Stock Options

12 Months Ended

Dec. 31, 2011

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock Options

12. Stock Options On February 21, 2000, the Company's Board of Directors approved the adoption of the 2000 Incentive Stock Option Plan (the “Plan”) for TOR Minerals International, Inc. The Plan provides for the award of a variety of incentive compensation arrangements, including restricted stock awards, performance units or other non-option awards, to such employees and directors as may be determined by a Committee of the Board. At the Annual Shareholders’ meeting on May 23, 2008, the maximum number of shares of the Company’s common stock that may be sold or issued under the Plan was increased to 250,000 shares subject to certain adjustments upon recapitalization, stock splits and combinations, merger, stock dividend and similar events; in addition the plan was extended to May 23, 2018. At December 31, 2011, there were 167,983 options outstanding, 72,359 exercised and 9,658 available for future issuance under the Plan.

For the twelve-month periods ended December 31, 2011, 2010 and 2009, the Company recorded $59,000, $91,000 and $266,000, respectively, in stock-based employee compensation. This compensation cost is included in the general and administrative expenses and cost of sales in the accompanying consolidated statements of operations.

The Company granted options to purchase 23,500, 23,404 and 27,500 shares of common stock during the twelve-month periods ended December 31, 2011, 2010 and 2009, respectively. The weighted average fair value per option at the date of grant for options granted in the twelve-month periods ended December 31, 2011, 2010 and 2009 was $8.98, $3.89 and $2.70, respectively, as valued using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Twelve Months Ended December 31,
	2011	2010	2009
Risk-free interest rate	2.78%	1.20 %	3.17 %
Expected dividend yield	0.00 %	0.00 %	0.00 %
Expected volatility	0.68	0.79	0.73
Expected term (in years)	5.00	3.00	7.00

The risk free interest rate is based on the Treasury Constant Maturity Rate as quoted by the Federal Reserve at the time of the grant for a term equivalent to the expected term of the grant. The estimated volatility is based on the historical volatility of our stock and other factors. The expected term of options represents the period of time the options are expected to be outstanding from grant date.

The following table summarizes certain information regarding stock option activity:

			Options
			Weighted Avg			Range of
	Total Reserved	Outstanding	Exercise Price			Exercise Prices
Balances at
December 31, 2008	225,782	148,720		$13.00	$4.60- $30.55
Granted		27,500		$2.70	$1.75- $2.90
Forfeited
or expired	(1,000)	(2,000)		$8.70	$2.90- $14.60
Balances at
December 31, 2009	224,782	174,220		$11.20	$4.60- $30.55
Granted		23,404		$7.52	$7.50- $7.63
Exercised	(14,539)	(14,539)		$3.17	$2.70- $7.50
Forfeited
or expired	(1,600)	(7,600)		$10.31	$2.90- $11.25
Balances at
December 31, 2010	208,643	175,485		$11.39	$1.75- $30.55
Granted		23,500		$13.46	$12.96- $16.33
Exercised	(31,002)	(31,002)		$6.65			-
Balances at
December 31, 2011	177,641	167,983		$12.53	$1.75- $30.55

The number of shares of common stock underlying options exercisable at December 31, 2011, 2010 and 2009 was 147,983, 175,485and 174,220, respectively. The weighted-average remaining contractual life of those options is 4.5 years. Exercise prices on options outstanding at December 31, 2011, ranged from $1.75 to $30.55 per share as noted in the following table.

	Options Outstanding
2011	2010	2009	Range of Exercise Prices
22,861	46,245	39,480	$ 1.75 - $9.99
120,802	108,180	113,680	$ 10.00 - $14.99
3,620	120	120	$ 15.00 - $19.99
12,800	12,800	12,800	$ 20.00 - $24.99
2,500	2,740	2,740	$ 25.00 - $29.99
5,400	5,400	5,400	$ 30.00 - $30.55
167,983	175,485	174,220

As of December 31, 2011, there was approximately $152,000 of compensation expense related to non-vested awards. This expense is expected to be recognized over a weighted average period of 4.07 years.

As most options issued under the Plan are Incentive Stock Options, the Company does not receive any excess tax benefits relating to the compensation expense recognized on vested options.