Annual report pursuant to Section 13 and 15(d)

Stock Based Compensation

v3.10.0.1
Stock Based Compensation
12 Months Ended
Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock Based Compensation

9. STOCK BASED COMPENSATION

The Company established the 2015 Award and Option Plan (the “2015 Plan”) which replaced the expired 2005 Award and Option Plan for the purpose of attracting and retaining the Company’s executive officers and other key employees, such plans being the “Plans”. There were 561,000 shares authorized for issuance under the 2015 Plan. Options granted under the Plans vest ratably over four and eight years, and must be exercised within ten years from the date of grant. The exercise price for qualified incentive stock options must be at least equal to the fair market value of the common shares at the date of grant. As of December 31, 2018, options for 4,500 shares were outstanding under the Plans and options for 290,659 shares of common stock were available for future issuance. The Company may also grant other stock-based awards under the 2015 Plan, including restricted stock and performance-based awards.

The Company also established the 2009 Outside Directors’ Stock Option and Award Plan (the “Non-employee Plan”) which replaced the 1995 Outside Directors’ Stock Option Plan for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors. Prior to 2016, the Non-employee Plan provided for the initial granting of options to purchase 3,500 shares of common stock and for the annual granting of options to purchase 2,000 shares of common stock to each eligible director. Such options vest over a one-year period for initial awards and immediately upon subsequent grants. The issuance of stock options to directors was discontinued in 2016. In addition, each outside director receives non-vested shares annually equal to 80% of the annual fees paid to them. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. During 2018, 4,183 non-vested shares were issued to outside directors. Such non-vested shares vest over a one-year period. The total shares reserved under the Non-employee Plan is 150,000. The exercise price for options granted under the Non-employee Plan is equal to the fair market value at the date of grant. As of December 31, 2018, options for 18,500 common shares and 4,183 of non-vested shares were outstanding under the Non-employee Plans. As of December 31, 2018 options for 63,688 shares of common stock were available for future issuance.

A summary of the Company’s stock option activity and related information for the years ended December 31 follows:

 

 

 

2018

 

 

2017

 

 

2016

 

 

 

Options

 

 

Weighted

average

exercise

price

 

 

Options

 

 

Weighted

average

exercise

price

 

 

Options

 

 

Weighted

average

exercise

price

 

Outstanding at beginning of year:

 

 

94,606

 

 

$

52.24

 

 

 

95,706

 

 

$

52.08

 

 

 

95,706

 

 

$

52.08

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercised

 

 

(71,606

)

 

 

43.68

 

 

 

(1,100

)

 

 

39.00

 

 

 

 

 

 

 

Adjusted / (forfeited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at end of year

 

 

23,000

 

 

$

78.87

 

 

 

94,606

 

 

$

52.24

 

 

 

95,706

 

 

$

52.08

 

Exercisable at end of year

 

 

23,000

 

 

$

78.87

 

 

 

93,106

 

 

$

51.85

 

 

 

92,706

 

 

$

51.31

 

 

A summary of the Company’s stock options outstanding at December 31, 2018 follows:

 

 

 

Outstanding

 

 

Exercisable

 

Exercise Price Range

 

Options

 

 

Weighted

average

exercise

price

 

 

Options

 

 

Weighted

average

exercise

price

 

$49.42 – 69.99

 

 

5,500

 

 

$

56.87

 

 

 

5,500

 

 

$

56.87

 

$70.00 – 91.58

 

 

17,500

 

 

$

85.78

 

 

 

17,500

 

 

$

85.78

 

Total

 

 

23,000

 

 

$

78.87

 

 

 

23,000

 

 

$

78.87

 

Intrinsic value of outstanding stock options at December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

$

324,840

 

Intrinsic value of exercisable stock options at December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

$

324,840

 

 

The intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was $3.5 million and $0.1 million, respectively. There were no options exercised during the year ended December 31, 2016.

Proceeds from stock options exercised during the years ended December 31, 2018 and 2017 totaled $3.1 million and $0.1 million, respectively.

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock at December 31, 2018, or the price on the date of exercise for those exercised during the year. The weighted average remaining contractual life of all outstanding options, which are all exercisable, is 5.5 years.

Non-vested stock

The Company has also issued shares of non-vested stock to employees which vest over one to nine year periods. During the restriction period, the non-vested shares may not be sold, transferred, or otherwise encumbered. The holder of the non-vested shares has all rights of a holder of common shares, including the right to vote and receive dividends. For issuances of non-vested stock during the year ended December 31, 2018, the fair market value of the non-vested stock on the date of grant ranged from $81.86 to $99.71. During 2018, 31,879 shares of non-vested stock were issued to employees and directors with an aggregate fair value of $3.0 million. The Company charges the fair value ratably to expense over the vesting period. The Company uses the average of the high and low price of its common stock on the date the award is granted as the fair value for non-vested stock awards that do not have a market condition.

A summary of the status of unvested shares of stock issued to employees and directors as of and during the years ended December 31 follows:

 

 

 

2018

 

 

2017

 

 

2016

 

 

 

Non-vested

Shares

 

 

Weighted

average

grant date

fair value

 

 

Non-vested

Shares

 

 

Weighted

average

grant date

fair value

 

 

Non-vested

Shares

 

 

Weighted

average

grant date

fair value

 

Unvested at beginning of year:

 

 

170,809

 

 

$

71.75

 

 

 

258,163

 

 

$

58.89

 

 

 

305,520

 

 

$

59.09

 

Granted

 

 

31,879

 

 

 

95.32

 

 

 

51,276

 

 

 

85.17

 

 

 

23,405

 

 

 

89.30

 

Vested

 

 

(67,753

)

 

 

69.27

 

 

 

(96,615

)

 

 

58.95

 

 

 

(70,762

)

 

 

69.82

 

Forfeited

 

 

(38,266

)

 

 

49.00

 

 

 

(42,015

)

 

 

38.53

 

 

 

 

 

 

 

Unvested at end of year

 

 

96,669

 

 

$

90.28

 

 

 

170,809

 

 

$

71.75

 

 

 

258,163

 

 

$

58.89

 

 

Compensation expense of $6.0 million, $7.1 million, and $7.2 million was recognized for the vested portion of non-vested stock grants in 2018, 2017, and 2016, respectively. The fair value of non-vested stock that vested during 2018, 2017, and 2016 was $4.7 million, $5.7 million, and $4.9 million, respectively. The total unrecognized compensation cost related to non-vested stock was $7.2 million at December 31, 2018, and the remaining weighted-average period over which this expense will be recognized was 3.9 years.

Performance-based awards

During 2018, 2017 and 2016, the Company granted performance-based awards that entitle the recipients to earn up to 34,760, 48,762 and 37,082 shares, respectively, if certain performance criteria are achieved over a three-year period. The actual number of shares to be issued will be determined at the end of a three year period. No performance-based shares were issued in 2018, 2017, or 2016. The performance-based awards granted are based upon the Company’s performance over a three-year period depending on the Company’s total shareholder return relative to a group of peer companies. Performance based awards are recognized as compensation expense based on the fair value on the date of grant, the number of shares ultimately expected to vest and the vesting period. For accounting purposes, the performance shares are considered to have a market condition. The effect of the market condition is reflected in the grant date fair value of the award and thus, compensation expense is recognized on this type of award provided that the requisite service is rendered (regardless of whether the market condition is achieved). The Company estimated the fair value of each performance-based award granted under the Plans on the date of grant using a Monte Carlo simulation that uses the assumptions noted in Note 2.

During 2018, compensation expense of $2.1 million (included in the $6.0 million discussed above) was recognized for performance awards granted in 2018 and prior. The total unrecognized compensation cost related to non-vested performance awards was $2.6 million at December 31, 2018 and the weighted-average period over which this expense will be recognized is 2.4 years.

Deferred compensation plan for directors

Under the Deferred Compensation Plan for Directors, non-employee Directors may defer all or part of their Directors’ fees that are otherwise payable in cash. Directors’ fees that are deferred under this plan are credited to each Directors’ account under the plan in the form of Units. The number of Units credited is determined by dividing the amount of Directors’ fees deferred by the closing price of the Company’s Common Stock on the New York Stock Exchange on the day immediately preceding the day upon which Directors’ fees otherwise would be paid by the Company. A Director is credited with additional Units for dividends on the shares of Common Stock represented by Units in such Directors’ Account. A Director may elect to receive the shares in a lump sum on a date specified by the Director or in quarterly or annual installments over a specified period and commencing on a specified date. The Directors may not elect to receive cash in lieu of shares. Under this plan there were a total of 22,520 units outstanding at December 31, 2018. Fees that were earned and credited to Directors’ accounts are recorded as compensation expense and totaled $0.1 million in 2016. No fees were elected to be deferred by any non-employee Directors in 2018 or 2017.