Note 12 — Share-Based Compensation
The Company’s 1999, 2004, and 2012 share-based compensation programs are long-term retention programs intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options and restricted stock.
Stock Options
With the exception of non-qualified stock options granted to directors under the 1999, 2004, and 2012 plans, which in some cases may be exercised at any time prior to expiration and in some other cases may be exercised at intervals less than a year following the grant date, incentive stock options granted under the plans may not be exercised in whole or in part within a year following the date of the grant, as these incentive stock options become exercisable in 25% increments pro ratably over the four-year period following the grant date. The options are granted at an exercise price at least equal to the fair value of the common stock at the date of grant and expire ten years from the date of grant. No options were granted under the 1999 plan after January 2, 2004, and the 1999 plan is closed other than for any options still unexercised and outstanding. No options were granted under the 2004 plan after January 26, 2012, and the 2004 plan is closed other than for any options still unexercised and outstanding. The 2012 plan is the only plan from which new share-based compensation grants may be issued. It is the Company’s policy to grant options out of the 1,684,000 shares registered under the 2012 plan, of which no more than 817,476 shares can be granted as restricted stock.
Activity in the Company’s stock option plans is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.
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Weighted- |
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Weighted- |
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Average |
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Average |
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Remaining |
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Aggregate |
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Number of |
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Exercise |
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Contractual |
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Intrinsic |
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Options |
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Shares |
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Price |
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Life (Yrs.) |
|
Value (000’s) |
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Outstanding at January 1, 2012 |
|
370,207 |
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$ |
30.69 |
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|
|
|
Granted |
|
28,224 |
|
31.75 |
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|
|
|
|
Exercised |
|
(36,681 |
) |
24.54 |
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|
|
|
Expired/Forfeited |
|
(6,404 |
) |
31.17 |
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|
|
|
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Outstanding at September 30, 2012 |
|
355,346 |
|
31.40 |
|
4.74 |
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$ |
3,159 |
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Exercisable at September 30, 2012 |
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283,147 |
|
31.25 |
|
3.87 |
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$ |
2,559 |
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Weighted-average fair value of options granted during the year |
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$ |
11.55 |
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The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options’ vesting periods. The following weighted-average assumptions were used in valuing options issued:
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Nine Months Ended |
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September 30, |
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2012 |
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2011 |
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Dividend yield |
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2.10 |
% |
2.20 |
% |
Expected life |
|
6 years |
|
6 years |
|
Expected volatility |
|
46 |
% |
44 |
% |
Risk-free interest rate |
|
1.06 |
% |
2.32 |
% |
As of September 30, 2012, there was $619,000 of total unrecognized compensation cost related to nonvested stock option grants under the plans. The cost is expected to be recognized over a weighted-average period of 1.26 years as of September 30, 2012. The total fair value of shares vested during the nine months ended September 30, 2012 was $402,000.
Restricted Stock
The Company from time-to-time also grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of the shareholders of the Company by providing economic value directly related to increases in the value of the Company’s stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. The Company recognizes expenses, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock grants to employees typically “cliff vest” after four years. On occasion, grants of restricted stock will “cliff vest” over a longer period, such as seven or ten years. Grants to non-employee directors typically vest within a 12-month period.
Nonvested restricted stock for the nine months ended September 30, 2012 is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.
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Weighted- |
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Average |
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Grant-Date |
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Restricted Stock |
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Shares |
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Fair Value |
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Nonvested at January 1, 2012 |
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171,704 |
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$ |
30.32 |
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Granted |
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47,666 |
|
32.27 |
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Vested |
|
(34,187 |
) |
30.30 |
|
Forfeited |
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(4,992 |
) |
32.03 |
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Nonvested at September 30, 2012 |
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180,191 |
|
30.80 |
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As of September 30, 2012, there was $3.9 million of total unrecognized compensation cost related to nonvested restricted stock granted under the plans. This cost is expected to be recognized over a weighted-average period of 3.89 years as of September 30, 2012. The total fair value of shares vested during the nine months ended September 30, 2012 was $1.0 million.
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