Share-Based Compensation

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 7 – Share-Based Compensation

The Company recognized the following share-based compensation expense in SG&A in its Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016:

		2018		2017		2016
Stock options	$	1,053	$	958	$	848
Nonvested restricted stock awards and restricted stock units		2,459		2,935		3,121
Employee stock purchase plan		89		88		87
Non-elective and elective 401(k) matching contribution in stock		—		72		2,124
Director stock ownership plan		123		137		169
Total share-based compensation expense	$	3,724	$	4,190	$	6,349

During the first quarter of 2017, the Company began matching non-elective and elective 401(k) contributions in cash rather than stock. Also, the Company’s estimated tax payable as of December 31, 2016, was sufficient to fully recognize $0.7 million of excess tax benefits related to stock option exercises as cash inflows from financing activities in its Consolidated Statements of Cash Flows.

Stock option activity under all plans is as follows:

			Weighted		Weighted
			Average		Average
			Exercise		Remaining	Aggregate
		Number of	Price		Contractual	Intrinsic
		Options	(per option)		Term (years)	Value
Options outstanding as of January 1, 2018		111,255	$	97.71
	Options granted	35,842		151.75
	Options exercised	(25,025)		83.96
Options outstanding as of December 31, 2018		122,072	$	116.39	5.0	$	7,185
Options expected to vest after December 31, 2018		86,635	$	125.48	5.3	$	4,312
Options exercisable as of December 31, 2018		35,437	$	94.17	4.2	$	2,873

The total intrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was approximately $2.0 million, $3.4 million and $2.9 million, respectively. Intrinsic value is calculated as the difference between the current market price of the underlying security and the strike price of a related option.

A summary of the Company’s outstanding stock options as of December 31, 2018 is as follows:

						Weighted
						Average	Weighted			Weighted
					Number	Remaining	Average		Number	Average
Range of					of Options	Contractual	Exercise Price		of Options	Exercise Price
Exercise Prices					Outstanding	Term (years)	(per option)		Exercisable	(per option)
$	50.01	-	$	60.00	874	1.2		58.26	874		58.26
$	60.01	-	$	70.00	—	—		—	—		—
$	70.01	-	$	80.00	42,272	4.1		72.19	19,791		72.26
$	80.01	-	$	90.00	2,797	3.2		87.30	2,797		87.30
$	90.01	-	$	130.00	—	—		—	—		—
$	130.01	-	$	140.00	40,287	5.2		134.60	11,975		134.60
$	140.01	-	$	150.00	—	—		—	—		—
$	150.01	-	$	160.00	35,842	6.2		151.75	—		—
					122,072	5.0		116.39	35,437		94.17

As of December 31, 2018, unrecognized compensation expense related to options granted in 2018, 2017 and 2016 was $0.8 million, $0.4 million and less than $0.1 million, respectively, to be recognized over a weighted average period of 1.8 years.

The Company granted stock options under its LTIP plan that are subject only to time vesting over a three-year period in the first quarters of 2018, 2017, 2016 and 2015. For the purposes of determining the fair value of stock option awards, the Company uses the Black-Scholes option pricing model and the assumptions set forth in the table below:

	2018		2017		2016		2015
Number of stock options granted	35,842		42,477		67,444		38,698
Dividend yield	1.37	%	1.49	%	1.49	%	1.55	%
Expected volatility	24.73	%	25.52	%	28.39	%	36.32	%
Risk-free interest rate	2.54	%	1.67	%	1.08	%	1.22	%
Expected term (years)	4.0		4.0		4.0		4.0

These awards are being amortized on a straight-line basis over the respective vesting period of each award. The compensation expense recorded on each award during the years ended December 31, 2018, 2017 and 2016, respectively, is as follows:

		2018		2017		2016
2018 Stock option awards	$	310	$	—	$	—
2017 Stock option awards	$	367	$	308	$	—
2016 Stock option awards	$	332	$	332	$	282
2015 Stock option awards	$	44	$	276	$	276

Activity of nonvested restricted stock awards granted under the Company’s LTIP plan is shown below:

		Weighted
		Average Grant
	Number of	Date Fair Value
	Shares	(per share)
Nonvested awards, December 31, 2017	72,164	$	91.03
Granted	16,166	$	152.38
Vested	(34,954)	$	87.08
Forfeited	(591)	$	121.43
Nonvested awards, December 31, 2018	52,785	$	112.09

The fair value of the nonvested stock is based on the trading price of the Company’s common stock on the date of grant. The Company adjusts the grant date fair value for expected forfeitures based on historical experience for similar awards. As of December 31, 2018, unrecognized compensation expense related to these awards was $2.1 million, to be recognized over a weighted average remaining period of 1.7 years.

Activity of nonvested restricted stock units granted under the Company’s LTIP plan is shown below:

		Weighted
		Average Grant
	Number of	Date Fair Value
	Units	(per unit)
Nonvested awards, December 31, 2017	4,277	$	95.53
Granted	1,549	$	153.84
Vested	(1,176)	$	87.30
Nonvested awards, December 31, 2018	4,650	$	117.03

The fair value of the nonvested restricted stock units is based on the trading price of the Company’s common stock on the date of grant. The Company adjusts the grant date fair value for expected forfeitures based on historical experience for similar awards. As of December 31, 2018, unrecognized compensation expense related to these awards was $0.2 million, to be recognized over a weighted average remaining period of 1.8 years.

Employee Stock Purchase Plan

In 2000, the Board adopted an Employee Stock Purchase Plan (“ESPP”) whereby employees may purchase Company stock through a payroll deduction plan. Purchases are made from the plan and credited to each participant’s account at the end of each month (the “Investment Date”). The purchase price of the stock is 85% of the fair market value on the Investment Date. The plan is compensatory, and the 15% discount is expensed on the Investment Date. All employees, including officers, are eligible to participate in this plan. A participant may withdraw all uninvested payment balances credited to a participant’s account at any time. An employee whose stock ownership of the Company exceeds five percent of the outstanding common stock is not eligible to participate in this plan.

2013 Director Stock Ownership Plan

In 2013, the Company adopted the 2013 Director Stock Ownership Plan (the “Plan”), to encourage the Directors to increase their investment in the Company, which was approved at the Company’s May 2013 shareholders’ meeting. The Plan authorizes the issuance of up to 75,000 shares of Quaker common stock in accordance with the terms of the Plan in payment of all or a portion of the annual cash retainer payable to each of the Company’s non-employee directors in 2013 and subsequent years during the term of the Plan. Under the Plan, each director who, on May 1of the applicable calendar year, owns less than 400% of the annual cash retainer for the applicable calendar year, divided by the average of the closing price of a share of Quaker Common Stock as reported by the composite tape of the New York Stock Exchange for the previous calendar year (the “Threshold Amount”), is required to receive 75% of the annual cash retainer in Quaker common stock and 25% of the retainer in cash, unless the director elects to receive a greater percentage of Quaker common stock, up to 100% of the annual cash retainer for the applicable year. Each director who owns more than the Threshold Amount may elect to receive common stock in payment of a percentage (up to 100%) of the annual cash retainer. The annual retainer is $0.1 million and the retainer payment date is June 1.