Note 12 - Share-based Compensation

12 Months Ended

Dec. 31, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

NOTE 12 – Share-Based Compensation:

In May 2013, the shareholders of the Company approved the 2013 Incentive Stock and Awards Plan (the “2013 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and other stock based compensation. In May 2022, the shareholders of the Company approved the 2022 Equity Incentive and Awards Plan (the “2022 Plan”), authorizing the granting of incentive stock options, non-qualified stock options, stock appreciation rights (“SARs”), restricted stock, performance shares and other stock based compensation. A total of 2,000,000 shares of common stock have been reserved for issuance under the 2022 Plan. All options and SARs have been or will be granted with exercise prices at least equal to the fair market value of the shares on the date of grant. At December 31, 2024, the Company had 605,983 shares of common stock available for grant for share-based compensation awards under the 2022 Plan. The 2022 Plan replaced the 2013 Plan. No new awards will be granted under the 2013 Plan, but outstanding awards granted under the 2013 Plan will continue unaffected.

Share-based compensation is recorded in selling and administrative expense in the statements of comprehensive income. The following table details the share-based compensation expense by type of award and the total related tax benefit for the periods presented (in thousands):

	Years Ended December 31,
	2024		2023
Stock options and SARs	$	1,018	$	1,279
Restricted stock		2,237		2,560
Performance shares		1,015		(52	)
Total share-based compensation expense	$	4,270	$	3,787
Related income tax benefit	$	902	$	767

Stock Options and Stock Appreciation Rights (“SARs”)

The Company grants stock options and stock-settled SARs to employees that allow them to purchase shares of the Company’s common stock. Stock options are also granted to outside members of the Board of Directors of the Company. The Company determines the fair value of stock options and SARs at the date of grant using the Black-Scholes valuation model. Assumptions regarding volatility, risk-free interest rate, expected term and dividend yield are required for the Black-Scholes model. The risk-free interest rate is based on the yield of a U.S. treasury bond with a similar maturity to the award’s expected life. The expected life for awards granted is based on the historical exercise patterns experienced by the Company when the award is made. The determination of expected stock price volatility for awards is based on historical Superior common stock prices over a period commensurate with the expected life. The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts.

The following table summarizes significant assumptions utilized to determine the fair value of stock options and SARs:

	Years Ended December 31,
	2024			2023
Stock Options:
Risk free interest rate		4.3% - 4.5%			3.5% - 4.9%
Expected award life (years)		3 - 6			3-10
Expected volatility		45.7% - 56.7%			46.9% - 67.8%
Expected dividend yield		2.8% - 4.1%			4.7% - 7.1%
Weighted average fair value per share at grant date	$	4.27		$	4.14
SARs:
Risk free interest rate		4.3	%		4.0	%
Expected award life (years)		3			3
Expected volatility		45.7	%		67.8	%
Expected dividend yield		4.1	%		4.7	%
Weighted average fair value per share at grant date	$	3.80		$	4.58

All stock options and SARs granted prior to August 3, 2018 vested immediately when granted. Awards issued thereafter vest between one and three years after the grant date. Employee awards expire five years after the grant date, and those issued to directors expire ten years after the grant date. The Company issues new shares upon the exercise of stock options and SARs. Stock options and SARs granted in tandem with stock options are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, as applicable.

A summary of stock option transactions during the year ended December 31, 2024 follows:

						Weighted Average		Aggregate
		No. of			Weighted Average	Remaining Life		Intrinsic Value
		Shares			Exercise Price	(in years)		(in thousands)
Outstanding, January 1, 2024		953,176		$	14.73	2.80	$	1,718
Granted		183,800			14.38
Exercised		(123,595	)		10.71
Lapsed or cancelled	(218,949)				16.14
Outstanding, December 31, 2024		794,432			14.89	2.99		2,634
Exercisable, December 31, 2024		339,069			18.61	1.93		570

Intrinsic value is the difference between the market value of our common stock and the exercise price of each stock option multiplied by the number of stock options outstanding for those stock options where the market value exceeds their exercise price. Options exercised during the years ended December 31, 2024 and 2023 had intrinsic values of $0.9 million and $0.1 million, respectively. During the years ended December 31, 2024 and 2023 the Company received $1.1 million and $0.2 million, respectively, in cash from stock option exercises. No current tax benefits on stock option exercises were recognized during the years ended December 31, 2024 and 2023. Additionally, during the years ended December 31, 2024 and 2023 the Company received 12,366 and 7,627 shares, respectively, of its common stock as payment of the exercise price in the exercise of stock options for 19,899 and 9,115 shares, respectively, of its common stock. As of December 31, 2024, the Company had $0.6 million in unrecognized compensation related to nonvested stock options to be recognized over the remaining weighted average vesting period of one year.

A summary of stock-settled SARs transactions during the year ended December 31, 2024 follows:

					Weighted Average		Aggregate
	No. of			Weighted Average	Remaining Life		Intrinsic Value
	Shares			Exercise Price	(in years)		(in thousands)
Outstanding, January 1, 2024	292,508		$	14.35	2.07	$	506
Granted	79,128			13.84
Exercised	(19,032	)		8.43
Lapsed or cancelled	(81,770	)		19.23
Outstanding, December 31, 2024	270,834			13.14	2.10		1,071
Exercisable, December 31, 2024	136,630			13.41	0.54		578

SARs exercised during the years ended December 31, 2024 and 2023 had intrinsic values of $0.2 million and $0.2 million, respectively. No current tax benefits on SAR exercises were recognized during the years ended December 31, 2024 and 2023. As of December 31, 2024, the Company had $0.2 million in unrecognized compensation related to nonvested SARs to be recognized over the remaining weighted average vesting period of one year.

Restricted Stock

The Company has granted shares of restricted stock to directors and certain employees, which vest at a specified future date, generally after three years, over five years or when certain conditions are met. The shares are subject to accelerated vesting under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, as applicable. Expense for each of these grants is based on the fair value at the date of the grant and is being recognized on a straight-line basis over the respective service period.

A summary of restricted stock transactions during the year ended December 31, 2024 follows:

				Weighted Average
	No. of			Grant Date
	Shares			Fair Value
Outstanding, January 1, 2024		428,366		$	18.14
Granted		369,748			15.39
Vested		(107,093	)		23.15
Forfeited		(34,029	)		19.75
Outstanding, December 31, 2024		656,992			15.69

The table above includes 89,445 restricted shares issued in the acquisition of 3Point. See Note 6 for additional details.

As of December 31, 2024, the Company had $5.1 million of unrecognized compensation cost related to nonvested restricted stock grants expected to be recognized over the remaining weighted average vesting period of 1.8 years.

Performance Shares

The Company has granted performance shares, which either contain only service-based vesting conditions or service-based and performance-based vesting conditions. The service-based awards vest after the service period is met, which is generally three to five years. Expense for these grants is based on the fair value on the date of the grant and is being recognized on a straight-line basis over the respective service period. The performance-based awards generally vest after five years if the performance and service targets are met. The Company evaluates the performance conditions associated with these grants each reporting period to determine the expected number of shares to be issued. Expenses for grants of performance shares are recognized on a straight-line basis over the respective service period based on the grant date fair value and expected number of shares to be issued. The awards are subject to accelerated vesting on a pro rata basis under certain circumstances as outlined in the 2013 Plan and the 2022 Plan, except in those circumstances in which award agreements or change in control agreements specify full vesting.

On May 1, 2024, the Compensation Committee approved the Company entering into a grant of 125,000 and 75,000 performance shares to Michael Benstock, Chief Executive Officer and Michael Koempel, Chief Financial Officer, respectively, under the 2022 Equity Incentive and Awards Plan. The performance shares agreements were executed on May 6, 2024. Each performance share represents a contingent right to receive one share of common stock. The performance shares will vest if, in each case and during a four-year performance period beginning on January 1, 2024, subject to additional requirements, the average closing price of the Company’s common stock over a rolling thirty (30) day period equals or exceeds 115%, 130%, and 150% of the closing share price on May 10, 2024 and the executive is still employed by the Company twelve (12) months after the applicable stock price condition has been satisfied. The fair value and derived service periods of the shares were determined based on a Monte Carlo valuation model, which includes estimates of the Company’s stock price volatility of 50% and a risk free rate assumption of 4.6%. Expense for these grants is being recognized on a straight-line basis over each tranche’s derived service period.

A summary of performance share transactions during the year ended December 31, 2024 follows:

				Weighted Average
	No. of			Grant Date
	Shares			Fair Value
Outstanding, January 1, 2024		283,521		$	18.13
Granted		200,000			14.73
Vested		(14,068	)		17.77
Forfeited		(99,439	)		19.62
Outstanding, December 31, 2024		370,014			15.91

As of December 31, 2024, the Company had $2.1 million of unrecognized compensation cost related to nonvested performance share grants expected to be recognized over the remaining weighted average service period of 1.3 years.