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Stock-based Compensation
 3 Months Ended
Jun. 30, 2012
Stock-based Compensation  
Stock-based Compensation

6.  Stock-based Compensation

 

Stock-based compensation costs for award grants to employees and directors are valued at fair value and recognized on a straight line basis over the service periods of each award.  We estimate forfeiture rates for the year based on historical experience.  Amounts recognized in the condensed financial statements related to stock-based compensation are as follows:

 

 

 

Three months ended
June 30,

 

(Dollars in thousands except earnings per share)

 

2012

 

2011

 

Total cost of stock-based compensation charged against income before income taxes

 

$

149

 

$

96

 

Amount of income tax benefit recognized in earnings

 

51

 

35

 

Amount charged against net income

 

$

98

 

$

61

 

Impact on net income per common share:

 

 

 

 

 

Basic

 

$

0.03

 

$

0.02

 

Diluted

 

0.03

 

0.02

 

 

Stock-based compensation expense is included in cost of revenues, and general and administrative expense in the condensed statements of income.

 

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). We use historical data to estimate the expected price volatility, the expected option life and expected forfeiture rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period. The following summarizes the Black-Scholes assumptions:

 

 

 

Three months ended June 30,

 

 

 

2012

 

2011

 

Volatility

 

31.1%

 

33.4%

 

Risk-free interest rate

 

0.6 — 1.0%

 

2.2 — 3.6%

 

Expected option life (years)

 

5 — 10

 

5 — 10

 

Dividend yield

 

1.5%

 

1.7%

 

 

The following summarizes option activity:

 

 

 

Number of
Shares

 

Weighted-
average
Exercise Price
per Share

 

Weighted-
average
Remaining
Contractual
Term

 

Aggregate
Intrinsic Value
(000s)

 

Outstanding at March 31, 2012

 

433,785

 

$

22.77

 

3.9

 

 

 

Options granted

 

103,880

 

50.20

 

6.2

 

 

 

Options forfeited

 

(7,900

)

30.36

 

 

 

 

 

Options expired

 

—

 

 

 

 

 

 

 

Options exercised

 

(29,780

)

20.97

 

 

 

 

 

Outstanding at June 30, 2012

 

499,985

 

28.46

 

4.3

 

$

9,016

 

 

 

 

 

 

 

 

 

 

 

Exercisable at June 30, 2012

 

210,305

 

20.86

 

3.3

 

1,805

 

 

We issue new shares of common stock upon exercise of stock options.  The total intrinsic value of options exercised was $851,000 and $495,000 during the three month periods ended June 30, 2012 and 2011, respectively.

 

A summary of the status of our unvested option shares as of June 30, 2012 is as follows:

 

 

 

Number of
Shares

 

Weighted-
average
Grant-Date
Fair Value

 

Unvested at March 31, 2012

 

284,875

 

$

7.23

 

Options granted

 

103,880

 

12.37

 

Options forfeited

 

(7,900

)

7.86

 

Options vested

 

(91,175

)

6.80

 

Unvested at June 30, 2012

 

289,680

 

9.19

 

 

As of June 30, 2012, there was approximately $1,918,000 of total unrecognized compensation cost related to unvested stock options granted under our plans, which is expected to be recognized over a weighted-average period of 3 years.