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Note 11 - Share Based Compensation and Employee Benefit Plans | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Share-based Payment Arrangement [Text Block] |
11. | SHARE BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS:
Employee Stock Purchase Plan The Company’s 2004 Employee Stock Purchase Plan, as amended and restated (the “Employee Stock Purchase Plan”) allows eligible employees to contribute up to $10,625 of their base earnings every six months toward the semi-annual purchase of the Company’s Class A Common Stock. The employee’s purchase price is 85% of the lesser of the closing price of the Class A Common Stock on the first business day or the last business day of the semi-annual offering period, as reported by The NASDAQ Global Select Market. Employees may purchase shares having a fair market value of up to $25,000 (measured as of the first day of each semi-annual offering period) for each calendar year. Under the Employee Stock Purchase Plan, there are approximately 594,717 shares remaining of the 2,700,000 shares of the Company’s Class A Common Stock that were reserved for issuance. The Company issued 148,999 shares under the Employee Stock Purchase Plan during the year ended December 31, 2021 and 176,807 shares during the year ended December 31, 2020. Of the 7,166 employees eligible to participate, approximately 1,854 elected to participate in the plan as of December 31, 2021. Non-Employee Director Stock Option Plan The Rush Enterprises, Inc. 2006 Non-Employee Director Stock Option Plan, as amended and restated (the “Director Plan”), reserved 750,000 shares of Class A Common Stock for issuance upon exercise of any awards granted under the plan. The Director Plan is designed to attract and retain highly qualified non-employee directors. Currently, each non-employee director receives a grant of the Company’s Class A Common Stock equivalent to a compensation value of $145,000; provided however, that directors may elect to receive up to 40% of the value of such grant in cash. In 2021, three non-employee directors each received a grant of 2,875 shares of the Company’s Class A Common Stock and two non-employee directors each received a grant of 2,013 shares of the Company’s Class A Common Stock and $43,500 cash and one non-employee director received a grant of 1,725 shares of the Company’s Class A Common Stock and $58,000 cash for total compensation equivalent to $145,000 each. One director who was appointed to the Company’s Board of Directors in October of 2021 received 1,350 shares of the Company’s Class A Common Stock, for total compensation equivalent to $72,500. In 2020, three non-employee directors each received a grant of 5,235 shares of the Company’s Class A Common Stock and three non-employee directors each received a grant of 3,141 shares of the Company’s Class A Common Stock and $50,000 cash, for total compensation equivalent to $125,000 each. Under the Director Plan, there are approximately 148,152 shares remaining for issuance of the 750,000 shares of the Company’s Class A Common Stock that were reserved for issuance. The Company granted 15,726 shares of Class A Common Stock under the Director Plan during the year ended December 31, 2021 and 25,128 shares of Class A Common Stock under the Director Plan during the year ended December 31, 2020. Employee Incentive Plans In May 2007, the Board of Directors and shareholders adopted the Rush Enterprises, Inc. 2007 Long-Term Incentive Plan (the “2007 Incentive Plan”). The 2007 Incentive Plan provides for the grant of stock options (which may be nonqualified stock options or incentive stock options for tax purposes), stock appreciation rights issued independent of or in tandem with such options (“SARs”), restricted stock awards and performance awards. The 2007 Incentive Plan was amended and restated on May 20, 2014, May 16, 2017 and again on May 12, 2020, to increase the number of shares available for issuance under the plan to 13,200,000 shares of Class A Common Stock and 4,800,000 shares of Class B Common Stock and to make certain other changes intended to bring the 2007 Incentive Plan into conformance with current best practices. The aggregate number of shares of common stock subject to stock options or SARs that may be granted to any one participant in any year under the 2007 Incentive Plan is 150,000 shares of Class A Common Stock or 150,000 shares of Class B Common Stock. Each option granted pursuant to the 2007 Incentive Plan has a ten year term from the grant date and vests in three equal annual installments beginning on the third anniversary of the grant date. The Company has 13,200,000 shares of Class A Common Stock and 4,800,000 shares of Class B Common Stock reserved for issuance under the Company’s 2007 Incentive Plan. As of December 31, 2021, approximately 2,243,779 shares of Class A Common Stock and 1,308,825 shares of Class B Common Stock are available for issuance under the Company’s 2007 Incentive Plan. The Company issues new shares of its Class A or Class B Common Stock upon the exercise of stock options or vesting of restricted stock units and upon the issuance of restricted stock awards. During the year ended December 31, 2021, the Company granted to employees 498,700 options to purchase Class A Common Stock and 340,650 restricted Class B Common Stock awards under the 2007 Incentive Plan. Restricted stock awards are issued when granted, but are subject to vesting requirements. During the year ended December 31, 2020, the Company granted to employees 753,600 options to purchase Class A Common Stock and 518,400 restricted Class B Common Stock awards under the 2007 Incentive Plan. Valuation and Expense Information Stock-based compensation expense related to stock options, restricted stock awards, restricted stock units and employee stock purchases was $22.2 million for the year ended December 31, 2021, $19.4 million for the year ended December 31, 2020, and $19.0 million for the year ended December 31, 2019. Cash received from options exercised and shares purchased under all share-based payment arrangements was $18.3 million for the year ended December 31, 2021, $23.5 million for the year ended December 31, 2020, and $11.1 million for the year ended December 31, 2019. The following table presents a summary of the Company’s stock option activity and related information for the year ended December 31, 2021:
|  |  |  |  |  |  |  |  |  | Weighted |  |  |  |  |
|  |  |  |  |  | Weighted |  |  | Average |  |  |  |  |
|  |  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  |  |  |  |  | Exercise |  |  | Contractual |  |  | Intrinsic |
Options |  | Shares |  |  | Price |  |  | Life (in Years) |  |  | Value |
Balance of Outstanding Options at January 1, 2021 |  |  | 4,080,944 |  |  | $ | 22.01 |  |  |  |  |  |  |  |  |
Granted |  |  | 498,700 |  |  |  | 49.47 |  |  |  |  |  |  |  |  |
Exercised |  |  | (768,668 | ) |  |  | 18.43 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (6,000 | ) |  |  | 37.16 |  |  |  |  |  |  |  |  |
Balance of Outstanding Options at December 31, 2021 |  |  | 3,804,976 |  |  | $ | 26.31 |  |  |  | 6.3 |  |  | $ | 111,599,381 |
Expected to vest after December 31, 2021 |  |  | 2,549,712 |  |  | $ | 29.93 |  |  |  | 7.5 |  |  | $ | 65,546,772 |
Vested and exercisable at December 31, 2021 |  |  | 1,228,362 |  |  | $ | 18.54 |  |  |  | 3.8 |  |  | $ | 45,572,873 |
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the closing price of the Company’s Class A Common Stock on December 31, 2021, which was $55.64. The total intrinsic value of options exercised was $23.4 million during the year ended December 31, 2021, $20.8 million during the year ended December 31, 2020, and $8.7 million during the year ended December 31, 2019. The following table presents a summary of the status of the number of shares underlying the Company’s non-vested stock options as of December 31, 2021, and changes during the year ended December 31, 2021:
|  |  |  |  |  | Weighted |
|  |  |  |  |  | Average |
|  | Number of |  |  | Grant Date |
Non-vested Shares |  | Shares |  |  | Fair Value |
Non-vested at January 1, 2021 |  |  | 2,737,757 |  |  | $ | 7.95 |
Granted |  |  | 498,700 |  |  |  | 14.77 |
Vested |  |  | (653,843 | ) |  |  | 7.60 |
Forfeited |  |  | (6,000 | ) |  |  | 11.07 |
Non-vested at December 31, 2021 |  |  | 2,576,614 |  |  | $ | 9.35 |
The total fair value of vested options was $5.0 million during the year ended December 31, 2021, $4.5 million during the year ended December 31, 2020, and $5.0 million during the year ended December 31, 2019. The weighted-average grant date fair value of options granted was $14.77 per share during the year ended December 31, 2021, $6.36 per share during the year ended December 31, 2020, and $8.37 per share during the year ended December 31, 2019. Stock Awards The Company granted restricted stock awards to certain of its employees under the 2007 Incentive Plan and unrestricted stock awards to its non-employee directors under the Director Plan during the year ended December 31, 2021. The restricted stock awards and previously granted restricted stock units granted to employees vest in three equal installments on the first, second and third anniversary of the grant date and are forfeited in the event the recipient’s employment or relationship with the Company is terminated prior to vesting, except as a result of retirement or under certain circumstances associated with a change of control or involuntary termination, as further described in the Company’s executive transition plan. The fair value of the restricted stock awards and restricted stock unit awards granted to the Company’s employees is amortized to expense on a straight-line basis over the restricted stock’s vesting period. The shares granted to non-employee directors are expensed on the grant date. The following table presents a summary of the Company’s non-vested restricted stock awards at December 31, 2021:
|  |  |  |  |  | Weighted |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Average |  |  |  |  |  |  | Weighted |
|  |  |  |  |  | Remaining |  |  | Aggregate |  |  | Average |
|  |  |  |  |  | Contractual |  |  | Intrinsic |  |  | Grant Date |
Stock Awards and Units |  | Shares |  |  | Life (in Years) |  |  | Value |  |  | Fair Value |
Outstanding non-vested shares at January 1, 2021 |  |  | 987,728 |  |  |  |  |  |  |  |  |  |  | $ | 24.28 |
Granted |  |  | 356,376 |  |  |  |  |  |  |  |  |  |  |  | 44.86 |
Vested |  |  | (499,084 | ) |  |  |  |  |  |  |  |  |  |  | 25.94 |
Forfeited |  |  | (1,200 | ) |  |  |  |  |  |  |  |  |  |  | 44.59 |
Outstanding non-vested at December 31, 2021 |  |  | 843,820 |  |  |  | 8.4 |  |  | $ | 45,540,965 |  |  |  | 31.97 |
Expected to vest after December 31, 2021 |  |  | 842,423 |  |  |  | 8.4 |  |  | $ | 45,465,553 |  |  |  |  |
The total fair value of the shares issued upon the vesting of restricted and unrestricted stock awards and restricted stock unit awards during the year ended December 31, 2021 was $12.9 million. The weighted-average grant date fair value of stock awards granted was $44.86 per share during the year ended December 31, 2021, $21.98 per share during the year ended December 31, 2020 and $26.91 per share during the year ended December 31, 2019. As of December 31, 2021, the Company had $9.3 million of unrecognized compensation expense related to non-vested employee stock options to be recognized over a weighted-average period of 2.2 years and $9.2 million of unrecognized compensation cost related to non-vested restricted stock awards to be recognized over a weighted-average period of 1.3 years. Defined Contribution Plan The Company has a defined contribution plan (the “Rush 401k Plan”) that is available to all employees. Each employee who has completed 30 days of continuous service is entitled to enter the Rush 401k Plan on the first day of the following month. Participating employees may contribute from 1% to 50% of their total gross compensation. However, certain highly compensated employees are limited to a maximum contribution of 15% of total gross compensation. Effective February 1, 2012, for the first 10% of an employee’s contribution, the Company contributed an amount equal to 20% of the employees’ contributions for those employees with less than five years of service and an amount equal to 40% of the employees’ contributions for those employees with more than five years of service. Effective June 16, 2020, as part of the Company’s expense reductions due to the Covid-19 pandemic, for the first 10% of an employee’s contribution, the Company contributed an amount equal to 5% of the employees’ contributions for those employees with less than five years of service and an amount equal to 10% of the employees’ contributions for those employees with more than five years of service. Effective March 15, 2021, for the first 10% of an employee’s contribution, the Company contributed an amount equal to 20% of the employees’ contributions for those employees with less than five years of service and an amount equal to 40% of the employees’ contributions for those employees with more than five years of service. The Company incurred expenses related to the Rush 401k Plan of approximately $8.2 million during the year ended December 31, 2021, $6.0 million during the year ended December 31, 2020 and $9.4 million during the year ended December 31, 2019. Deferred Compensation Plan On November 6, 2010, the Board of Directors of the Company adopted the Rush Enterprises, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) pursuant to which certain employees and directors may elect to defer a portion of their annual compensation. The Deferred Compensation Plan was amended and restated effective May 18, 2021 in order to bring the plan into conformance with current “best” practices. The Deferred Compensation Plan also provides the Company with the discretion to make matching contributions to participants’ accounts. The Company established a rabbi trust to finance obligations under the Deferred Compensation Plan with corporate-owned variable life insurance contracts. Participants are 100% vested in their respective deferrals and the earnings thereon. The first deferral election period began on January 1, 2011. The Company’s liability related to the Deferred Compensation Plan was $21.3 million on December 31, 2021 and $19.5 million on December 31, 2020. The related cash surrender value of the life insurance contracts was $12.7 million on December 31, 2021 and $11.5 million on December 31, 2020. The Company currently does not provide any post-retirement benefits nor does it provide any post-employment benefits.

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