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Stock Options
 12 Months Ended
Dec. 31, 2012
Stock Options [Abstract]  
Stock Options

6. Stock Options

In 2010, the Board of Directors adopted a new stock option plan called the Encore Wire 2010 Stock Option Plan (the “2010 Stock Option Plan”) which was approved by the Company’s stockholders at the 2010 Annual Meeting of Stockholders. Similar to the “1999 Stock Option Plan”, which expired on June 28, 2009, the 2010 Stock Option Plan permits the grant of stock options to its directors, officers and employees. The Company granted stock option awards in 2010 and 2012 with exercise prices equal to the fair market value of its stock on the date of grant of the options. These options vest ratably over a period of five years from the time the options were granted. No options were granted in 2011. The maximum term of any option granted under the 1999 or 2010 Stock Option Plan is ten years. As of December 31, 2012, 343,500 options were available to be granted in the future under the 2010 Stock Option Plan.

During 2012, 2011 and 2010, the Company recorded $746,000, $416,000 and $467,000, respectively, of stock based compensation included in selling, general and administrative expenses. The income tax benefit realized in excess of book deductions associated with stock based compensation totaled $12,000, $100,000 and $55,000 for the years ended December 31, 2012, 2011 and 2010, respectively.

The following presents a summary of stock option activity for the year ended December 31, 2012:

 

                                 
    Number
of
Shares		     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contractual
Term		     Aggregate
Intrinsic Value
(In Thousands)		  

Outstanding at January 1, 2012

     216,500     $ 22.22                  

Granted

     142,500       28.74                  

Exercised

     (11,050 )      17.93                  

Forfeited/Cancelled

     (2,800 )      25.41                  
   

 

 

    

 

 

                  

Outstanding at December 31, 2012

     345,150     $ 25.03       6.67     $ 1,824  
   

 

 

    

 

 

    

 

 

    

 

 

  

Vested and exercisable at December 31, 2012

     161,420     $ 23.69       4.79     $ 1,069  
   

 

 

    

 

 

    

 

 

    

 

 

  

 

The fair value of stock options granted during the years ended December 31, 2012, 2011, and 2010, was estimated on the date of grant using a Black-Scholes options pricing model and the following weighted average assumptions:

 

                         
    Year Ended December 31,  
    2012     2011     2010  

Risk-free interest rate

     0.78 %      n/a       1.76 % 

Expected dividend yield

     0.28 %      n/a       0.42 % 

Expected volatility

     44.9 %      n/a       48.3 % 

Expected lives

     5.0 years       n/a       5.0 years  

We base expected volatilities on historical volatilities of our common stock. The expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting periods and management’s consideration of historical exercise patterns. The risk free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding to the expected life of the option. The expected dividend yield is based on the annualized dividend payment paid on common shares.

ASC 718 requires the estimation of forfeitures when recognizing compensation expense and adjustment of the estimated forfeiture rate over the requisite service period should actual forfeitures differ from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment, which is recognized in the period of change and impacts the amount of un-recognized compensation expense to be recorded in future periods.

During the years ended December 31, 2012, 2011, and 2010, the weighted average grant date fair value of options granted was $11.11, n/a and $8.10, respectively, and the total intrinsic value of options exercised was $0.1 million, $3.1 million and $0.7 million, respectively. As of December 31, 2012, total unrecognized compensation cost related to non-vested stock options of $1.2 million was expected to be recognized over a weighted average period of 3.83 years.