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EXCEL - IDEA: XBRL DOCUMENT - HI TECH PHARMACAL CO INCFinancial_Report.xls
10-Q - FORM 10-Q - HI TECH PHARMACAL CO INCd399017d10q.htm
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v2.4.0.6
Stock-Based Compensation
6 Months Ended
Oct. 31, 2012
Stock-Based Compensation [Abstract]  
STOCK-BASED COMPENSATION

11. STOCK-BASED COMPENSATION:

US GAAP requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, non-employee directors, and consultants, including employee stock options. Stock compensation expense based on the grant date fair value estimated in accordance with the provisions of US GAAP is recognized as an expense over the requisite service period.

For stock options granted as consideration for services rendered by non-employees, the Company recognizes compensation expense in accordance with the requirements of the applicable accounting guidance.

 

The Company’s employee stock options are considered incentive stock options unless they do not meet the requirements for incentive stock options under the Internal Revenue Code. With incentive stock options, there is no tax deferred benefit associated with recording the stock-based compensation.

The Company recognized stock-based compensation for awards issued under the Company’s Stock Option Plans and Employee Stock Purchase Plan in the following line items in the condensed consolidated statements of operations:

 

                                 
    Three months ended October 31,     Six months ended October 31,  
    2012     2011     2012     2011  

Cost of goods sold

  $ 125,000     $ 87,000     $ 217,000     $ 174,000  

Selling, general and administrative expenses

    735,000       571,000       1,271,000       1,137,000  

Research and product development costs

    181,000       83,000       338,000       166,000  
   

 

 

   

 

 

   

 

 

   

 

 

 

Stock-based compensation expense

  $ 1,041,000     $ 741,000     $ 1,826,000     $ 1,477,000  
   

 

 

   

 

 

   

 

 

   

 

 

 

The Company has elected to use the Black-Scholes option-pricing model, which incorporates various assumptions including volatility, expected life, and interest rate. The expected volatility is based on the historical volatility of the Company’s common stock. The interest rates for periods within the contractual life of the award are based on the United States Treasury yield on the date of each option grant. The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding and was determined based on historical experience and vesting schedules of similar awards.

All options granted through October 31, 2012 had exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of ten years and generally a vesting period of four years. In accordance with US GAAP the Company adjusts share-based compensation on a quarterly basis for changes to the estimate of expected equity award forfeitures based on actual forfeiture experience. The effect of adjusting the forfeiture rate for all expense amortization after May 1, 2006 is recognized in the period the forfeiture estimate is changed. As of October 31, 2012, the weighted average forfeiture rate was 9% and the effect of forfeiture adjustments for the three and six months ended October 31, 2012 and 2011 was insignificant. On July 16, 2012 the Company granted 442,000 options to directors and employees for an exercise price of $32.59. Additionally, the Company granted 2,500 employee options on August 1, 2012 for an exercise price of $33.00. The Company did not grant any options during the six months ended October 31, 2011.

The following weighted average assumptions were used for the stock options granted during the six months ended October 31, 2012:

 

                 
    July 16, 2012     August 1, 2012  

Dividend yield

    None       None  

Expected volatility

    54     54

Risk-free interest rate

    0.60     0.60

Expected term

    4.00       4.00  

Weighted average fair value per share at grant date

  $ 13.62     $ 13.79  

The intrinsic value of options exercised for the Amended and Restated Stock Option Plan, the 2009 Stock Option Plan and the 1994 Directors Stock Option Plan, as amended was $4,538,000 and $1,822,000 for the six month periods ended October 31, 2012 and 2011, respectively. As of October 31, 2012, $9,407,000 of total unrecognized compensation cost related to stock options for both plans is expected to be recognized over a weighted average period of 2.9 years.