12. STOCK-BASED COMPENSATION

The Company applies the provisions of FASB ASC 718, “Compensation – Stock Compensation,” to account for the Company’s share-based compensation. Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized over the employees’ requisite service period. The Company recorded stock compensation expense of $460 and $96 for the three-month period ended June 30, 2013 and 2012, respectively, related to restricted stock awards and performance unit awards. Stock compensation expense of $1,091 and $835 was recorded for the six-month periods ended June 30, 2013 and 2012, respectively.

Shares issued as a result of vested stock-based compensation generally will be from previously issued shares which have been reacquired by the Company and held as Treasury shares or authorized but previously unissued common stock.

The excess tax benefit realized for the tax deduction from stock-based compensation approximated $133 and $37 for the six months ended June 30, 2013 and 2012, respectively. This excess tax benefit is included in cash flows from financing activities in the Condensed Consolidated Statements of Cash Flows.

Stock Option Awards

A summary of the option activity as of June 30, 2013 is presented below.



				Weighted		Aggregate
			Weighted	Average		Intrinsic
			Average	Remaining		Value
			Exercise	Contractual		(Dollars in
	Shares		Price	Term		thousands)
Outstanding and Exercisable at January 1, 2013	22,500	$	10.41	2.2
Granted	-		-	-
Canceled	-		-	-
Exercised	-		-	-
Outstanding and Exercisable at June 30, 2013	22,500	$	10.41	1.7	$	737

At June 30, 2013, common stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $7.81 to $14.77, with a weighted average exercise price of $10.41. At June 30, 2012, common stock options outstanding and exercisable under the Company’s equity plans had option prices ranging from $4.10 to $14.77, with a weighted average exercise price of $8.92 per share.

The total intrinsic value of stock options outstanding and exercisable at June 30, 2012 was $758.

The weighted average remaining contractual life of the stock options outstanding at June 30, 2013 and 2012 was 1.7 and 2.3 years, respectively.

There were no stock options exercised during the six-month period ended June 30, 2013. There were 1,450 stock options with a weighted average exercise price per share of $9.30 exercised during the six-month period ended June 30, 2012. The total intrinsic value of stock options exercised during the six-month period ended June 30, 2012 was $30.

Restricted Stock Awards

For the six-month periods ended June 30, 2013 and 2012, the Company granted approximately 13,000 and 92,000 shares, respectively, of restricted stock to employees. A summary of restricted stock award activity follows:



					Aggregate
			Grant Date		Fair Value
Grant Date	Shares		Fair Value		(Dollars in Thousands)
February 1, 2012	66,000	$	30.15	$	1,990
March 6, 2012	18,347		27.49		504
May 23, 2012	8,000		28.05		224
February 27, 2013	12,973		42.49		551

These forfeitable restricted stock awards time-vest after a four-year holding period, unless indicated otherwise by the underlying restricted stock agreement. Certain awards of restricted stock included in the above table provide for incremental vesting over a period up to the vesting date listed.

Performance Unit Awards

Annually, under separate three-year long-term incentive plans, pursuant to the Omnibus Plan, the Company grants performance units. A summary of performance unit stock award activity follows:



						Aggregate
Incentive				Grant Date		Fair Value
Plan	Grant Date	Units		Fair Value		(Dollars in Thousands)
2011 - 2013	March 15, 2011	34,002	$	38.46	$	1,308
2012 - 2014	March 6, 2012	43,042		27.49		1,183
2013 - 2015	February 27, 2013	31,418		42.49		1,335

Performance units are subject to forfeiture, time-vest over a three year period and will be converted into common stock of the Company based upon the Company’s performance relative to performance measures and conversion multiples as defined in the underlying plan. The aggregate fair value in the above table is based upon achieving 100% of the performance targets as defined in the underlying plan. During the three-month period ended June 30, 2012, the Company reversed $1,157 of incentive compensation expense caused by the impact of a $19,000 product warranty charge on plan performance conditions, as the vesting of the performance units was determined to be improbable at that time.