Note 7 - 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]

(7)     Share-Based Compensation

The Company measures and recognizes compensation expense for all share-based payments based on the grant-date fair value of those awards. All of the Company’s existing stock option awards and non-vested stock awards have been determined to be equity-classified awards.

In August 2001, the Board of Directors adopted, and on May 1, 2002, the Company’s shareholders approved, the National Research Corporation 2001 Equity Incentive Plan (“2001 Equity Incentive Plan”). The 2001 Equity Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of class A common stock and 300,000 shares of class B common stock. Stock options granted may be either nonqualified or incentive stock options. Stock options vest over one to five years following the date of grant and option terms are generally five to ten years following the date of grant. Due to the expiration of the 2001 Equity Incentive plan, at December 31, 2013, there were no shares of stock available for future grants. The Company has accounted for grants of 1,683,309 class A and 280,552 class B options and restricted stock under the 2001 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

The Company’s 2004 Non-Employee Director Stock Plan (the “2004 Director Plan”) is a nonqualified plan that provides for the granting of options with respect to 1,650,000 shares of class A common stock and 275,000 shares of class B common stock. The 2004 Director Plan provides for grants of nonqualified stock options to each director of the Company who is not employed by the Company. On the date of each annual meeting of shareholders of the Company, options to purchase 36,000 shares of class A common stock and 6,000 shares of class B common stock are granted to directors that are re-elected or retained as a director at such meeting. Stock options vest one year following the date of grant and option terms are generally ten years following the date of grant, or three years in the case of termination of the outside director’s service. At December 31, 2013, there were 255,000 shares of class A common stock and 42,500 shares of class B common stock available for issuance pursuant to future grants under the 2004 Director Plan. The Company has accounted for grants of 1,395,000 class A and 232,500 class B options under the 2004 Director Plan using the date of grant as the measurement date for financial accounting purposes.

In February 2006, the Board of Directors adopted, and on May 4, 2006, the Company’s shareholders approved the National Research Corporation 2006 Equity Incentive Plan (the “2006 Equity Incentive Plan”). The 2006 Equity Incentive Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares and other share-based awards and benefits up to an aggregate of 1,800,000 shares of class A common stock and 300,000 shares of class B common stock. Stock options granted may be either incentive stock options or nonqualified stock options. Vesting terms vary with each grant and option terms are generally five to ten years following the date of grant. At December 31, 2013, there were 1,033,455 shares of class A common stock and 172,242 shares of class B common stock available for issuance pursuant to future grants under the 2006 Equity Incentive Plan. The Company has accounted for grants of 766,545 class A and 127,758 class B options and restricted stock under the 2006 Equity Incentive Plan using the date of grant as the measurement date for financial accounting purposes.

The Company granted options to purchase 232,344 shares of the Company’s class A common stock and 38,718 shares of the class B common stock during the twelve-month period ended December 31, 2013. During the same period in 2012, the Company granted options to purchase 238,890 shares of class A common stock and 39,815 shares of class B common stock, and during 2011 granted options to purchase 498,024 shares of class A common stock and 83,004 shares of class B common stock. Options to purchase shares of common stock are typically granted with exercise prices equal to the fair value of the common stock on the date of grant. The Company does, in certain limited situations, grant options with exercise prices that exceed the fair value of the common shares on the date of grant. The fair value of stock options granted (pre-May 2013 Recapitalization) was estimated using a Black-Scholes valuation model with the following assumptions:

	2013				2012				2011
Expected dividend yield at date of grant		2.26	to	3.46%		2.63	to	3.98%		2.00	to	2.55%
Expected stock price volatility		30.34	to	30.51%		29.10	to	31.70%		28.70	to	32.00%
Risk-free interest rate		0.55	to	1.07%		0.56	to	1.15%		1.70	to	2.14%
Expected life of options (in years)		4	to	6		4	to	6		4	to	6

The risk-free interest rate assumptions were based on the U.S. Treasury yield curve in effect at the time of the grant. The expected volatility was based on historical monthly price changes of the Company’s stock based on the expected life of the options at the date of grant. The expected life of options is the average number of years the Company estimates that options will be outstanding. The Company considers groups of associates that have similar historical exercise behavior separately for valuation purposes.

The following table summarizes stock option activity under the 2001 and 2006 Equity Incentive Plans and the 2004 Director Plan for the year ended December 31, 2013:

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms (Years)		Aggregate Intrinsic Value (In thousands)
Class A
Outstanding at December 31, 2012		1,367,754		$	8.45
Granted		232,344		$	15.98
Exercised		(155,253	)	$	3.36			$	1,126
Forfeited		--			--
Outstanding at December 31, 2013		1,444,845		$	10.21		6.48	$	12,438
Exercisable at December 31, 2013		693,975		$	8.96		5.37	$	6,846
Class B
Outstanding at December 31, 2012		227,959		$	18.45
Granted		38,718		$	29.35
Exercised		(31,875	)	$	14.69			$	992
Forfeited		--			--
Outstanding at December 31, 2013		234,802		$	20.76		6.54	$	3,276
Exercisable at December 31, 2013		109,662		$	18.85		5.43	$	1,739

The weighted average grant date fair value of stock options granted during the years ended December 31, 2013, 2012, and 2011, was $3.24, $2.43 and $2.12, respectively, for both class A and class B common stock. The total intrinsic value of stock options exercised during the years ended December 31, 2013, was $1.1 million for the shares of class A common stock and $992,000 for the shares of class B common stock. The total intrinsic value of stock options exercised was $5.6 million for the shares of class A common stock and $941,000 for the shares of class B common stock for the year ended December 31, 2012, and $900,000 for the shares of class A common stock and $150,000 for the shares of class B common stock for the year ended December 31, 2011. The total intrinsic value of stock options vested during the years ended December 31, 2013, was $1.5 million for the shares of class A common stock and $0.5 million for the shares of class B common stock. The total intrinsic value of stock options vested was $2.3 million for the shares of class A common stock and $376,000 for the shares of class B common stock for the year ended December 31, 2012, and $1.3 million for the shares of class A common stock and $224,000 for the shares of class B common stock for the year ended December 31, 2011. As of December 31, 2013, the total unrecognized compensation cost related to non-vested stock option awards was approximately $729,000 and $122,000 for class A and class B common stock shares, respectively, which was expected to be recognized over a weighted average period of 2.38 years for each class of stock.

Cash received from stock options exercised for the years ended December 31, 2013, 2012, and 2011 was $840,000, $1.3 million, and $568,000, respectively. The actual tax benefit realized for the tax deduction from stock options exercised was $753,000, $2.0 million and $350,000, for the years ended December 31, 2013, 2012, and 2011, respectively.

During 2012, the Company granted 23,469 and 3,912 non-vested shares of class A and class B common stock, respectively, under the 2006 Equity Incentive Plan. During 2011, the Company granted 118,503 and 19,751 non-vested shares of class A and class B common stock, respectively, under the 2006 Equity Incentive Plan. No non-vested shares of common stock were granted during 2013. As of December 31, 2013, the Company had 60,609 and 10,101 non-vested shares of class A and class B common stock, respectively, outstanding under the 2006 Equity Incentive Plan. These shares vest over one to five years following the date of grant and holders thereof are entitled to receive dividends from the date of grant, whether or not vested. The fair value of the awards is calculated as the fair market value of the shares on the date of grant. The Company recognized $140,000, $74,000 and $143,000 of non-cash compensation for the years ended December 31, 2013, 2012, and 2011, respectively, related to this non-vested stock.

The following table summarizes information regarding non-vested stock granted to associates under the 2001 and 2006 Equity Incentive Plans for the year ended December 31, 2013:

	Class A Shares Outstanding		Class A Weighted Average Grant Date Fair Value Per Share		Class B Shares Outstanding		Class B Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2012		60,609	$	5.77		10,101	$	34.65
Granted		--		--		--		--
Vested		--		--		--		--
Forfeited		--		--		--		--
Outstanding at December 31, 2013		60,609	$	5.77		10,101	$	34.65

As of December 31, 2013, the total unrecognized compensation cost related to non-vested stock awards was approximately $340,000 and is expected to be recognized over a weighted average period of 2.53 years.