Note 14 - Stock-Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 14 — STOCK-BASED COMPENSATION

The Company makes an estimate of expected forfeitures and recognizes compensation costs only for those stock-based awards expected to vest. As of December 31, 2013, the total future compensation cost related to unvested stock-based awards that are expected to vest is $10,258,000, which amount will be recognized over a weighted average period of 1.4 years.

During the years ended December 31, 2013, 2012 and 2011, the Company recorded compensation related to stock-based awards as follows:

	Year Ended December 31,
	2013		2012		2011
	(Dollars in thousands)
Cost of revenues	$	3,971	$	4,225	$	4,325
Selling and marketing expenses		494		542		600
General and administrative expenses		1,799		1,611		1,747
Total stock-based compensation expense		6,264		6,378		6,672
Tax effect on stock-based compensation expense		783		797		834
Net effect of stock-based compensation expense	$	5,481	$	5,581	$	5,838

During the third and fourth quarters of 2013, the Company evaluated the trends in the stock-based award forfeiture rate and determined that the actual rates are 7.5% and 7.2%, respectively. This represents an increase of 1.1% and 0.8%, respectively from the estimate made in the third quarter of 2012. As a result of the increase in the estimated forfeiture rate, the stock based compensation expense decreased by an immaterial amount.

Valuation assumptions

The fair value of each grant of stock-based awards is estimated using the Black-Scholes valuation model and the assumptions noted in the following table. The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding. In the absence of enough historical information, the expected term was determined using the simplified method giving consideration to the contractual term and vesting schedule. Since the Company does not have any traded stock-based award and was listed for trading on the New York Stock Exchange beginning in November 2004, the Company’s expected volatility was calculated based on the Company’s historical volatility and for the period of time prior to the Company’s listing, the historical volatility of the Parent. There is a high correlation between the stock behavior of the Company and its Parent. The dividend yield forecast is expected to be 20% of the Company’s yearly net profit, which is equivalent to a 0.0% yearly weighted average dividend rate in the year ended December 31, 2013. The risk-free interest rate was based on the yield from U.S. constant treasury maturities bonds with an equivalent term. The forfeiture rate is based on trends in actual stock-based awards forfeitures.

The Company calculated the fair value of each stock-based award on the date of grant based on the following assumptions:

	Year Ended December 31,
	2013			2012			2010
For stock options issued by the Company:
Risk-free interest rates		0.8	%		1.0	%		2.2	%
Expected lives (in years)		4.6			5.0			5.1
Dividend yield		0.71	%		0.81	%		0.80	%
Expected volatility		37.8	%		47.2	%		46.4	%
Forfeiture rate		5.6	%		6.4	%		7.5	%

Stock-based awards

The 2004 Incentive Compensation Plan

In 2004, the Company’s Board of Directors adopted the 2004 Incentive Compensation Plan (“2004 Incentive Plan”), which provides for the grant of the following types of awards: incentive stock options, non-qualified stock options, restricted stock, stock appreciation rights (“SARs”), stock units, performance awards, phantom stock, incentive bonuses, and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the 2004 Incentive Plan, a total of 3,750,000 shares of the Company’s common stock have been reserved for issuance, all of which could be issued as options or as other forms of awards. Options and SARs granted to employees under the 2004 Incentive Plan cliff vest and are exercisable from the grant date as follows: 25% after 24 months, 25% after 36 months, and the remaining 50% after 48 months. Options granted to non-employee directors under the 2004 Incentive Plan cliff vest and are exercisable one year after the grant date. Vested shares may be exercised for up to ten years from the date of grant. The shares of common stock will be issued upon exercise of options or SARs from the Company’s authorized share capital. The 2004 Incentive Plan expired in May 2012 upon adoption of the 2012 Incentive Plan, except as to share based awards outstanding on that date.

The 2012 Incentive Compensation Plan

In May 2012, the Company’s shareholders adopted the 2012 Incentive Compensation Plan (“2012 Incentive Plan”), which provides for the grant of the following types of awards: incentive stock options, non-qualified stock options, restricted stock, SARs, stock units, performance awards, phantom stock, incentive bonuses, and other possible related dividend equivalents to employees of the Company, directors and independent contractors. Under the 2012 Incentive Plan, a total of 4,000,000 shares of the Company’s common stock have been reserved for issuance, all of which could be issued as options or as other forms of awards. Options and SARs granted to employees under the 2012 Incentive Plan will vest and become exercisable as follows: 25% vest 24 months after the grant date, an additional 25% vest 36 months after the grant date, and the remaining 50% vest 48 months after the grant date. Options granted to non-employee directors under the 2012 Incentive Plan will vest and become exercisable one year after the grant date. Vested stock-based awards may be exercised for up to ten years from the date of grant. The shares of common stock will be issued upon exercise of options or SARs from the Company’s authorized share capital.

The 2012 Incentive Plan empowers our Board of Directors, in its discretion, to amend the 2012 Incentive Plan in certain respects. Consistent with its authority to amend the Incentive Plan, in February 2014 the Board adopted and approved certain amendments to the Incentive Plan. The key amendments are as follows:

Increase of per grant limit: Section 15(a) of the 2012 Incentive Plan was amended to allow the grant of up to 400,000 shares of our common stock with respect to the initial grant of an equity award to newly hired executive officers in any calendar year. This amendment will become void if not adopted by our stockholders by May 31, 2014; and

Acceleration of vesting: Section 15(l) of the 2012 Incentive Plan was amended to clarify our ability to provide in the applicable award agreement that part and/or all of the award will be accelerated upon the occurrence of certain pre-determined events and/or conditions, such as a "change in control" (as defined in the 2012 Incentive Plan, as amended).

	Year Ended December 31,
	2013					2012					2011
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at beginning of year		3,563		$	30.09		2,934		$	32.40		2,335		$	34.35
Granted, at fair value:
Stock Options		45			26.70		75			19.01		30			19.10
SARs*		1,270			23.08		602			20.13		622			25.65
Exercised		(39	)		16.89		—			—		—			—
Forfeited		(114	)		30.04		(48	)		28.92		(53	)		31.69
Expired		(15	)		37.90		—			—		—			—
Outstanding at end of year		4,710			28.23		3,563			30.09		2,934			32.40
Options and SARs exercisable at end of year		2,123			33.82		1,592			36.61		1,086			37.46
Weighted-average fair value of options and SARs granted during the year				$	6.66				$	7.25				$	9.69

* Upon exercise, SARs entitle the recipient to receive shares of common stock equal to the increase in value of the award between the grant date and the exercise date.

As of December 31, 2013, 2,609,900 shares of the Company’s common stock are available for future grants under the 2012 Incentive Plan. No shares of the Company’s common stock are available for future grants under the 2004 Incentive Plan as of such date.

The following table summarizes information about stock-based awards outstanding at December 31, 2013 (shares in thousands):

		Options Outstanding						Options Exercisable
Exercise Price		Number of Shares Outstanding		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value		Number of Shares Exercisable		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
						(Dollars in thousands)						(Dollars in thousands)
$	15.00		21		0.8	$	258		21		0.8	$	258
	18.56		45		5.8		389		45		5.8		389
	19.10		23		4.8		182		23		4.8		182
	19.69		26		5.6		197		26		5.6		197
	20.13		578		5.3		4,089		—		—		—
	20.54		120		5.3		800		—		—		—
	23.34		1,138		5.4		4,404		—		—		—
	25.65		578		4.3		901		144		4.3		225
	25.74		23		1.8		33		23		1.8		33
	26.70		45		6.8		23		—		—		—
	26.84		529		2.2		196		529		2.2		196
	28.19		30		3.8		—		30		3.8		—
	29.21		8		3.3		—		8		3.3		—
	29.95		547		3.3		—		273		3.3		—
	34.13		222		2.3		—		222		2.3		—
	38.50		23		2.8		—		23		2.8		—
	38.85		8		0.2		—		8		0.2		—
	42.08		329		0.3		—		329		0.3		—
	45.78		397		1.3		—		397		1.3		—
	52.98		23		0.8		—		23		0.8		—
			4,710		3.7	$	11,474		2,123		2.1	$	1,480

The following table summarizes information about stock-based awards outstanding at December 31, 2012 (shares in thousands):

		Options Outstanding						Options Exercisable
Exercise Price		Number of Shares Outstanding		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value		Number of Shares Exercisable		Weighted Average Remaining Contractual Life in Years		Aggregate Intrinsic Value
						(Dollars in thousands)						(Dollars in thousands)
$	15.00		32		1.8	$	136		32		1.8	$	136
	18.56		45		6.8		32		—		—		—
	19.10		30		5.8		5		30		5.8		5
	19.69		30		6.6		—		—		—		—
	20.10		8		1.8		—		8		1.8		—
	20.13		594		6.3		—		—		—		—
	25.65		598		5.3		—		—		—		—
	25.74		23		2.8		—		23		2.8		—
	26.84		552		3.2		—		276		3.2		—
	28.19		30		4.8		—		30		4.8		—
	29.21		8		4.3		—		8		4.3		—
	29.95		567		4.3		—		139		4.3		—
	34.13		225		3.3		—		225		3.3		—
	37.90		15		0.8		—		15		0.8		—
	38.50		23		3.8		—		23		3.8		—
	38.85		8		1.2		—		8		1.2		—
	42.08		340		1.3		—		340		1.3		—
	45.78		412		2.3		—		412		2.3		—
	52.98		23		1.8		—		23		1.8		—
			3,563		4.0	$	173		1,592		2.6	$	141

The aggregate intrinsic value in the above tables represents the total pretax intrinsic value, based on the Company’s stock price of $27.21 and $19.28 as of December 31, 2013 and 2012, respectively, which would have potentially been received by the stock-based award holders had all stock-based award holders exercised their stock-based award as of those dates. The total number of in-the-money stock-based awards exercisable as of December 31, 2013 and 2012 was 811,269 and 61,726, respectively.

The total pretax intrinsic value of options exercised during the year ended December 31, 2013 was $140,000 based on the average stock price of $23.57 during the year ended December 31, 2013. No options were exercised during the years ended December 31, 2012 and 2011.