(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				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Selling, general & administrative expense	$	199,967	$	182,286	$	707,453	$	679,340

Share-based compensation for the nine-month periods ended September 30, 2013, and 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 $58,000 and $55,000 for the three-month periods ended September 30, 2013, and 2012, respectively, and approximately $215,000 and $227,000 for the nine-month periods ended September 30, 2013, and 2012, respectively.

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

	Shares Under Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2012	493,888		$	5.47
Granted	97,362		19.74
Exercised	(117,500	)	2.85
Cancelled or expired	—		—
Outstanding at September 30, 2013	473,750		$	9.05	$	6,498,890
Options exercisable at September 30, 2013	367,500		$	6.31	$	6,048,878
Vested and expected to vest at September 30, 2013	473,750		$	9.05	$	6,498,890

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. On September 12, 2013, the Company granted to a certain employee options for the purchase of 30,000 shares of common stock at that day’s closing price of $21.67. The compensation expense for the above noted grants was determined as the fair value of the options using the Black Scholes option pricing model based on the following assumptions:

Expected volatility	34.0% - 50.0%
Expected dividends	none
Risk free interest rate	0.4% - 0.7%
Expected term	3.3 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 nine-month period ended September 30, 2013, was $5.84.

During the nine-month periods ended September 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 $2,070,527 and $2,028,138, respectively, and the total amount of consideration received from the exercised options was $334,475 and $491,036, respectively.

During the three-month periods ended September 30, 2013, and 2012, the Company recognized compensation expenses related to stock options granted to directors and employees of $40,178 and $18,186, respectively. During the nine-month periods ended September 30, 2013, and 2012, the Company recognized compensation expenses related to stock options granted to directors and employees of $165,384 and $115,809, 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 $300,000 during the three- and nine-month periods ended September 30, 2013. In the three- and nine-month periods ended September 30, 2012, the Company recorded $75,000 and $225,000, 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 nine-month period ended September 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	(6,931	)	13.23
Unvested at September 30, 2013	50,900		$	11.64

During the three- and nine-month periods ended September 30, 2013, the Company recorded compensation expense related to RSUs of $59,789 and $182,069, respectively. The Company recorded compensation expense of $89,100 and $278,531, 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 nine-month periods ended September 30, 2013, and 2012, 37,796 and 39,700 shares were surrendered at an average market price of $19.81 and $16.93, respectively.

At September 30, 2013, unrecognized compensation expense of $1,019,771 is expected to be recognized over a weighted average period of 1.18 years.