Stock Options

12 Months Ended

Dec. 31, 2012

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 11, 2012, the maximum number of shares of the Company’s common stock that may be sold or issued under the Plan was increased to 500,000 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, 2022.  At December 31, 2012, there were 173,888 options outstanding, 87,454 exercised and 238,658 available for future issuance under the Plan.

For the twelve-month periods ended December 31, 2012, 2011 and 2010, the Company recorded $90,000, $58,000 and $91,000, 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 income.

The Company granted options to purchase 21,000, 23,500 and 23,404 shares of common stock during the twelve-month periods ended December 31, 2012, 2011 and 2010, respectively.  The weighted average fair value per option at the date of grant for options granted in the twelve-month periods ended December 31, 2012, 2011 and 2010 was $11.03, $8.98 and $3.89, respectively, as valued using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Twelve Months Ended December 31,
	2012			2011		2010
Risk-free interest rate		1.17	%	2.78	%	1.20	%
Expected dividend yield	0.00		%	0.00	%	0.00	%
Expected volatility		0.68		0.68		0.79
Expected term (in years)		7.00		5.00		3.00

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, 2009			224,782	174,220		$	11.20	$	4.60	-	$	30.55
	Granted			23,404		$	7.52	$	7.50	-	$	7.63
	Exercised		(14,529)	(14,539)		$	3.17	$	2.7		$	7.5
	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	$	1.75	-	$	13.80
Balances at
December 31, 2011			177,641	167,983		$	12.53	$	1.75	-	$	30.55
	Additional options
	authorized		250,000
	Granted			21,000		$	11.03	$	16.77	-	$	1,822.00
	Exercised		(15,095)	(15,095)		$	8.83	$	2.90	-	$	11.05
Balances at
December 31, 2012			412,546	173,888		$	13.39	$	2.70	-	$	30.55

The number of shares of common stock underlying options exercisable at December 31, 2012, 2011 and 2010 was 143,388, 147,983and 175,485, respectively.  The weighted-average remaining contractual life of those options is 4.4 years.  Exercise prices on options outstanding at December 31, 2012, ranged from $1.75 to $30.55 per share as noted in the following table.

				Options Outstanding
2012				2011		2010	Range of Exercise Prices
		17,158			22,861	46,245	$   1.75 - $   9.99
	111,410				120,802	108,180	$ 10.00 - $ 14.99
		24,620			3,620	120	$ 15.00 - $ 19.99
		12,800			12,800	12,800	$ 20.00 - $ 24.99
			2,500		2,500	2,740	$ 25.00 - $ 29.99
			5,400		5,400	5,400	$ 30.00 - $ 30.55
	173,888				167,983	175,485

As of December 31, 2012, there was approximately $294,000 of compensation expense related to non-vested awards.  This expense is expected to be recognized over a weighted average period of 3.64 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.