NOTE

– Share-Based Compensation:

2003,

the stockholders of the Company approved the

2003

Incentive Stock and Awards Plan (the

“2003

Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARS”), restricted stock, performance stock and other stock based compensation. This plan expired in

May

2013,

at which time, the stockholders of the Company approved the

2013

Incentive Stock and Awards Plan (the

“2013

Plan”), authorizing the granting of incentive stock options, non-qualified stock options, SARS, restricted stock, performance shares and other stock based compensation. A total of

5,000,000

shares of common stock (subject to adjustment for expirations and cancellations of options outstanding from the

2003

Plan subsequent to its termination) have been reserved for issuance under the

2013

Plan. All options and SARS under both plans have been or will be granted with exercise prices at least equal to the fair market value of the shares on the date of grant. At

December

31,

2016,

the Company had

3,945,981

shares of common stock available for grant of share-based compensation under the

2013

Plan.

Share-based compensation is recorded in selling and administrative expense in the consolidated statements of comprehensive income. The following table details the share-based compensation expense by plan and the total related tax benefit for the periods presented:

	Year Ended December 31,
	2016		2015		2014
Stock options and SARS	$	1,071,000	$	1,079,000	$	1,175,000
Restricted stock		317,000		282,000		229,000
Performance shares		250,000		-		-
Total share-based compensation expense	$	1,638,000	$	1,361,000	$	1,404,000

Related income tax benefit	$	325,000	$	203,000	$	219,000

Stock options and SARS

The Company grants stock options and stock settled SARS to employees that allow them to purchase shares of the Company’s common stock. Options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARS at the date of grant using the Black-Scholes valuation model.

All options and SARS vest immediately at the date of grant. Awards generally expire

five

years after the date of grant with the exception of options granted to outside directors, which expire

ten

years after the date of grant. The Company issues new shares upon the exercise of stock options and SARS.

A summary of stock option transactions during the

two

years ended

December

31,

2016

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2014		1,118,058		$	6.63
Granted		153,618			18.11
Exercised		(309,230	)		6.90
Lapsed		(10,900	)		6.00
Cancelled		(5,000	)		11.22
Outstanding December 31, 2015		946,546		$	8.39
Granted		172,862		$	16.53
Exercised		(279,766	)		7.31
Lapsed		(11,131	)		5.92
Cancelled		(3,260	)		17.53
Outstanding December 31, 2016		825,251		$	10.46

December

31,

2016,

options outstanding, all of which were fully vested and exercisable, had an intrinsic value of

$7,563,000.

The weighted-average remaining contractual term was

months.

Options exercised during the years ended

December

31,

2016,

2015

and

2014,

had intrinsic values of

$3,129,000,

$3,528,000

and

$1,356,000

respectively.

The weighted average fair values of the Company’s

172,862,

153,618

and

397,218

options granted during the years ended

December

31,

2016,

2015

and

2014

were

$4.69

and

$5.22

and

$2.26,

respectively.

During the years ended

December

31,

2016,

2015

and

2014,

respectively, the Company received

$1,504,000,

$1,840,000,

and

$1,855,000

in cash from stock option exercises. Current tax benefits of

$361,000,

$618,000

and

$231,000,

respectively, were recognized for these exercises. Additionally, during the years ended

December

31,

2016,

2015

and

2014,

respectively, the Company received

27,770,

14,571

and

20,256

shares of its common stock as payment of the exercise price in the exercise of stock options for

81,608,

50,224

and

40,816

shares of its common stock related to the exercise of stock options.

The following table summarizes information about stock options outstanding as of

December

31,

2016:

Range of						Weighted Average Remaining		Weighted Average
Exercise Price				Shares		Contractual Life (Years)		Exercise Price
	$3.82	-	$5.55		74,166		2.94	$	4.75
	$5.65	-	$7.36		388,685		2.03	$	6.47
	$7.96	-	$10.38		62,800		4.70	$	9.30
	$16.35	-	$18.66		299,600		4.96	$	17.28
	$3.82	-	$18.66		825,251		3.38	$	10.46

A summary of stock-settled SARS transactions during the

two

years ended

December

31,

2016

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2014		522,024		$	6.17
Granted		53,292			18.66
Exercised		(193,750	)		5.73
Lapsed		-			-
Cancelled		-			-
Outstanding December 31, 2015		381,566		$	8.14
Granted		58,108		$	16.35
Exercised		(114,168	)		6.27
Lapsed		-			-
Cancelled		-			-
Outstanding December 31, 2016		325,506		$	10.26

December

31,

2016,

SARS outstanding, all of which were fully vested and exercisable, had an aggregate intrinsic value of

$3,048,000.

The weighted-average remaining contractual term was

months.

SARS exercised during the years ended

December

31,

2016,

2015

and

2014,

respectively, had intrinsic values of

$1,472,000,

$2,602,000

and

$275,000

respectively. Current tax benefits of

$521,000,

$957,000

and

$32,000

respectively, were recognized for these exercises. The weighted average grant date fair values of the Company’s SARS granted during the years ended

December

31,

2016,

2015

and

2014

was

$4.49,

$5.20

and

$2.02,

respectively.

The following table summarizes information about SARS outstanding as of

December

31,

2016:

Range of						Weighted Average Remaining		Weighted Average
Exercise Price				SARS		Contractual Life (Years)		Exercise Price
	$5.65	-	$7.36		214,106		1.55	$	6.51
	$16.35	-	$18.66		111,400		3.60	$	17.46
	$5.65	-	$18.66		325,506		2.26	$	10.26

December

31,

2016

shares available for grant as awards under the plan were

3,945,981.

Options and SARS have never been repriced by the Company in any year.

The following table summarizes significant assumptions utilized to determine the fair value of options and SARS:

Years ended
December 31,	SARS		Options
Exercise price
2016		$16.35		$16.35	-	$18.55
2015		$18.66		$16.78	-	$18.66
2014		$7.36		$7.36	-	$10.38

Market price
2016		$16.35		$16.35	-	$18.55
2015		$18.66		$16.78	-	$18.66
2014		$7.36		$7.36	-	$10.38
Risk free interest rate 1
2016		1.3%		1.1%	-	1.8%
2015		1.5%		1.5%	-	2.1%
2014		1.5%		1.5%	-	2.6%
Expected award life (years) 2		5		5	-	10

Expected volatility 3
2016		36.5%		36.5%	-	40.3%
2015		34.9%		34.9%	-	39.0%
2014		42.5%		37.3%	-	42.5%
Expected dividend yield 4
2016		2.0%		1.8%	-	2.1%
2015		1.6%		1.6%	-	1.9%
2014		3.7%		2.9%	-	3.7%

The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity as the expected life of the awards.

The expected life in years for awards granted was based on the historical exercise patterns experienced by the Company when the award is made.

The determination of expected stock price volatility for awards granted in each of the

three

years ended

December

31,

2016,

2015

and

2014

was based on historical Superior common stock prices over a period commensurate with the expected life.

The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts.

Restricted Stock

The Company has granted restricted stock to directors and certain employees under the terms of the

2013

Plan which vest at a specified future date, generally after

three

years, or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances pursuant to the

2013

Plan. Expense for each of these grants is based on the fair value at the date of the grant and is being recognized on a straight-line basis over the respective service period. As of

December

31,

2016,

the Company had

$234,000

of unrecognized compensation cost related to nonvested grants expected to be recognized over the weighted average service period of

0.5

years.

A summary of restricted stock transactions during the years ended

December

31,

2016

follows:

	No. of			Weighted Average
	Shares			Grant Date Fair Value
Outstanding December 31, 2014		106,016		$	7.62
Granted		8,326			18.14
Vested		-			-
Forfeited		-			-
Outstanding December 31, 2015		114,342		$	8.39
Granted		10,396			16.35
Vested		-			-
Forfeited		(1,050	)		21.92
Outstanding December 31, 2016		123,688		$	8.94

Performance Shares

2016,

the Compensation Committee of the Board of Directors approved grants of performance shares under the terms of the

2013

Plan. Under the terms of the grants, certain employees received service-based or service-based and performance-based shares. The service-based awards vest after the service period is met, which is generally

three

five

years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based shares generally vest after

five

years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. Based upon this evaluation, expected expenses for these grants are being recognized based on the fair value on the date of the grant on a straight-line basis over the respective service period. The shares are subject to accelerated vesting under certain circumstances as outlined in the

2013

Plan. As of

December

31,

2016,

the Company had

$1,129,000

of unrecognized compensation cost related to nonvested grants expected to be recognized over the weighted average service period of

4.1

years.

A summary of performance share transactions during the year ended

December

31,

2016

follows:

	No. of		Weighted Average
	Shares		Grant Date Fair Value
Outstanding December 31, 2015		-	$	-
Granted		101,000		16.36
Vested		-		-
Forfeited		-		-
Outstanding December 31, 2016		101,000	$	16.36