EMCI » Topics » Stock-Based Compensation

These excerpts taken from the EMCI 10-K filed Mar 14, 2008.

Stock-Based Compensation

 

The Company has no stock-based compensation plans of its own; however, Employers Mutual has several stock plans that utilize the common stock of the Company. The Company receives the current fair value for all shares issued under these plans. Employers Mutual also has a stock appreciation rights (SAR) agreement in effect with an executive officer of the Company. The SAR is based upon the common stock of the Company, and because it will be settled in cash, it is considered to be a liability-classified award.

 

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) “Share-Based Payment,” using the modified prospective method, which requires compensation expense to be recorded for all options granted after the date of adoption as well as for existing options for which the requisite service has not been rendered as of the date of adoption. The compensation expense is based on the fair value of the stock option. The modified-prospective method does not require restatement of prior periods to reflect the impact of SFAS 123(R).

 

Prior to January 1, 2006, under the provisions of Accounting Principles Board (APB) No. 25 “Accounting for Stock Issued to Employees,” the Company did not recognize any compensation expense from the operation of Employers Mutual’s incentive stock option plans since the exercise price of the options was equal to the fair value of the stock on the date of grant. The Company’s insurance subsidiaries reimburse Employers Mutual for their share of the statutory-basis compensation expense (equal to the excess of the fair value of the stock on the option exercise date over the option’s exercise price) associated with stock option exercises. The statutory-basis compensation expense that was paid by the Company’s subsidiaries to Employers Mutual ($245,441 in 2005) was reclassified as a dividend payment to Employers Mutual in these GAAP-basis financial statements.

 

The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123(R) to Employers Mutual’s incentive stock option plans:

 

Year ended 

December 31, 2005

Net income, as reported 

$           43,009,045 

Deduct:  Total stock-based employee compensation expense

determined under the fair value method for all awards

 

vesting in the current calendar year 

117,710 

Pro forma net income 

$           42,891,335 

Net income per share:

 

Basic and diluted -

As reported 

$                      3.16 

Pro forma 

$                      3.15 

 

 

103

 


Stock-Based Compensation



 



The Company has no stock-based compensation plans of its own; however, Employers Mutual has several stock plans that utilize the common stock of the Company. The Company receives the current fair value for all shares issued under these plans. Employers Mutual also has a stock appreciation rights (SAR) agreement in effect with an executive officer of the Company. The SAR is based upon the common stock of the Company, and because it will be settled in cash, it is considered to be a liability-classified award.



 



Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) “Share-Based Payment,” using the modified prospective method, which requires compensation expense to be recorded for all options granted after the date of adoption as well as for existing options for which the requisite service has not been rendered as of the date of adoption. The compensation expense is based on the fair value of the stock option. The modified-prospective method does not require restatement of prior periods to reflect the impact of SFAS 123(R).



 



Prior to January 1, 2006, under the provisions of Accounting Principles Board (APB) No. 25 “Accounting for Stock Issued to Employees,” the Company did not recognize any compensation expense from the operation of Employers Mutual’s incentive stock option plans since the exercise price of the options was equal to the fair value of the stock on the date of grant. The Company’s insurance subsidiaries reimburse Employers Mutual for their share of the statutory-basis compensation expense (equal to the excess of the fair value of the stock on the option exercise date over the option’s exercise price) associated with stock option exercises. The statutory-basis compensation expense that was paid by the Company’s subsidiaries to Employers Mutual ($245,441 in 2005) was reclassified as a dividend payment to Employers Mutual in these GAAP-basis financial statements.



 



The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123(R) to Employers Mutual’s incentive stock option plans:



 








































































Year ended 


December 31, 2005


Net income, as reported 


$           43,009,045 


Deduct:  Total stock-based employee compensation expense


determined under the fair value method for all awards


 


vesting in the current calendar year 


117,710 


Pro forma net income 


$           42,891,335 


Net income per share:


 


Basic and diluted -


As reported 


$                      3.16 


Pro forma 


$                      3.15 




 



 



103



 











This excerpt taken from the EMCI 10-K filed Mar 20, 2007.

Stock-Based Compensation

 

The Company has no stock-based compensation plans of its own; however, Employers Mutual has several stock plans that utilize the common stock of the Company. The Company receives the current fair value for all shares issued under these plans. Under the terms of the pooling agreement (see note 2), stock option expense is allocated to the Company’s insurance subsidiaries as determined on a statutory basis of accounting. The Company’s insurance subsidiaries reimburse Employers Mutual for their share of the statutory-basis compensation expense (equal to the excess of the fair value of the stock on the option exercise date over the option’s exercise price) associated with stock option exercises.

 

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) “Share-Based Payment,” which is a revision of SFAS No. 123 (as amended by SFAS 148) “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Effective January 1, 2006, the Company adopted SFAS 123(R) using the modified prospective method, which requires compensation expense to be recorded for all options granted after the date of adoption as well as for existing options for which the requisite service has not been rendered as of the date of adoption. The modified-prospective method does not require restatement of prior periods to reflect the impact of SFAS 123(R). There was no initial change to net income or stockholders’ equity upon the adoption of SFAS 123(R). Under the provisions of SFAS 123(R), the Company recognized compensation expense of $377,294 (gross and net of tax) during 2006 related to incentive stock options and a stock appreciation rights agreement.

 

Prior to January 1, 2006, under the provisions of APB 25, the Company did not recognize any compensation expense from the operation of Employers Mutual’s incentive stock option plans since the exercise price of the options was equal to the fair value of the stock on the date of grant. The statutory-basis compensation expense that was paid by the Company’s subsidiaries to Employers Mutual ($245,441 in 2005 and $293,583 in 2004) was reclassified as a dividend payment to Employers Mutual in these GAAP-basis financial statements.

 

The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123 (as amended by SFAS No. 148) “Accounting for Stock-Based Compensation” to Employers Mutual’s incentive stock option plans:

 

 

Year ended December 31,

 

2005

 

2004

Net income, as reported 

$   43,009,045 

 

$   13,184,683 

Deduct:  Total stock-based employee compensation expense

 

 

 

determined under the fair value method for all awards

 

 

 

vesting in the current calendar year 

117,710 

 

32,373 

Pro forma net income 

$   42,891,335 

 

$   13,152,310 

 

 

 

 

Net income per share:

 

 

 

Basic and diluted -

 

 

 

As reported 

$              3.16 

 

$              1.10 

Pro forma 

$              3.15 

 

$              1.10 

 

 

13

 


This excerpt taken from the EMCI 10-K filed Mar 15, 2007.

Stock-Based Compensation

 

The Company has no stock-based compensation plans of its own; however, Employers Mutual has several stock plans that utilize the common stock of the Company. The Company receives the current fair value for all shares issued under these plans. Under the terms of the pooling agreement (see note 2), stock option expense is allocated to the Company’s insurance subsidiaries as determined on a statutory basis of accounting. The Company’s insurance subsidiaries reimburse Employers Mutual for their share of the statutory-basis compensation expense (equal to the excess of the fair value of the stock on the option exercise date over the option’s exercise price) associated with stock option exercises.

 

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004) “Share-Based Payment,” which is a revision of SFAS No. 123 (as amended by SFAS 148) “Accounting for Stock-Based Compensation” and supersedes Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.” SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Effective January 1, 2006, the Company adopted SFAS 123(R) using the modified prospective method, which requires compensation expense to be recorded for all options granted after the date of adoption as well as for existing options for which the requisite service has not been rendered as of the date of adoption. The modified-prospective method does not require restatement of prior periods to reflect the impact of SFAS 123(R). There was no initial change to net income or stockholders’ equity upon the adoption of SFAS 123(R). Under the provisions of SFAS 123(R), the Company recognized compensation expense of $377,294 (gross and net of tax) during 2006 related to incentive stock options and a stock appreciation rights agreement.

 

Prior to January 1, 2006, under the provisions of APB 25, the Company did not recognize any compensation expense from the operation of Employers Mutual’s incentive stock option plans since the exercise price of the options was equal to the fair value of the stock on the date of grant. The statutory-basis compensation expense that was paid by the Company’s subsidiaries to Employers Mutual ($245,441 in 2005 and $293,583 in 2004) was reclassified as a dividend payment to Employers Mutual in these GAAP-basis financial statements.

 

The following table illustrates the effect on net income and net income per share if the Company had applied the fair value recognition provisions of SFAS No. 123 (as amended by SFAS No. 148) “Accounting for Stock-Based Compensation” to Employers Mutual’s incentive stock option plans:

 

 

Year ended December 31,

 

2005

 

2004

Net income, as reported 

$   43,009,045 

 

$   13,184,683 

Deduct:  Total stock-based employee compensation expense

 

 

 

determined under the fair value method for all awards

 

 

 

vesting in the current calendar year 

117,710 

 

32,373 

Pro forma net income 

$   42,891,335 

 

$   13,152,310 

 

 

 

 

Net income per share:

 

 

 

Basic and diluted -

 

 

 

As reported 

$              3.16 

 

$              1.10 

Pro forma 

$              3.15 

 

$              1.10 

 

 

105

 


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