Annual report pursuant to Section 13 and 15(d)

Stock Options, Stock Grants and New Stock

v3.6.0.2
Stock Options, Stock Grants and New Stock
 12 Months Ended
Dec. 31, 2016
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 December 28, 2013
$
11.95

 
162,736

 
7.5
 
$
582,894

 
181,017

  Granted February 20, 2014
$
14.76

 
13,790

 
 
 
 
 
(13,790
)
  Exercised
$
11.23

 
(17,074
)
 
 
 
$
91,772

 
 

  Expired
$
13.70

 
(2,157
)
 
 
 
 

 
2,157

At January 3, 2015
$
12.25

 
157,295

 
6.9
 
$
852,810

 
169,384

  Granted February 10, 2015
$
16.01

 
32,532

 
 
 
 

 
(32,532
)
  Exercised
$
12.47

 
(666
)
 
 
 
$
1,511

 


  Expired
$
14.08

 
(15,176
)
 
 
 
 

 
15,176

At December 31, 2015
$
12.79

 
173,985

 
6.4
 
$
—

 
152,028

  Exercised
$
—

 
—

 
 
 
$
—

 
 
  Expired
$
16.01

 
(937
)
 
 
 
 
 
937

At December 31, 2016
$
12.77

 
173,048

 
5.4
 
$
—

 
152,965

Exercisable options
$
12.12

 
129,762

 
4.8
 
$
—

 
 

 
 

 
 

 
 
 
 
 
 

Options expected to vest:
 

 
 

 
 
 
Grant Date Fair Value
 
 

At January 3, 2015
$
12.54

 
100,508

 
7.2
 
$
6.76

 
 

  Granted February 10, 2015
$
16.01

 
32,532

 
 
 
$
6.39

 
 

   Vested
$
12.16

 
(35,794
)
 
 
 
$
7.01

 
 

   Forfeited unvested options
$
14.23

 
(11,286
)
 
 
 
 
 
 
At December 31, 2015
$
13.76

 
85,960

 
7.3
 
$
6.57

 
 

  Vested
$
12.71

 
(41,737
)
 
 
 
$
6.91

 
 
  Forfeited unvested options
$
16.01

 
(937
)
 
 
 
 
 
 
At December 31, 2016
$
14.72

 
43,286

 
7.1
 
$
6.24

 
 

The following table summarizes information about stock options outstanding at December 31, 2016: 
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
 
 
$
11.55

 
82,342

 
$
11.55

 
4.06
 
82,342

 
$
11.55

$
11.35

 
25,076

 
$
11.35

 
5.10
 
19,879

 
$
11.35

$
13.70

 
27,801

 
$
13.70

 
6.10
 
17,141

 
$
13.70

$
14.76

 
9,260

 
$
14.76

 
7.14
 
3,704

 
$
14.76

$
16.01

 
28,569

 
$
16.01

 
8.11
 
6,696

 
$
16.01

 

 
173,048

 
 

 
 
 
129,762

 
 


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 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. 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 20, 2014, the Company granted options to purchase 13,790 shares of its common stock at an exercise price of $14.76 per share to participants in the 2011 Plan. The fair value of this stock option grant was $6.70. The Black-Scholes model for this grant was based on a risk-free interest rate of two percent, an expected life of seven years, an expected volatility of 0.52 and a dividend yield of 1.80 percent.
On February 10, 2015, the Company granted options to purchase 32,532 shares of its commons stock at an exercise price of $16.01 per share to participants in the 2011 Plan. The per share weighted-average fair value of this stock option grant was $6.39. The Black-Scholes model for this grant was based on a risk-free interest rate of two percent, an expected life of seven years, an expected volatility of 0.46 and a dividend yield of two percent.
No options were exercised by employees or directors in 2016. In 2015 and 2014, options for 666 and 17,074 shares were exercised by employees and directors for an aggregate exercise price of $8,000 and $192,000, respectively. The proceeds were generated from cash received of $8,000 in 2015 and from cash received of $42,000 and repurchase of 9,094 shares from employees and directors totaling $150,000 in 2014. At the 2016, 2015 and 2014 respective year ends, options to purchase 129,762, 88,025 and 56,787 shares with weighted average exercise prices of $12.12, $11.85 and $11.73, respectively, were fully exercisable. Compensation cost charged against income before taxes for the options was approximately $135,000 for 2016, $278,000 for 2015 and $261,000 for 2014. As of December 31, 2016, there was $173,000 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 2.50 years.
The Compensation & Long-Term Incentive Committee ("Compensation 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 grants will vest in 20 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. On October 16, 2014, 31,080 shares, with a market price of $15.69 per share, were granted under the Plan to the chief executive officer of the Company. On November 21, 2014, as a result of the acquisition of Specialty, 23,665 shares, at a market price of $15.85 per share, were granted under the Plan to certain management employees of Specialty. On January 5, 2015, 3,000 shares, with a market price of $17.95 per share, were granted under the Plan to external consultants of the Company. The Company's 2005 Stock Awards Plan expired on February 3, 2015 at which time no further grants could be awarded. There are outstanding awards under this plan that will vest over the next three years.
The 2015 Stock Awards Plan was approved by the Compensation Committee of the Board of Directors of the Company and authorizes the issuance of up to 250,000 shares which can be awarded for a period of ten years from the effective date of the plan. 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 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 19, 2016, the Compensation Committee of the Company's Board of Directors approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 50,062 shares with a market price of $7.51 per share were granted under the Plan. On May 5, 2016, the Compensation Committee of the Company's Board of Directors approved stock grants under the Company's 2015 Stock Awards Plan to certain management employees of the Company where 42,348 shares with a market price of $8.05 per share were granted under the Plan.
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 28, 2013
19,252

 
$
11.15

Granted October 16, 2014
31,080

 
$
15.69

Granted November 21, 2014
23,665

 
$
15.85

Vested
(7,434
)
 
$
10.60

Forfeited
(160
)
 
$
13.34

Outstanding at January 3, 2015
66,403

 
$
15.00

Granted January 5, 2015
3,000

 
$
17.95

Vested
(17,903
)
 
$
13.86

Forfeited
(60
)
 
$
13.34

Outstanding at December 31, 2015
51,440

 
$
15.57

Granted February 19, 2016
50,062

 
$
7.51

Granted May 5, 2016
42,348

 
$
8.05

Vested
(21,133
)
 
$
13.12

Forfeited
(1,260
)
 
$
17.73

Outstanding at December 31, 2016
121,457

 
$
10.03


Compensation expense on the grants issued is charged against earnings equally before forfeitures, if any, over a period of 60 months from the date of the grants, with the offset recorded in Shareholders' Equity. Compensation cost charged against income for the awards was approximately $324,000, $207,000 net of income taxes, or $0.02 per share for 2016, $243,000, $155,000 net of income taxes, or $0.02 per share for 2015 and $103,000, $66,000 net of income taxes, or $0.01 per share, for 2014. As of December 31, 2016, there was $1,082,000 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 3.58 years.
Each year, the Company allows each non-employee director to elect to receive up to 100 percent 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 for those individuals that are appointed mid-term. On May 5, 2016, May 12, 2015 and April 24, 2014, non-employee directors received an aggregate of 40,991, 8,216 and 7,088 shares, respectively, of restricted stock in lieu of total retainer fees of $330,000, $119,000 and $111,000, 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.