SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2012

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

NOTE 9. SHARE-BASED COMPENSATION

The Company’s three stock option plans, consisting of the Directors’ Stock Option Plan, the Executive Long-term Incentive Plan and the Employee Stock Option Plan (the “Plans”), which collectively provide for the granting of options to purchase up to 3,250,000 common shares. The exercise price of stock options granted under the Plans is established by the respective plan committees, but the exercise price may not be less than the market price of the Company’s common stock on the date the option is granted. The Company stock options typically vest on a graded schedule, typically in equal, one-third increments, although the respective stock option committees have the discretion to impose different vesting periods or modify existing vesting periods. Options expire ten years from the grant date. By their amended terms, the Plans will expire in June 2013 after which no options may be granted unless the Plans are amended or replaced.  Such amendment or replacement requires the approval of a majority of the Company’s stockholders.

A summary of the stock option activity as of and for the year ended December 31, 2012 is presented below:

			Weighted Average
Options	Shares		Exercise Price		Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of period	2,347,456		$	12.13	—	—
Granted	942,474		8.81		—	—
Exercised	(9,166	)	5.78		—	—
Forfeited	(142,000	)	8.77		—	—
Expired	(4,444	)	19.32		—	—
Outstanding at end of period	3,134,320		$	11.29	6.7 yrs.	$	3,523,257
Exercisable at end of period	1,636,581		$	12.94	4.8 yrs.	$	1,207,171

On May 21, 2010, the Company commenced a Stock Option Exchange Program whereby eligible employees were allowed a one-time opportunity to voluntarily surrender certain outstanding underwater stock options in exchange for fewer new stock options with a lower exercise price (the “Exchange Offer”).  The Exchange Offer expired on June 18, 2010.  Pursuant to the Exchange Offer, 454,319 eligible stock options were tendered and accepted by the Company for cancellation.  The tendered options represented approximately 95% of the total stock options eligible for exchange in the Exchange Offer.  On June 21, 2010, the Company granted an aggregate of 426,709 new stock options in exchange for the eligible stock options surrendered in the Exchange Offer.  The exercise price of the new stock options is $11.15, which was the closing price of the Company’s common stock on June 21, 2010 as reported by the NASDAQ stock exchange.

A summary of the status of the Company’s nonvested shares as of, and for the year ended, December 31, 2012 is presented below:

Nonvested Shares	Shares		Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2012	1,115,127		$	12.16
Granted	942,474		8.81
Vested	(413,418	)	12.94
Forfeited	(146,444	)	8.77
Nonvested at December 31, 2012	1,497,739		$	9.49

Expense Measurement and Recognition:

The Company recognizes share-based compensation for all current award grants and for the unvested portion of previous award grants based on grant date fair values. Unrecognized costs related to all share-based awards outstanding at December 31, 2012 totaled approximately $1.2 million and is expected to be recognized over a weighted average period of 4.8 years.

The Company uses historical data and projections to estimate expected employee, executive and director behaviors related to option exercises and forfeitures.

The Company estimates the fair value of each stock option award on the grant date using the Black-Scholes valuation model incorporating the assumptions noted in the following table. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate.  Option valuation assumptions for options granted during each year were as follows:

	Years ended December 31,
	2012			2011			2010
Expected volatility	56.1		%	56.1		%	42.9		%
Expected dividends	—			—			—
Expected life (in years)
Directors’ Plan	9.5			9.5			9.5
Executive Plan	3.1			3.1			3.1
Employee Plan	3.1			3.1			3.1
Weighted average risk free rate	0.4		%	0.7		%	1.2		%
Weighted average grant date fair value per share of options granted	$	3.43		$	3.89		$	2.13
Total intrinsic value of options exercised	$	41,240		—			$	64,253
Cash received for all stock option exercises	$	52,995		—			$	95,372
Tax benefit realized for tax return deductions	$	13,816		—			$	4,472

The risk-free interest rate is based on the U.S. treasury security rate in effect as of the date of grant. The expected lives of options are based on historical data of the Company.  The Company has determined that an implied volatility is more reflective of market conditions and a better indicator of expected volatility.

Reported stock based compensation expense was classified as follows:

	For the years ended December 31,
	2012			2011			2010
Casino	$	65,018		$	80,530		$	46,313
Food and beverage	80,520			70,633			75,633
Hotel	20,273			17,028			27,866
Selling, general and administrative	1,202,156			1,451,461			1,591,272
Total stock-based compensation, before taxes	1,367,967			1,619,652			1,741,084
Tax benefit	(478,788		)	(581,601		)	(609,379		)
Total stock-based compensation, net of tax	$	889,179		$	1,038,051		$	1,131,705