Note 9 - Share-based Compensation

12 Months Ended

Dec. 31, 2023

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, 2023, there were 670,932 shares of common stock available for issuance pursuant to future grants under the 2004 Director Plan. We have accounted for grants of 2,329,068 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, 2023, there were 720,088 shares of common stock available for issuance pursuant to future grants under the 2006 Equity Incentive Plan. We have accounted for grants of 1,079,912 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 2023, 2022 and 2021, we granted options to purchase 96,359, 127,227, and 101,091 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:

	2023			2022			2021
Expected dividend yield at date of grant		2.13	%		3.39	%		2.15	%
Expected stock price volatility		35.12	%		35.52	%		34.85	%
Risk-free interest rate		3.61	%		2.33	%		0.91	%
Expected life of options (in years)		6.85			6.29			7.01

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, 2023:

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Common Stock
Outstanding at December 31, 2022		581,286	$	32.86
Granted		96,359	$	40.55
Exercised		87,378	$	20.89
Forfeited		21,099	$	40.52
Outstanding at December 31, 2023		569,168	$	35.72		5.75	$	3,971
Exercisable at December 31, 2023		346,032	$	30.73		4.55	$	3,894

The following table summarizes information related to stock options for the years ended December 31, 2023, 2022 and 2021:

	2023		2022		2021
Weighted average grant date fair value of stock options granted	$	9.16	$	9.43	$	12.55
Intrinsic value of stock options exercised (in thousands)	$	2,037	$	648	$	3,535
Intrinsic value of stock options vested (in thousands)	$	3,894	$	4,369	$	4,805

As of December 31, 2023, the total unrecognized compensation cost related to non-vested stock option awards was approximately $1.2 million which was expected to be recognized over a weighted average period of 2.76 years.

There was $584,000 and $446,000 in cash received from stock options exercised for the years ended December 31, 2023 and 2021, respectively. No cash was received for stock options exercised for the year ended December 31, 2022. We recognized $997,000, $1.1 million, and $607,000 of non-cash compensation for the years ended December 31, 2023, 2022, and 2021, 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 $498,000, $160,000, and $862,000 for the years ended December 31, 2023, 2022, and 2021, respectively.

During 2021 we granted 12,698 non-vested shares of common stock under the 2006 Equity Incentive Plan. No shares of non-vested common stock were granted during the years ended December 31, 2023 or 2022 and 6,640 shares were forfeited during the year ended December 31, 2023. As of December 31, 2023, we had 6,058 non-vested shares of common stock outstanding under the 2006 Equity Incentive Plan. These shares vest 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 a $62,000 benefit, $109,000 expense, and $17,000 expense of non-cash compensation for the years ended December 31, 2023, 2022, and 2021, respectively, related to this non-vested stock, which is included in direct and selling, general and administrative expenses. No restricted stock vested during the years end December 31, 2023, 2022 and 2021.

The following table summarizes information regarding non-vested stock granted to associates under the 2006 Equity Incentive Plans for the year ended December 31, 2023:

	Common Stock Outstanding		Common Stock Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2022		12,698	$	42.92
Granted		—	$	—
Vested		—	$	—
Forfeited		6,640	$	42.92
Outstanding at December 31, 2023		6,058	$	42.92

As of December 31, 2023, the total unrecognized compensation cost related to non-vested stock awards was approximately $104,000 and is expected to be recognized over a weighted average period of 2.00 years.