Annual report pursuant to Section 13 and 15(d)

Stock Options, Stock Grants and New Stock

v3.8.0.1
Stock Options, Stock Grants and New Stock
 12 Months Ended
Dec. 31, 2017
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 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

  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

Exercisable options
$
12.45

 
119,861

 
4.2
 
$
156,445

 
 

 
 

 
 

 
 
 
 
 
 

Options expected to vest:
 

 
 

 
 
 
Grant Date Fair Value
 
 

At December 31, 2015
$
13.76

 
85,960

 
7.3
 
$
6.57

 
 

   Vested
$
12.71

 
(41,737
)
 
 
 
$
6.91

 
 

   Forfeited options
$
16.01

 
(937
)
 
 
 
 
 
 
At December 31, 2016
$
14.72

 
43,286

 
7.1
 
$
6.24

 
 

  Vested
$
14.35

 
(17,574
)
 
 
 
$
5.96

 
 
  Forfeited options
$
15.38

 
(62
)
 
 
 
 
 
 
At December 31, 2017
$
14.72

 
25,650

 
6.5
 
$
6.41

 
 

The following table summarizes information about stock options outstanding at December 31, 2017: 
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

 
56,710

 
$
11.55

 
3.06
 
56,710

 
$
11.55

$
11.35

 
25,076

 
$
11.35

 
4.10
 
25,076

 
$
11.35

$
13.70

 
27,801

 
$
13.70

 
5.10
 
22,084

 
$
13.70

$
14.76

 
8,109

 
$
14.76

 
6.14
 
4,865

 
$
14.76

$
16.01

 
27,815

 
$
16.01

 
7.11
 
11,126

 
$
16.01

 

 
145,511

 
 

 
 
 
119,861

 
 


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 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.
In 2017 and 2015, options for 25,632 and 666 shares were exercised by employees and directors for an aggregate exercise price of $296,050 and $8,302, respectively. The proceeds received by the Company were generated from the surrender of 20,243 shares previously owned from employees and directors in 2017 and from cash received of $8,302 in 2015. No options were exercised by employees or directors in 2016. At the 2017, 2016 and 2015 respective year ends, options to purchase 119,861, 129,762 and 88,025 shares with weighted average exercise prices of $12.45, $12.12 and $11.85, respectively, were fully exercisable. Compensation cost charged against income before taxes for the options was approximately $80,966 for 2017, $135,085 for 2016 and $278,341 for 2015. As of December 31, 2017, there was $86,280 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 1.90 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 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. 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. 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 42,193 shares with a market price of $8.05 per share were granted under the Plan.
On February 8, 2017, 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 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 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.
            
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 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
42,193

 
$
8.05

Vested
(21,133
)
 
$
13.12

Forfeited
(1,260
)
 
$
17.73

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


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 for grants prior to May 5, 2016, with the offset recorded in Shareholders' Equity. Compensation expense on grants issued after that date is charged against earnings over 36 months. Compensation cost charged against income for the awards was approximately $557,450, $354,538 net of income taxes, or $0.04 per share for 2017, $324,388, $206,311 net of income taxes, or $0.02 per share for 2016 and $243,354, $154,773 net of income taxes, or $0.02 per share, for 2015. As of December 31, 2017, there was $1,073,914 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 2.12 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 18, 2017, May 5, 2016 and May 12, 2015, non-employee directors received an aggregate of 24,209, 40,991 and 8,216 shares, respectively, of restricted stock in lieu of total retainer fees of $287,500, $330,000 and $118,750, 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.