Common Stock

Overview

The Company’s common stock has a stated value of $1 per share, with no cumulative voting rights or preemptive rights. Holders of the common stock have the right to elect the Company’s directors and to vote on other matters.

Long-Term Incentive Plan

On May 2, 2007, the Company’s shareholders approved a stock-based long-term incentive plan (the "2007 LTIP") and authorized the issuance of up to one million shares of common stock for the benefit of directors and employees. Under the 2007 LTIP, common stock may be issued through the award or grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, bonus stock, performance stock, cash-based awards and other stock-based awards. The Company may issue new shares, purchase shares on the open market, or issue shares from shares the Company has repurchased to meet the share requirements of the 2007 LTIP. As discussed in Note A, the Company accounts for its stock-based long-term incentive plan under FASB guidance for stock-based compensation.

Stock Options. Stock options have been granted at exercise prices equal to or greater than the market value of the underlying shares at the date of grant. The fair value for these options was estimated at the grant date using the Black-Scholes option pricing model. The options expired ten years from the date of grant unless terminated earlier by the Board of Directors (the “Board”). Stock options have not been granted since 2003.

The 15,000 options outstanding at December 31, 2012 were exercised during 2013 with a weighted average exercise price of $12.78. The Company received $0.2 million in cash and realized a current tax benefit of $0.1 million. The Company has no stock options outstanding as of December 31, 2013.

The intrinsic value of stock options exercised in 2013, 2012 and 2011 were $0.3 million, $0.6 million and $1.0 million, respectively. No options were forfeited, vested or expired during 2013, 2012 and 2011. No compensation cost was recognized in 2013, 2012 and 2011 for stock options.

Restricted Stock. The Company has awarded restricted stock under its long-term incentive plan. Restrictions from resale generally lapse and awards vest over periods of one to three years. The market value of the unvested restricted stock at the date of grant is amortized to expense over the restriction period net of anticipated forfeitures.

The expense, deferred tax benefit, and current tax expense recognized related to restricted stock awards in 2013, 2012 and 2011 is presented below (in thousands):



	2013		2012		2011

Expense (a)	$	2,458	$	1,508	$	2,258
Deferred tax benefit	860		528		790
Current tax benefit recognized	109		94		518

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(a) Any capitalized costs related to these expenses is less than $0.1 million for all years.

The aggregate intrinsic value and fair value at grant date of restricted stock which vested in 2013, 2012 and 2011 is presented below (in thousands):



	2013		2012		2011

Aggregated intrinsic value	$	2,077	$	2,242	$	3,279
Fair value at grant date	1,765		1,973		1,799

The unvested restricted stock transactions for 2013 are presented below:



	Total Shares		Weighted Average Grant Date Fair Value		Unrecognized Compensation Expense (a)		Aggregate Intrinsic Value
					(In thousands)		(In thousands)
Restricted shares outstanding at December 31, 2012	84,446		$	31.26
Restricted stock awards	96,279		35.48
Vested	(58,642	)	30.10
Forfeitures	(1,549	)	31.28
Restricted shares outstanding at December 31, 2013	120,534		35.19		$	1,976	$	4,232

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(a) The unrecognized compensation expense is expected to be recognized over the weighted average remaining contractual term of the outstanding restricted stock of approximately one year.

The weighted average fair value per share at grant date for restricted stock awarded during 2013, 2012 and 2011 were:



	2013		2012		2011
Weighted average fair value per share	$	35.48	$	32.45	$	28.98

The holder of a restricted stock award has rights as a shareholder of the Company, including the right to vote and receive cash dividends on restricted stock.

Performance Shares. The Company has granted performance share awards to certain officers under the Company’s existing long-term incentive plan, which provides for issuance of Company stock based on the achievement of certain performance criteria over a three-year period. The payout varies between 0% to 200% of performance share awards.

Detail of performance shares vested follows:



Date Vested	Payout Ratio		Performance Shares Awarded	Compensation Costs Expensed		Period Compensation Costs Expensed	Aggregated Intrinsic Value
				(In thousands)			(In thousands)
February 18, 2014	0	%	0	$	954	2011-2013	$	—
January 29, 2013	150.0	%	64,275	849		2010-2012	2,176
January 1, 2012	175.0	%	174,038	1,193		2009-2011	6,029
September 3, 2011	112.5	%	3,825	40		2008-2011	129
July 9, 2011	112.5	%	2,250	23		2008-2011	75

In 2014, 2015 and 2016, subject to meeting certain performance criteria, additional performance shares could be awarded. In accordance with FASB guidance related to stock-based compensation, the Company recognizes the related compensation expense by ratably amortizing the grant date fair value of awards over the requisite service period and the compensation expense is only adjusted for forfeitures. The actual number of shares to be issued can range from zero to 181,894 shares.

The fair value at the date of each separate grant of performance shares was based upon a Monte Carlo simulation. The Monte Carlo simulation reflected the structure of the performance plan which calculates the share payout on performance of the Company relative to a defined peer group over a three-year performance period based upon total return to shareholders. The fair value was determined as the average payout of one million simulation paths discounted to the grant date using a risk-free interest rate based upon the constant maturity treasury rate yield curve at the grant date. The expected volatility of total return to shareholders is calculated in accordance with the plan’s term structure and includes the volatilities of all members of the defined peer group.

The outstanding performance share awards at the 100% performance level is summarized below:



	Number Outstanding		Weighted Average Grant Date Fair Value		Unrecognized Compensation Expense (a)		Aggregate Intrinsic Value
					(In thousands)		(In thousands)
Performance shares outstanding at December 31, 2012	128,033		$	26.48
Performance share awards	39,814		34.69
Performance shares vested	(42,850	)	19.82
Performance shares outstanding at December 31, 2013	124,997		31.38		$	1,452	$	4,389

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(a) The unrecognized compensation expense is expected to be recognized over the weighted average remaining contractual term of the awards of approximately one year.

A summary of information related to performance shares for 2013, 2012 and 2011 is presented below:



	2013		2012		2011
Weighted average per share grant date fair value per share of performance shares awarded	$	34.69	$	32.74	$	23.45
Fair value of performance shares vested (in thousands)	849		1,193		628
Intrinsic value of performance shares vested (in thousands) (a)	1,450		3,464		1,032
Compensation expense (in thousands) (b)	1,188		170		1,573
Deferred tax benefit related to compensation expense (in thousands)	416		59		551

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(a) Based on a 100% performance level.

(b) Includes adjustments for forfeiture of performance share awards by certain executives.

Repurchase Program

No shares of common stock were repurchased during the twelve months ended December 31, 2013. Detail regarding the Company's stock repurchase program are presented below:

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(a)	Represents repurchased shares and cost since inception of the stock repurchase program in 1999.


(b)	Shares repurchased does not include 86,735 treasury shares related to employee compensation arrangements outside of the Company's repurchase programs.

The Company may in the future make purchases of its common stock pursuant to its authorized program in open market transactions at prevailing prices and may engage in private transactions where appropriate. The repurchased shares will be available for issuance under employee benefit and stock incentive plans, or may be retired.

Dividend Policy

On December 30, 2013, the Company paid $10.7 million in quarterly cash dividends to shareholders. The Company paid a total of $42.0 million, $38.9 million and $27.2 million in cash dividends during the twelve months ended December 31, 2013, 2012 and 2011, respectively. On January 23, 2014, the Board of Directors declared a quarterly cash dividend of $0.265 per share payable on March 31, 2014 to shareholders of record on March 14, 2014.

Basic and Diluted Earnings Per Share

FASB guidance requires the Company to include share-based compensation awards that qualify as participating securities in both basic and diluted earnings per share to the extent they are dilutive. A share-based compensation award is considered a participating security if it receives non-forfeitable dividends or may participate in undistributed earnings with common stock. The Company awards unvested restricted stock which qualifies as a participating security. The basic and diluted earnings per share are presented below:



	Years Ended December 31,
	2013			2012			2011
Weighted average number of common shares outstanding:
Basic number of common shares outstanding	40,114,594			39,974,022			41,349,883
Dilutive effect of unvested performance awards	12,053			66,756			206,658
Dilutive effect of stock options	—			14,803			30,518
Diluted number of common shares outstanding	40,126,647			40,055,581			41,587,059
Basic net income per common share:
Net income	$	88,583		$	90,846		$	103,539
Income allocated to participating restricted stock	(254		)	(256		)	(471		)
Net income available to common shareholders	$	88,329		$	90,590		$	103,068
Diluted net income per common share:
Net income	$	88,583		$	90,846		$	103,539
Income reallocated to participating restricted stock	(254		)	(256		)	(469		)
Net income available to common shareholders	$	88,329		$	90,590		$	103,070
Basic net income per common share:
Distributed earnings	$	1.045		$	0.97		$	0.66
Undistributed earnings	1.155			1.30			1.83
Basic net income per common share	$	2.200		$	2.27		$	2.49
Diluted net income per common share:
Distributed earnings	$	1.045		$	0.97		$	0.66
Undistributed earnings	1.155			1.29			1.82
Diluted net income per common share	$	2.200		$	2.26		$	2.48

The amount of restricted stock awards and performance shares at 100% performance level excluded from the calculation of the diluted number of common shares outstanding because their effect was antidilutive is presented below:



	Year Ended December 31,
	2013	2012	2011
Restricted stock awards	51,189	45,178	81,653
Performance shares (a)	115,044	57,625	—

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(a)	Certain performance shares were excluded from the computation of diluted earnings per share as no payouts would have been required based upon performance at the end of each corresponding period.

Since 1999
(a)

Authorized
Shares

Shares repurchased (b)

Cost, including commission (in thousands)

Total remaining shares available for repurchase at December 31, 2013