Annual report pursuant to Section 13 and 15(d)

Stock Options, Stock Grants and New Stock

v2.4.0.8
Stock Options, Stock Grants and New Stock
 12 Months Ended
Dec. 28, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Options, Stock Grants and New Stock Issues
Stock Options, Stock Grants and New Stock Issues
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 January 1, 2011
$
9.13

 
44,000

 
3.6
 
$
131,670

 
—

2011 option plan
 

 
 

 
 
 
 

 
350,000

Granted January 24, 2011
$
11.55

 
100,000

 
 
 
 
 
(100,000
)
Exercised
$
9.15

 
(19,200
)
 
 
 
 

 
 

Canceled / Expired
$
9.96

 
(4,000
)
 
 
 
 

 
—

At December 31, 2011
$
11.28

 
120,800

 
8.0
 
$
6,448

 
250,000

Granted February 9, 2012
$
11.35

 
36,740

 
 
 
 

 
(36,740
)
Granted August 21, 2012
$
12.73

 
75,000

 
 
 
 
 
(75,000
)
Exercised
$
10.50

 
(11,800
)
 
 
 
 

 


Canceled / Expired
$
—

 
—

 
 
 
 

 
—

At December 29, 2012
$
11.82

 
220,740

 
8.4
 
$
367,937

 
138,260

Granted February 7, 2013
$
13.70

 
40,594

 
 
 
 
 
(40,594
)
Exercised
$
10.69

 
(15,247
)
 
 
 
 
 
 
Canceled / Expired
$
12.70

 
(83,351
)
 
 
 
 
 
83,351

At December 28, 2013
$
11.95

 
162,736

 
7.5
 
582,894

 
181,017

Exercisable options
$
11.26

 
40,591

 
6.8
 
$
173,518

 
 

 
 

 
 

 
 
 
 
 
 

Options expected to vest:
 

 
 

 
 
 
Grant Date Fair Value
 
 

At December 31, 2011
$
11.55

 
100,000

 
9.1
 
$
7.93

 
 

Granted February 9, 2012
$
11.35

 
36,740

 
 
 
$
5.03

 
 

Granted August 21, 2012
$
12.73

 
75,000

 
 
 
$
5.44

 
 
Vested
$
11.55

 
(20,000
)
 
 
 
 
 
 

At December 29, 2012
$
11.97

 
191,740

 
8.9
 
$
6.40

 
 

Granted February 7, 2013
$
13.70

 
40,594

 
 
 
$
6.30

 
 
Vested
$
11.49

 
(27,347
)
 
 
 
 
 
 
Forfeited unvested options
$
12.71

 
(82,842
)
 
 
 
 
 
 
At December 28, 2013
$
12.18

 
122,145

 
7.8
 
$
7.19

 
 

The following table summarizes information about stock options outstanding at December 28, 2013: 
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
 
 
$
9.96

 
5,000

 
$
9.96

 
1.09
 
5,000

 
$
9.96

$
11.55

 
91,000

 
$
11.55

 
7.07
 
16,000

 
$
11.55

$
11.35

 
30,037

 
$
11.35

 
8.12
 
19,591

 
$
11.35

$
13.70

 
36,699

 
$
13.70

 
9.11
 
—

 


 

 
162,736

 
 

 
 
 
40,591

 
 


On January 21, 2011, the Board of Directors of the Company adopted the 2011 Long-Term Incentive Stock Option Plan (the "2011 Plan") which was approved by the shareholders at the April 28, 2011 Annual Meeting. The 2011 Plan authorizes the issuance of incentive options for up to 350,000 shares of the Company's common stock. All shares granted under this plan may be exercised beginning one year after the date of the grant at a rate of 20 percent annually on a cumulative basis and unexercised options expire ten years from the grant date.
The Company granted options to purchase 100,000 shares of its common stock at an exercise price of $11.55 to its CEO on January 24, 2011. The per share weighted-average fair value of the stock options granted during 2011 was $7.93. The Black-Scholes model for this grant was based on a risk-free interest rate of 3.34 percent, an expected life of seven years, an expected volatility of 0.49 and a dividend yield of 2.10 percent.
On February 9, 2012, the Company granted options to purchase 36,740 shares of its common stock at an exercise price of $11.35 to participants in the 2011 Plan and an additional 75,000 options were granted on August 21, 2012 to the President of Palmer in connection with his employment agreement with the Company at an exercise price of $12.73.  The fair value of the option grants were $5.03 and $5.44, respectively. The fair value of the grants were estimated using the Black-Scholes option-pricing model based on a risk-free interest rate of 2.04 percent and 1.80 percent, respectively, an expected volatility of 0.53 and 0.51, respectively, with both grants using an expected life of seven years and a dividend yield of 2.10 percent.
On February 7, 2013, the Company granted options to purchase 40,594 shares of its common stock at an exercise price of $13.70 per share to participants in the 2011 Plan. The stock options will vest in 20 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. Any portion of the grant that has not vested will be forfeited upon termination of employment. The Company may terminate any portion of the grant that has not vested upon an employee's failure to comply with all conditions of the award or the 2011 Plan. 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. The per share weighted-average fair value of this stock option grant was $6.30. The Black-Scholes model for this grant was based on a risk-free interest rate of 2.00 percent, an expected life of seven years, an expected volatility of 0.53 and a dividend yield of 1.80 percent.
Prior to the 2011 Plan, the Company had two stock option plans, neither of which have options available for future issuance after April 30, 2008. Under the 1998 Plan covering officers and key employees, options may be exercised beginning one year after date of grant at a rate of 20 percent annually on a cumulative basis, and unexercised options expire ten years from the grant date. Under the 1994 Non-Employee Directors' Plan, options were exercisable at the date of grant. Shares issued under both stock option plans come from shares held in treasury with the Company.
The 2011 Plan and the 1998 Plan are incentive stock option plans, therefore there are no income tax consequences to the Company when an option is granted or exercised. In 2013, 2012 and 2011, options for 15,247, 11,800 and 19,200 shares were exercised by employees and directors for an aggregate exercise price of $163,000, $124,000 and $176,000, respectively. The proceeds were generated from cash received of $138,000 and repurchase of 1,752 shares from employees and directors totaling $25,000 in 2013, from cash received of $124,000 in 2012 and from cash received of $162,000 and from the repurchase of 1,045 shares from employees and directors totaling $14,000 in 2011. At the 2013, 2012 and 2011 respective year ends, options to purchase 40,591, 29,000 and 20,800 shares with weighted average exercise prices of $11.26, $10.84 and $9.96, respectively, were fully exercisable. Compensation cost charged against income before taxes for the options was approximately $249,000 for 2013, $228,000 for 2012 and $111,000 for 2011. As of December 28, 2013, there was $668,000 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 2.68 years.
The Company has a stock awards plan in effect at December 28, 2013. A summary of plan activity for 2011, 2012 and 2013 is as follows: 
 
Shares
 
Weighted Average
Grant Date Fair Value
Outstanding at January 1, 2011
48,340

 
$
10.47

Granted January 24, 2011
13,420

 
$
11.55

Granted February 9, 2011
13,300

 
$
13.34

Vested
(12,290
)
 
$
12.81

Forfeited
(19,198
)
 
$
9.62

Outstanding at December 31, 2011
43,572

 
$
11.39

Vested
(11,099
)
 
$
12.60

Forfeited
—

 


Outstanding at December 29, 2012
32,473

 
$
10.98

Vested
(8,161
)
 
$
11.06

Forfeited
(5,060
)
 
$
10.20

Outstanding at December 28, 2013
19,252

 
$
11.15


The Compensation & Long-Term Incentive Committee of the Board of Directors of the Company approves stock grants under the Company's 2005 Stock Awards Plan to certain management employees of the Company. 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. 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 2005 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. There were no grants issued in 2013. Compensation expense on the grants issued is being charged against earnings equally before forfeitures, if any, over a period of 60 months from the dates of the grants, with the offset recorded in Shareholders' Equity. Compensation cost charged against income for the awards was approximately $82,000, $52,000 net of income taxes, or $0.01 per share for 2013, $110,000, $70,000 net of income taxes, or $0.01 per share for 2012 and $165,000, $105,000 net of income taxes, or $0.02 per share, for 2011. As of December 28, 2013, there was $143,000 of total unrecognized compensation cost related to unvested stock grants under the 2005 Stock Awards Plan. The weighted average period over which the stock grant compensation cost is expected to be recognized is 1.96 years.
On April 27, 2012, the Company issued to each of its non-employee directors 1,598 shares of its common stock from shares held in treasury with the Company (an aggregate of 7,990 shares) and 7,238 shares shares in 2011. Such shares were issued to the directors in lieu of $20,000 of their annual cash retainer fees for 2012 and $15,000 of their annual cash retainer fees for 2011. During 2011, two non-employee directors resigned/retired from the Board of Directors resulting in the forfeiture of 1,248 shares.
On April 25, 2013, the Company permitted each non-employee director to elect up to 100% of their 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. In 2013, non-employee directors received an aggregate of 9,411 shares of restricted stock in lieu of total retainer fees of $128,000. 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.
On September 30, 2013, the Company closed on an underwritten public offering of 2,000,000 shares of its common stock at a price of $15.75 per share. The underwriters also exercised their option to purchase and close upon an additional 300,000 shares of common stock at a price of $15.75 per share. The Company received net proceeds, after underwriting discounts and estimated expenses, of approximately $34,233,000. The Company intends to use the net proceeds from the offering to invest approximately $3,500,000 in new equipment for the CRI Tolling facility. The Company used $18,061,000 of the stock sale proceeds to pay off the outstanding balance on the line of credit.