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Share-Based Compensation
 6 Months Ended
Jun. 30, 2013
Share-Based Compensation  
Share-Based Compensation

(4)                   Share-Based Compensation

 

Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

 

The Company issues share-based payments through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2012.  The compensation cost charged against income for those plans is as follows:

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

30-Jun-2013

 

30-Jun-2012

 

30-Jun-2013

 

30-Jun-2012

 

Selling, general & administrative expense

 

$

328,146

 

$

310,153

 

$

507,486

 

$

497,054

 

 

Share-based compensation for the three- and six-month periods ended June 30, 2013, and June 30, 2012, includes approximately $60,000 representing the fair value of the Company’s stock granted to the Board of Directors.

 

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements was approximately $106,000 and $102,000 for the three-month periods ended June 30, 2013, and 2012, respectively, and approximately $157,000 for each of the six-month periods ended June 30, 2013, and 2012, respectively.

 

The following is a summary of stock option activity under all plans for the six-month period ended June 30, 2013:

 

 

 

Shares Under
Options

 

Weighted
Average
Exercise Price

 

Aggregate
Intrinsic Value

 

Outstanding at December 31, 2012

 

493,888

 

$

5.47

 

 

 

Granted

 

67,362

 

18.88

 

 

 

Exercised

 

(11,250

)

5.78

 

 

 

Cancelled or expired

 

—

 

—

 

 

 

Outstanding at June 30, 2013

 

550,000

 

$

7.11

 

$

7,774,290

 

Options exercisable at June 30, 2013

 

473,750

 

$

5.46

 

$

7,473,940

 

Vested and expected to vest at June 30, 2013

 

550,000

 

$

7.11

 

$

7,774,290

 

 

On March 31, 2013, the Company granted to certain employees options for the purchase of 60,000 shares of its common stock at that day’s closing price of $18.85. On June 12, 2013, the Company granted to its directors options for the purchase of 7,362 shares of common stock at that day’s closing price of $19.08. The compensation expense for both grants was determined as the fair value of the options using the Black Scholes option pricing model based on the following assumptions:

 

Expected volatility

40.0% - 50.0%

Expected dividends

none

Risk free interest rate

0.4%

Expected term

3.8 to 5.0 years

 

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The weighted average grant date fair value of options granted during the six-month period ended June 30, 2013, was $6.03.

 

During the six-month periods ended June 30, 2013, and 2012, the total intrinsic value of all options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employees to exercise the options) was $154,564 and $1,843,794, respectively, and the total amount of consideration received from the exercised options was $65,063 and $320,012, respectively.

 

During the three-month periods ended June 30, 2013, and 2012, the Company recognized compensation expenses related to stock options granted to directors and employees of $99,810 and $79,437, respectively.  During the six-month periods ended June 30, 2013, and 2012, the Company recognized compensation expenses related to stock options granted to directors and employees of $125,206 and $97,623, respectively.

 

On February 18, 2013, the Company’s Compensation Committee approved the award of $400,000 payable in shares of common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Incentive Plan.  The shares will be issued on or before December 31, 2013.  The Company recorded compensation expense associated with the award of $100,000 and $200,000 during the three- and six-month periods ended June 30, 2013.  In the three- and six-month periods ended June 30, 2012, the Company recorded $75,000 and $150,000, respectively, of compensation expense for an award of $300,000 that was payable in shares of common stock in December 2012.

 

The following table summarizes information about Restricted Stock Units (“RSUs”) activity during the six-month period ended June 30, 2013:

 

 

 

Restricted
Stock Units

 

Weighted Average
Award Date
Fair Value

 

Unvested at December 31, 2012

 

108,866

 

$

8.77

 

Awarded

 

10,600

 

19.97

 

Shares vested

 

(61,635

)

6.67

 

Forfeited / cancelled

 

(5,679

)

11.74

 

Unvested at June 30, 2013

 

52,152

 

$

13.20

 

 

During the three- and six-month periods ended June 30, 2013, the Company recorded compensation expense related to RSUs of $68,336 and $122,280, respectively.  The Company recorded compensation expense of $95,716 and $189,431, respectively, for the same periods of 2012.

 

At its discretion, the Company allows option and RSU holders to surrender previously owned common stock in lieu of paying the minimum statutory withholding taxes due upon the exercise of options or the vesting of RSUs.  During the six-month periods ended June 30, 2013, and 2012, 22,089 and 39,707 shares were surrendered at an average market price of $19.29 and $16.93, respectively.

 

At June 30, 2013, unrecognized compensation expense of $1,070,543 is expected to be recognized over a weighted average period of 1.24 years.