Share-Based Compensation

3 Months Ended

Mar. 31, 2015

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

Share-Based Compensation

10. Share-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation,” which requires the Company to recognize compensation expense for stock-based awards, measured at the fair value of the awards at the grant date. The Company recognized expense of $0.5 million and $0.4 million during the three-month periods ended March 31, 2015 and 2014, respectively.

The weighted-average fair value of stock options granted during the three months ended March 31, 2015 and 2014 was estimated at $7.15 and $7.77 per option, respectively, using the Black-Scholes option-pricing model based on the following assumptions:

Expected Volatility: The Company utilizes a volatility factor based on the Company’s historical stock prices for a period of time equal to the expected term of the stock option utilizing weekly price observations. For the three months ended March 31, 2015 and 2014, the Company utilized a weighted-average volatility factor of 54% and 57%, respectively.

Expected Term: For the three months ended March 31, 2015 and 2014, the Company utilized a weighted-average expected term factor of 6.5 years and 6.4 years, respectively.

Risk-Free Interest Rate: The risk-free interest rate factor utilized is based upon the implied yields currently available on U.S. Treasury zero-coupon issues over the expected term of the stock options. For the three months ended March 31, 2015 and 2014, the Company utilized a weighted-average risk-free interest rate factor of 2.0% and 2.3%, respectively.

Expected Dividends: The Company utilized a weighted average expected dividend rate of 1.6% and 1.3% to value options granted during the three months ended March 31, 2015 and 2014, respectively.

The fair value of the stock options granted is recorded as compensation expense on a straight-line basis over the vesting periods of the options adjusted for the Company’s estimate of pre-vesting forfeitures. The pre-vesting forfeiture estimate is based on historical activity and is reviewed periodically and updated as necessary.

The Company received $2,000 and $0.5 million in cash from employees and directors exercising options during the three months ended March 31, 2015 and 2014, respectively. The intrinsic value of options exercised during the three months ended March 31, 2015 and 2014 was $15,000 and $1.0 million, respectively.