Quarterly report pursuant to Section 13 or 15(d)

COMMON AND PREFERRED STOCK

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COMMON AND PREFERRED STOCK
9 Months Ended
Sep. 30, 2015
COMMON AND PREFERRED STOCK [Abstract]  
COMMON AND PREFERRED STOCK
NOTE 5    COMMON AND PREFERRED STOCK

The Company’s Articles of Incorporation authorize the issuance of up to 100,000,000 shares.  The shares are classified in two classes, consisting of 95,000,000 shares of common stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par value $.001 per share.  The board of directors is authorized to establish one or more series of preferred stock, setting forth the designation of each such series, and fixing the relative rights and preferences of each such series.  The Company has neither designated nor issued any shares of preferred stock.

Common Stock

The following is a schedule of changes in the number of shares of common stock outstanding during the nine months ended September 30, 2015 and the year ended December 31, 2014:
 
   
Nine Months Ended
September 30, 2015
   
Year Ended
December 31, 2014
 
Beginning Balance
    61,066,712       61,858,199  
Stock Options Exercised
    -       100,000  
Restricted Stock Grants (Note 6)
    565,039       299,416  
Stock Repurchased
    -       (1,153,885 )
Other Surrenders
    (29,551 )     (79,461 )
Other
    (1,397 )     42,443  
Ending Balance
    61,600,803       61,066,712  

2015 Activity

In the nine months ended September 30, 2015, 29,551 shares of common stock were surrendered by certain employees of the Company to cover tax obligations in connection with their restricted stock awards.  The total value of these shares was approximately $205,000, which was based on the market prices on the dates the shares were surrendered.

Stock Repurchase Program
 
In May 2011, the Company’s board of directors approved a stock repurchase program to acquire up to $150 million of the Company’s outstanding common stock.  The stock repurchase program allows the Company to repurchase its shares from time to time in the open market, block transactions and in negotiated transactions.

During the first nine months of 2015, the Company did not repurchase shares of its common stock under the stock repurchase program.  In 2014, the Company repurchased 1,153,885 shares of its common stock under the stock repurchase program.  This stock had a cost of approximately $15.5 million.  All repurchased shares are included in the Company’s pool of authorized but unissued shares.  The Company’s accounting policy upon the repurchase of shares is to deduct its par value from Common Stock and to reflect any excess of cost over par value as a deduction from Additional Paid-in Capital.

Performance Equity Awards

The Company has granted performance equity awards under its 2015 Long Term Incentive Program to certain officers.  The awards are subject to a market condition, which is based on a comparison of the Company versus a defined peer group with respect to year-over-year change in average stock price from 2014 to 2015.  Depending on the Company’s stock price performance relative to the defined peer group, the award recipients will earn between 0% and 150% of their 2015 base salaries and will be settled in restricted shares of the Company’s common stock that will vest over a three-year service-based period beginning in 2016.

The Company used a Monte Carlo simulation model to estimate the fair value of the awards based on the expected outcome of the Company’s stock price performance relative to the defined peer group using key valuation assumptions.  The assumptions used for the Monte Carlo model to determine the fair value of the awards and associated compensation expense included a forecast period of one year, a risk-free interest rate of 0.11% and 44% for Northern’s stock price volatility.

The maximum value of the performance shares issuable if all participants earned the maximum award would total $2.9 million.  For the three- and nine-month periods ended September 30, 2015, the Company recorded $0.2 million and $0.3 million, respectively, of compensation expense in connection with these performance awards.