STOCK OWNERSHIP AND BENEFIT PLANS

On September 21, 2006, our stockholders approved, and we adopted, the 2006 Stock Incentive Plan (“2006 Plan”). On May 23, 2013, our stockholders approved an amendment to the 2006 Plan to increase the number of shares of common stock that may be issued under the 2006 Plan. The 2006 Plan provides for the grant of various types of equity-based incentives, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, performance units and other stock-based awards. There are a total of 1,617,500 shares available for grant under the 2006 Plan. As of December 31, 2014, we have granted an aggregate of 1,217,221 shares of restricted stock and restricted stock units under the 2006 Plan, leaving 400,279 shares available for future grant.

The following table sets forth the total stock-based compensation expense included in the Consolidated Statements of Operations:



	2014			2013			2012
Cost of products sold	$	309		$	304		$	324
General and administrative expenses	2,995			2,913			3,018
Selling and distribution expenses	284			184			1,101
Stock-based compensation expense before income taxes and discontinued operations	3,588			3,401			4,443
Income tax benefit	(970		)	(990		)	(864		)
Stock-based compensation expense before discontinued operations, net of income taxes	2,618			2,411			3,579

Discontinued operations	112			—			—
Income tax benefit	(38		)	—			—
Stock-based compensation expense in discontinued operations, net of income taxes	74			—			—

Stock-based compensation expense, net of income taxes	2,692			2,411			3,579

Earnings per share impact - Basic:
Continuing operations	$	0.19		$	0.18		$	0.27
Discontinued operations	$	0.01		$	—		$	—
Net income	$	0.20		$	0.18		$	0.27
Earnings per share impact - Diluted:
Continuing operations	$	0.19		$	0.18		$	0.27
Discontinued operations	$	0.01		$	—		$	—
Net income	$	0.20		$	0.18		$	0.27

Our stock-based compensation expense results from restricted stock awards, restricted stock units and stock issued under the Employee Stock Purchase Plan. Our 2012 stock-based compensation expense includes $672 relating to the accelerated recognition of stock-based compensation expense resulting from accelerated vesting of restricted stock awards associated with the retirement of our former President and Chief Executive Officer on March 1, 2013 and the December 31, 2012 retirement of another senior executive. During the first quarter of 2013 and, as a result of board actions taken in January 2013, we recorded a one-time expense of $2,965 associated with these management retirements. This expense included $894 of stock-based compensation, with the remainder representing cash payments.

Restricted Stock Awards and Units: Restricted stock awards and restricted stock units are granted to employees and non-employee directors based on time-vesting and/or performance conditions. Stock awards with time-vesting only generally vest in one-third increments on the first, second, and third anniversary of the grant date. For stock awards with performance conditions, one-quarter of the shares vest on each of the first and second anniversaries of the grant date. On the third anniversary, all or a portion of the remaining one-half of the shares will vest based on a formula that takes into account the Company’s achievement of Adjusted EBITDA compared to a target amount and the relative total return to the Company’s stockholders in comparison to the total stockholder return of the Company’s peer group of public companies. The fair value of restricted stock and restricted stock unit awards granted to employees and non-employee directors is based on the fair value of DMC’s stock on the grant date. Stock awards granted to employees are amortized to compensation expense over the vesting period on a straight-line basis. Stock awards granted to non-employee directors are amortized to compensation expense over one year, which represents the term of their appointment.

A summary of the activity of our nonvested shares of restricted stock issued under the 2006 Plan for the years ended December 31, 2014, 2013, and 2012 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2011	261,829		$	30.59
Granted	116,900		20.74
Vested	(136,344	)	27.20

Balance at December 31, 2012	242,385		$	27.75
Granted	163,579		16.37
Vested	(216,851	)	27.95
Forfeited	(2,000	)	22.05

Balance at December 31, 2013	187,113		$	17.63
Granted	157,680		21.31
Vested	(81,823	)	18.55
Forfeited	(250	)	22.05

Balance at December 31, 2014	262,720		$	19.55

On March 1, 2013 Kevin Longe, our President and Chief Executive Officer, was granted 30,000 shares of restricted stock outside of our 2006 Plan per specific exemptions in the Nasdaq regulations. The exemption relates to equity compensation agreed upon at an arms length basis to hire a new executive or director if the terms of the grant are promptly disclosed after the award. These shares vest in one-third increments on the first, second, and third anniversary of the date of grant.

A summary of the activity of our nonvested restricted stock units for the years ended December 31, 2014, 2013, and 2012 is as follows:



	Share Units		Weighted Average Grant Date Fair Value
Balance at December 31, 2011	53,998		$	20.43
Granted	50,200		20.44
Vested	(20,769	)	20.43
Forfeited	(3,000	)	21.15

Balance at December 31, 2012	80,429		$	20.41
Granted	56,217		15.67
Vested	(35,001	)	20.88
Forfeited	(2,300	)	19.01

Balance at December 31, 2013	99,345		$	17.59
Granted	33,895		21.25
Vested	(48,674	)	18.87

Balance at December 31, 2014	84,566		$	18.33

As of December 31, 2014, there was $2,548 and $738 of total unrecognized stock-based compensation related to unvested restricted stock awards and restricted stock units, respectively. The cost is expected to be recognized over a weighted average period of 1.63 years and 1.61 years for the restricted stock awards and restricted stock units, respectively.

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan (“ESPP”) which is authorized to issue up to 600,000 shares of which 115,218 shares remain available for future purchases. The offerings begin on the first day following each previous offering (“Offering Date”) and end six months from the offering date (“Purchase Date”). The ESPP provides that full time employees may authorize DMC to withhold up to 15% of their earnings, subject to certain limitations, to be used to purchase common stock of DMC at the lesser of 85% of the fair market value of DMC’s common stock on the Offering Date or the Purchase Date. In connection with the ESPP, 20,148; 22,689; and 14,717 shares of our stock were purchased during the years ended December 31, 2014, 2013, and 2012, respectively. Our total stock-based compensation expense for 2014, 2013, and 2012 includes $92, $76, and $58 respectively, in compensation expense associated with the ESPP.

401(k) Plan

We offer a contributory 401(k) plan to our employees. We make matching contributions equal to 100% of each employee’s contribution up to 3% of qualified compensation and 50% of the next 2% of qualified compensation contributed by each employee. Total DMC contributions were $523, $485, and $431 for the years ended December 31, 2014, 2013 and 2012, respectively.

Defined Benefit Plans

We have defined benefit pension plans at certain foreign subsidiaries for which we have recorded an unfunded pension obligation of $1,143 and $910 as of December 31, 2014 and 2013, respectively, which is included in other long-term liabilities in the Consolidated Balance Sheets. All necessary adjustments to the obligation are based upon actuarial calculations are recorded directly to the statement of operations. We recognized net adjustments of $349, $67 and $235, respectively, for the years ended December 31, 2014, 2013 and 2012.