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Note 14 - Employee Benefits | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Compensation and Employee Benefit Plans [Text Block] | 1 4 . Employee Benefits Equity Incentive Plans - In May 2015, our stockholders approved our 2015 Equity Incentive Plan (the “2015 Plan”). Our Board of Directors adopted the 2015 Plan in March 2015. Under our 2015 Plan, all of our employees and any subsidiary employees, as well as all of our non-employee directors, may be granted stock-based awards, including non-statutory stock options, performance unit awards and shares of common stock, of which 998,022 shares have been awarded as of December 31, 2018. Stock options expire within 7 or 10 years after the date of grant and the exercise price must be at least the fair market value of our common stock on the date of grant. Stock options issued to employees are generally exercisable beginning one year from the date of grant in cumulative amounts of 20% per year. Performance unit awards are subject to vesting requirements over a five -year period, primarily based on our earnings growth. Options exercised and performance unit award shares issued represent newly issued shares. The maximum number of shares of common stock available for issuance under the 2015 Plan is 1,333,333 shares. As of December 31, 2018, there were 568,873 shares reserved for issuance under options outstanding and 349,814 shares reserved for issuance under outstanding performance unit awards under the 2015 Plan. The 2015 Plan replaces our 2005 Stock Incentive Plan (the “2005 Plan”), which expired by its terms in May 2015. Under the 2005 Plan, officers, directors and employees were granted non-statutory stock options and performance unit awards with similar terms to the options and awards under the 2015 Plan. As of December 31, 2018, there were 370,320 shares reserved for issuance under options outstanding, which will continue according to their terms. As of the same date, there were no shares reserved for issuance under outstanding performance unit awards under the 2005 Plan. No additional awards will be granted under the 2005 Plan. We use the Black-Scholes option pricing model to calculate the grant-date fair value of option awards. The fair value of service-based option awards granted was estimated as of the date of grant using the following weighted average assumptions:
|  | 201 8 |  |  | 2017 |  |  | 2016 |
Expected option life in years (1) |  |  | 6.0 |  |  |  | 6.0 |  |  |  | 6.0 |
Expected stock price volatility percentage (2) |  |  | 26 | % |  |  | 25 | % |  |  | 25 | %
Risk-free interest rate percentage (3) |  |  | 2.8 | % |  |  | 2.0 | % |  |  | 1.4 | %
Expected dividend yield (4) |  |  | 0.48 | % |  |  | 0.59 | % |  |  | 0.50 | %
Fair value as of the date of grant |  | $ | 6.19 |  |  | $ | 4.34 |  |  | $ | 3.17 |
( 1 ) | Expected option life – We use historical employee exercise and option expiration data to estimate the expected life assumption for the Black-Scholes grant-date valuation. We believe that this historical data is currently the best estimate of the expected term of a new option. We use a weighted-average expected life for all awards.
( 2 ) | Expected stock price volatility – We use our stock’s historical volatility for the same period of time as the expected life. We have no reason to believe that its future volatility will differ from the past.
( 3 ) | Risk-free interest rate – The rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the same period of time as the expected life.
( 4 ) | Expected dividend yield – The calculation is based on the total expected annual dividend payout divided by the average stock price.
Compensation costs associated with service-based option awards with graded vesting are recognized, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period, which is the period between the grant date and the award’s stated vesting term. Service-based option awards become immediately exercisable in full in the event of death or disability and upon a change in control with respect to all options that have been outstanding for at least six months. In May 2012, we granted 98,750 performance unit awards under our 2005 Stock Incentive Plan to certain employees. This was our third grant of such awards. As of December 31, 2012 and each December 31 st thereafter through December 31, 2016, each award vested and became the right to receive a number of shares of common stock equal to a total vesting percentage multiplied by the number of units subject to such award. The total vesting percentage for each of the five years was equal to the sum of a performance vesting percentage, which was the percentage increase, if any, in our diluted net income per share for the year being measured over the prior year, and a service vesting percentage of five percentage points. All payments were made in shares of our common stock. One half of the vested performance units were paid to the employees immediately upon vesting, with the other half being credited to the employees’ accounts within the Marten Transport, Ltd. Deferred Compensation Plan, which restricts the sale of vested shares to the later of each employee’s termination of employment or attainment of age 62. In May 2013, we granted 104,250 performance unit awards with similar terms to the awards previously granted, and which vested from December 31, 2013 through 2017. In May 2014, we granted 60,668 performance unit awards with similar terms to the awards previously granted, and also granted 18,337 performance unit awards with similar terms to such awards, except that all vested performance units will be paid to the employees immediately upon vesting. All awards granted in 2014 vested from December 31, 2014 through 2018. In May 2015, we granted 58,335 performance unit awards under our 2015 Equity Incentive Plan with similar terms to the awards previously granted, and also granted 32,500 performance unit awards with similar terms to such awards, except that all vested performance units will be paid to the employees immediately upon vesting. All awards granted in 2015 vest from December 31, 2015 through 2019. In May 2016, we granted 57,669 performance unit awards under our 2015 Equity Incentive Plan with similar terms to the awards previously granted, except that the calculation of vesting shares is based on our increase in net income instead of our increase in diluted net income per share. As permitted in the performance unit award agreements granted in 2011 through 2015, the calculation of the performance vesting component beginning with the year 2015 was adjusted to be based on the increase in net income. We also granted 21,671 performance unit awards in May 2016 and 1,667 awards in August 2016 with similar terms to such awards, except that all vested performance units will be paid to the employees immediately upon vesting. All awards granted in 2016 vest from December 31, 2016 through 2020. In May 2017, we granted 109,169 performance unit awards under our 2015 Equity Incentive Plan with similar terms to the awards granted in 2016, except that the service-based component was increased from five percent to ten percent per year. The Compensation Committee adjusted the equity vesting formula to better align it with our long-range growth plan. We also granted 43,342 performance unit awards in May 2017 and 2,000 awards in August 2017 with similar terms to such awards, except that all vested performance units will be paid to the employees immediately upon vesting. All awards granted in 2017 vest from December 31, 2017 through 2021. In May 2018, we granted 45,700 performance unit awards under our 2015 Equity Incentive Plan with similar terms to the awards granted in 2017. We also granted 28,000 performance unit awards in May 2018 and 2,000 awards in August 2018 with similar terms to such awards, except that all vested performance units will be paid to the employees immediately upon vesting. These awards granted in 2018 vest from December 31, 2018 through 2022. We also granted 2,000 performance unit awards in December 2018 with similar terms to the awards granted in August 2018, except that the awards vest from December 31, 2019 through 2023. The fair value of each performance unit is based on the closing market price on the date of grant. We recognize compensation expense for these awards based on the estimated number of units probable of achieving the vesting requirements of the awards, net of an estimated forfeiture rate. The amount of share-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We currently expect, based on an analysis of our historical forfeitures and known forfeitures on existing awards, that approximately 1.25% of unvested outstanding awards will be forfeited each year. This analysis will be re-evaluated quarterly and the forfeiture rate will be adjusted as necessary. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest. Total share-based compensation expense recorded in 2018 was $3.3 million ( $2.6 million net of income tax benefit, $0.05 earnings per basic and diluted share), in 2017 was $1.3 million ( $738,000 net of income tax benefit, $0.01 of earnings per basic and diluted share), and in 2016 was $883,000 ( $547,000 net of income tax benefit, $0.01 of earnings per basic and diluted share). All share-based compensation expense was recorded in salaries, wages and benefits expense. As of December 31, 2018, there was a total of $1.6 million of unrecognized compensation expense related to unvested service-based option awards, which is expected to be recognized over a weighted-average period of 3.2 years, and $2.4 million of unrecognized compensation expense related to unvested performance unit awards, which will be recorded based on the estimated number of units probable of achieving the vesting requirements of the awards through 2022. Effective January 1, 2017, we adopted the provisions of FASB ASU No. 2016 - 09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting” which simplifies several aspects of the accounting for share-based payment transactions. The adoption of this standard resulted in decreases to our provision for income taxes in 2018 of $319,000 and in 2017 of $176,000, as the actual increase in our stock price exceeded the grant-date fair value of the period’s exercised options and vested performance unit awards. Excess tax benefits were recognized in additional paid-in capital through 2016. Option activity in 2018 was as follows:
|  | Shares |  |  | Weighted Average Exercise Price |
Outstanding at December 31, 2017 |  |  | 918,583 |  |  | $ | 12.02 |
Granted |  |  | 154,500 |  |  |  | 21.26 |
Exercised |  |  | (105,588 | ) |  |  | 8.91 |
Forfeited |  |  | (28,302 | ) |  |  | 15.66 |
Outstanding at December 31, 2018 |  |  | 939,193 |  |  | $ | 13.78 |
Exercisable at December 31, 2018 |  |  | 545,713 |  |  | $ | 11.49 |
The 939,193 options outstanding as of December 31, 2018 have a weighted average remaining contractual life of 3.8 years and an aggregate intrinsic value based on our closing stock price on December 31, 2018 for in-the-money options of $3.0 million. The 545,713 options exercisable as of the same date have a weighted average remaining contractual life of 2.7 years and an aggregate intrinsic value similarly calculated of $2.6 million. The fair value of options granted in 2018, 2017 and 2016 was $957,000, $592,000 and $227,000, respectively, for service-based options. The total intrinsic value of options exercised in 2018, 2017 and 2016 was $1.5 million, $830,000 and $1.9 million, respectively. Intrinsic value is the difference between the fair value of the acquired shares at the date of exercise and the exercise price, multiplied by the number of options exercised. Proceeds received from option exercises in 2018, 2017 and 2016 were $938,000, $1.1 million and $4.4 million, respectively. Nonvested service-based option awards as of December 31, 2018 and changes during 2018 were as follows:
|  | Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Weighted Average Remaining Contractual Life (in Years) |
Nonvested at December 31, 2017 |  |  | 413,228 |  |  | $ | 3.79 |  |  |  | 5.1 |
Granted |  |  | 154,500 |  |  |  | 6.19 |  |  |  | 6.7 |
Vested |  |  | (146,546 | ) |  |  | 3.73 |  |  |  | 3.4 |
Forfeited |  |  | (27,702 | ) |  |  | 4.26 |  |  |  | 5.1 |
Nonvested at December 31, 2018 |  |  | 393,480 |  |  | $ | 4.72 |  |  |  | 5.2 |
The total fair value of options which vested during 2018, 2017 and 2016 was $547,000, $515,000 and $534,000, respectively. The following table summarizes our nonvested performance unit award activity in 2018:
|  | Shares |  |  | Weighted Average Grant Date Fair Value |
Nonvested at December 31, 2017 |  |  | 322,662 |  |  | $ | 13.32 |
Granted |  |  | 77,700 |  |  |  | 20.31 |
Vested |  |  | (182,481 | ) | (1) |  | 14.55 |
Forfeited |  |  | (31,973 | ) |  |  | 13.81 |
Nonvested at December 31, 2018 |  |  | 185,909 |  |  | $ | 14.89 |
( 1 ) | This number of performance unit award shares vested based on our financial performance in 2018 and was distributed or credited to the Marten Transport, Ltd. Deferred Compensation Plan in February 2019. As permitted in the performance unit award agreements granted in 2014 and 2015, the Compensation Committee of our Board of Directors adjusted the calculation of the performance vesting component for 2018 to be based on our increase in net income instead of our increase in diluted net income per share. Additionally, the $56.5 million deferred income taxes benefit in 2017 related to the federal Tax Cuts and Jobs Act of 2017 was excluded from the calculation of the increase in net income from 2017 to 2018. The calculation of the increase in net income also included an adjustment of 2017 net income to reflect a federal income tax rate of 21% instead of 35%, to be consistent with the federal rate in 2018. The fair value of unit award shares that vested in 2018 was $2.7 million.
Retirement Savings Plan - We sponsor a defined contribution retirement savings plan under Section 401 (k) of the Internal Revenue Code. Employees are eligible for the plan after three months of service. Participants are able to contribute up to the limit set by law, which in 2018 was $18,500 for participants less than age 50 and $24,500 for participants age 50 and above. We contribute 35% of each participant’s contribution, up to a total of 6% contributed. Our contribution vests at the rate of 20% per year for the first through fifth years of service. In addition, we may make elective contributions as determined by the Board of Directors. No elective contributions were made in 2018, 2017 or 2016. Total expense recorded for the plan was $2.3 million in 2018 and $2.1 million in each of 2017 and 2016. Stock Purchase Plans - An Employee Stock Purchase Plan and an Independent Contractor Stock Purchase Plan are sponsored to encourage employee and independent contractor ownership of our common stock. Eligible participants specify the amount of regular payroll or contract payment deductions and voluntary cash contributions that are used to purchase shares of our common stock. The purchases are made at the market price on the open market. We pay the broker’s commissions and administrative charges for purchases of common stock under the plans.

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 712 -URI http://asc.fasb.org/topic&trid=2197446 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 715 -URI http://asc.fasb.org/topic&trid=2235017 + Details
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