NOTE 15 - Stock-Based Compensation

Under the terms of the 2003 Plan, employees, certain consultants and advisors and non-employee members of the Company’s Board of Directors have the opportunity to receive incentive and nonqualified grants of stock options, stock appreciation rights, restricted stock and other equity-based awards as approved by the Company’s Board of Directors. These award programs are used to attract, retain and motivate employees and to encourage individuals in key management roles to retain stock. The Company has a policy of issuing new shares to satisfy awards under the 2003 Plan. The aggregate number of shares under the 2003 Plan that may be issued pursuant to stock options or restricted stock grants is 4,150,000. Not more than 2,500,000 of such shares shall be available for issuance as restricted stock grants. There were 917,341 shares available for future grants under the 2003 Plan as of December 31, 2013, of which 738,569 shares were available to be issued as restricted stock grants.

Total stock-based compensation expense was $2.6 million, $2.6 million and $2.3 million for the years ended December 31, 2013, 2012 and 2011, respectively. Excess tax benefits from stock-based payment arrangements increased cash provided by financing activities and decreased cash provided by operating activities by $1.1 million, $0.6 million and $1.3 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Stock Options

In previous years, stock option awards were issued as part of the Company’s overall compensation strategy.

Option awards were generally granted with an exercise price equal to the market price of the Company’s stock at the date of the grant and have 7- to 10-year contractual terms. All options issued contain service conditions based on the participant’s continued service with the Company, and provide for accelerated vesting if there is a change in control as defined in the 2003 Plan. Employee stock options generally vest over four years. The Company also issued stock options to non-employee independent directors. These options generally vest in one year.

There were no stock options granted during the years ended December 31, 2013, 2012 and 2011.

A summary of option activity for the each of the three years in the period ended December 31, 2013 follows:

During the years ended December 31, 2013, 2012 and 2011, the Company recognized total compensation expense related to options of $0.2 million, $0.1 million and $0.1 million, respectively.

There were 127,957, 89,900 and 169,611 stock options exercised during the years ended December 31, 2013, 2012 and 2011, respectively. The total pretax intrinsic value of stock options exercised was $1.7 million, $0.7 million and $0.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The following table summarizes information about the stock options outstanding and exercisable as of December 31, 2013:

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $25.20 as of December 31, 2013, which would have been received by the option holders had all option holders exercised their options as of that date.

As of December 31, 2013, the total future compensation cost related to non-vested stock options not yet recognized in the Consolidated Statements of Operations was $0.1 million and the weighted average period over which these awards are expected to be recognized was 0.4 years. As of December 31, 2013, $0.5 million of additional potential compensation cost related to non-vested stock options has not been recognized due to performance targets not being achieved. However, in certain circumstances, these options may be subject to vesting prior to their expiration dates. The weighted average remaining term of these options is approximately 2.1 years.

Restricted Stock Awards

Restricted stock awards provide that, during the applicable vesting periods, the shares awarded may not be sold or transferred by the participant. The vesting period for restricted stock awards generally ranges from three to 10 years. All awards issued contain service conditions based on the participant’s continued service with the Company, and provide for accelerated vesting if there is a change in control as defined in the 2003 Plan.

The vesting of certain restricted shares may be accelerated to a minimum of three years based on achievement of various individual performance measures. Acceleration of expense for awards based on individual performance factors occurs when the achievement of the performance criteria is determined.

In addition, the Company has issued certain shares under a Management Stock Ownership Program. Under this program, restrictions on the shares lapse at the end of 10 years but may lapse (vest) in a minimum of three years if the employee continues in service at the Company and owns a matching number of other common shares in addition to the restricted shares.

Of the total restricted stock awards granted during the year ended December 31, 2013, 89,952 shares may be subject to accelerated vesting based on individual performance factors; no shares have vesting contingent upon performance factors. Vesting was accelerated in 2013, 2012 and 2011 on certain awards based on the achievement of certain performance criteria determined annually, as described below.

The Company also issues restricted stock to non-employee independent directors. These shares generally vest in seven years from the grant date or six months following the director’s termination from Board of Directors service.

The following table summarizes the activity of the non-vested restricted stock during the each of the three years in the period ended December 31, 2013:

During the years ended December 31, 2013, 2012 and 2011, the Company granted restricted stock awards with grant date fair values totaling $3.3 million, $1.4 million and $3.3 million, respectively.

As vesting occurs, or is deemed likely to occur, compensation expense is recognized over the requisite service period and additional paid-in capital is increased. The Company recognized $2.4 million, $2.5 million and $2.2 million of compensation expense related to restricted stock for the years ended December 31, 2013, 2012 and 2011, respectively.

Of the $2.4 million total compensation expense related to restricted stock for the year ended December 31, 2013, approximately $0.4 million related to accelerated vesting during the first quarter of 2013, based on the achievement of certain performance criteria determined annually. Of the $2.5 million total compensation expense related to restricted stock for the year ended December 31, 2012, approximately $1.0 million related to accelerated vesting during the first quarter of 2012, which was also based on the achievement of certain performance criteria determined annually.

As of December 31, 2013, there was $3.8 million of unrecognized compensation cost related to non-vested restricted stock compensation scheduled to be recognized over a weighted average period of 4.1 years. In the event individual performance targets are achieved, $1.6 million of the unrecognized compensation cost would accelerate to be recognized over a weighted average period of 1.0 years. In addition, certain of the awards granted may result in the issuance of 58,757 additional shares of stock if achievement of certain targets is greater than 100%. The expense related to the additional shares awarded will be dependent on the Company’s stock price when the achievement level is determined.

The fair values of shares that vested during the years ended December 31, 2013, 2012 and 2011 were $3.5 million, $4.7 million and $5.1 million, respectively.

Employee Stock Purchase Plan

In October 2003, the Company adopted the Employee Stock Purchase Plan (the “2003 ESPP”). Under the terms of the 2003 ESPP, employees had the opportunity to purchase shares of common stock during designated offering periods equal to the lesser of 95% of the fair market value per share on the first day of the offering period or the purchase date. Participants were limited to 10% of their compensation. The aggregate number of shares under the ESPP that was available for issue was 200,000. During the year ended 2011, 14,597 shares of common stock were sold for $0.2 million, pursuant to the terms of the 2003 ESPP. As of December 31, 2011, there were no shares remaining available for issuance under the 2003 ESPP. In accordance with the terms of the 2003 ESPP, termination of the plan occurred in December 2011 when all shares available for issuance under the 2003 ESPP had been issued

In May 2012, the Company’s shareholders approved the adoption of the Company’s 2012 Employee Stock Purchase Plan (the “2012 ESPP”). Under the terms of the 2012 ESPP, employees have the opportunity to set aside up to 10% of their compensation (subject to certain maximums) and to purchase shares of common stock during designated offering periods at a price equal to the lesser of 95% of the fair market value per share on the first day of the offering period or the fair market value per share on the purchase date. The aggregate number of shares that may be issued under the 2012 ESPP is 140,000. During the years ended 2013 and 2012, 14,727 and 8,788 shares, respectively, of common stock were sold for $0.3 million and $0.1 million, respectively, pursuant to the terms of the 2012 ESPP. As of December 31, 2013, there were 116,485 shares remaining available for issuance under the 2012 ESPP.