NOTE

– Share-Based Compensation:

May 2013,

the shareholders 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, stock appreciation rights (“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 previous plan) have been reserved for issuance under the

2013

Plan. All options and SARs 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, 2019

, the Company had

3,305,302

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 statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented (in thousands):

	Years Ended December 31,
	2019		2018		2017
Stock options and SARs	$	407	$	984	$	1,093
Restricted stock		835		551		331
Performance shares(1)		243		729		240
Total share-based compensation expense	$	1,485	$	2,264	$	1,664

Related income tax benefit	$	262	$	282	$	229

(

)

During the year ended

December 31, 2019

, the Company reversed

$0.5

million of previously recognized expense for certain performance awards after determining that the performance conditions are

not

expected to be met.

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. 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. Assumptions regarding volatility, risk-free interest rate, expected term and dividend yield are required for the Black-Scholes model. The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity to the award’s expected life. The expected life for awards granted is based on the historical exercise patterns experienced by the Company when the award is made. The determination of expected stock price volatility for awards is 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.

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

	Years Ended December 31,
	2019			2018			2017
Stock Options:
Risk free interest rate		1.7% - 2.5%			2.6% - 2.9%			1.8% - 2.4%
Expected award life (years)		3-10			3-10			5-10
Expected volatility		34.2% - 38.8%			35.4% - 42.1%			36.6% - 41.4%
Expected dividend yield		2.3% - 2.5%			1.6% - 2.1%			1.8% - 2.1%
Weighted average fair value per share at grant date	$	3.96		$	5.93		$	5.56

SARs:
Risk free interest rate		2.4	%		2.6	%		1.9	%
Expected award life (years)		3			3			5
Expected volatility		34.8	%		38.1	%		36.6	%
Expected dividend yield		2.3	%		1.6	%		2.1	%
Weighted average fair value per share at grant date	$	3.97		$	6.06		$	4.83

All stock options and SARs granted prior to

August 3, 2018

vested immediately when granted. Awards issued thereafter vest

two

years after the grant date. Employee awards expire

five

years after the grant date, and those issued to directors expire

ten

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

A summary of stock option transactions during the year ended

December 31, 2019

follows:


						Weighted Average		Aggregate
		No. of			Weighted Average	Remaining Life		Intrinsic Value
		Shares			Exercise Price	(in years)		(in thousands)
Outstanding, January 1, 2019		676,846		$	15.70	2.99	$	2,230
Granted		184,994			17.22
Exercised		(75,444	)		6.71
Lapsed or cancelled	(85,265)				17.77
Outstanding, December 31, 2019		701,131		$	16.82	2.95	$	714
Exercisable, December 31, 2019		496,153		$	16.54	2.33	$	714

Intrinsic value is the difference between the market value of our common stock and the exercise price of each stock option multiplied by the number of stock options outstanding for those stock options where the market value exceeds their exercise price. Options exercised during the years ended

December 31, 2019

2018

and

2017

had intrinsic values of

$0.8

million,

$1.2

million and

$4.2

million, respectively. During the years ended

December 31, 2019

2018

and

2017

, the Company received

$0.3

million,

$0.7

million and

$1.9

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

$0.1

million,

$0.1

million and

$0.8

million were recognized for these exercises during the years ended

December 31, 2019

2018

and

2017

, respectively. Additionally, during the years ended

December 31, 2019

2018

and

2017

, the Company received

12,450

,894

and

50,981

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

33,172

,234

and

144,443

shares, respectively, of its common stock. As of

December 31, 2019

the Company had

$0.4

million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of

1.1

years.

A summary of stock-settled SARs transactions during the year ended

December 31, 2019

follows:


					Weighted Average		Aggregate
		No. of		Weighted Average	Remaining Life		Intrinsic Value
		Shares		Exercise Price	(in years)		(in thousands)
Outstanding, January 1, 2019		182,894	$	18.99	2.61	$	89
Granted		42,841		17.77
Exercised		-		-
Lapsed or cancelled	(19,035)			19.67
Outstanding, December 31, 2019		206,700	$	18.67	2.04	$	-
Exercisable, December 31, 2019		168,478	$	18.88	1.57	$	-

SARs exercised during the years ended

December 31,

2018

and

2017

had intrinsic values of

$0.1

million and

$3.5

million, respectively. There were

SARs exercised during the year ended

December 31, 2019

. Current tax benefits of

$0.1

million and

$1.3

million were recognized for these exercises during the years ended December

31,

2018

and

2017

, respectively. As of

December 31, 2019

, the Company had

$0.1

million in unrecognized compensation related to nonvested SARs to be recognized over the remaining weighted average vesting period of

1.1

years.

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 as outlined in 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.

A summary of restricted stock transactions during the year ended

December 31, 2019

follows:

	No. of			Weighted Average
	Shares			Grant Date Fair Value
Outstanding, January 1, 2019		92,032		$	19.46
Granted		69,530			16.79
Vested		(10,396	)		16.37
Forfeited		-			-
Outstanding, December 31, 2019		151,166		$	18.44

As of

December 31, 2019

, the Company had

$1.4

million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of

1.6

years.

Performance Shares

Under the terms of the grants, certain employees received service-based or service-based and performance-based shares, to which we collectively refer to as performance 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 between

three

and

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. During the year ended

December 31, 2019

, the Company reversed

$0.5

million of previously recognized expense for certain awards after determining that the performance conditions are

not

expected to be met. Expenses for grants of performance shares are recognized on a straight-line basis over the respective service period based on the grant date fair value and expected number of shares to be issued. The awards are subject to accelerated vesting under certain circumstances as outlined in the

2013

Plan.

A summary of performance share transactions during the year ended

December 31, 2019

follows:

	No. of			Weighted Average
	Shares			Grant Date Fair Value
Outstanding, January 1, 2019		194,378		$	20.08
Granted		14,068			17.77
Vested		-			-
Forfeited		(14,434	)		22.03
Outstanding, December 31, 2019		194,012		$	19.77

As of

December 31, 2019

the Company had

$1.4

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

1.5

years.