RICHARDSON ELECTRONICS, LTD. Stock Compensation Disclosure
5. SHARE-BASED COMPENSATION
Stock options granted generally vest over a period of five years and have contractual terms to exercise of 10 years. A summary of stock option activity is as follows (in thousands, except option prices and years):
|
|
Number of |
|
|
Weighted |
|
|
Weighted |
|
|
Aggregate |
|
||||
Options Outstanding at May 28, 2022 |
|
|
1,148 |
|
|
$ |
7.82 |
|
|
|
|
|
|
|
||
Granted |
|
|
194 |
|
|
|
15.58 |
|
|
|
|
|
|
|
||
Exercised |
|
|
(441 |
) |
|
|
8.58 |
|
|
|
|
|
|
|
||
Forfeited |
|
|
(20 |
) |
|
|
8.15 |
|
|
|
|
|
|
|
||
Cancelled |
|
|
(25 |
) |
|
|
11.67 |
|
|
|
|
|
|
|
||
Options Outstanding at May 27, 2023 |
|
|
856 |
|
|
$ |
9.07 |
|
|
|
|
|
|
|
||
Granted |
|
|
205 |
|
|
|
15.51 |
|
|
|
|
|
|
|
||
Exercised |
|
|
(75 |
) |
|
|
7.91 |
|
|
|
|
|
|
|
||
Forfeited |
|
|
(18 |
) |
|
|
9.32 |
|
|
|
|
|
|
|
||
Cancelled |
|
|
(10 |
) |
|
|
11.70 |
|
|
|
|
|
|
|
||
Options Outstanding at June 1, 2024 |
|
|
958 |
|
|
$ |
10.51 |
|
|
|
|
|
|
|
||
Granted |
|
|
184 |
|
|
|
11.89 |
|
|
|
|
|
|
|
||
Exercised |
|
|
(47 |
) |
|
|
6.76 |
|
|
|
|
|
|
|
||
Forfeited |
|
|
(6 |
) |
|
|
11.80 |
|
|
|
|
|
|
|
||
Cancelled |
|
|
(17 |
) |
|
|
10.11 |
|
|
|
|
|
|
|
||
Options Outstanding at May 31, 2025 |
|
|
1,072 |
|
|
$ |
10.91 |
|
|
|
6.3 |
|
|
$ |
1,087 |
|
Options Vested at May 31, 2025 |
|
|
565 |
|
|
$ |
9.27 |
|
|
|
4.8 |
|
|
$ |
889 |
|
There were 47,440 stock options exercised during fiscal 2025, with cash received of $0.3 million. The total intrinsic value of options exercised was $0.3 million during fiscal 2025, $0.3 million during fiscal 2024 and $4.7 million for fiscal 2023. The weighted average fair value of stock option grants was $4.95 during fiscal 2025, $6.33 during fiscal 2024 and $5.44 during fiscal 2023. As of May 31, 2025, total unrecognized compensation costs related to unvested stock options and restricted stock awards was approximately $2.7 million, which is expected to be recognized over the remaining weighted average period of approximately to four years. The total grant date fair value of stock options vested during fiscal 2025 was $0.5 million.
The fair value of stock options is estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:
|
|
Fiscal Year Ended |
|
|||||||||
|
|
May 31, 2025 |
|
|
June 1, 2024 |
|
|
May 27, 2023 |
|
|||
Expected volatility |
|
|
48.07 |
% |
|
|
44.80 |
% |
|
|
39.12 |
% |
Risk-free interest rate |
|
|
4.17 |
% |
|
|
4.02 |
% |
|
|
3.09 |
% |
Expected live (years) |
|
|
5.67 |
|
|
|
5.61 |
|
|
|
5.47 |
|
Annual cash dividend |
|
$ |
0.24 |
|
|
$ |
0.24 |
|
|
$ |
0.24 |
|
The expected volatility assumptions are based on historical experience commensurate with the expected term. The risk-free interest rate is based on the yield of a treasury note with a remaining term equal to the expected life of the stock option. The expected term of stock options is estimated from the vesting period of the award and represents the weighted average period that our stock options are expected to be outstanding.
As of May 31, 2025, a summary of restricted stock award transactions was as follows (in thousands):
|
|
Unvested |
|
|
Unvested at May 27, 2023 |
|
|
125 |
|
Granted |
|
|
45 |
|
Vested |
|
|
(66 |
) |
Unvested at June 1, 2024 |
|
|
104 |
|
Granted |
|
|
74 |
|
Vested |
|
|
(78 |
) |
Unvested at May 31, 2025 |
|
|
100 |
|
Compensation effects arising from issuing stock awards have been charged against income and recorded as additional paid-in-capital in the Consolidated Statements of Stockholders’ Equity during fiscal 2025, fiscal 2024 and fiscal 2023.
The Amended and Restated 2011 Long-Term Incentive Compensation Plan (the “Plan”) authorizes the issuance of up to 3,500,000 shares as incentive stock options, non-qualified stock options or stock awards. Under this plan, 443,000 shares are reserved for future issuance. The Plan authorizes the granting of stock options at the fair market value at the date of grant. Generally, these options become exercisable over five years and expire up to 10 years from the date of grant. Restricted stock awards vest on the anniversary of the grant date in three equal installments.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.