Note 6 - Share-based Compensation

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

(6) 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. We refer to our restricted stock awards as “non-vested” stock in these consolidated financial statements.

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. The 2004 Director Plan provides for grants of nonqualified stock options to each of our directors who we do not employ. 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 when joining the board and when retained as a director at each annual 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.

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 our 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.

During the nine months ended September 30, 2021 and 2020, we granted options to purchase 101,091 and 70,471 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:

	2021			2020
Expected dividend yield at date of grant		2.15	%		1.84	%
Expected stock price volatility		34.85	%		33.62	%
Risk-free interest rate		0.91	%		1.35	%
Expected life of options (in years)		7.0			7.4

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 2006 Equity Incentive Plans and the 2004 Director Plan for the nine-month period ended September 30, 2021:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2020		600,571		$	25.31		5.58	$	11,665
Granted		101,091		$	44.96
Exercised		(78,284	)	$	13.45			$	2,416
Expired		(84,432	)	$	38.38
Forfeited		(22,837	)	$	9.74
Outstanding at September 30, 2021		516,109		$	29.51		5.93	$	7,697
Exercisable at September 30, 2021		280,668		$	21.83		4.58	$	6,081

As of September 30, 2021, 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 2.31 years.

There was $142,000 and $1.1 million of cash received from stock options exercised for the three-month periods ended September 30, 2021 and 2020, respectively. Cash received from stock options exercised for the nine-month periods ended September 30, 2021 and 2020, were $304,000 and $1.6 million respectively. We recognized $99,000 and $237,000 of non-cash compensation for three months ended September 30, 2021 and 2020, respectively, and $285,000 and $736,000 of non-cash compensation for the nine months ended September 30, 2021 and 2020, respectively, related to options, which is included in direct fixed and selling, general and administrative expenses.

During the nine months ended September 30, 2021, we granted 12,698 non-vested shares of Common Stock under the 2006 Equity Incentive Plan. No shares were granted during the nine months ended September 30, 2020. As of September 30, 2021, we had 12,698 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 $27,000 and $37,000 of non-cash compensation for the three months ended September 30, 2021 and 2020, respectively, and ($10,000) and $12,000 of non-cash compensation for the nine months ended September 30, 2021 and 2020, respectively, related to this non-vested stock, which is included in direct fixed and selling, general and administrative expenses. During the nine months ended September 30, 2021, 6,005 shares were forfeited.

The following table summarizes information regarding non-vested stock granted to associates under the 2006 Equity Incentive Plan for the nine-month period ended September 30, 2021:

	Common Shares Outstanding			Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2020		6,005		$	38.30
Granted		12,698			42.92
Vested		–			–
Forfeited		(6,005	)	$	38.30
Outstanding at September 30, 2021		12,698		$	42.92

As of September 30, 2021, the total unrecognized compensation cost related to non-vested stock awards was approximately $463,000 and is expected to be recognized over a weighted average period of 4.25 years.