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Stock Compensation Plans
 12 Months Ended
Dec. 31, 2011
Stock Compensation Plans [Abstract]  
Stock Compensation Plans

Note 13 — Stock Compensation Plans

The Company’s 2009 Equity Compensation Plan (“Equity Plan”) provides for the grant of nonqualified and incentive stock options, stock awards and stock units to officers and employees of the Company. The Equity Plan also provides for the grant of option rights and restricted stock to non-employee directors. Under the Equity Plan, 500,000 shares of common stock were available to be awarded with no participant being granted more than 40,000 shares of common stock in any calendar year. The Equity Plan is administered by the Compensation Committee of the Board of Directors, or its designee, which as administrator of the plan, has the authority to select plan participants, grant awards, and determine the terms and conditions of the awards.

The Company has a Stock Performance Rights Plan (“SPR Plan”) that provides for the issuance of Stock Performance Rights that allow non-employee directors, officers and key employees to receive cash awards, subject to certain restrictions, equal to the appreciation of the Company’s common stock. The SPR Plan is administered by the Compensation Committee of the Board of Directors.

Service based awards

Service based awards require the participants to provide service to the Company over a fixed period of time. The Company has three award types that are based solely on a service condition: Stock Performance Rights (“SPRs”), Restricted Stock Awards (“RSAs”) and Restricted Stock Units (“RSUs”).

Stock Performance Rights

SPRs have a seven or ten year life and vest ratably over three years beginning on the first anniversary of the date of the grant. SPRs entitle the recipient to receive a cash payment equal to the excess of the market value of the Company’s common stock over the SPR exercise price when the SPRs are surrendered. Expense, equal to the fair market value of the SPR at the measurement date, is recorded ratably over the vesting period. Employees and non-employee directors who are retirement eligible, defined as age 65 or older, are permitted to retain their awards after retirement and exercise them during the remaining contractual life. All expense is recognized on the date of grant for SPRs granted to retirement eligible recipients. Compensation expense or benefit is included in Selling, general and administrative expense.

On December 31, 2011, the SPRs outstanding were re-measured at fair value using the Black-Scholes valuation model. This model requires the input of subjective assumptions that may have a significant impact on the fair value estimate. The weighted-average estimated value of SPRs outstanding as of December 31, 2011 was $3.91 per SPR using the Black-Scholes valuation model with the following assumptions:

 

    September 30,

Expected volatility

   50.7% to 74.4%

Risk-free rate of return

   0.1% to 0.5%

Expected term (in years)

   0.5 to 3.6

Expected annual dividend

   $0.48

The expected volatility was based on the historic volatility of the Company’s stock price commensurate with the expected life of the SPR. The risk-free rate of return reflects the interest rate offered for zero coupon treasury bonds over the expected life of the SPR. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using the simplified method allowed by the SEC due to insufficient historical data. The estimated annual dividend was based on the recent dividend payout trend.

A benefit of $1.1 million was recognized for the year ended December 31, 2011 as the overall decline in the fair value of the SPRs exceeded the amortization expense related to the unvested SPRs. Compensation expense of $0.8 million was recorded for the year ended December 31, 2010 and no expense or benefit was incurred in 2009 as the decrease in the SPRs value was offset by the amortization expense. No cash has been paid out for SPR exercises during the three year period ended December 31, 2011.

 

Activity related to the Company’s SPRs during the year ended December 31, 2011 was as follows:

 

      September 30,       September 30,  
     Number
of SPRs		     Weighted
Average
Exercise Price		  
     

Outstanding on December 31, 2010

     302,250     $ 27.54  

Cancelled

     (26,050 )      27.05  
   

 

 

          

Outstanding on December 31, 2011

     276,200       27.58  
   

 

 

          
     

Exercisable on December 31, 2011

     246,834     $ 28.78  
   

 

 

          

The SPRs outstanding had an immaterial intrinsic value as of December 31, 2011. Unrecognized compensation cost related to non-vested SPRs was $0.1 million at December 31, 2011, which will be recognized over a weighted average period of one year. During the year ended December 31, 2011, 56,333 SPRs with a fair value of $0.3 million vested. At December 31, 2011, the weighted average remaining contractual term was 5.1 years for all outstanding SPRs and also for the all exercisable SPRs.

Restricted Stock Awards

Restricted stock awards vest ratably over a one to three year period beginning on the first anniversary of the date of the grant. On each vesting date the vested restricted stock awards are exchanged for an equal number of the Company’s common stock. Common stock received by the participant cannot be transferred until either the end of the three year term or employment with the Company is terminated without cause. The participants have no voting or dividend rights with the restricted stock awards or the common shares received through vesting until the final vesting date unless they leave the Company without cause. The restricted stock awards are valued at the closing price of the common stock on the date of grant and the expense is recorded ratably over the vesting period.

Activity related to the Company’s RSAs during the year ended December 31, 2011 was as follows:

 

      September 30,  
     Restricted Stock
Awards		  
   

Outstanding on December 31, 2010

     59,765  

Granted

     52,149  

Exchanged for common shares

     (46,719 ) 

Cancelled

     (1,805 ) 
   

 

 

  

Outstanding on December 31, 2011

     63,390  
   

 

 

  

An expense of $0.7 million and $0.5 million was recorded in Selling, general and administrative expenses in 2011 and 2010, respectively. As of December 31, 2011, there was $0.6 million of total unrecognized compensation cost related to RSAs that will be recognized over a weighted average period of 1.2 years. The awards granted in 2011 had a weighted average grant date fair value of $19.78 per share.

Restricted Stock Units

RSUs can be exchanged for either the Company’s common stock or the equivalent value in cash on the vesting date. In April, 2010 the Company issued 30,944 RSUs which vested in April 2011. All of the vested RSUs were exchanged for cash in the amount of $0.7 million. An expense of $0.2 million and $0.5 million was recorded in Selling, general and administrative expenses in 2011 and 2010, respectively. As of December 31, 2011, there were no outstanding RSUs.

Performance based awards

The Company has three Long-Term Incentive Plans. One plan was established for both the Company’s Senior Executive Officers and the Company’s Vice Presidents covering the 2011 to 2013 performance period (“2011 LTIP”) and two plans covering the 2010 to 2012 performance period; one for the Senior Executive Officers (“2010 SEO LTIP”) and one for the Company’s Vice Presidents (“2010 VP LTIP”). Awards under these plans are contingent on the level of financial performance of the Company over the performance period compared to pre-established targets. An expense of $0.2 million and $0.4 million for performance based awards for 2011 and 2010, respectively, was included in Selling, general and administrative expense.

 

2011 LTIP

The performance based portion of the 2011 LTIP will be awarded in cash at the end of the three year period. The 2011 LTIP also includes an RSA component based on service only. These RSAs have been included in the Service Awards Based section above.

2010 SEO LTIP

Participants in the 2010 SEO LTIP can earn one-third of the total target award if the financial performance of the Company exceeds the established threshold levels for each year. At the end of the three-year performance period, the average actual results for the three years will be determined and the achievement calculated as a percent of the average annual goals for the entire performance period. The award for each fiscal year will then be adjusted based on the average annual results achieved. If a certain minimum performance level is not attained for the three year period, no award will be earned for any of the three years.

Under the terms of the 2010 SEO LTIP, at the end of the three year period, one half of the amount earned is payable in cash and one half is payable in the Company’s common stock. The maximum amount of stock that could be issued, assuming the December 31, 2012 closing price of the stock remained at the December 31, 2011 closing price of $15.43 would be 81,772 shares.

2010 VP LTIP

Participants in the 2010 VP LTIP can earn one-third of the total target award if the financial performance of the Company exceeds the established threshold levels for each year. The 2010 VP LTIP is payable one half in restricted stock and one half in non-qualified stock options. As of December 31, 2011, there were 13,112 shares of restricted stock and 27,661 non-qualified stock options with a weighted average exercise price of $14.05 outstanding that represents the maximum amount that can be earned by the participants over the three year period. These amounts may be reduced based on the Company’s financial performance over the upcoming years.

A portion of the total 2010 VP LTIP can be earned each year; 30% in 2010, 30% in 2011 and 40% in 2012. The awards are earned each year and vest at the end of the three year period. If certain minimum performance levels are not attained in any given year, no award will be earned that year.