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Note 14 - Share-based Compensation

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

(14)

Share-Based Compensation

The Company issues share-based awards through several plans that are described in detail below.

Incentive Plan

In June 2003, the Company formally adopted the 2003 Incentive Plan (the “Plan”). As amended and restated to date, the Plan is intended to benefit the Company by offering equity-based and other incentives to certain of the Company’s executives and employees who are in a position to contribute to the long-term success and growth of the Company, thereby encouraging the continuance of their involvement with the Company and/or its subsidiaries.

Two types of equity awards may be granted to participants under the Plan: restricted shares or other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock. Such awards may include Restricted Stock Unit Awards (“RSUs”), incentive and non-qualified stock options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan.

Through December 31, 2024, 1,384,054 shares of common stock were issued under the 2003 Incentive Plan, none of which have been restricted. An additional 79,447 shares are being reserved for outstanding grants of RSUs and other share-based compensation that are subject to various performance and time-vesting contingencies. The Company has also granted awards in the form of stock options under this Plan. Through December 31, 2024, 192,935 options were granted and 7,935 options are outstanding. At December 31, 2024, 692,845 shares or options are available for future issuance in the 2003 Incentive Plan.

Director Plan

Effective July 15, 1998, the Company adopted the 1998 Director Plan, which was amended and renamed on June 3, 2009 as the 2009 Non-Employee Director Stock Incentive Plan (the “Director Plan”). The Director Plan was amended on March 7, 2013, to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii) prohibit the Company from buying out underwater stock options. The Director Plan was amended on June 8, 2022, to increase the maximum number of shares issuable under the Director Plan from 975,000 to 1,075,000. The Director Plan, as amended, provides for the issuance of stock options and other equity-based securities to non-employee members of the Company’s board of directors.

Through December 31, 2024, 407,980 options were granted, and 64,997 options are outstanding. For the year ended December 31, 2024, 1,380 RSUs are reserved for outstanding grants of RSUs and 119,687 shares remain available to be issued under the Director Plan.

Share-based compensation

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). Share-based compensation is included in selling, general & administrative expenses as follows (in thousands):

		Years Ended December 31,
Share-based compensation related to:		2024				2023				2022
Common stock grants		$	400			$	400			$	400
Stock option grants			485				432				263
RSUs			5,957				3,809				2,545
Total share-based compensation		$	6,842			$	4,641			$	3,208

The total income tax benefit recognized in the consolidated statements of comprehensive income for share-based compensation arrangements was approximately $2.4 million, $2.2 million, and $1.3 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Common stock grants

The compensation expense for common stock granted during the three-year period ended December 31, 2024, was determined based on the market price of the shares on the date of grant.

Stock option grants

The compensation expense for stock options granted during the three-year period ended December 31, 2024, was determined as the fair value of the options using the Black Scholes valuation model. The range of assumptions are noted as follows:

	Years Ended December 31,
	2024		2023		2022
Expected volatility	39.7%		36.6% - 40.6%		34.7%
Expected dividends	None		None		None
Risk-free interest rate	4.3%		3.6% - 3.9%		2.9%
Exercise price	$260.92		$111.54 - $167.98		$77.28
Expected term (years)	6.3		6.2 - 6.8		6.2
Weighted-average grant date fair value	$121.61		$37.81 - $71.17		$30.37

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option. The expected term is estimated based on historical option exercise activity.

The following is a summary of stock option activity for the year ended December 31, 2024:

		Shares Under Options				Weighted Average Exercise Price (per share)				Weighted Average Remaining Contractual Life (in years)				Aggregate Intrinsic Value (in thousands)

Outstanding December 31, 2023			78,488			$	57.14
Granted			2,958				260.92
Exercised			(8,214	)			41.35
Outstanding December 31, 2024			73,232			$	67.15				4.86			$	13,037
Exercisable at December 31, 2024			66,306			$	55.85				4.76			$	12,510
Vested and expected to vest at December 31, 2024			73,232			$	67.15				4.86			$	13,037

During the years ended December 31, 2024, 2023, and 2022, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was approximately $1.5 million, $3.0 million, and $1.2 million, respectively, and the amount of consideration received from the exercise of these options was approximately $0.2 million, $0.7 million, and $0.4 million, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the years ended December 31, 2024, 2023 and 2022, 653 shares, 861 shares and 1,876 shares were redeemed for this purpose at an average market price of $162.93, $127.05 and $95.82, respectively.

RSUs

The Company grants RSUs to its directors, executive officers and employees. The stock unit awards are subject to various time-based vesting requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing stock price, and is charged, to expense ratably over the requisite service period for time-based awards, and to expense utilizing the accelerated attribution method for performance-based awards. No compensation expense is taken on awards that do not become vested, and the amount of compensation expense recorded is adjusted based on management’s determination of the probability that these awards will become vested.

The following table summarizes informa‐tion about stock unit award activity during the year ended December 31, 2024:

		Restricted Stock Units				Weighted Average Award Date Fair Value
Outstanding at December 31, 2023			95,693			$	64.82
Awarded			36,311				174.80
Shares vested			(50,582	)			79.53
Forfeitures			(595	)			137.96
Outstanding at December 31, 2024			80,827			$	98.79

At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the years ended December 31, 2024, 2023 and 2022, 21,914 shares, 20,457 shares and 19,425 shares were redeemed for this purpose at an average market price of $216.80, $117.95 and $67.05, respectively.

The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through December 31, 2024, vest (in thousands):

		Restricted Stock Units				Options				Total
2025		$	3,807			$	174			$	3,981
2026			1,481				-				1,481
2027			116				-				116
Total		$	5,404			$	174			$	5,578