11. Stock Based Compensation—The Company accounts for stock-based awards to employees and directors in accordance with FASB ASC 718, “Share-Based Payment,” which requires the measurement and recognition of compensation for all share-based payment awards made to employees and directors including shares of common stock granted for services, employee stock options, and employee stock purchases related to the Employee Stock Purchase Plan (“employee stock purchases”) based on estimated fair values.

The below tables illustrate the Company’s stock based compensation, unamortized stock-based compensation, and remaining weighted average period for the three months and nine months ended September 30, 2015 and 2014.


	Stock-Based Compensation for the Three months ended		Stock-Based Compensation for the Nine months ended		Unamortized Stock-Based Compensation		Remaining Weighted Average Period (years)
September 30, 2015
Incentive Stock Options	$	94	$	325	$	1,009		2.3
Restricted Stock		334		2,296		2,751		1.5
Performance Based Restricted Stock		18		222		686		1.8
Performance Based Options		12		100		373		2.2

Total	$	458	$	2,943	$	4,819


September 30, 2014
Incentive Stock Options	$	—	$	21	$	—		—
Restricted Stock		1,139		2,958		6,069		1.9
Performance Based Restricted Stock		101		67		1,404		2.4

Total	$	1,240	$	3,046	$	7,473

Stock Options—During the nine months ended September 30, 2015, the Company did not grant any employees options to acquire shares of common stock.

Option activity within each plan is as follows:


	Incentive Stock Option Plans			Weighted Average Price Per Share		Exercisable Weighted Average Price Per Share
Balance outstanding, December 31, 2014		724,904		$	9.22	$	7.82
Options exercised, $7.50		(16,650	)		7.50
Options forfeited, $11.49 and $13.24		(10,400	)		11.49

Balance outstanding, March 31, 2015		697,854		$	9.21	$	7.71
Options exercised, $7.50		(34,800	)		7.50
Options forfeited, $11.49		(2,481	)		11.49

Balance outstanding, June 30, 2015		660,573		$	9.29	$	7.72
Options exercised, $7.50		(4,000	)		7.50
Options forfeited, $11.49		(22,582	)		11.49

Balance outstanding, September 30, 2015		633,991		$	9.25	$	7.73

Information relating to stock options at September 30, 2015 summarized by exercise price is as follows:


	Outstanding Weighted Average						Exercisable Weighted Average
Exercise Price Per Share	Shares		Remaining Life (Months)		Exercise Price		Shares		Exercise Price
Incentive Stock Option Plan:
$7.50		361,750		62	$	7.50		361,750	$	7.50
$11.32—$11.49		272,241		107	$	11.56		16,679	$	12.69

		633,991			$	9.25		378,429	$	7.73

The weighted average exercise prices for options granted and exercisable and the weighted average remaining contractual life for options outstanding as of September 30, 2015 was as follows:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
As of September 30, 2015:
Incentive Stock Option Plans:
Outstanding		633,991	$	9.25		82	$	1,489
Expected to Vest		623,148	$	9.21		81	$	1,488
Exercisable		378,429	$	7.73		62	$	1,471

During the three months ended September 30, 2015 and 2014, the Company recognized stock-based compensation related to stock options of $94 and $0, respectively. During the nine months ended September 30, 2015 and 2014, the Company recognized stock-based compensation related to stock options of $325 and $21, respectively.

As of September 30, 2015, the Company had approximately $1,009 of unamortized stock-based compensation related to unvested stock options outstanding. This amount will be recognized over the weighted-average period of 2.3 years. This projected expense will change if any stock options are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.

Restricted Shares—A status summary of non-vested shares as of and for the nine months ended September 30, 2015 and 2014 is presented below:


	Nine Months Ended September 30, 2015					Nine Months Ended September 30, 2014
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested shares at January 1^st		560,842		$	21.44		376,702		$	24.85
Granted		30,000			11.42		—			—
Vested		(192,266	)		20.47		(1,000	)		31.83
Forfeited		(422	)		14.92		(1,840	)		24.23

Nonvested shares at March 31^st		398,154		$	21.17		373,862		$	24.83
Granted		21,005			14.28		240,724			14.81
Vested		(28,505	)		13.53		(23,478	)		13.84
Forfeited		(1,201	)		14.92		—			—

Nonvested shares at June 30^th		389,453		$	21.37		591,108		$	21.19
Granted		13,196			12.88		—			—
Vested		(19,000	)		27.93		(4,000	)		12.16
Forfeited		(26,723	)		22.64		(6,104	)		14.92

Nonvested shares at September 30^th		356,926		$	20.62		581,004		$	21.32

Restricted stock grants — During the nine months ended September 30, 2015, the Company granted a total of 64,201 shares of common stock. Of these, 21,005 shares vest immediately, 7,500 shares will vest after 90 days from date of grant, 3,196 shares will vest one-third each year on the anniversaries of the employee’s employment date and the balance will cliff vest after three years of service. The shares granted in 2015 were average fair valued at $12.66 per share. The fair value was determined by using the publicly traded share price as of the date of grant. The Company is recognizing as expense the value of restricted shares over the required service period.

During the nine months ended September 30, 2014, the Company granted a total of 240,724 shares of common stock. Of these, 23,478 shares vest immediately, and the balance will cliff vest after three years of service. The shares granted in 2014 were average fair valued at $14.81 per share. The fair value was determined by using the publicly traded share price as of the date of grant. The Company is recognizing as expense the value of restricted shares over the required service period.

During the three months ended September 30, 2015 and 2014, the Company recognized stock-based compensation related to restricted shares of $334 and $1,139, respectively. During the nine months ended September 30, 2015 and 2014, the Company recognized stock-based compensation related to restricted shares of $2,296 and $2,958, respectively.

As of September 30, 2015 and 2014, the Company had approximately $2,751 and $6,069, respectively, of unamortized stock-based compensation related to unvested restricted shares. This amount will be recognized over the weighted-average period of 1.5 and 1.9 years, respectively. This projected expense will change if any restricted shares are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.

Performance Based Shares—A summary of non-vested performance based shares as of and for the nine months ended September 30, 2015 and 2014 is presented below:


	Nine Months Ended September 30, 2015					Nine Months Ended September 30, 2014
	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Nonvested shares at January 1^st		103,907		$	17.77		24,637	$	28.28
Granted		7,500			10.96		—		—

Nonvested shares at March 31^st		111,407		$	17.31		24,637	$	28.28
Granted		—			—		79,270		14.51
Nonvested shares at June 30^th		111,407		$	17.31		103,907	$	17.77
Granted		3,196			12.37		—		—
Forfeited		(10,200	)		18.43		—		—

Nonvested shares at September 30^th		104,403		$	17.05		103,907	$	17.77

Performance Based Shares — During the nine months ended September 30, 2015, the Company granted a total of 10,696 performance based shares. Of these, 7,500 shares will cliff vest on January 5, 2018 with a measurement period commencing January 1, 2015 and ending December 31, 2017 and 3,196 shares will cliff vest on August 1, 2018 with a measurement period commencing July 1, 2015 and ending June 30, 2018, provided that the recipient is continuously employed by the Company during the vesting period. Eighty percent of these performance based shares are based upon financial performance of the Company, specifically, an earnings before income tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30%. The remaining 20% of performance based shares are based upon AVD stock price appreciation over the same performance measurement period. The EBIT and net sales goals measure the relative growth of the Company’s EBIT and net sales for the performance measurement period, as compared to the median growth of EBIT and net sales for an identified peer group. The stockholder return goal measures the relative growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that of the Russell 2000 Index and the median fair market value of the common stock of the comparator companies, identified in the Company’s 2015 Proxy Statement. All parts of these awards vest in three years, but are subject to reduction to a minimum (or even zero) for meeting less than the targeted performance and to increase to a maximum of 200% for meeting in excess of the targeted performance.

During the nine months ended September 30, 2014, the Company granted a total of 79,270 performance based shares that will cliff vest on May 23, 2017, provided that recipient is continuously employed by the Company during the vesting period. Of these performance based shares, 80% are based upon financial performance of the Company, specifically, an earnings before interest and tax (“EBIT”) goal weighted at 50% and a net sales goal weighted at 30% for the period commencing April 1, 2014 and ending December 31, 2016; the remaining 20% of performance based shares are based upon AVD stock price appreciation (shareholder return) over the same performance measurement period. The net sales and EBIT goal measures the relative growth of the Company’s net sales and EBIT for the performance measurement period, as compared to the median growth of net sales and EBIT for an identified peer group. The stockholder return goal measures the relative growth of the fair market value of the Company’s stock price over the performance measurement period, as compared to that of the Russell 2000 Index and the median fair market value of the common stock of the comparator companies. All parts of these awards vest in three years, but are subject to reduction to a minimum (or even zero) for meeting less than the targeted performance and to increase to a maximum of 200% for meeting in excess of the targeted performance.

As of September 30, 2015, performance based shares related to net income and net sales have an average fair value of $11.86 per share. The fair value was determined by using the publicly traded share price as of the date of grant. The performance based shares related to the Company’s stock price have an average fair value of $9.48 per share. The fair value was determined by using the Monte Carlo valuation method. For awards with performance conditions, the Company recognizes share-based compensation cost on a straight-line basis for each performance criteria over the implied service period.

During the three months ended September 30, 2015 and 2014, the Company recognized stock-based compensation related to performance based shares of $18 and $101, respectively.

During the nine months ended September 30, 2015, the Company recognized stock-based compensation related to performance based shares of $222. During the nine months ended September 30, 2014, the Company recognized stock-based compensation related to performance based shares of $67.

As of September 30, 2015, the Company had approximately $686 of unamortized stock-based compensation related to unvested performance based shares. This amount will be recognized over the weighted-average period of 1.8 years. This projected expense will change if any performance based shares are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.

Performance Incentive Stock Options—During the nine months ended September 30, 2015 and 2014, the Company did not grant any employees performance incentive stock options to acquire shares of common stock.

Performance option activity is as follows:


	Incentive Stock Option Plans			Weighted Average Price Per Share		Exercisable Weighted Average Price Per Share
Balance outstanding, December 31, 2014		107,689		$	11.49	$	—
Options forfeited, $11.49		(9,279	)		11.49

Balance outstanding, September 30, 2015		98,410		$	11.49	$	—

Information relating to outstanding stock options at September 30, 2015 summarized by exercise price is as follows:


	Outstanding Weighted Average						Exercisable Weighted Average
Exercise Price Per Share	Shares		Remaining Life (Months)		Exercise Price		Shares		Exercise Price
Performance Incentive Stock Option Plan:
$11.49		98,410		27	$	11.49		—	$	—

		98,410			$	11.49		—	$	—

The weighted average exercise prices for options granted and exercisable and the weighted average remaining contractual life for options outstanding as of September 30, 2015 are as follows:


	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Months)		Intrinsic Value (thousands)
As of September 30, 2015:
Incentive Stock Option Plans:
Outstanding		98,410	$	11.49		27	$	7
Expected to Vest		54,692	$	11.49		27	$	4
Exercisable		—	$	—		—	$	—

During the three months ended September 30, 2015 the Company recognized stock-based compensation related to performance stock options of $12. There were no performance incentive stock options issued by the Company prior to those issued during the quarter ended December 31, 2014.

During the nine months ended September 30, 2015 the Company recognized stock-based compensation related to performance stock options of $100. There were no performance incentive stock options issued by the Company prior to those issued during the quarter ended December 31, 2014.

As of September 30, 2015, the Company had approximately $373 of unamortized stock-based compensation related to unvested performance incentive stock options outstanding. This amount will be recognized over the weighted-average period of 2.2 years. This projected expense will change if any performance incentive stock options are granted or cancelled prior to the respective reporting periods or if there are any changes required to be made for estimated forfeitures.