Note 16.

Stock-based Compensation

The Company applies the provisions of FASB ASC 718, “Compensation – Stock Compensation,” to account for the Company’s share-based compensation. Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized over the employees’ requisite service period. The Company recorded share-based compensation expense of $2,156, $1,989 and $1,958 for the years ended December 31, 2013, 2012 and 2011, respectively, related to fully-vested stock awards, restricted stock awards and performance unit awards as follows. As of December 31, 2013, unrecognized compensation expense for awards the Company expects to vest approximated $3,517. The Company will recognize this expense over the upcoming 3.2 year period through February 2017.

Shares issued as a result of vested stock-based compensation generally will be from previously issued shares which have been reacquired by the Company and held as Treasury shares or authorized but previously unissued common stock.

The excess tax benefit realized for the tax deduction from share-based compensation approximated $203, $199 and $425 for the years ended December 31, 2013, 2012 and 2011, respectively. This excess tax benefit is included in cash flows from financing activities in the Consolidated Statements of Cash Flows.

Stock Option Awards

The Company has two equity compensation plans: The 1998 Long-Term Incentive Plan for Officers and Directors, amended and restated in May 2006, (1998 Plan) and the 2006 Omnibus Incentive Plan, amended and restated in October 2013 (Omnibus Plan).

The 1998 Plan provides for the award of stock options to key employees and directors to purchase up to 900,000 shares of common stock at no less than 100% of fair market value on the date of the grant. The 1998 Plan provides for the granting of “nonqualified options” and “incentive stock options” with a duration of not more than ten years from the date of grant. The 1998 Plan also provides that, unless otherwise set forth in the option agreement, stock options are exercisable in installments of up to 25% annually beginning one year from date of grant. Non-employee directors were automatically awarded fully vested, nonqualified stock options to acquire 5,000 shares of the Company’s common stock on each date the outside directors were elected at an annual shareholders’ meeting to serve as directors. The 1998 Plan was amended in May 2006 to remove the automatic awarding of stock options to outside directors.

The Omnibus Plan allows for the issuance of 900,000 shares of common stock through the granting of stock options or stock awards (including performance units convertible into stock) to key employees and directors at no less than 100% of fair market value on the date of the grant. The Omnibus Plan provides for the granting of “nonqualified options” with a duration of not more than ten years from the date of grant. The Omnibus Plan also provides that, unless otherwise set forth in the option agreement, stock options are exercisable in installments of up to 25% annually beginning one year from the date of grant. No stock options have been granted under the Omnibus Plan and, as such, there was no share-based compensation expense related to stock options recorded in 2013, 2012 or 2011.

Certain information for the three years ended December 31, 2013 relative to employee stock options is summarized as follows:



	2013	2012	2011
Number of shares under the plans:
Outstanding and exercisable at beginning of year	22,500	39,950	80,950
Granted	-	-	-
Canceled	-	-	-
Exercised	(3,750)	(17,450)	(41,000)
Outstanding and exercisable at end of year	18,750	22,500	39,950

Number of shares available for future grant:
Beginning of year	561,655	315,840	391,881
End of year	557,655	561,655	315,840

The total intrinsic value of stock options outstanding and exercisable at December 31, 2013, 2012 and 2011 was $687, $743 and $773, respectively.

At December 31, 2013, stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.64. At December 31, 2012, stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.41 per share. At December 31, 2011, stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $4.23 to $14.77, with a weighted average price of $8.94.

The weighted average remaining contractual life of the stock options outstanding at December 31, 2013, 2012 and 2011 were 1.3, 2.2 and 2.8 years, respectively.

The weighted average exercise price per share of the stock options exercised in 2013, 2012 and 2011 were $9.30, $7.03 and $5.02, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2013, 2012 and 2011 were $124, $457 and $1,112, respectively.

Certain information for the year ended December 31, 2013 relative to stock options at respective exercise price ranges is summarized as follows:



	Options Outstanding and Exercisable
	Number	Weighted Average		Weighted
Range of Exercise Prices	of Shares	Remaining Life		Exercise Price

$7.81 - $8.97	10,000	0.9	$	8.39
$9.29 - $14.77	8,750	1.7		13.20
	18,750	1.3	$	10.64

Fully-Vested Stock Awards

Non-employee directors are automatically awarded 3,500 fully vested shares, or a lesser amount determined by the directors, of the Company’s common stock on each date the non-employee directors are elected at an annual shareholders’ meeting to serve as directors.

The non-employee directors were granted a total of 9,960, 12,000 and 10,500 fully-vested shares for the years ended December 31, 2013, 2012 and 2011, respectively. Compensation expense recorded by the Company related to fully-vested stock awards to non-employee directors was approximately $450, $337 and $370 for the years ended December 31, 2013, 2012 and 2011, respectively.

The weighted average fair value of all the fully-vested stock grants awarded was $45.16, $28.05 and $35.24 per share for 2013, 2012 and 2011, respectively.

Restricted Stock Awards

The Restricted Stock Awards granted under the Omnibus Plan generally have vesting requirements that are determined by the underlying Restricted Stock Agreement. These forfeitable Restricted Stock Awards time-vest after a four year holding period, unless indicated otherwise by the underlying Restricted Stock Agreement.

For the periods ended December 31, 2013, 2012 and 2011, the Company granted approximately 12,973, 42,677 and 46,436 shares, respectively, of restricted stock under the Omnibus Plan. During 2012, the Company also granted approximately 66,000 shares of restricted stock to an employee director. A summary of restricted stock award activity follows:



					Aggregate Grant
			Grant Date		Date Fair Value
Grant Date	Shares		Share Price		(Dollars in Thousands)
March 15, 2011	24,836	$	38.46	$	955
July 21, 2011	16,600		38.44		638
August 29, 2011	5,000		24.50		123
February 1, 2012	66,000		30.15		1,990
March 6, 2012	18,347		27.49		504
May 23, 2012	8,000		28.05		224
December 11, 2012	16,330		41.98		686
February 27, 2013	12,973		42.49		551

These forfeitable Restricted Stock Awards time-vest after a four-year period, unless indicated otherwise by the underlying Restricted Stock Agreement. Certain awards of restricted stock included in the above table provide for partial vesting over a period up to the vesting date listed.

Performance Unit Awards

Annually, under separate three-year long-term incentive plans, pursuant to the Omnibus Plan, the Company grants performance units. Performance units granted during the periods ended December 31, 2013, 2012 and 2011 are as follows:



						Aggregate Grant
Incentive				Grant Date		Date Fair Value
Plan	Grant Date	Units		Share Price		(Dollars in Thousands)
2011 - 2013	March 15, 2011	34,002	$	38.46	$	1,308
2012 - 2014	March 6, 2012	43,042		27.49		1,183
2013 - 2015	February 27, 2013	31,418		42.49		1,335

In addition, on March 15, 2011 the Company awarded, pursuant to the Omnibus Plan, 1,500 special performance units to a former employee director and 1,000 special performance units to an executive officer. Based on the satisfaction of the underlying performance conditions, these special performance units were converted, net of shares withheld for applicable income tax purposes, into 1,436 and 957 shares, respectively, of the Company’s common stock on March 6, 2012. The grant date fair value of these awards was $38.46 and the aggregate fair value was $58 and $38, respectively.

Performance units are subject to forfeiture and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying plan. The aggregate fair value in the above table is based upon achieving 100% of the performance targets as defined in the underlying plan. During 2012, the Company reversed $807 of incentive compensation recognized in prior years under its separate three-year long-term incentive plans caused by the impact of the product warranty charge on Company performance, as it related to the awards’ underlying performance conditions. More information on the product warranty charge can be found in Note 20, Commitments and Contingent Liabilities.

The number of shares awarded under the respective three year long-term incentive plans was determined using an average grant date fair value as follows:



	Average
	Grant date
Incentive Plan	Fair Value	Ten Day Period
2011 - 2013	40.25	February 2011
2012 - 2014	31.80	February 2012
2013 - 2015	43.57	February 2013

Excluding the fully-vested stock awards granted to non-employee directors, the Company recorded compensation expense of $1,706, $1,652 and $1,588, respectively, for the periods ended December 31, 2013, 2012 and 2011 related to restricted stock and performance unit awards.

The Company issued, pursuant to the Omnibus Plan, approximately 34,000 fully-vested shares during 2012 which were earned under the 2009 – 2011 three year long-term incentive plan. This non-cash transaction of $1,130 was reflected as a decrease to Treasury Stock in the Consolidated Balance Sheet at December 31, 2012. During 2011 the Company issued, pursuant to the Omnibus Plan, approximately 20,000 fully-vested shares which were earned under the 2008 – 2010 three year long-term incentive plan. This non-cash transaction of $670 was reflected as a decrease to Treasury Stock in the Consolidated Balance Sheet at December 31, 2011.