Note 7 - Share-Based Compensation

In the first quarter of fiscal 2025, the Compensation Committee of the Company’s Board of Directors granted 446,993 restricted stock units (“RSUs”) and 340,454 performance share awards (“PSUs”) to the Company’s key employees and officers under the Company’s 2024 Omnibus Incentive Plan (the “2024 Plan”).

Of the RSUs granted in the first quarter of fiscal 2025, 334,042 RSUs have a five-year term and vest one-fifth per year commencing November 30, 2025 and each October 31 thereafter. The remaining 112,951 RSUs have a three-year term and vest one-third per year commencing November 30, 2025 and each October 31 thereafter. The aggregate fair value of all the RSUs granted was based on the market closing price of the underlying Class A common stock on the grant date and totaled $9 million. The compensation expense associated with the RSUs is recognized over the requisite service period of the awards, net of forfeitures, which for participants who were retirement eligible as of the grant date or who will become retirement eligible during the term of the awards is the longer of two years or the period ending on the date retirement eligibility is achieved.

The PSUs granted in the first quarter of fiscal 2025 comprise two separate and distinct awards with different vesting conditions. Awards vest if the threshold level under the specified metric is met at the end of the approximately three-year performance period. The performance metrics are (1) the Company’s total shareholder return (“TSR”) based on the Company’s average TSR percentile rank relative to a designated peer group and (2) the Company’s volume growth. Award share payouts depend on the extent to which the performance goals have been achieved. The number of shares that a participant receives is equal to the number of performance shares granted multiplied by a payout factor, which ranges from a threshold of 50% to a maximum of 200%. The TSR award stipulates certain limitations to the payout in the event the payout reaches a defined ceiling level or the Company’s TSR is negative.

Approximately half of the PSUs granted during the first quarter of fiscal 2025 vest based on the Company’s relative TSR metric over an approximately three-year performance period ending August 31, 2027. The Company estimated the fair value of TSR awards granted in the first quarter of fiscal 2025 using a Monte-Carlo simulation model utilizing several key assumptions, including the following:

The estimated aggregate fair value of the TSR-based PSUs at the date of grant was $3 million. The compensation expense for these awards based on the grant-date fair value, net of estimated forfeitures, is recognized over the requisite service period (or to the date a qualifying employment termination event entitles the recipient to a prorated award, if before the end of the service period), regardless of whether the market condition has been or will be satisfied.

Approximately half of the PSUs granted during the first quarter of fiscal 2025 vest based on the Company’s volume growth for the three-year performance period consisting of the Company’s 2025, 2026 and 2027 fiscal years. The fair value of the awards granted was based on the market closing price of the underlying Class A common stock on the grant date and totaled $3 million.

The Company accrues compensation cost for the PSUs related to volume growth based on the probable outcome of achieving specified performance conditions, net of estimated forfeitures, over the requisite service period (or to the date a qualifying employment termination event entitles the recipient to a prorated award, if before the end of the service period). The Company reassesses whether achievement of the performance conditions is probable at each reporting date. If it is probable that the actual performance results will exceed the stated target performance conditions, the Company accrues additional compensation cost for the additional performance shares to be awarded. If, upon reassessment, it is no longer probable that the actual performance results will exceed the stated target performance conditions, or it is no longer probable that the target performance conditions will be achieved, the Company reverses any recognized compensation cost for shares no longer probable of being issued. If the performance conditions are not achieved at the end of the performance period, all related compensation cost previously recognized is reversed.

PSUs will be paid in Class A common stock as soon as practicable after the end of the requisite service period and vesting date of October 31, 2027.

In the second quarter of fiscal 2025, the Company granted deferred stock units (“DSUs”) to each of its non-employee directors under the Company’s 2024 Plan. Each DSU gives the director the right to receive one share of Class A common stock at a future date. The grant included an aggregate of 57,642 shares that will vest in full on the day before the Company’s 2025 annual meeting of shareholders, subject to continued Board service. The total fair value of these awards at the grant date was $1 million.