2.68


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.
During fiscal year 2011, the Company initiated a cash tender offer for certain ConferencePlus employee stock options.  Pursuant to the tender offer, employees tendered for purchase 732,191 options, and the Company accepted for purchase all such options. As a result, the Company paid an aggregate of $36,000 to the participating employees and incurred equity-based compensation expense of $63,000 related to the remaining unamortized equity-based compensation expense associated with the options tendered in the offer and to any amounts paid in excess of fair value. As of March 31, 2011, the Company had fully recognized the expense related to these outstanding options.