Share-Based Compensation

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

12. Stock incentive plans

Stock incentive plans.  We currently have three primary stock incentive plans: the 1996 Directors’ Stock Plan, which provided for non-discretionary awards to non-employee directors; the 2001 Employee Stock Plan, which provided for the grant of awards to key employees of the Company and other non-employees who provided services to the Company; and the 2005 Equity Incentive Plan, which provides for awards to executives, key employees, directors and consultants.  The plans generally provide for awards in the form of: (i) incentive stock options, (ii) non-qualified stock options, (iii) restricted stock, (iv) restricted stock units, (v) stock appreciation rights or (vi) limited stock appreciation rights.  However, the 2001 Employee Stock Plan does not provide for incentive stock option awards.  Options granted under these plans have exercise prices equal to 100% of the fair market value of the common stock at the date of grant.  Options granted have a ten-year term and generally vest over a three- to five-year period, unless automatically accelerated for certain defined events.  As of May 2005, no new awards will be made under the 1996 Directors’ Stock Plan or the 2001 Employee Stock Plan.  Under our 2005 Equity Incentive Plan, we may authorize up to 1,200,000 of shares of TransAct common stock.  At December 31, 2013, 195,755 shares of common stock remained available for issuance under the 2005 Equity Incentive Plan.

Under the assumptions indicated below, the weighted-average fair value of stock option grants for the years ended December 31, 2013, 2012 and 2011 was $7.94, $6.91 and $10.42, respectively.  The table below indicates the key assumptions used in the option valuation calculations for options granted in the years ended December 31, 2013, 2012 and 2011 and a discussion of our methodology for developing each of the assumptions used in the valuation model:

	Year ended December 31,
	2013		2012		2011
Expected option term	6.8 years		6.7 years		6.8 years
Expected volatility		56.5%		57.8%		62.5%
Risk-free interest rate		0.8%		0.8%		2.0%
Dividend yield		3.1%		-%		-%

Expected Option Term - This is the weighted average period of time over which the options granted are expected to remain outstanding giving consideration to our historical exercise patterns.  Options granted have a maximum term of ten years and an increase in the expected term will increase compensation expense.

Expected Volatility – The stock volatility for each grant is measured using the weighted average of historical daily price changes of our common stock over the most recent period approximately equal to the expected option term of the grant.  An increase in the expected volatility factor will increase compensation expense.

Risk-Free Interest Rate - This is the U.S. Treasury rate in effect at the time of grant having a term approximately equal to the expected term of the option.  An increase in the risk-free interest rate will increase compensation expense.

Dividend Yield – We began paying a quarterly dividend of $.06 per share to common shareholders in December 2012, which was increased to $.07 per share in May 2013. The dividend yield is calculated by dividing the annual dividend declared per common share by the weighted average market value of our common stock on the date of grant. An increase in the dividend yield will decrease compensation expense.

For the years ending December 31, 2013, 2012 and 2011, we recorded $521,000, $520,000, and $587,000 of share-based compensation expense, respectively, included primarily in general and administrative expense in our Consolidated Statements of Income.  We also recorded income tax benefits of approximately $127,000, $183,000, and $195,000 in 2013, 2012, and 2011 respectively, related to such share-based compensation.  At December 31, 2013, these benefits are recorded as a deferred tax asset in the Consolidated Balance Sheets.

The 1996 Directors’ Stock Plan, 2001 Employee Stock Plan and 2005 Equity Incentive Plan option activity is summarized below:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2012		849,961	$	8.19
Granted		129,000		7.94
Exercised		(206,111)		5.45
Forfeited		(2,000)		6.70
Cancelled		(52,375)		14.24
Outstanding at December 31, 2013		718,475	$	8.49	6.2 years	$	3,349,000
Options exercisable at December 31, 2013		388,650	$	9.26	4.6 years	$	1,717,000
Options vested or expected to vest		699,575	$	8.52	6.1 years	$	3,255,000

12. Stock incentive plans (continued)

Shares that are issued upon exercise of employee stock options are newly issued shares and not issued from treasury stock.  As of December 31, 2013, unrecognized compensation cost related to stock options is approximately $903,000, which is expected to be recognized over a weighted average period of 2.4 years.

The total intrinsic value of stock options exercised was $910,000, $222,000 and $1,576,000 and the total fair value of stock options vested was $815,000, $641,000, and $504,000 during the years ended December 31, 2013, 2012 and 2011, respectively.  Cash received from option exercises was $1,045,000, $172,000 and $959,000 for 2013, 2012 and 2011, respectively.  We recorded a realized tax benefit in 2013,2012 and 2011 from equity-based awards of $132,000, $57,000 and $498,000, respectively, related to options exercised which has been included as a component of cash flows from financing activities in the Consolidated Statement of Cash Flows.

Restricted stock:Under the 2001 Employee Stock Plan and 2005 Equity Incentive Plan, we granted shares of restricted common stock, for no consideration, to our officers, directors and certain key employees. As of December 31, 2013, there was no unrecognized compensation cost related to restricted stock and all previously issued restricted shares are fully vested.

We paid a portion of the 2012, 2011 and 2010 incentive bonus for the chief executive officer and chief financial officer in the form of 17,613, 20,055 and 14,323 deferred stock units, respectively, with a corresponding credit recorded to Additional Paid in Capital (net of share relinquishments) in the amounts of $111,000, $134,000 and $141,000 in 2013, 2012 and 2011, respectively.  Such deferred stock units were granted in March 2013, 2012 and 2011, respectively, and were fully vested at the time of grant.  These units will be converted three years from the grant date to shares of the Company’s common stock on a one-for-one basis.  The weighted average exercise price of the deferred stock units was $7.98.