Note 13 - Share-based Compensation

12 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

In 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. In May 2022, the shareholders of the Company approved the 2022 Equity Incentive and Awards Plan (the “2022 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 2,000,000 shares of common stock have been reserved for issuance under the 2022 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, 2022, the Company had 1,712,378 shares of common stock available for grant of share-based compensation under the 2022 Plan. The 2022 Plan replaced the 2013 Plan. No new awards will be granted under the 2013 Plan, but outstanding awards granted under the 2013 Plan will continue unaffected.

Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income (loss). 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,
	2022		2021
Stock options and SARs	$	1,472	$	1,420
Restricted stock		2,598		2,241
Performance shares		219		349
Total share-based compensation expense	$	4,289	$	4,010
Related income tax benefit	$	804	$	760

Stock Options and Stock Appreciation Rights (“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,
	2022			2021
Stock Options:
Risk free interest rate		1.6% -3.8	%		0.2% -1.6	%
Expected award life (years)		3-10			3-10
Expected volatility		46.8% -65.0	%		46.9% -65.0	%
Expected dividend yield		2.4% -5.6	%		1.6% -2.2	%
Weighted average fair value per share at grant date	$	5.39		$	9.91
SARs:
Risk free interest rate		1.6% -3.8	%		0.2	%
Expected award life (years)		3-4			3
Expected volatility		61.6% -64.8	%		64.3	%
Expected dividend yield		2.4% -5.6	%		1.6	%
Weighted average fair value per share at grant date	$	6.34		$	10.09

All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest between one and three 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. Stock options and SARs granted in tandem with stock options are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, as applicable.

A summary of stock option transactions during the year ended December 31, 2022 follows:

						Weighted Average		Aggregate
		No. of			Weighted Average	Remaining Life		Intrinsic Value
		Shares			Exercise Price	(in years)		(in thousands)
Outstanding, January 1, 2022		779,938		$	16.12	3.27	$	5,097
Granted		324,091			14.41
Exercised		(85,840	)		10.17
Lapsed or cancelled	(55,414)				19.34
Outstanding, December 31, 2022		962,775			15.89	3.26		301
Exercisable, December 31, 2022		512,161			14.48	2.19		282

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, 2022 and 2021 had intrinsic values of $0.5 million and $4.5 million, respectively. During the years ended December 31, 2022 and 2021 the Company received $0.7 million and $2.7 million, respectively, in cash from stock option exercises. Current tax benefits of $0.9 million were recognized for these exercises during the year ended December 31, 2021. No current tax benefits on stock option exercises were recognized during the year ended December 31, 2022. Additionally, during the years ended December 31, 2022 and 2021 the Company received 9,738 and 17,365 shares, respectively, of its common stock as payment of the exercise price in the exercise of stock options for 11,784 and 24,591 shares, respectively, of its common stock. As of December 31, 2022, the Company had $1.4 million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of 1.9 years.

A summary of stock-settled SARs transactions during the year ended December 31, 2022 follows:

					Weighted Average		Aggregate
	No. of			Weighted Average	Remaining Life		Intrinsic Value
	Shares			Exercise Price	(in years)		(in thousands)
Outstanding, January 1, 2022	291,059		$	14.99	2.65	$	2,205
Granted	57,120			16.60
Exercised	(24,836	)		15.16
Lapsed or cancelled	(2,958	)		18.84
Outstanding, December 31, 2022	320,385			15.23	2.23		69
Exercisable, December 31, 2022	232,228			13.48	1.60		67

SARs exercised during the years ended December 31, 2022 and 2021 had intrinsic values of $0.1 million and $0.8 million, respectively. Current tax benefits of $0.1 million were recognized for these exercises during the year ended December 31, 2021. No current tax benefits on SAR exercises were recognized during the year ended December 31, 2022. As of December 31, 2022, the Company had $0.2 million in unrecognized compensation related to nonvested SARs to be recognized over the remaining weighted average vesting period of 1.6 year.

Restricted Stock

The Company has granted shares of restricted stock to directors and certain employees, which vest at a specified future date, generally after three years, over five years or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, as applicable. 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, 2022 follows:

				Weighted Average
	No. of			Grant Date
	Shares			Fair Value
Outstanding, January 1, 2022		458,166		$	19.51
Granted		66,544			14.82
Vested		(133,740	)		15.24
Forfeited		(18,500	)		14.68
Outstanding, December 31, 2022		372,470			20.45

As of December 31, 2022, the Company had $4.6 million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of 2.6 years.

Performance Shares

The Company has granted performance shares, which either contain only service-based vesting conditions or service-based and performance-based vesting conditions. 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 awards 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. 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 on a pro rata basis under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, except in those circumstances in which award agreements or change in control agreements specify full vesting.

A summary of performance share transactions during the year ended December 31, 2022 follows:

				Weighted Average
	No. of			Grant Date
	Shares			Fair Value
Outstanding, January 1, 2022		193,523		$	21.50
Granted		68,978			18.15
Vested		(15,750	)		16.97
Forfeited		(47,300	)		22.04
Outstanding, December 31, 2022		199,451			20.57

As of December 31, 2022, the Company had $2.4 million of unrecognized compensation cost related to nonvested performance share grants expected to be recognized over the remaining weighted average service period of 3.6 years.