Annual report pursuant to Section 13 and 15(d)

Stock - Based Compensation

v3.20.4
Stock - Based Compensation
 12 Months Ended
Dec. 31, 2020
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, 2020, there were no 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 operations and comprehensive loss of $1.8 million and $2.1 million in 2020 and 2019, respectively. The associated income tax benefit recognized was $0.2 million for 2020 and $0.4 million for 2019, 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.
On February 5, 2020 the Compensation Committee approved stock option grants under the 2011 Plan. Options for a total of 123,500 shares, with an exercise price of $12.995 per share, were granted under the 2011 Plan to certain management employees of the Company. The stock options will vest in 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. The per share weighted-average fair value of this stock option grant was $4.53. The Black-Scholes model for this grant was based on a risk-free interest rate of 1.66 percent, an expected life of 10 years, an expected
volatility of 35.1 percent and a dividend yield of 1.79 percent. Compensation expense totaling $0.6 million will be recorded against earnings over the following 36 months from the date of grant with the offset recorded in Shareholders' Equity.
On June 30, 2020 the Compensation Committee approved stock option grants under the 2011 Plan. Options for a total of 20,000 shares, with an exercise price of $7.33 per share, were granted under the 2011 Plan to certain management employees of the Company. The stock options will vest in 33 percent increments annually on a cumulative basis, beginning one year after the date of grant. The per share weighted-average fair value of this stock option grant was $2.59. The Black-Scholes model for this grant was based on a risk-free interest rate of 0.64 percent, an expected life of 10 years, an expected volatility of 38.7 percent and a dividend yield of 1.89 percent. Compensation expense totaling $0.1 million will be recorded against earnings over the following 36 months from the date of grant with the offset recorded in Shareholders' Equity.
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
December 31, 2018 $ 14.16  59,096  4.8 $ 143,737  155,845 
 Exercised $ 12.61  (3,628) — 
December 31, 2019 $ 14.26  55,468  3.8 $ 18,331  155,845 
Granted February 5, 2020 $ 13.00  123,500  (123,500)
Granted June 30, 2020 $ 7.33  20,000  (20,000)
 Canceled, forfeited, or expired $ 13.14  (19,437) 19,437 
December 31, 2020 $ 12.74  179,531  7.2 $ 9,402  31,782 
Exercisable options $ 13.77  86,531  5.1 $ —   
       
Options expected to vest:       Grant Date Fair Value  
December 31, 2018 $ 15.83  9,969  6.0 $ 6.44   
  Vested $ 15.72  (6,246) $ 6.46 
December 31, 2019 $ 16.01  3,723  5.1 $ 6.11 
Granted February 5, 2020 $ 13.00  123,500  $ 4.53 
Granted June 30, 2020 $ 7.33  20,000  $ 2.59 
Vested $ 13.24  (34,786) $ 4.68 
   Canceled, forfeited, or expired $ 13.14  (19,437) $ 4.62 
December 31, 2020 $ 11.78  93,000  9.2 $ 5.53 
The following table summarizes information about stock options outstanding as of December 31, 2020:
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  1.10 11,713  $ 11.35 
$ 13.70  13,994  $ 13.70  2.10 13,994  $ 13.70 
$ 14.76  8,109  $ 14.76  3.13 8,109  $ 14.76 
$ 16.01  20,715  $ 16.01  4.11 20,715  $ 16.01 
$ 13.00  105,000  $ 13.00  9.10 32,000  $ 13.00 
$ 7.33  20,000  $ 7.33  9.50 —  $ 7.33 
  179,531      86,531   

There were no options exercised by employees and directors in 2020. In 2019, options for 3,628 shares were exercised by employees and directors for an aggregate exercise price of $45,734.
At the 2020 and 2019 respective year ends, options to purchase 86,531 and 51,745 shares, respectively, with weighted average exercise prices of $13.77 and $14.13, respectively, were fully exercisable.
Compensation cost charged against income before taxes for the options was approximately $0.4 million for 2020 and $31,186 for 2019, respectively. As of December 31, 2020, there was $0.2 million 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 2.14 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 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 originally authorized 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. 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. Prior to May 9, 2017, 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. The fair value of the restricted stock awards are determined based on the average of the high and low common stock price on the day prior to 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 February 5, 2020, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 45,418 shares with a market price of $13.00 per share were granted under the Plan. The 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 November 10, 2020, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan in conjunction with the appointment of the Company's Interim President and Chief Executive Officer where 50,000 shares with a market price of $5.65 per share were granted under the Plan. Under the terms of the associated employment agreement, two-thirds of the stock award vests over a one-year period from the effective date of the agreement while one-third of the award vests over an 18-month period from the effective date of the agreement.
A summary of plan activity for the 2005 and 2015 Stock Awards Plans is as follows:
Shares Weighted Average
Grant Date Fair Value
Outstanding 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 December 31, 2019 100,775  $ 13.28 
Granted February 5, 2020 45,418  $ 13.00 
Granted November 10, 2020 50,000  $ 5.65 
Vested (81,233) $ 12.87 
Forfeited (17,535) $ 13.11 
Outstanding December 31, 2020 97,425  $ 11.97 
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 $1.0 million and $1.4 million for 2020 and 2019, respectively. As of December 31, 2020, there was $0.5 million of total unrecognized compensation cost related to unvested restricted 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 2.78 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 average of the high and low common stock price on the day prior to 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 weighted-average grant-date fair value per unit of performance-based restricted stock classified as equity awards granted was $13.00 and $15.72 in 2020 and 2019, respectively. The total fair value of performance-based restricted stock awards vesting was approximately $0.6 million and $0.4 million in 2020 and 2019, respectively.

On November 10, 2020, the Compensation Committee approved stock grants under the Company's 2015 Stock Awards Plan in conjunction with the appointment of the Company's Interim President and Chief Executive Officer where 90,000 shares were granted under the Plan, with 50,000 shares vesting when, during the term of the employment agreement, the thirty-day volume weighted average price of a Company common share equals $8 per share or more, and the remaining 40,000 shares vesting when, during the term of the employment agreement, the thirty-day volume weighted average price of a Company common share equals $11 or more. The grant is contingent upon shareholder approval of an increase in the number of shares of our common stock that may be issued pursuant to the 2015 Stock Awards Plan. Shareholders will vote on this matter at our 2021 Annual Meeting of Shareholders.

A summary of the status of our non-vested performance-based restricted stock awards as of December 31, 2020, and changes during fiscal 2020, were as follows:
Units(1)
Weighted-Average Grant Date Fair Value
Outstanding December 31, 2019 77,986  $ 13.66 
Granted(2)
36,647  $ 13.00 
Vested(3)
(64,711) $ 13.21 
Forfeited/Canceled (20,558) $ 13.73 
Non-vested December 31, 2020 29,364  $ 13.76 
(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, 2020, the maximum number of non-vested shares under the provisions of the agreement was 44,046.
(2) Contingent shares have been excluded from the table above.
(3) Excludes the vesting of an additional 5,074 shares due to performance conditions of the awards exceeding target.
As of December 31, 2020, 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 2.12 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 December 18, 2020 and May 16, 2019, non-employee directors received an aggregate of 43,063 and 15,909 shares, respectively, of restricted stock in lieu of total retainer fees of $345,000 and $304,000, 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.