Stock Options and Incentive Plans

12 Months Ended

Dec. 31, 2016

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

Stock Options and Incentive Plans

18. Stock Options and Incentive Plans

We recognized no stock option expense during 2016, 2015 or 2014 and there are currently no remaining unvested options for which stock-option compensation costs will be recognized in future periods.

There have been no stock options granted since November 2002 and we have no stock option plan under which options may be granted, although options may be granted under the Company’s 2011 incentive plan. Options issued under previous plans and still outstanding were exercisable in five cumulative annual amounts beginning twelve months after date of grant. Option exercise prices were normally equal to and were not permitted to be less than the market value on the date of grant. Unexercised options generally terminate twenty years after the date of grant for all plans, and must be exercised within ten years of retirement.

Activity with respect to these plans is as follows:

	2016	2015	2014
Shares under option January 1	88,773	187,233	228,533
Options canceled	-	-	-
Options exercised	26,383	98,460	41,300
Shares under option at December 31	62,390	88,773	187,233
Options exercisable at December 31	62,390	88,773	187,233

The weighted average exercise price is as follows:

	2016	2015	2014
Shares under option January 1	$18.67	$18.99	$18.94
Options canceled	-	-	-
Options exercised	19.60	19.27	18.71
Shares under option December 31	18.28	18.67	18.99
Options exercisable December 31	18.28	18.67	18.99

As of December 31, 2016, the aggregate intrinsic value of vested options was $1.7 million. The aggregate intrinsic value of options exercised was $0.5 million in 2016, $2.0 million in 2015, and $0.7 million in 2014.

Executive Management share-based compensation:

In 2011, shareholders approved the Albany International 2011 Incentive Plan. Awards granted to date under these plans provide key members of management with incentive compensation based on achieving certain performance targets over a three year period. Such awards are paid out partly in cash and partly in shares of Class A Common Stock. Participants may elect to receive shares net of applicable income taxes. In March 2016, we issued 26,146 shares and made cash payments totaling $0.8 million. In March 2015, we issued 35,393 shares and made cash payments totaling $1.2 million. In March 2014, we issued 29,321 shares and made cash payments totaling $1.1 million. If a person terminates employment prior to the award becoming fully vested, the person may forfeit all or a portion of the incentive compensation award. The grant date share price is determined when the awards are approved each year and that price is used for measuring the cost for the share-based portion of the award. Expense associated with these awards is recognized over the three year vesting period. In connection with this plan, we recognized expense of $2.7 million in 2016, $3.0 million in 2015 and $2.4 million in 2014. For share-based awards that are dependent on performance after 2016, we expect to record additional compensation expense of approximately $0.7 million in 2017 and $0.6 million in 2018.

In 2011, the Board of Directors modified the annual incentive plan for executive management whereby 40 to 50 percent of the earned incentive compensation is payable in the form of shares of Class A Common Stock. Participants may elect to receive shares net of applicable income taxes. In March 2016, the Company issued 26,774 shares and made cash payments totaling $1.9 million as a result of performance in 2015. In March 2015, the Company issued 19,571 shares and made cash payments totaling $1.5 million as a result of performance in 2014. In March 2014, the Company issued 15,910 shares and made cash payments totaling $1.4 million as a result of performance in 2013. The allocation of the award between cash and shares is determined by an average share price after the year of performance. Expense recorded for this plan was $3.3 million in 2016, $3.4 million in 2015, and $2.7 million in 2014.

Shares payable under these plans generally vest immediately prior to payment. As of December 31, 2016, there were 235,299 shares of Company stock authorized for the payment of awards under these plans. Information with respect to these plans is presented below:

	Number of shares		Weighted average grant date value per share	Year-end intrinsic value (000's)
Shares potentially payable at January 1, 2014	185,564		$27.51	$6,667
Forfeitures	-		-
Payments	(75,385	)	$28.60
Shares accrued based on 2014 performance	75,020		$34.65
Shares potentially payable at December 31, 2014	185,199		$30.69	$5,683
Forfeitures	-		-
Payments	(95,889	)	$29.09
Shares accrued based on 2015 performance	98,998		$38.01
Shares potentially payable at December 31, 2015	188,308		$35.35	$6,657
Forfeitures	-		-
Payments	(86,926	)	$33.43
Shares accrued based on 2016 performance	88,036		$36.78
Shares potentially payable at December 31, 2016	189,418		$36.90	$6,989

Other Management share-based compensation:

In 2003, the Company adopted a Restricted Stock Program under which certain key employees were awarded restricted stock units. Company has not awarded new restricted stock units since November 2010 and no expense was recognized in 2016 for this plan. Such units vested over a five-year period and were paid annually in cash based on current market prices of the Company’s stock. The amount of compensation cost attributable to such units was recorded in Selling, general and administrative expenses and was $0.6 million in 2015 and $1.4 million in 2014.

In 2012, the Company adopted a Phantom Stock Plan that replaced the Restricted Stock Program. Awards under this program vest over a five-year period and are paid annually in cash based on current market prices of the Company’s stock. Under this program, employees may earn more or less than the target award based on the Company’s results in the year of the award. Expense recognized for this plan amounted to $3.8 million in 2016, $2.6 million in 2015, and $2.2 million in 2014. Based on awards outstanding at December 31, 2016, we expect to record $8.3 million of compensation cost from 2017 to 2020. The weighted average period for recognition of that cost is approximately 2 years.

In 2012, the Company granted restricted stock units to two executives. The amount of compensation expense was subject to changes in the market price of the Company’s stock and was recorded in Selling, general, and administrative expenses. The final vesting and payment due under these grants occurred in 2015, resulting in no expense recognized in 2016. Expense recognized for these grants was $0.3 million in 2015, and $0.7 million in 2014.

The determination of compensation expense for other management share-based compensation plans is based on the number of outstanding share units, the end-of-period share price, and Company performance. Information with respect to these plans is presented below:

	Number of shares		Weighted average value per share	Cash paid for share based liabilities(000's)
Share units potentially payable at January 1, 2014	361,189
Grants	91,631
Changes due to performance	(8,793	)
Payments	(86,840	)	$35.01	$3,040
Forfeitures	(9,246	)
Share units potentially payable at December 31, 2014	347,941
Grants	90,065
Changes due to performance	13,966
Payments	(167,482	)	$36.08	$6,040
Forfeitures	(31,624	)
Share units potentially payable at December 31, 2015	252,866
Grants	118,279
Changes due to performance	18,779
Payments	(88,073	)	$33.20	$2,924
Forfeitures	(40,706	)
Share units potentially payable at December 31, 2016	261,145

The Company maintains a voluntary savings plan covering substantially all employees in the United States. The Plan, known as the ProsperityPlus Savings Plan, is a qualified plan under section 401(k) of the U.S. Internal Revenue Code. The Company matches, in the form of cash, between 50% and 100% of employee contributions up to a defined maximum. The investment of employee contributions to the plan is self-directed. The Company’s cost of the plan amounted to $5.5 million in 2016, $4.8 million in 2015, and $4.3 million in 2014.

The Company’s profit-sharing plan covers substantially all employees in the United States. After the close of each year, the Board of Directors determines the amount of the profit-sharing contribution. Company contributions to the plan are in the form of cash. The expense recorded for this plan was $2.9 million in 2016, $2.4 million in 2015, and $1.5 million in 2014.