The board of directors of FutureFuel adopted an omnibus incentive plan which was approved by the shareholders of FutureFuel at its 2007 annual shareholder meeting on June 26, 2007. The purpose of the plan is to:

The plan authorizes FutureFuel to issue stock options (including incentive stock options and nonqualified stock options), stock awards, and stock appreciation rights. Eligible participants in the plan include: (i) members of FutureFuel’s board of directors and its executive officers; (ii) regular, active employees of FutureFuel and any of its subsidiaries; and (iii) persons engaged by FutureFuel or any of its subsidiaries to render services to FutureFuel or its subsidiaries as an advisor or consultant.

Awards under the plan are limited to shares of FutureFuel’s common stock, which may be shares acquired by FutureFuel, including shares purchased in the open market, or authorized but un-issued shares. Awards are limited to 10% of the issued and outstanding shares of FutureFuel’s common stock in the aggregate.

The plan became effective upon its approval by FutureFuel’s shareholders on June 26, 2007 and continues in effect for a term of ten years thereafter unless amended and extended by FutureFuel or unless otherwise terminated.

FutureFuel recognizes compensation expense in its financial statements for stock based options based upon the grant-date fair value over the requisite service period.

In May 2014, FutureFuel issued a restricted stock award of 250,000 shares to Paul A. Novelly, FutureFuel’s Chief Executive Officer. The restricted shares vest in three annual installments on the first, second, and third anniversaries of the grant date as service to the company is fulfilled. The total expense for the award was $4,195 and will be recognized into expense equally over the three years.

In July 2014, FutureFuel issued a restricted stock award of 125,000 shares to Paul M. Flynn, FutureFuel’s Executive Vice President of Business and Marketing, upon commencement of employment on September 2, 2014. Twenty percent of the shares vested immediately. The remaining shares vest equally over the remaining annual installments on the first, second, third, and fourth anniversaries of the commencement of employment as service to the company is fulfilled. The total expense for the award was $2,136, with 20% recognized immediately and the remainder to be recognized into expense equally over the four years.

No stock awards were issued in 2015.

In December 2014, FutureFuel granted a total of 90,000 stock options to select members of management. The options awarded have an exercise price equal to the mean between the highest and lowest quoted sales prices for FutureFuel’s common stock as of the grant date as reported by the New York Stock Exchange. The options awarded vest annually in equal increments over three years and expire on December 2, 2019. FutureFuel has utilized the Black Scholes Merton option pricing model, which relies on certain assumptions, to estimate the fair value of the options it granted.

In December 2015, FutureFuel granted a total of 30,000 stock options to new members of the Board of Directors. The options awarded in 2015 have an exercise price equal to the mean between the highest and lowest quoted sales prices for FutureFuel’s common stock as of the grant date as reported by the New York Stock Exchange. All options awarded in 2015 vested immediately upon grant and expire in December 2020. FutureFuel has utilized the Black Scholes Merton option pricing model, which relies on certain assumptions, to estimate the fair value of the options it granted.

The assumptions used in the determination of the fair value of the options granted are provided in the following table:

The volatility rate for the options granted in 2015 and 2014 were derived from the historical stock price volatility of FutureFuel’s common stock over the same time period as the expected term of each stock option award. The volatility rate is derived by a mathematical formula utilizing the daily closing stock price data over the expected term.

The expected dividend yield is calculated using FutureFuel’s expected dividend amount at the date of the option grant over the expected term divided by the fair market value of FutureFuel’s common stock.

The risk-free interest rate is derived from the United States Federal Reserve’s published interest rates of yields for the same time period as the expected term.

FutureFuel has only included share-based awards expected to vest in share-based compensation expense. The estimated forfeiture rates are based upon FutureFuel’s expected rate of forfeiture and are excluded from the quantity of awards included in share-based compensation expense.

For the years ended December 31, 2015, 2014, and 2013, total share-based compensation expense (before tax) totaled $2,043, $1,440, and $0, respectively. In the years ended December 31, 2015, 2014, and 2013, this balance was recorded as an element of selling, general, and administrative expenses. As of December 31, 2015, $3,069 of total unrecognized compensation expense related to restricted stock awards is expected to be recognized over a weighted average period of 1.86 years. As of December 31, 2015, $158 of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted average period of 1.92 years. Each amount will be adjusted for any future changes in estimated forfeitures.

The weighted average fair value of options granted in 2015 was $4.55 per option, in 2014, it was $2.78 per option, and no options were granted in 2013.  

A summary of the activity of FutureFuel’s stock options and awards for the period beginning January 1, 2013 and ending December 31, 2015 is presented below.

There were 1,194,700 options available for grant under the incentive plan at December 31, 2015. The following table provides the remaining contractual term and weighted average exercise prices of stock options outstanding and exercisable at December 31, 2015.

The weighted average remaining contractual life of all exercisable options is 1.83 years.

The aggregate intrinsic values of total options outstanding and at December 31, 2015 and 2014 were $378 and $299, respectively. The aggregate intrinsic values of total options exercisable at December 31, 2015 and 2014 were $248 and $148, respectively. Intrinsic value is the amount by which the last trade price of the common stock closest to December 31, 2015 and December 31, 2014, respectively, exceeded the exercise price of the options granted.

In 2015, FutureFuel realized gross proceeds from stock option exercises of $0 and realized a net tax benefit of $5. All of the options exercised in 2015 were exercised on a cashless basis and resulted in 16,556 shares of FutureFuel’s common stock being returned to FutureFuel by the stock option holder. All of the stock awards that vested were issued on a cashless basis and resulted in 10,000 shares of FutureFuel’s common stock being returned to FutureFuel by the stock award holder. Such shares were returned to satisfy payment of the exercise price along with minimum tax requirements. Such minimum tax requirements totaled $120.

The following summarizes unvested restricted stock activity:

The company realized a tax benefit of $339 in the year ended December 31, 2015 related to the vesting of restricted shares. The excess tax benefit attributable to restricted stock has been recorded as an decrease to additional paid-in-capital and is reflected as a financing cash inflow in the accompanying Consolidated Statement of Cash Flows.  

The following summarizes unvested stock option activity: