NOTE G — CAPITAL STOCK

Long-term incentive plan

In June 2012, the shareholders of the Company approved an amendment to the Company’s 2000 Long-Term Incentive Plan (the “Plan”) to increase the shares available for grant by 700,000 shares to 4,200,000 shares. These shares of the Company’s common stock are available for grants to directors, officers, employees, consultants and service providers and affiliates in the form of stock options or other equity-based awards. The Plan authorizes the Board of Directors of the Company, or a duly appointed committee thereof, to issue incentive stock options, non-qualified options and other stock-based awards. Options that have been granted under the Plan expire over a range of five to ten years from the date of grant and vest over a range of up to five years from the date of grant. As of December 31, 2013, there were 643,073 shares available for the grant of awards.

Cash dividends

In March 2011, the Company resumed the declaration of cash dividends on its outstanding shares of common stock.

Dividends declared in 2013 and 2012 are as follows:


Dividend per share	Date declared	Date of record	Payment date
$0.025	March 6, 2012	May 1, 2012	May 15, 2012
$0.025	June 13, 2012	August 1, 2012	August 15, 2012
$0.025	July 31, 2012	November 1, 2012	November 15, 2012
$0.025	November 2, 2012	February 1, 2013	February 15, 2013
$0.03125	March 12, 2013	May 1, 2013	May 15, 2013
$0.03125	June 13, 2013	August 1, 2013	August 15, 2013
$0.03125	August 2, 2013	November 1, 2013	November 15, 2013
$0.0375	October 31, 2013	January 31, 2014	February 14, 2014

On March 11, 2014, the Board of Directors declared a quarterly dividend of $0.0375 per share payable on May 15, 2014 to shareholders of record on May 1, 2014.

Stock repurchase program

On April 30, 2013, Lifetime’s Board of Directors authorized the repurchase of up to $10.0 million of the Company’s common stock. The repurchase authorization permits the Company to effect repurchases from time to time through open market purchases and privately negotiated transactions. During the year ended December 31, 2013, the Company repurchased 245,575 shares for a total cost of $3.2 million and thereafter retired the shares.

Preferred stock

The Company is authorized to issue 100 shares of Series A Preferred Stock and 2,000,000 shares of Series B Preferred Stock, none of which is issued or outstanding at December 31, 2013.

Restricted stock

In 2013, 2012 and 2011, the Company granted an aggregate of 22,459, 23,394 and 21,400 restricted shares, respectively, of the Company’s common stock to its non-employee directors representing payment of a portion of their annual retainer. The total fair value of the restricted shares, based on the number of shares granted and the quoted market prices of the Company’s common stock on the dates of grant was $298,000 in 2013, $270,000 in 2012 and $230,000 in 2011. For all restricted stock grants, the restriction lapses one year from the date of grant and the stock is expensed over the one year period.

Stock options

A summary of the Company’s stock option activity and related information for the three years ended December 31, 2013, is as follows:


	Options			Weighted- average exercise price		Weighted- average remaining contractual life (years)		Aggregate intrinsic value
Options outstanding at December 31, 2010		2,219,200		$	12.46
Grants		391,500			11.20
Exercises		(123,500	)		5.19
Cancellations		(11,450	)		13.29

Options outstanding at December 31, 2011		2,475,750			12.62
Grants		305,000			11.64
Exercises		(199,823	)		5.47
Cancellations		(52,750	)		12.82

Options outstanding at December 31, 2012		2,528,177			13.06
Grants		390,800			12.26
Exercises		(247,827	)		4.91
Cancellations		(68,000	)		16.89
Expirations		(231,500	)		22.46

Options outstanding at December 31, 2013		2,371,650			12.75		6.21	$	10,968,922

Options exercisable at December 31, 2013		1,508,350		$	13.15		5.31	$	7,800,990

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders had all option holders exercised their stock options on December 31, 2013. The intrinsic value is calculated for each in-the-money stock option as the difference between the closing price of the Company’s common stock on December 31, 2013 and the exercise price.

The total intrinsic values of stock options exercised for the years ended December 31, 2013, 2012 and 2011 were $1,997,000, $1,182,000 and $830,400, respectively. The intrinsic value of a stock option that is exercised is calculated at the date of exercise.

The Company recognized stock compensation expense of $2.9 million, $2.8 million and $2.8 million for the years ended December 31, 2013, 2012 and 2011, respectively. The stock compensation expense recognized each year is equal to the grant date fair values of stock options vested during the year. Total unrecognized compensation cost related to unvested stock options at December 31, 2013, before the effect of income taxes, was $3.7 million and is expected to be recognized over a weighted-average period of 2.41 years.

The Company values stock options using the Black-Scholes option valuation model. The Black-Scholes option valuation model, as well as other available models, was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility and risk-free interest rate. Because the Company’s stock options have characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect the fair value estimates of the Company’s stock options. The weighted-average per share grant date fair value of stock options granted during the years ended December 31, 2013, 2012 and 2011 was $6.12, $6.05 and $5.69, respectively.

The fair values for these stock options were estimated at the dates of grant using the following weighted-average assumptions:


	2013			2012			2011
Historical volatility		61	%		61	%		60	%
Expected term (years)		5.6			6.0			5.6
Risk-free interest rate		0.88	%		1.10	%		1.96	%
Expected dividend yield		0.97	%		0.86	%		0.89	%