NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(19) Stock-Based Incentive Compensation Plans
Fleetwood maintains a stock-based incentive compensation plan under Fleetwood’s Amended and Restated 1992 Stock-Based Incentive Compensation Plan for officers and key employees. Under this plan Fleetwood is authorized to grant up to 9,900,000 shares of Fleetwood’s stock in the form of shares, share options, restricted stock, and restricted stock units. In addition, Fleetwood maintains the 1992 Non-Employee Director Stock Option Plan for its non-employee directors. This plan has been authorized to grant up to 400,000 shares in the form of share options. Options were also granted to Elden L. Smith, Fleetwood’s President and Chief Executive Officer, as an inducement to his becoming an employee of Fleetwood, under a separate plan which, under the rules of the New York Stock Exchange, was not required to be approved by shareholders. Beginning with the first quarter of fiscal 2007, performance-based restricted stock units were granted, under Fleetwood’s Amended and Restated 1992 Stock-Based Incentive Compensation Plan, at no cost to officers and certain employees. The performance-based restricted stock units are awarded at the beginning of a one-year performance period and convert into restricted shares that can vary in number from 0% to 125% of the initial award depending on the level of performance achieved. Performance is measured against established targets for earnings per share (EPS) or segment operation returns (for awards granted to employees of operating groups) during the one-year performance period. Restricted shares time-vest ratably over a subsequent three-year service period. All of these plans are shareholder approved, other than the previously mentioned Elden L. Smith plan.
The following is a summary of the stock option activity for employees and non-employee directors for the last three fiscal years:
| 2007 | 2006 | 2005 | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares | Weighted Average Exercise Price |
Shares | Weighted Average Exercise Price |
Shares | Weighted Average Exercise Price |
||||||||||||||||||
| Outstanding at beginning of year | 4,545,850 | $ | 14.94 | 5,753,074 | $ | 14.18 | 5,812,945 | $ | 13.37 | ||||||||||||||
| Granted | 990,700 | 7.25 | 640,200 | 11.05 | 1,112,200 | 12.55 | |||||||||||||||||
| Exercised | (232,724 | ) | 4.56 | (850,019 | ) | 7.15 | (777,086 | ) | 5.11 | ||||||||||||||
| Forfeited | (169,522 | ) | 12.32 | (131,366 | ) | 5.88 | (79,462 | ) | 10.54 | ||||||||||||||
| Expired | (650,400 | ) | 18.42 | (866,039 | ) | 16.02 | (315,523 | ) | 16.77 | ||||||||||||||
| Outstanding at end of year | 4,483,904 | $ | 13.38 | 4,545,850 | $ | 14.94 | 5,753,074 | $ | 14.18 | ||||||||||||||
| Exercisable at end of year | 3,050,975 | $ | 15.47 | 3,488,665 | $ | 15.93 | 4,281,775 | $ | 15.88 | ||||||||||||||
| Weighted average fair value of options granted |
$ | 3.32 | $ | 4.83 | $ | 4.82 | |||||||||||||||||
The weighted-average grant-date fair value of options granted during the fiscal years ended 2007, 2006, and 2005 was $3.32, $4.83, and $4.82, respectively. The total intrinsic value of options exercised during the 2007, 2006 and 2005 fiscal years was approximately $859,000, $3.4 million, and $4.6 million, respectively.
As of April 29, 2007, there was a total of $3.9 million of unrecognized compensation cost related to nonvested stock options granted under Fleetwood’s stock-based incentive compensation plans that will be recognized over the remaining weighted average vesting period of 2.18 years.
Restricted stock units have a three-year vesting schedule and include a performance condition to vest. The fair value of each restricted stock unit is measured on the date of grant using the grant date price of Fleetwood’s stock and recorded as compensation cost over the remaining service period when it is probable that the performance condition will be achieved. If such goals are not met, no compensation cost is recognized and any recognized compensation cost is reversed.
A summary of restricted stock unit activity for the fiscal year ended April 29, 2007 is presented below:
| Shares | Weighted Average Grant Date Fair Value |
||||||
|---|---|---|---|---|---|---|---|
| Nonvested at April 30, 2006 | — | $ | — | ||||
| Granted | 248,388 | 7.76 | |||||
| Vested | — | — | |||||
| Forfeited(1) | (248,388 | ) | 7.76 | ||||
| Nonvested at April 29, 2007 | — | $ | — | ||||
(1) 32,092 units were forfeited due to termination of employment. The remaining restricted stock units were forfeited as Fleetwood did not meet the required performance targets.
As a result of adopting SFAS No. 123R on May 1, 2006, a total share-based payment cost of $3.4 million was recognized during the fiscal year ended April 29, 2007, as a component of operating expenses. No compensation cost was recognized during fiscal year ended April 29, 2007 related to the restricted stock units.