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Share-Based Compensation
 3 Months Ended
Mar. 31, 2012
Share-Based Compensation [Abstract]  
SHARE-BASED COMPENSATION

NOTE F—SHARE-BASED COMPENSATION

The 1999 Stock Option Plan

The 1999 Stock Option Plan (the “Plan”) permitted the grant of 300,000 options to buy common shares of the Company to certain employees at not less than fair market value of the shares on the date of grant. At March 31, 2012 there were no shares remaining to be issued under the plan. Options issued to date under the Plan vest 50% after one year following the date of the grant, 75% after two years, and 100% after three years and expire from five to ten years from the date of grant. Shares issued as a result of stock option exercises will be funded with the issuance of new shares.

The Company has elected to use the simplified method of calculating the expected term of the stock options and historical volatility to compute fair value under the Black-Scholes option-pricing model. The risk-free rate for periods within the contractual life of the option is based on the U.S. zero coupon Treasury yield in effect at the time of grant. Forfeitures have been estimated to be zero.

There were no shares granted for the three month periods ended March 31, 2012 and 2011.

Activity in the Plan for the three month period ended March 31, 2012 was as follows:

 

                                 
    Number of
Shares		     Weighted
Average
Exercise Price
per Share		     Weighted
Average
Remaining
Contractual
Term (Years)		     Aggregate
Intrinsic
Value		  

Outstanding at January 1, 2012

     49,907     $ 34.18                  

Granted

     —         —                    

Exercised

     —         —                    

Forfeited

     —         —                    
   

 

 

                          

Outstanding (vested and expected to vest) at March 31, 2012

     49,907     $ 34.39       4.3     $ 1,553  
   

 

 

                          

Exercisable at March 31, 2012

     47,782     $ 34.18       4.1     $ 1,497  
   

 

 

                          

There were zero and 1,500 stock options exercised during the three month period ended March 31, 2012 and 2011, respectively. The total intrinsic value of stock options exercised during the three month period ended March 31, 2011 was less than $.1 million. Cash received for the exercise of stock options during the three month period ended March 31, 2011 was $.1 million. Excess tax benefits from share-based awards for the three month period ended March 31, 2011 was $0.

 

For the three month periods ended March 31, 2012 and 2011, the Company recorded compensation expense related to the stock options currently vesting, reducing income before taxes and net income by less than $.1 million for each period. The total compensation cost related to nonvested awards not yet recognized at March 31, 2012 is expected to be less than $.1 million over a weighted-average period of .6 years.

Long Term Incentive Plan of 2008

Under the Preformed Line Products Company Long Term Incentive Plan of 2008 (the “LTIP”), certain employees, officers, and directors are eligible to receive awards of options and restricted shares. The purpose of this LTIP is to give the Company and its subsidiaries a competitive advantage in attracting, retaining, and motivating officers, employees, and directors and to provide an incentive to those individuals to increase shareholder value through long-term incentives directly linked to the Company’s performance. As of March 31, 2012, the total number of common shares reserved for awards under the LTIP is 900,000. Of the 900,000 common shares, 800,000 common shares have been reserved for restricted share awards and 100,000 common shares have been reserved for share options. The LTIP expires on April 17, 2018.

Restricted Share Awards

For all of the participants except the CEO, a portion of the restricted share award is subject to time-based cliff vesting and a portion is subject to vesting based upon the Company’s performance over a three year period. All of the CEO’s restricted shares are subject to vesting based upon the Company’s performance over a three year period.

The restricted shares are offered at no cost to the employees; however, the participant must remain employed with the Company until the restrictions on the restricted shares lapse. The fair value of restricted share awards is based on the market price of a common share on the grant date. The Company currently estimates that no awards will be forfeited. Dividends declared are accrued in cash dividends.

A summary of the restricted share awards under the LTIP for the three month period ended March 31, 2012 is as follows:

 

                                 
    Restricted Share Awards  
    Performance
and Service
Required		     Service
Required		     Total
Restricted
Awards		     Weighted-Average
Grant-Date
Fair Value		  

Nonvested as of January 1, 2012

     128,567       14,078       142,645     $ 37.75  

Granted

     41,627       4,588       46,215       61.52  

Vested

     —         —         —         —    

Forfeited

     —         —         —         —    
   

 

 

    

 

 

    

 

 

    

 

 

  

Nonvested as of March 31, 2012

     170,194       18,666       188,860     $ 43.57  
   

 

 

    

 

 

    

 

 

    

 

 

  

For time-based restricted shares, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award in general and administrative expense in the accompanying statement of consolidated income. Compensation expense related to the time-based restricted shares for the three month periods ended March 31, 2012 and 2011 was $.1 million for both periods. As of March 31, 2012, there was $.5 million of total unrecognized compensation cost related to time-based restricted share awards that is expected to be recognized over the weighted-average remaining period of approximately 2.2 years.

For the performance-based awards, the number of restricted shares that will vest depends on the Company’s level of performance measured by growth in pretax income and sales growth over a requisite performance period. Depending on the extent to which the performance criterions are satisfied under the LTIP, the participants are eligible to earn common shares over the vesting period. Performance-based compensation expense for the three month periods ended March 31, 2012 and 2011 was $.5 million for each period. As of March 31, 2012, the remaining performance-based restricted share awards compensation expense of $4.6 million is expected to be recognized over a period of approximately 2.2 years.

 

The excess tax benefits from restricted share awards for the three month periods ended March 31, 2012 and 2011 was $0 and less than $.1 million, as reported on the consolidated statements of cash flows in financing activities, and represent the reduction in income taxes otherwise payable during the period, attributable to the actual gross tax benefits in excess of the expected tax benefits for restricted shares vested in the current period.

In the event of a Change in Control, vesting of the restricted shares will be accelerated and all restrictions will lapse. Unvested performance-based awards are based on a maximum potential payout. Actual shares awarded at the end of the performance period may be less than the maximum potential payout level depending on achievement of performance-based award objectives.

To satisfy the vesting of its restricted share awards, the Company has reserved new shares from its authorized but unissued shares. Any additional awards granted will also be issued from the Company’s authorized but unissued shares. As of March 31, 2012, under the LTIP there were 483,319 common shares available for additional restricted share grants.

Deferred Compensation Plan

The Company maintains a trust, commonly referred to as a rabbi trust, in connection with the Company’s deferred compensation plan. This plan allows for two deferrals. First, Directors make elective deferrals of Director fees payable and held in the rabbi trust. The deferred compensation plan allows the Directors to elect to receive Director fees in shares of common stock of the Company at a later date instead of fees paid each quarter in cash. Assets of the rabbi trust are consolidated, and the value of the Company’s stock held in the rabbi trust is classified in Shareholders’ equity and generally accounted for in a manner similar to treasury stock. The Company recognizes the original amount of the deferred compensation (fair value of the deferred stock award at the date of grant) as the basis for recognition in common shares issued to the rabbi trust. Changes in the fair value of amounts owed to certain employees or Directors are not recognized as the Company’s deferred compensation plan does not permit diversification and must be settled by the delivery of a fixed number of the Company’s common shares. Second, this plan allows certain Company employees to defer LTIP restricted shares for future distribution in the form of common shares. As of March 31, 2012, 109,031 LTIP shares have been deferred and are being held by the rabbi trust.

Share Option Awards

The LTIP permits the grant of 100,000 options to buy common shares of the Company to certain employees at not less than fair market value of the shares on the date of grant. At March 31, 2012 there were 65,000 shares remaining available for issuance under the LTIP. Options issued to date under the LTIP vest 50% after one year following the date of the grant, 75% after two years, and 100% after three years and expire from five to ten years from the date of grant. Shares issued as a result of stock option exercises will be funded with the issuance of new shares.

The Company has elected to use the simplified method of calculating the expected term of the stock options and historical volatility to compute fair value under the Black-Scholes option-pricing model. The risk-free rate for periods within the contractual life of the option is based on the U.S. zero coupon Treasury yield in effect at the time of grant. Forfeitures have been estimated to be zero.

There were no options granted for the three month periods ended March 31, 2012 and 2011.

 

Activity in the Company’s LTIP for the three month period ended March 31, 2012 was as follows:

 

                                 
    Number of
Shares		     Weighted
Average
Exercise Price
per Share		     Weighted
Average
Remaining
Contractual
Term (Years)		     Aggregate
Intrinsic
Value		  

Outstanding at January 1, 2012

     27,000     $ 48.21                  

Granted

     —         —                    

Exercised

     —         —                    

Forfeited

     —         —                    
   

 

 

                          

Outstanding (vested and expected to vest) at March 31, 2012

     27,000     $ 48.21       9.1     $ 1,224  
   

 

 

                          

Exercisable at March 31, 2012

     7,500     $ 42.76       8.2     $ 171  
   

 

 

                          

There were no stock options exercised under the LTIP Plan during the three month periods ended March 31, 2012 and 2011. There were no excess tax benefits from share-based options for the three month periods ended March 31, 2012 and 2011.

For the three month periods ended March 31, 2012 and 2011, the Company recorded compensation expense related to the stock options currently vesting, reducing income before taxes and net income by $.1 million and less than $.1 million, respectively. The total compensation cost related to nonvested awards not yet recognized at March 31, 2012 is expected to be a combined total of $.3 million over a weighted-average period of approximately 2.4 years.