NOTE 10 — EMPLOYEE BENEFIT PLANS
Overview of Equity Incentive Plans
At January 31, 2013, the Company had awards outstanding from four equity-based compensation plans, only one of which is currently active. The active plan was approved by the Company’s shareholders in June 2009 and includes 4.0 million shares available for grant, of which approximately 3.0 million shares remain available for future grant at January 31, 2013. Under the active plan, the Company is authorized to award officers, employees, and non-employee members of the Board of Directors restricted stock, options to purchase common stock, maximum value stock-settled stock appreciation rights (“MV Stock-settled SARs”), maximum value options (“MVOs”), and performance awards that are dependent upon achievement of specified performance goals. Equity-based compensation awards are used by the Company to attract talent and as a retention mechanism for the award recipients and have a maximum term of ten years, unless a shorter period is specified by the Compensation Committee of the Company’s Board of Directors (“Compensation Committee”) or is required under local law. Awards under the plans are priced as determined by the Compensation Committee and under the terms of the Company’s active equity-based compensation plan are required to be priced at, or above, the fair market value of the Company’s common stock on the date of grant. Awards generally vest between one and four years from the date of grant.
For the fiscal years ended January 31, 2013, 2012 and 2011, the Company recorded $13.6 million, $12.0 million and $10.4 million, respectively, of stock-based compensation expense, and related income tax benefits of $4.4 million, $3.7 million and $3.1 million, respectively. Cash received from equity-based incentives exercised during the fiscal years ended January 31, 2013, 2012 and 2011 was $3.4 million, $35.1 million and $5.0 million, respectively, and the actual benefit received from the tax deduction from the exercise of equity-based incentives was $11.7 million, $7.6 million and $4.4 million, respectively, for the fiscal years ended January 31, 2013, 2012 and 2011.
Restricted Stock
The Company’s restricted stock awards are primarily in the form of restricted stock units (“RSUs”) and typically vest in annual installments lasting between one and four years from the date of grant, unless a different vesting schedule is mandated by country law. All of the RSUs have a fair market value equal to the closing price of the Company’s common stock on the date of grant. Stock-based compensation expense includes $12.6 million, $10.7 million and $8.0 million for the vesting of RSUs during fiscal 2013, 2012 and 2011, respectively.
A summary of the status of the Company’s RSU activity for the fiscal year ended January 31, 2013 is as follows:
|
| | | |
| Shares | | Weighted-
average grant date
fair value |
Outstanding at January 31, 2012 | 568,498 | | $43.74 |
Granted | 305,097 | | 52.80 |
Vested | (227,553) | | 40.75 |
Canceled | (39,275) | | 47.47 |
Outstanding at January 31, 2013 | 606,767 | | 49.18 |
The total fair value of RSUs which vested during the fiscal years ended January 31, 2013, 2012 and 2011 is $9.3 million, $7.9 million and $7.1 million, respectively. The weighted-average estimated fair value of the 272,949 and 277,527 RSUs granted during the fiscal years ended January 31, 2012 and 2011 was $48.53 and $44.88, respectively. As of January 31, 2013, the unrecognized stock-based compensation expense related to non-vested RSUs was $17.0 million, which the Company expects to be recognized over the next three years (over a remaining weighted average period of two years).
MV Stock-settled SARs, MVOs and Stock Options
MV Stock-settled SARs and MVOs are similar to traditional stock options, except these instruments contain a predetermined cap on the maximum earnings potential a recipient can expect to receive upon exercise. In addition, upon exercise, holders of an MV Stock-settled SAR will only receive shares with a value equal to the spread (the difference between the current market price per share of the Company’s common stock subject to the predetermined cap and the grant price). The grant price of the MV Stock-settled SARs and MVOs is determined using the last sale price of the Company’s common stock as quoted on the NASDAQ Stock Market, Inc. on the date of grant (or such higher price as may be required by applicable laws and regulations of specific foreign jurisdictions). MV Stock-settled SARs, MVOs and stock options vest annually between one and four years from the date of grant and have a contractual term of ten years.
A summary of the status of the Company’s MV Stock-settled SARs, MVOs and stock options activity for the fiscal year ended January 31, 2013 is as follows:
|
| | | | | | | | | | |
| Shares | | Weighted-
average
exercise price | | Weighted-
Average
remaining
contractual term
(in years) | | Aggregate
intrinsic
value
(in thousands) |
Outstanding at January 31, 2012 | 1,651,400 |
| | $33.89 | | | | |
Granted | 6,236 |
| | 54.03 | | | | |
Exercised | (1,110,020 | ) | | 34.12 | | | | |
Canceled | (45,391 | ) | | 37.03 | | | | |
Outstanding at January 31, 2013 | 502,225 |
| | 33.33 | | 3.0 | | $ | 8,848 |
|
Vested and expected to vest at January 31, 2013 | 499,712 |
| | 33.33 | | 3.0 | | 8,802 |
|
Exercisable at January 31, 2013 | 354,391 |
| | 37.74 | | 1.7 | | 4,669 |
|
Stock-based compensation expense includes $1.0 million, $1.3 million and $2.4 million for the vesting of MV Stock-settled SARS and MVOs during fiscal 2013, 2012 and 2011, respectively.
The aggregate intrinsic value in the table above represents the difference between the closing price of the Company’s common stock on January 31, 2013 and the grant price for all “in-the-money” equity-based awards at January 31, 2013. The intrinsic value of the equity-based awards changes based on the fair market value of the Company’s common stock. The intrinsic value of the MV Stock-settled SARs, MVO and stock option awards exercised during the fiscal year ended January 31, 2013, 2012 and 2011 was $21.0 million, $14.1 million and $5.3 million, respectively. As of January 31, 2013, the Company expects $0.2 million of total unrecognized compensation cost related to MV Stock-settled SARs and MVOs to be recognized over the next two fiscal years (over a weighted-average period of one year). The total fair value of MV Stock-settled SARs and MVOs which vested during the fiscal years ended January 31, 2013, 2012 and 2011 was $1.2 million, $1.5 million and $4.5 million, respectively. The weighted-average estimated fair value of the 6,236, 12,882 and 17,799 MVOs granted during the fiscal years ended January 31, 2013, 2012 and 2011 was $10.77, $10.78, and $7.97, respectively, based on a two-step valuation utilizing both the Hull-White Lattice (binomial) and Black-Scholes option-pricing models.
A summary of the status of the Company’s stock-based equity incentives outstanding, representing MV Stock-settled SARs, MVOs and stock options, at January 31, 2013, is as follows:
|
| | | | | | | | | | | | | |
| Outstanding | | Exercisable |
Range of exercise prices | Number
outstanding
at 1/31/13 | | Weighted-
average
remaining
contractual
life (years) | | Weighted-
average
exercise
price | | Number
exercisable
at 1/31/13 | | Weighted-
average
exercise
price |
$21.13 – $21.13 | 172,181 | | 5.9 | | $ | 21.13 |
| | 33,079 | | $ | 21.13 |
|
24.27 – 33.74 | 23,804 | | 0.6 | | 27.94 |
| | 22,866 | | 27.79 |
|
37.04 – 37.04 | 49,000 | | 2.0 | | 37.04 |
| | 49,000 | | 37.04 |
|
37.06 – 40.69 | 32,347 | | 2.8 | | 38.15 |
| | 31,149 | | 38.17 |
|
41.08 – 41.08 | 204,180 | | 1.2 | | 41.08 |
| | 204,180 | | 41.08 |
|
41.55 – 45.72 | 11,257 | | 1.2 | | 44.89 |
| | 10,897 | | 44.98 |
|
48.79 – 54.03 | 9,456 | | 6.2 | | 52.25 |
| | 3,220 | | 48.79 |
|
| 502,225 | | 3.0 | | 33.33 |
| | 354,391 | | 37.74 |
|
The Company’s policy is to utilize shares of its treasury stock, to the extent available, to satisfy its obligation to issue shares upon the exercise of awards (see further discussion of the Company’s share repurchase program in Note 11 – Shareholders’ Equity below).
Employee Stock Purchase Plan
Under the 1995 Employee Stock Purchase Plan (the “ESPP”), the Company is authorized to issue up to 1,000,000 shares of common stock to eligible employees in the Company’s U.S. and Canadian subsidiaries. Under the terms of the ESPP, employees can choose to have a fixed dollar amount or percentage deducted from their bi-weekly compensation to purchase the Company’s common stock and/or elect to purchase shares once per calendar quarter. The purchase price of the stock is 85% of the market value on the purchase date and employees are limited to a maximum purchase of $25,000 in fair market value each calendar year. From the inception of the ESPP through January 31, 2013, the Company has issued 482,776 shares of common stock to the ESPP. All shares purchased under the ESPP must be held by the employees for a period of one year. Stock-based compensation expense related to the ESPP was insignificant during fiscal 2013, 2012 and 2011.
Retirement Savings Plan
The Company sponsors the Tech Data Corporation 401(k) Savings Plan (the “401(k) Savings Plan”) for its U.S. employees. At the Company’s discretion, participant deferrals are matched in cash, in an amount equal to 50% of the first 6% of participant deferrals and participants are fully vested following four years of qualified service. Aggregate contributions made by the Company to the 401(k) Savings Plan were $2.5 million for both fiscal 2013 and 2012 and $2.3 million for fiscal 2011. In December 2012, the Company amended the 401(k) Savings Plan to eliminate the option for the 401(k) Savings Plan to invest in the Company's common stock and as of January 31, 2013, there were no shares of the Company's common stock held by the 401(k) Savings Plan. There were 157,722 shares held of Tech Data common stock held by the Company’s 401(k) Savings Plan at January 31, 2012.
