NOTE 18—STOCK-BASED COMPENSATION

2008 Equity Incentive Plan

Our 2008 Equity Incentive Plan, as amended (the “Plan”), authorizes us to issue up to 3.5 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees, non-employee directors and consultants. At December 31, 2017, there were 1.7 million shares available for future grants under this Plan. No more than 600,000 shares may be used under the Plan as “full value” awards, which include restricted stock and performance stock units. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options.

During the first quarter of 2015, the company implemented a long-term incentive program for the benefit of certain members of company management. The program was designed to strengthen employee retention and to provide a more structured incentive program to stimulate improvement in future company results. Per the terms of the program, participants were granted, in 2015, 2016 and 2017, time value restricted stock units (“RSUs”), vesting ratably over a three-year time period, and performance restricted stock units (“PSUs”), with a three-year cliff vesting. Upon vesting, each restricted stock award is exchangeable for one share of the company’s common stock, with accrued dividends. The PSUs are categorized further into three individual categories whose vesting is contingent upon the achievement of certain targets as follows:

•

40 percent of the PSUs vest upon certain Return on Invested Capital targets for 2017, 2016 and 2015 units

•

40 percent of the PSUs vest upon certain Cumulative EPS targets for 2017 and 2016 units

•

40 percent of the PSUs vest upon certain EBITDA margin targets for 2015 units

•

20 percent of the PSUs vest upon certain market based Shareholder Return targets for 2017, 2016 and 2015 units

Other Awards

During 2014, we granted 132,455 restricted shares, including 50,000 shares vesting April 30, 2017, and 82,455 shares vesting on December 31, 2016 under an Executive Employment Agreement (the “Employment Agreement”). The fair value of each of these restricted shares was $19.44. These grants were made outside of the Plan as inducement grants in connection with the appointment of our current CEO and company President. Beginning in 2015, the CEO will be granted restricted stock unit awards each year under Superior’s 2008 Equity Incentive Plan, or any successor equity plan. Under the CEO’s Employment Agreement, time-vested restricted stock units will be granted each year with cliff vesting at the third fiscal year end following grant. The CEO will also be granted performance-vested restricted stock units each year, vesting based on company performance goals established by the independent compensation committee during the three fiscal years following the grant.

Options

Options are granted at not less than fair market value on the date of grant and expire no later than ten years after the date of grant. Options and restricted shares granted under this Plan generally require no less than a three-year ratable vesting period. Stock option activity in 2017 and 2016 are summarized in the following table:


	Outstanding			Weighted Average Exercise Price		Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at December 31, 2015		376,033		$	18.89		3.6	$	452,128
Granted		—		$	—
Exercised		(86,908	)	$	18.77
Canceled		(24,750	)	$	21.51
Expired		(32,750	)	$	17.56

Balance at December 31, 2016		231,625		$	18.88		3.1	$	1,845,263
Granted		—			—
Exercised		(2,000	)	$	16.76
Canceled		(6,000	)	$	21.09
Expired		(78,000	)	$	18.62

Balance at December 31, 2017		145,625		$	18.96

Options vested or expected to vest at December 31, 2017		145,625		$	18.96		2.0	$	—

Exercisable at December 31, 2017		145,625

We received cash proceeds of less than $0.1 million, $1.6 million and $7.3 million from stock options exercised in 2017, 2016 and 2015, respectively. The total intrinsic value of options exercised was less than $0.1 million, $0.7 million and $0.8 million, for the years ended December 31, 2017, 2016 and 2015, respectively. Upon the exercise of stock options and the issuance of restricted stock awards, it is our policy to only issue shares from authorized common stock.

The aggregate intrinsic value represents the total pretax difference between the closing stock price on the last trading day of the reporting period and the option exercise price, multiplied by the number of in-the-money options. This is the amount that would have been received by the option holders had they exercised and sold their options on that day. This amount varies based on changes in the fair market value of our common stock. The closing price of our common stock on the last trading day of our fiscal year was $14.85.

Stock options outstanding at December 31, 2017 and 2016 are summarized in the following tables:


Range of Exercise Prices					Options Outstanding at 12/31/2017		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Options Exercisable at 12/31/2017		Weighted Average Exercise Price
$	15.17	—	$	15.75		29,375		1.6	$	15.17		29,375	$	15.17
$	15.76	—	$	16.54		24,250		2.4	$	16.32		24,250	$	16.32
$	16.55	—	$	19.65		22,000		4.5	$	17.07		22,000	$	17.07
$	19.66	—	$	22.21		49,000		0.4	$	21.84		49,000	$	21.84
$	22.22	—	$	22.57		21,000		3.4	$	22.57		21,000	$	22.57

						145,625		2.0	$	18.96		145,625	$	18.96


Range of Exercise Prices					Options Outstanding at 12/31/2016		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Options Exercisable at 12/31/2016		Weighted Average Exercise Price
$	15.17	—	$	16.54		54,625		3.0	$	15.68		54,625	$	15.68
$	16.55	—	$	17.58		36,000		5.5	$	16.95		36,000	$	16.95
$	17.59	—	$	20.20		54,000		2.3	$	18.16		54,000	$	18.16
$	20.21	—	$	22.21		51,000		1.4	$	21.84		51,000	$	21.84
$	22.22	—	$	22.57		36,000		4.4	$	22.57		36,000	$	22.57

						231,625		3.1	$	18.88		231,625	$	18.88

Restricted Stock Awards

Restricted stock awards, or “full value” awards, generally vest ratably over no less than a three-year period. Shares of restricted stock granted under the Plan are considered issued and outstanding at the date of grant, have the same dividend and voting rights as other outstanding common stock, are subject to forfeiture if employment terminates prior to vesting, and are expensed ratably over the vesting period. Dividends paid on the restricted shares granted under the Plan are non-forfeitable if the restricted shares do not ultimately vest. Restricted stock activity in 2017 and 2016 are summarized in the following table:


	Number of Awards			Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (in Years)
Balance at December 31, 2015		192,293		$	19.20		1.7
Granted		—		$	—
Vested		(42,546	)	$	18.47
Canceled		(5,452	)	$	18.75

Balance at December 31, 2016		144,295		$	19.43		0.5
Granted		—		$	—
Vested		(140,628	)	$	19.43
Canceled		(3,667	)	$	19.16

Balance at December 31, 2017		—		$	—		—

Restricted Stock Units

Restricted stock unit activity in 2017 and 2016 are summarized in the following table:


	Number of Awards			Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (in Years)
Balance at December 31, 2015		53,323		$	18.78		2.1
Granted		84,200		$	23.71
Vested		(7,227	)	$	18.78
Canceled		(2,729	)	$	18.78

Balance at December 31, 2016		127,567		$	22.03		1.7
Granted		131,656		$	22.24
Vested		(67,889	)	$	21.54
Canceled		(22,068	)	$	22.95

Balance at December 31, 2017		169,266		$	22.27		1.6

Restricted Performance Stock Units

Restricted performance stock unit activity in 2017 and 2016 are summarized in the following table:


	Number of Awards			Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (in Years)
Balance at December 31, 2015		106,647		$	18.78		2.0
Granted		127,139		$	23.14
Vested		—		$	—
Canceled		(6,593	)	$	19.92

Balance at December 31, 2016		227,193		$	21.72		1.6
Granted		164,566		$	22.39
Vested		(71,493	)	$	19.00
Added by performance factor		4,268			19.00
Canceled		(84,860	)	$	22.76

Balance at December 31, 2017		239,674		$	22.58		1.7

Stock Based Compensation

Stock-based compensation expense related to our equity incentive plans in accordance with U.S. GAAP was allocated as follows:


Year Ended December 31,	2017			2016			2015
(Thousands of dollars)
Cost of sales	$	452		$	472		$	370
Selling, general and administrative expenses		2,124			3,218			2,437

Stock-based compensation expense before income taxes		2,576			3,690			2,807
Income tax benefit		(970	)		(1,361	)		(1,044	)

Total stock-based compensation expense after income taxes	$	1,606		$	2,329		$	1,763

As of December 31, 2017, a total of $2.5 million of unrecognized stock-based compensation expense related to non-vested awards is expected to be recognized over a weighted average period of approximately 1.6 years. There were no significant capitalized stock-based compensation costs at December 31, 2017, 2016 or 2015.