Annual report pursuant to Section 13 and 15(d)

Stock Options, Stock Grants and New Stock Issues

v2.4.0.6
Stock Options, Stock Grants and New Stock Issues
 12 Months Ended
Dec. 31, 2011
Stock Options, Stock Grants and New Stock Issues [Abstract]  
Stock Options, Stock Grants and New Stock Issues
Note 7 Stock Options, Stock Grants and New Stock Issues
 
A summary of activity in the Company’s stock option plans is as follows:
 
               
Weighted
              
   
Weighted
          
Average
              
   
Average
          
Contractual
    
Intrinsic
        
   
Exercise
    
Options
    
Term
    
Value of
    
Options
  
   
Price
    
Outstanding
    
(in years)
    
Options
    
Available
  
At January 3, 2009
   $ 8.48       128,243       3.7     $ 4,865       -  
  Cancelled / Expired
   $ 7.67       (45,250 )                        
At January 2, 2010
   $ 8.92       82,993       4.5     $ 76,923       -  
  Exercised
   $ 4.97       (9,900 )                        
  Cancelled / Expired
   $ 9.96       (29,093 )                        
At January 1, 2011
   $ 9.13       44,000       3.6     $ 131,670       -  
  2011 option plan
                                     350,000  
  Granted
   $ 11.55       100,000                       (100,000 )
  Exercised
   $ 9.15       (19,200 )                        
  Expired
   $ 9.96       (4,000 )                        
At December 31, 2011
   $ 11.28       120,800       8.0       6,448       250,000  
Exercisable options
   $ 9.96       20,800       3.1       6,448          
                                         
                           
Grant Date
          
Options expected to vest:
                          
Fair Value
          
  At January 2, 2010
   $ 9.96       15,454       5.1     $ 6.77          
     Vested
   $ 9.96       (15,454 )                        
  At January 1, 2011
   $ -       -             $ -          
     Granted
   $ 11.55       100,000       9.1       7.93          
     Vested
   $ -       -             $ -          
  At December 31, 2011
   $ 11.55       100,000             $ -          
 
The following table summarizes information about stock options outstanding at December 31, 2011:
 
     
Outstanding Stock Options
    
Exercisable Stock Options
  
           
Weighted Average
          
Weighted
  
                 
Remaining
          
Average
  
Range of
        
Exercise
    
Contractual
          
Exercise
  
Exercise Prices
  
Shares
    
Price
    
Life in Years
    
Shares
    
Price
  
$ 9.96       20,800     $ 9.96       3.09       20,800     $ 9.96  
$ 11.55       100,000     $ 11.55       9.07       -       -  
          120,800                       20,800          
 
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. 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, which may be exercised beginning one year after the date of grant at a rate of 20 percent annually on a cumulative basis, and unexercised options expire ten years from the grant date. The per
share weighted-average fair value of the stock options granted during 2011 was $7.93.  The fair value of the option grant was estimated using the Black-Scholes option-pricing model based on a risk-free interest rate of 3.34 percent, an expected life of ten years, an expected volatility of 0.49 and a dividend yield of 2.10 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. The 1998 Plan is an incentive stock option plan, therefore there are no income tax consequences to the Company when an option is granted or exercised. No options were exercised in 2009. In 2011 and 2010, options for 19,200 and 9,900 shares were exercised by employees and directors for an aggregate exercise price of $176,000 and $49,000 respectively. The proceeds were generated from cash received of $162,000 and from the repurchase of 1,045 shares from employees and directors totaling $14,000 in 2011 and from cash received of $39,000 and from the repurchase of 1,016 shares from employees and directors totaling $10,000 in 2010. At the 2011, 2010 and 2009 respective year ends, options to purchase 20,800, 44,000 and 67,539 shares with weighted average exercise prices of $9.96, $9.13 and $8.69, respectively, were fully exercisable. Compensation cost charged against income before taxes for the options was approximately $111,000 for 2011, $7,000 for 2010 and $76,000 for 2009. As of December 31, 2011, there was $682,000 of unrecognized compensation cost related to unvested stock options granted under the Company's stock option plans.
 
The Company has a Stock Awards Plan in effect at December 31, 2011. A summary of plan activity for 2009, 2010 and 2011 is as follows:
 
         
Weighted Average
  
   
Shares
    
Grant Date Fair Value
  
             
Outstanding at January 3, 2009
     25,244     $ 21.62  
    Granted February 12, 2009
     5,500       5.22  
    Vested
     (6,382 )     21.97  
    Forfeited or expired
     (1,228 )     21.76  
Outstanding at January 2, 2010
     23,134       17.62  
    Granted February 24, 2010
     51,500       7.88  
    Vested
     (7,059 )     19.30  
    Forfeited or expired
     (19,235 )     8.89  
Outstanding at January 1, 2011
     48,340       10.47  
    Granted January 24, 2011
     13,420       11.55  
    Granted February 09, 2011
     13,300       13.34  
    Vested
     (12,290 )     12.81  
    Forfeited or expired
     (19,198 )     9.62  
Outstanding at December 31, 2011
     43,572       11.39  
 

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. 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 Plan. An employee is not entitled to any voting rights with respect to any shares not yet vested, and the shares are not transferable. Compensation expense totaling $332,000, $406,000 and $29,000 on the grants issued in 2011, 2010 and 2009, respectively, is being charged against earnings equally net of 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 $165,000, $105,000 net of income taxes, or $0.02 per share for 2011, $174,000, $110,000 net of income taxes, or $0.02 per share for 2010 and $134,000, $85,000 net of income taxes, or $0.01 per share, for 2009. As of December 31, 2011, there was $372,000 of total unrecognized compensation cost related to unvested stock grants under the 2005 Stock Awards Plan.
 
On May 4, 2011, the Company issued to each of its non-employee directors 998 shares of its common stock from shares held in Treasury (an aggregate of 4,990 shares). Additionally, on August 11, 2011, the Company issued to each of two newly elected non-employee directors 1,124 shares of its common stock from shares held in Treasury.  The Company issued 1,531 shares and 2,532 shares to non-employee directors in 2010 and 2009, respectively. Such shares were issued to the directors in lieu of $15,000 of their annual cash retainer fees.  During 2011, two non-employee directors resigned/retired from the Board of Directors resulting in the forfeiture of 1,248 shares.