Note 9 - Share-based Compensation

12 Months Ended

Dec. 31, 2021

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.

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. 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, 2021, there were 780,330 shares of Common Stock available for issuance pursuant to future grants under the 2004 Director Plan. We have accounted for grants of 2,219,670 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. 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, 2021, there were 806,537 shares of Common Stock available for issuance pursuant to future grants under the 2006 Equity Incentive Plan. We have accounted for grants of 993,463 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 2021, 2020 and 2019, we granted options to purchase 101,091, 70,471, and 100,615 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			2019
Expected dividend yield at date of grant		2.15	%		1.84	%		2.60	%
Expected stock price volatility		34.85	%		33.62	%		34.01	%
Risk-free interest rate		0.91	%		1.35	%		2.38	%
Expected life of options (in years)		7.01			7.39			7.46

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 2006 Equity Incentive Plan and the 2004 Director Plan for the year ended December 31, 2021:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Common Stock
Outstanding at December 31, 2020		600,571		$	25.31
Granted		101,091		$	44.96
Exercised		(116,753	)	$	13.14			$	3,535
Expired		(22,837	)		9.74
Forfeited		(84,432	)	$	38.38
Outstanding at December 31, 2021		477,640		$	30.88		5.97	$	6,337
Exercisable at December 31, 2021		249,488		$	23.99		4.82	$	4,805

The following table summarizes information related to stock options for the years ended December 31, 2021, 2020 and 2019:

	2021		2020		2019
Weighted average grant date fair value of stock options granted	$	12.55	$	18.67	$	11.99
Intrinsic value of stock options exercised (in thousands)	$	3,535	$	25,912	$	8,280
Intrinsic value of stock options vested (in thousands)	$	4,805	$	1,965	$	1,891

As of December 31, 2021, the total unrecognized compensation cost related to non-vested stock option awards was approximately $1.1 million which was expected to be recognized over a weighted average period of 2.37 years.

There was $446,000 and $1.7 million in cash received from stock options exercised for the years ended December 31, 2021 and 2020, respectively and no cash received from options exercised in 2019. We recognized $607,000, $680,000, and $934,000 of non-cash compensation for the years ended December 31, 2021, 2020, and 2019, 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 $862,000, $6.3 million, and $1.9 million for the years ended December 31, 2021, 2020, and 2019, respectively.

During 2021 and 2019 we granted 12,698 and 6,005 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, 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 $17,000, $23,000, and $290,000 of non-cash compensation for the years ended December 31, 2021, 2020, and 2019, 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 for the year ended December 31, 2020. No restricted stock vested during the year end December 31, 2021 and 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, 2021:

	Common Stock Outstanding			Common Stock 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 December 31, 2021		12,698		$	42.92

As of December 31, 2021, the total unrecognized compensation cost related to non-vested stock awards was approximately $436,000 and is expected to be recognized over a weighted average period of 4.00 years.