Annual report pursuant to Section 13 and 15(d)

Stock - Based Compensation

v3.19.3.a.u2
Stock - Based Compensation
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock - Based Compensation
Stock-Based Compensation

Overview of Stock-Based Compensation Plans

The Company has a number of active equity incentive plans under which the Company has been authorized to grant share-based awards to key employees and non-employee directors. A total of 500,000 shares have been previously authorized for grant to key employees and non-employee directors. As of December 31, 2019, there were 215,823 shares remaining available for grants under the currently active equity incentive plans.

The Company recognized stock-based compensation expense within SG&A expense on the consolidated statement of earnings of $2.1 million, $0.8 million, and $0.6 million in 2019, 2018, and 2017, respectively. The associated income tax benefit recognized was $0.4 million for 2019, and $0.2 million for 2018 and 2017, respectively.

Stock Options
2011 Long-Term Incentive Stock Option Plan
The 2011 Long-Term Incentive Stock Option Plan (the "2011 Plan") is an incentive stock option plan; therefore, there are no income tax consequences to the Company when an option is granted or exercised. The stock options will vest in 20 percent or 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. In order for the options to vest, the employee must be in the continuous employment of the Company since the date of the grant. Except for death, disability, or qualifying retirement, any portion of the grant that has not vested will be forfeited upon termination of employment. Shares representing grants that have not yet vested will be held in escrow by the Company. An employee will not be entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.
A summary of activity in the Company's stock option plans is as follows:
 
Weighted
Average
Exercise
Price
 
Options
Outstanding
 
Weighted
Average
Contractual
Term
(in years)
 
Intrinsic
Value of
Options
 
Options
Available
At December 31, 2016
$
12.77

 
173,048

 
5.4
 
$
—

 
152,965

  Exercised
$
11.55

 
(25,632
)
 
 
 
$
78,818

 


  Expired
$
15.26

 
(1,905
)
 
 
 
 
 
1,905

At December 31, 2017
$
12.96

 
145,511

 
4.6
 
$
156,445

 
154,870

  Exercised
$
12.09

 
(85,440
)
 
 
 
$
842,742

 
 
  Expired
$
16.01

 
(975
)
 
 
 
 

 
975

At December 31, 2018
$
14.16

 
59,096

 
4.8
 
$
143,737

 
155,845

  Exercised
$
12.61

 
(3,628
)
 
 
 


 
—

At December 31, 2019
$
14.26

 
55,468

 
3.8
 
$
18,331

 
155,845

Exercisable options
$
14.13

 
51,745

 
3.7
 
$
18,331

 
 

 
 
 
 

 
 
 
 
 
 

Options expected to vest:
 

 
 

 
 
 
Grant Date Fair Value
 
 

December 31, 2017
$
14.72

 
25,650

 
6.5
 
$
6.41

 
 

   Vested
$
14.78

 
(15,380
)
 
 
 
$
6.38

 
 

   Forfeited unvested options
$
16.01

 
(301
)
 
 
 
 
 
 
At December 31, 2018
$
15.83

 
9,969

 
6.0
 
$
6.44

 
 

  Vested
$
15.72

 
(6,246
)
 
 
 
$
6.46

 
 
At December 31, 2019
$
16.01

 
3,723

 
5.1
 
$
6.11

 
 

The following table summarizes information about stock options outstanding at December 31, 2019: 
Range of Exercise Prices
 
Outstanding Stock Options
 
Exercisable Stock Options
 
Shares
 
Weighted Average
 
Shares
 
Weighted Average Exercise Price
 
 
Exercise Price
 
Remaining Contractual Life in Years
 
 
$
11.35

 
11,713

 
$
11.35

 
2.10
 
11,713

 
$
11.35

$
13.70

 
13,994

 
$
13.70

 
3.10
 
13,994

 
$
13.70

$
14.76

 
8,109

 
$
14.76

 
4.14
 
8,109

 
$
14.76

$
16.01

 
21,652

 
$
16.01

 
5.11
 
17,929

 
$
16.01

 

 
55,468

 
 

 
 
 
51,745

 
 


In 2019 and 2018, options for 3,628 and 85,440 shares, respectively, were exercised by employees and directors for an aggregate exercise price of $45,734 and $1.0 million, respectively.
At the 2019, 2018 and 2017 respective year ends, options to purchase 51,745, 49,127 and 119,861 shares, respectively, with weighted average exercise prices of $14.13, $13.82 and $12.45, respectively, were fully exercisable.
Compensation cost charged against income before taxes for the options was approximately $31,186 for 2019, $46,529 for 2018 and $80,966 for 2017. As of December 31, 2019, there was $2,261 of unrecognized compensation cost related to unvested stock options granted under the Company's stock option plans. The weighted average period over which the stock option compensation cost is expected to be recognized is 0.11 years.
Restricted Stock Awards
2005 Stock Awards Plan
The Compensation & Long-Term Incentive Committee ("Compensation Committee") of the Board of Directors of the Company approved stock grants under the Company's 2005 Stock Awards Plan to certain management employees of the Company. The stock grants will vest in 20 percent or 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. In order for the grants to vest, the employee must be in the continuous employment of the Company since the date of the grant. Any portion of the grant that has not vested will be forfeited upon termination of employment. Shares representing grants that have not yet vested will be held in escrow by the Company. An employee will not be entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.
2015 Stock Awards Plan
The 2015 Stock Awards Plan was approved by the Compensation Committee and authorizes the issuance of up to 250,000 shares which can be awarded for a period of 10 years from the effective date of the plan. Prior to May 9, 2017, as discussed below, the stock awards vest in 20 percent increments annually on a cumulative basis, beginning one year after the date of grant from shares held in treasury with the Company. In order for the awards to vest, the employee must be in the continuous employment of the Company since the date of the award. Except for death, disability, or qualifying retirement, any portion of an award that has not vested is forfeited upon termination of employment. The Company may terminate any portion of the award that has not vested upon an employee's failure to comply with all conditions of the award or the 2015 Stock Awards Plan. An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable.
On February 8, 2017, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 44,687 shares with a market price of $12.30 per share were granted under the Plan.
Effective May 1, 2017, the Company's Board of Directors approved the First Amendment to the 2015 Stock Awards Plan. The amendment grants the Compensation Committee the authority to establish and amend vesting schedules for stock awards made pursuant to the 2015 Stock Awards Plan. On May 9, 2017, the Committee approved the amendment of the vesting schedules for the May 5, 2016 and February 8, 2017 stock grants reducing the vesting period from five years to three years. As a result of this amendment, compensation expense increased in 2017 by $75,756 and $67,180, for the five employees receiving grants on May 5, 2016 and eight employees receiving grants on February 8, 2017, respectively.
On February 7, 2018, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 65,527 shares with a market price of $12.47 per share were granted under the Plan. These stock awards vest in either 20 percent or 33 percent increments annually on a cumulative basis, beginning one year after the date of grant.
On February 6, 2019, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 44,949 shares with a market price of $15.72 per share were granted under the Plan. These stock awards vest in either 20 percent or 33 percent increments annually on a cumulative basis, beginning one year after the date of grant.
On May 17, 2018, a majority of the shareholders of the Company, upon the recommendation of the Company's Board of Directors, voted to amend and restate the 2015 Stock Awards Plan to increase the authorization of issuances from 250,000 shares to 500,000 shares.
A summary of plan activity for the 2005 and 2015 Stock Awards Plans is as follows:
 
Shares
 
Weighted Average
Grant Date Fair Value
Outstanding at December 31, 2016
121,302

 
$
10.03

Granted February 8, 2017
44,687

 
$
12.30

Vested
(34,322
)
 
$
10.45

Outstanding at December 31, 2017
131,667

 
$
10.69

Granted February 7, 2018
65,527

 
$
12.47

Vested
(51,775
)
 
$
10.84

Forfeited
(3,245
)
 
$
10.96

Outstanding at December 31, 2018
142,174

 
$
11.45

Granted February 6, 2019
44,949

 
$
15.72

Vested
(84,734
)
 
$
11.76

Forfeited
(1,614
)
 
$
12.44

Outstanding at December 31, 2019
100,775

 
$
13.28


Compensation expense on the grants issued is charged against earnings equally before forfeitures, if any, with the offset recorded in Shareholders' Equity. Compensation cost charged against income for the awards was approximately $1.4 million for 2019, $0.8 million, for 2018 and $0.6 million for 2017. As of December 31, 2019, there was $0.8 million of total unrecognized compensation cost related to unvested stock grants under the Company's Stock Awards Plan. The weighted average period over which the stock grant compensation cost is expected to be recognized is 2.11 years.

Performance-Based Restricted Stock Awards

The Company issues performance-based restricted stock classified as equity awards. Expense is recognized on a straight-line method over the requisite service period, based on the probability of achieving the performance condition, with changes in expectations recognized as an adjustment to earnings in the period of change. Compensation cost is not recognized for performance-based restricted stock awards that do not vest because service or performance conditions are not satisfied and any previously recognized compensation cost is reversed. Performance-based restricted stock awards do not have dividend rights. The Company recognized forfeitures as they occur.

The Company's performance-based restricted stock awards are classified as equity and contain performance and service conditions that must be satisfied for an employee to earn the right to benefit from the award. The performance condition is based on the achievement of the Company's EBITDA targets. The fair value of the performance-based restricted stock awards are determined based on the closing market price of our stock on the date of grant.

In general, 0% to 150% of the Company's performance-based restricted stock awards vest at the end of a three year service period from the date of grant based upon achievement of the specified performance condition.

The total fair value of performance-based restricted stock awards vesting was approximately $0.4 million in 2019. There were no performance-based restricted stock awards that vested in 2018 or 2017, respectively.

A summary of the status of our non-vested performance-based restricted stock awards at December 31, 2019, and changes during fiscal 2019, were as follows:
 
Units(1)
 
Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2018
100,037

 
$
10.56

Granted
35,887

 
$
15.72

Vested(2)
(57,938
)
 
$
9.58

Forfeited/Canceled
—

 
$
—

Non-vested at December 31, 2019
77,986

 
$
13.66

(1)The number of units presented is based on achieving the targeted performance goals as defined in the performance award agreement. As of December 31, 2019, the maximum number of non-vested shares under the provisions of the agreement was 116,979. 
(2) Excludes the vesting of an additional 4,284 shares due to performance conditions of the awards exceeding target. 

At December 31, 2019, there was $0.2 million of unrecognized compensation expense related to non-vested performance-based restricted stock awards that is expected to be recognized over a weighted-average period of 1.36 years.
Non-Employee Director Compensation Plan
Each year, the Company allows each non-employee director to elect to receive up to 100 percent of the director's annual retainer in restricted stock. The number of restricted shares issued is determined by the average of the high and low common stock price on the day prior to the Annual Meeting of Shareholders or the date prior to the appointment to the Board for those individuals that are appointed mid-term. On May 16, 2019, May 17, 2018 and May 18, 2017, non-employee directors received an aggregate of 15,909, 14,857 and 24,209 shares, respectively, of restricted stock in lieu of total retainer fees of $304,000, $276,000 and $287,500, respectively. The shares granted to the directors are not registered under the Securities Act of 1933 and are subject to forfeiture in whole or in part upon the occurrence of certain events.