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During the year stock appreciation rights relating to 74,395 stock option shares were exercised at a weighted average market price of $21.0351 per share and the stock options relating to these rights which had a weighted average exercise price of $13.1028 per share were cancelled. In addition, stock options and stock appreciation rights relating to 17,597 shares which had a weighted average exercise price of $16.9381, were cancelled during the year ended December 31, 1997. At December 31, 1997, there were outstanding exercisable options to purchase 91,493 common shares at $6.4850 - $15.7175 per share (weighted average price of $11.6895), and unexercisable options to purchase 220,625 common shares at $11.765 - $18.820 per share (weighted average price of $14.4699). The weighted average remaining contractual life of outstanding exercisable and unexercisable options was 5.9261 years and 6.9105 years, respectively. Total compensation expense recognized in 1997 related to the stock options and stock appreciation rights plan was $1,751,085. At December 31, 1997, there were 923,487 shares available for future option grants.
5. Retirement Plans
The Company provides retirement benefits for its employees under a non-contributory qualified defined benefit pension plan. The benefits are based on years of service and compensation during the last 36 months of employment. The Company's current funding policy is to contribute annually to the plan only those amounts that can be deducted for federal income tax purposes. The plan assets consist primarily of investments in mutual funds.
The actuarially computed net pension cost credit for the year ended December 31, 1997 was $511,605, and consisted of service expense of $178,678, interest expense of $326,372, expected return on plan assets of $767,345, and a net amortization credit of $249,310.
In determining the actuarial present value of the projected benefit obligation, the interest rate used for the weighted-average discount rate and the expected rate of annual salary increases was 7.0%, and the expected long-term rate of return on plan assets was 8.0%.
On January 1, 1997, the accumulated benefit obligation, including vested benefits, was $3,567,110. The fair value of the plan assets was $9,715,752 and the projected benefit obligation for service rendered to date was $4,475,562, which resulted in excess plan assets of $5,240,190. The remaining components of prepaid pension cost at January 1, 1997 included $2,029,896 in unrecognized net gain, $508,900 in unrecognized prior service cost and $623,224 is the remaining portion of the unrecognized net asset existing at January 1, 1987, which is being amortized over 15 years. Prepaid pension cost included in other assets at December 31, 1997 was $3,607,575.
In addition, the Company has a nonqualified unfunded benefit plan which provides employees with defined retirement benefits to supplement the qualified plan. The Company does not provide postretirement medical benefits.
6. Expenses
The cumulative amount of accrued expenses at December 31, 1997 for employees and former employees of the Company was $3,157,637. Aggregate remuneration paid or accrued during the year ended December 31, 1997 to officers and directors amounted to $3,247,542.
Research, accounting and other office services provided to and reimbursed by the Company's non-controlled affiliate, Petroleum & Resources Corporation, amounted to $475,342 for the year ended December 31, 1997.
7. Portfolio Securities Loaned
The Company makes loans of securities to brokers, secured by cash deposits, U.S. Government securities, or bank letters of credit, the value of which exceeds the market value of such loaned securities. The Company receives compensation for lending securities in the form of fees. The Company continues to receive dividends on the securities loaned. At December 31, 1997, the value of security loans outstanding was $23,525,775.
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