9. Share Based Compensation

Share-based compensation expense is based on the value of the portion of share-based payment awards that is ultimately expected to vest. Guidance for share-based compensation requires forfeitures to be estimated at the time of grant in order to estimate the amount of share-based awards that will ultimately vest. The forfeiture rate is based on historical rates. Share-based compensation expense recognized in the Company's Consolidated Statements of Income for the years ended December 31, 2011, December 31, 2010 and December 31, 2009 includes (i) compensation expense for share-based payment awards granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the guidance for share-based compensation and (ii) compensation expense for the share-based payment awards granted subsequent to December 31, 2005, based on the grant date fair value estimated in accordance with guidance for share-based compensation. As share-based compensation expense recognized in the Consolidated Statement of Income for the years ended December 31, 2011, December 31, 2010 and December 31, 2009 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures.

The Company maintains the 1994 Stock Incentive Plan and 2003 Stock Incentive Plan. The Company was authorized to grant options for up to 2,362,500 shares under its 1994 Stock Incentive Plan. The Company has granted options for 2,691,225 shares and has had cancellations of 397,811 shares through December 31, 2011. There are no remaining stock options available to grant under this plan. The options granted under this plan generally became exercisable over a five-year period for incentive stock options and six months for nonqualified stock options and have a maximum term of ten years.

The 2003 Stock Incentive Plan was amended in 2005 to allow the issuance of Restricted Stock Units (the “Units”) to eligible employees and non-employee directors. The Units are payable in shares of the Company's common stock upon vesting. For directors, the Units vest annually over three years on the anniversary date of their issuance. For officers and employees, the Units typically vest annually over five years on the anniversary date of their issuance.

The Company's stockholders approved an amendment to the 2003 Stock Incentive Plan in 2010 to increase the number of shares authorized for issuance under the plan by 750,000. The Company may grant options and Units for up to 1,875,000 shares under the 2003 Stock Incentive Plan, as amended. The Company has granted options for 475,125 shares and Units for 869,865 shares under this plan through December 31, 2011. There have been cancellations of 122,409 shares associated with this plan through December 31, 2011. The options under this plan have a life of ten years.

During the years ended December 31, 2011 and 2010, the Company issued Units to certain directors, officers and employees with weighted average grant date fair values and Units issued as indicated in the table below. Pursuant to guidance of share-based compensation, the Company records compensation expense for the amount of the grant date fair value on a straight line basis over the vesting period. The Company incurred charges associated with the vesting of the Units of $4.1 million for the year ended December 31, 2011, $3.8 million for the year ended December 31, 2010, and $3.6 million for the year ended December 31, 2009.

Share-based compensation expense reduced the Company's results of operations as follows (in thousands, except per share amounts):

	2011			2010			2009
Share-based compensation expense recognized:
General and administrative, options	$	-		$	41		$	214
General and administrative, Units		4,145			3,803			3,624
Related deferred income tax benefit		(1,652	)		(1,532	)		(1,529	)

Decrease in net income	$	2,493		$	2,312		$	2,309

Decrease in basic earnings per share	$	0.10		$	0.09		$	0.09

Decrease in diluted earnings per share	$	0.10		$	0.09		$	0.09

The amounts above include the impact of recognizing compensation expense related to non-qualified stock options.

As of December 31, 2011, there was no unrecognized compensation cost related to non-vested outstanding stock options. The aggregate intrinsic value of stock options exercised was $4.5 million and $190,000 for the years ended December 31, 2011 and 2010, respectively.

As of December 31, 2011, there was approximately $8.6 million of total unrecognized compensation cost related to non-vested Units granted under the 2003 Stock Incentive Plan. That cost is expected to be recognized over a weighted average period of 2.9 years.

The following is a summary of stock option activity:

	2011					2010					2009
	Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price		Number of Options			Weighted Average Exercise Price
Outstanding, beginning of year		428,000		$	12.28		454,400		$	12.37		462,900		$	12.22
Options granted		-		$	-		-		$	-		-		$	-
Options exercised		(168,850	)	$	6.89		(25,500	)	$	14.19		(8,500	)	$	3.96
Options cancelled		-		$	-		(900	)	$	3.62		-		$	-
Outstanding, end of year		259,150		$	15.80		428,000		$	12.28		454,400		$	12.37
Exercisable, end of year		259,150		$	15.80		428,000		$	12.28		448,400		$	12.28

The following is a summary of Unit activity:

	2011					2010					2009
	Units			Weighted Average Grant Fair Value		Units			Weighted Average Grant Fair Value		Units			Weighted Average Grant Fair Value
Outstanding, beginning of year		399,684		$	28.40		363,924		$	32.47		271,264		$	45.90
Granted		109,834		$	42.12		166,205		$	22.98		198,350		$	19.35
Vested		(135,957	)	$	31.26		(118,245	)	$	33.25		(82,340	)	$	41.57
Forfeited		(10,834	)	$	30.33		(12,200	)	$	43.58		(23,350	)	$	44.98
Non-vested Units at end of year		362,727		$	31.43		399,684		$	28.40		363,924		$	32.47

The following table summarizes information regarding options outstanding and options exercisable at December 31, 2011:

	Outstanding and Exercisable
Range of Exercise Prices	Number of Options		Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Aggregate Intrinsic Value (000s)
$2.98 - $4.58		55,350		0.70	$	3.42	$	1,293
$16.90 - $18.80		114,450		1.84	$	17.06	$	1,113
$21.50 - $22.67		89,350		2.65	$	21.85	$	441
		259,150		1.87	$	15.80	$	2,847

The following table summarizes information regarding Units outstanding at December 31, 2011:

		Outstanding
Range of Grant Prices		Number of Units		Average Remaining Contractual Life (Years)		Weighted Average Grant Fair Value
	$16.53 - $31.69		301,607		2.65	$	29.30
	$35.67 - $39.43		32,400		1.44	$	38.60
	$40.73 - $45.70		19,600		1.42	$	44.59
	$52.47 - $62.07		3,900		0.22	$	56.52
	$66.35 - $81.18		5,220		0.48	$	70.42
			362,727		2.42	$	31.84

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The Company's options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.

The Company calculates expected volatility based on historical data of the Company's common stock. The risk-free interest rate assumption is based upon an observed interest rate appropriate for the term of the Company's employee stock options. The dividend yield assumption is based on the Company's intent not to issue a dividend under its dividend policy. The expected holding period assumption was estimated based on historical experience.