Note 12 - Share-based Compensation

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

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

NOTE

1

2

– Share-Based Compensation:

In

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

of

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, 2018,

the Company had

3,498,367

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,
	(In thousands)
	2018		2017		2016
Stock options and SARS	$	984	$	1,093	$	1,071
Restricted stock		551		331		317
Performance shares		729		240		250
Total share-based compensation expense	$	2,264	$	1,664	$	1,638
Related income tax benefit	$	282	$	229	$	325

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.

Options and SARS vest immediately at the date of grant or after a

two

-year period. 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, 2018

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2016		825,251		$	10.46
Granted		155,142			18.67
Exercised		(336,726	)		8.71
Lapsed		(1,100	)		5.86
Cancelled		(8,690	)		15.82
Outstanding December 31, 2017		633,877		$	13.33
Granted		141,630			22.20
Exercised		(94,241	)		9.56
Lapsed		(1,800	)		5.88
Cancelled		(2,620	)		20.05
Outstanding December 31, 2018		676,846		$	15.70

At

December 31, 2018,

633,601

options outstanding were fully vested and exercisable and

43,245

options outstanding had a remaining vesting period of

1.59

years. The aggregate intrinsic value of outstanding options was

$2.2

million and weighted-average remaining contractual term was

36

months.

Options exercised during the years ended

December 31, 2018,

2017

and

2016

 had intrinsic values of

$1.2

million,

$4.2

million and

$3.1

million respectively.

The weighted average fair values of the Company’s

141,630,

155,142

and

172,862

options granted during the years ended

December 31, 2018,

2017

and

2016

were

$5.93

and

$5.56

and

$4.69,

respectively. As of

December 31, 2018,

the Company had

$0.2

million in unrecognized compensation related to nonvested grants to be recognized over the remaining service period of

1.59

years.

During the years ended

December 31, 2018,

2017

and

2016,

 respectively, the Company received

$0.7

million,

$1.9

million and

$1.5

million in cash from stock option exercises. Current tax benefits of

$0.1

million,

$0.8

million and

$0.4

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

December 31, 2018,

2017

and

2016,

respectively, the Company received

6,894,

50,981

and

27,770

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

26,234,

144,443

and

81,608

shares of its common stock.

The following table summarizes information about stock options outstanding as of

December 31, 2018:

Range of					Weighted Average Remaining		Weighted Average
Exercise Price			Shares		Contractual Life (Years)		Exercise Price
$ 3.82	-	$ 5.88		89,000		2.61		$5.33
$ 7.36	-	$10.38		97,344		1.67		$8.00
$16.35	-	$18.86		347,472		2.91		$17.50
$21.63	-	$24.28		143,030		4.33		$23.03
$ 3.82	-	$24.28		676,846		3.12		$15.70

A summary of stock-settled SARS transactions during the

two

years ended

December 31, 2018

follows:

	No. of			Weighted Average
	Shares			Exercise Price
Outstanding December 31, 2016		325,506		$	10.26
Granted		43,988			16.97
Exercised		(222,990	)		6.90
Lapsed		-			-
Cancelled		-			-
Outstanding December 31, 2017		146,504		$	17.38
Granted		48,515			23.59
Exercised		(12,125	)		17.92
Lapsed		-			-
Cancelled		-			-
Outstanding December 31, 2018		182,894		$	18.99

At

December 31, 2018,

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

$0.1

million. The weighted-average remaining contractual term was

31

months.

SARS exercised during the years ended

December 31, 2018,

2017

and

2016,

respectively, had intrinsic values of

$0.1

million,

$3.5

million and

$1.5

million respectively. Current tax benefits of

$0.1

million,

$1.3

million and

$0.5

million 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, 2018,

2017

and

2016

was

$6.06,

$4.83

and

$4.49,

respectively.

The following table summarizes information about SARS outstanding as of

December 31, 2018:

Range of					Weighted Average Remaining		Weighted Average
Exercise Price			SARS		Contractual Life (Years)		Exercise Price
$16.35	-	$18.66		134,379		2.08		$17.33
$23.59	-	$23.59		48,515		4.08		$23.59
$16.35	-	$23.59		182,894		2.61		$18.99

At

December 31, 2018

shares available for grant as awards under the plan were

3,498,367.

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
2018		$23.59		$18.86	-	$24.28
2017		$16.97		$16.97	-	$21.63
2016		$16.35		$16.35	-	$18.55
Market price
2018		$23.59		$18.86	-	$24.28
2017		$16.97		$16.97	-	$21.63
2016		$16.35		$16.35	-	$18.55
Risk free interest rate 1
2018		2.6%		2.6%	-	2.9%
2017		1.9%		1.8%	-	2.4%
2016		1.3%		1.1%	-	1.8%
Expected award life (years) 2
2018		3		3	-	10
2017		5		5	-	10
2016		5		5	-	10
Expected volatility 3
2018		38.1%		35.4%	-	42.1%
2017		36.6%		36.6%	-	41.4%
2016		36.5%		36.5%	-	40.3%
Expected dividend yield 4
2018		1.6%		1.6%	-	2.1%
2017		2.1%		1.8%	-	2.1%
2016		2.0%		1.8%	-	2.1%

1

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.

2

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

3

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

three

years ended

December 31, 2018,

2017

and

2016

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

4

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, 2018,

the Company had

$1.0

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

1.66

years.

A summary of restricted stock transactions during the

two

years ended

December 31, 2018

follows:

	No. of			Weighted Average
	Shares			Grant Date Fair Value
Outstanding December 31, 2016		123,688		$	8.94
Granted		43,706			18.30
Vested		(106,016	)		7.62
Forfeited		-			-
Outstanding December 31, 2017		61,378		$	17.89
Granted		37,930			21.63
Vested		(7,276	)		17.59
Forfeited		-			-
Outstanding December 31, 2018		92,032		$	19.46

Performance Shares

In

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

to

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, 2018,

the Company had

$2.7

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

2.67

years.

A summary of performance share transactions during the year ended

December 31, 2018

follows:

	No. of			Weighted Average
	Shares			Grant Date Fair Value
Outstanding December 31, 2017		118,492		$	17.24
Granted		84,838			24.56
Vested		-			-
Forfeited		(8,952	)		24.98
Outstanding December 31, 2018		194,378		$	20.08