STOCK COMPENSATION

12 Months Ended

Dec. 31, 2012

STOCK OPTION PLANS [Abstract]

STOCK OPTION PLANS

STOCK COMPENSATION

The Company accounts for stock compensation using ASC 718 Compensation – Stock Compensation.  The Company recorded stock compensation of $4.1 million, $2.4 million and $0.2 million in 2012, 2011 and 2010, respectively.  The Company granted 45,000 stock options, 492,500 stock options and 494,938 stock options in 2012, 2011 and 2010, respectively. Options to the Board of Directors vest immediately and options to employees vest over three years. All options expire 10 years from the grant date. The Company granted 293,000 restricted stock awards in 2012 and no restricted stock awards in 2011 or 2010. The restricted stock awards vest over four years.

2005 Equity Incentive Plan

The Company adopted the 2005 Equity Incentive Plan to provide stock compensation as a means of attracting and retaining qualified independent directors and employees for the Company.  A total of 2.0 million shares are available for future issuance under the equity incentive plan.  The exercise price of stock options may not be less than the fair market value of the common stock on the date of the grant.  The vesting and term of each option is set by the Board of Directors.  The Company granted 45,000 stock options under this plan in 2012, 492,500 stock options under this plan in 2011, and 494,938 stock options under this plan in 2010. The Company granted 293,000 restricted stock awards under this plan in 2012.

Stock Options

The following is a summary of activity in stock options for 2012:

	Shares Subject to Option		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (in thousands)
Outstanding, December 31, 2011	1,234,051		$	17.40
Granted	45,000		23.39
Exercised	(71,910	)	12.99
Forfeited/Expired	(27,054	)	19.75
Outstanding, December 31, 2012	1,180,087		17.85		7.25	$	4,895
Exercisable, December 31, 2012	780,793		16.97		6.57	$	4,032

The total intrinsic value of options exercised in 2012 was $1.0 million.  Cash received from the exercise of stock options was $0.9 million for 2012.  Tax benefit realized for the tax deductions from stock options exercised was $0.4 million for 2012.  The weighted-average per share estimated grant date fair value of options issued in 2012 was $13.39.  Pre-tax unrecognized compensation expense for stock options was $4.4 million at December 31, 2012, and will be recognized as expense over a weighted-average period of 1.7 years.

The total intrinsic value of options exercised in 2011 was $1.3 million.  Cash received from the exercise of stock options was $0.5 million for 2011.  Tax benefit realized for the tax deductions from stock options exercised was $0.7 million in 2011. The weighted-average per share estimated grant date fair value of options issued in 2011 was $13.30.

The total intrinsic value of options exercised in 2010 was $0.4 million.  Cash received from the exercise of stock options was $0.3 million for 2010.  The weighted-average per share estimated grant date fair value of options issued in 2010 was $8.65. There was no tax benefit realized for the tax deductions from stock options exercised for 2010.

The Company currently uses treasury shares to satisfy any stock option exercises.  At December 31, 2012, the Company had 1.8 million shares of treasury stock.

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to determine the fair value of its stock options.  The determination of the fair value of stock option awards on the date of grant using option pricing models is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables.  These variables include the Company’s expected stock price volatility over the expected term of the awards, actual and projected stock option exercise behaviors, risk-free interest rates and expected dividends.  The expected term of options represents the period of time over which options are expected to be outstanding and is estimated based on historical experience.  Expected volatility is based on the historical volatility of the Company’s common stock calculated over the expected term of the option.  The risk-free interest rate is based on U.S. Treasury yields in effect at the date of grant.

Weighted average assumptions used for stock options issued in 2012, 2011 and 2010:

	2012		2011		2010
Expected life (in years)	6.0		6.0		6.1
Expected volatility	67.0	%	65.8	%	55.5	%
Expected dividends	0.1	%	0.1	%	—
Risk-free interest rate	0.93	%	1.21	%	1.82	%

Restricted Stock

	Shares	Weighted Average Grant Date Fair Value
Unvested at December 31, 2011	—	—
Granted	293,000	20.83
Vested	—	—
Forfeited/Expired	—	—
Unvested at December 31, 2012	293,000	20.83

Pre-tax unrecognized compensation expense for unvested restricted stock was 6.0 million at December 31, 2012, and will be recognized as an expense over a weighted-average period of 3.9 years.