Note 9 - Share-based Compensation

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

(9) Share-Based Compensation

We measure and recognize compensation expense for all share-based payments based on the grant-date fair value of those awards. All of our existing stock option awards and unvested stock awards have been determined to be equity-classified awards. We account for forfeitures as they occur. As described in Note 2, we completed a Recapitalization in April 2018 which, among other things, settled all then-existing outstanding class B share-based awards and resulted in the elimination of the class B common stock. As a result, we accelerated vesting of all outstanding class B share-based awards, resulting in accelerated share-based compensation of $331,000 in the year ended December 31, 2018. All outstanding class B share-based awards were then settled for the same stock to cash proportion of the class B common stock described in Note 2, less the exercise price, if any, which approximated the awards’ intrinsic values.

Our 2001 Equity Incentive Plan provided for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of our former class A common stock and 300,000 shares of our former class B common stock. Stock options granted could have been either nonqualified or incentive stock options. Stock options vest over one to five years following the date of grant and option terms are generally five to ten years following the date of grant. Due to the expiration of the 2001 Equity Incentive Plan, at December 31, 2015, there were no shares of stock available for future grants.

Our 2004 Non-Employee Director Stock Plan, as amended (the “2004 Director Plan”), is a nonqualified plan that provides for the granting of options with respect to 3,000,000 shares of our Common Stock and, prior to the Recapitalization, 500,000 shares of our former class B common stock. The 2004 Director Plan provides for grants of nonqualified stock options to each of our directors who we do not employ. Beginning in 2018, on the date of each annual meeting of shareholders, options to purchase shares of Common Stock equal to an aggregate grant date fair value of $100,000 are granted to each non-employee director that is elected or retained as a director at each such meeting. Stock options vest approximately one year following the date of grant and option terms are generally the earlier of ten years following the date of grant, or three years from the termination of the outside director’s service. At December 31, 2020, there were 830,419 shares of Common Stock available for issuance pursuant to future grants under the 2004 Director Plan. We have accounted for grants of 2,169,581 shares of Common Stock under the 2004 Director Plan using the date of grant as the measurement date for financial accounting purposes.

Our 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”), as amended, provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of Common Stock and, prior to the Recapitalization, 300,000 shares of our former class B common stock. Stock options granted may be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally five to ten years following the date of grant. At December 31, 2020, there were 779,800 shares of Common Stock available for issuance pursuant to future grants under the 2006 Equity Incentive Plan. We have accounted for grants of 1,020,200 shares of Common Stock and restricted stock under the 2006 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

During 2020, 2019 and 2018, we granted options to purchase 70,471, 100,615 and 116,276 shares of Common Stock, respectively. Options to purchase shares of common stock are typically granted with exercise prices equal to the fair value of the common stock on the date of grant. We do, in certain limited situations, grant options with exercise prices that exceed the fair value of the common shares on the date of grant. The fair value of stock options granted was estimated using a Black-Scholes valuation model with the following weighted average assumptions:

	2020			2019			2018
	Common Stock			Common Stock			Common Stock
Expected dividend yield at date of grant		1.84	%		2.60	%		2.59	%
Expected stock price volatility		33.62	%		34.01	%		32.47	%
Risk-free interest rate		1.35	%		2.38	%		2.51	%
Expected life of options (in years)		7.39			7.46			7.28

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of our stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years we estimate that options will be outstanding. We consider groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the 2001 and 2006 Equity Incentive Plans and the 2004 Director Plan for the year ended December 31, 2020:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Common Stock
Outstanding at December 31, 2019		1,245,922		$	18.08
Granted		70,471		$	62.23
Exercised		(630,373	)	$	14.20			$	25,912
Forfeited		(85,449	)	$	32.28
Outstanding at December 31, 2020		600,571		$	25.31		5.58	$	11,665
Exercisable at December 31, 2020		270,876		$	18.00		4.14	$	6,811

The following table summarizes information related to stock options for the years ended December 31, 2020, 2019 and 2018:

	2020		2019		2018
	Common Stock		Common Stock		Common Stock
Weighted average grant date fair value of stock options granted	$	18.67	$	11.99	$	10.02
Intrinsic value of stock options exercised (in thousands)	$	25,912	$	8,280	$	10,621
Intrinsic value of stock options vested (in thousands)	$	1,965	$	1,891	$	2,719

As of December 31, 2020, the total unrecognized compensation cost related to non-vested stock option awards was approximately $1.4 million which was expected to be recognized over a weighted average period of 2.96 years.

There was $1.7 million in cash received from stock options exercised for the year ended December 31, 2020 and no cash received from options exercised in 2019 or 2018. We recognized $680,000, $934,000 and $1.1 million of non-cash compensation for the years ended December 31, 2020, 2019, and 2018, respectively, related to options, which is included in direct and selling, general and administrative expenses. The actual tax benefit realized for the tax deduction from stock options exercised was $6.3 million, $2.0 million and $3.8 million for the years ended December 31, 2020, 2019 and 2018, respectively.

During 2019 and 2018, we granted 6,005 and 6,793 non-vested shares of Common Stock, respectively, under the 2006 Equity Incentive Plan. No shares of non-vested Common Stock were granted during the year ended December 31, 2020. As of December 31, 2020, we had 6,005 non-vested shares of Common Stock outstanding under the 2006 Equity Incentive Plan. These shares vest over five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested. The fair value of the awards is calculated as the fair market value of the shares on the date of grant. We recognized $23,000, $290,000 and $428,000 of non-cash compensation for the years ended December 31, 2020, 2019, and 2018, respectively, related to this non-vested stock, which is included in direct and selling, general and administrative expenses. The actual tax benefit realized for the tax deduction from vesting of restricted stock was $235,000 and $168,000 for the years ended December 31, 2020 and 2018, respectively. No restricted stock vested during the year end December 31, 2019.

The following table summarizes information regarding non-vested stock granted to associates under the 2006 Equity Incentive Plans for the year ended December 31, 2020:

	Common Stock Outstanding			Common Stock Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2019		84,176		$	17.23
Granted		--		$	--
Vested		(71,378	)	$	13.59
Forfeited		(6,793	)	$	36.80
Outstanding at December 31, 2020		6,005		$	38.30

As of December 31, 2020, the total unrecognized compensation cost related to non-vested stock awards was approximately $138,000 and is expected to be recognized over a weighted average period of 3.00 years.