Share-Based Compensation

6 Months Ended

Jun. 30, 2012

Share-Based Compensation

Share-Based Compensation

(5)Share-Based Compensation

Share-based compensation cost is measured at the grant date based on the calculated fair value of the award and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant).

The Company issues share-based payments through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2011. The compensation cost charged against income for those plans is as follows:

	Three Months Ended				Six Months Ended
	30-Jun-2012		30-Jun-2011		30-Jun-2012		30-Jun-2011
Cost of sales	$	—	$	—	$	—	$	—
Selling, general & administrative expense	310,153		382,022		497,054		631,357
Total share-based compensation expense	$	310,153	$	382,022	$	497,054	$	631,357

Share-based compensation for the three- and six-month periods ended June 30, 2012, and June 30, 2011, include approximately $60,000 representing the fair value of the Company’s stock granted to the Board of Directors in lieu of fees.

The total income tax benefit recognized in the condensed consolidated statements of income for share-based compensation arrangements was approximately $96,000 and $134,000 for the three-month periods ended June 30, 2012, and 2011, respectively, and approximately $157,000 and $219,000 for the six-month periods ended June 30, 2012, and 2011, respectively.

The following is a summary of stock option activity under all plans for the six-month period ended June 30, 2012:

	Shares Under Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2011	638,521		$	4.98
Granted	7,770		16.32
Exercised	(118,870	)	2.69
Cancelled or expired	(11,250	)	9.09
Outstanding at June 30, 2012	516,171		$	5.59	$	7,870,369
Options exercisable at June 30, 2012	479,921		$	5.18	$	7,434,216
Vested and expected to vest at June 30, 2012	516,171		$	5.59	$	7,870,369

On June 14, 2012, the Company granted to its directors options for the purchase of 7,770 shares of its common stock at that day’s closing price of $16.32.  The compensation expense was determined as the intrinsic fair market value of the options using the Black Scholes option pricing model based on the following assumptions:

Expected volatility	56%
Expected dividends	none
Risk free interest rate	0.39%
Expected term	5 years

The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The weighted average grant date fair value of options granted during the six-month period ended June 30, 2012, was $7.72.

In prior years, the Company used a lattice-based model to determine fair value.

During the six-month periods ended June 30, 2012, and 2011, the total intrinsic value of all options exercised (i.e., the difference between the market price on the exercise date and the price paid by the employees to exercise the options) was $1,843,794 and $1,823,092, respectively, and the total amount of consideration received from the exercised options was $320,012 and $162,182, respectively.

During the three-month periods ended June 30, 2012, and 2011, the Company recognized compensation expenses related to stock options granted to directors and employees of $79,437 and $84,467, respectively.  During the six-month periods ended June 30, 2012, and 2011, the Company recognized compensation expenses related to stock options granted to directors and employees of $97,623 and $104,747, respectively.

On February 17, 2012, the Company’s Compensation Committee approved the award of $300,000 payable in shares of common stock to the Company’s Chairman, Chief Executive Officer, and President under the 2003 Incentive Plan.  The shares will be issued on or before December 31, 2012.  The Company has recorded compensation expense associated with the award of $75,000 and $150,000 during the three- and six-month periods ended June 30, 2012.  During the three- and six-month periods ended June 30, 2011, $106,251 and $212,502 of compensation expense was recognized for a similar award.

The following table summarizes information about Restricted Stock Units (“RSUs”) activity during the six-month period ended June 30, 2012:

	Restricted Stock Units		Weighted Average Award Date Fair Value
Outstanding at December 31, 2011	176,209		$	6.98
Awarded	13,553		15.62
Shares vested	(80,896	)	5.96
Forfeited / cancelled	—		—
Outstanding at June 30, 2012	108,866		$	8.77

During the three- and six-month periods ended June 30, 2012, the Company recorded compensation expense related to RSUs of $95,716 and $189,431, respectively.  The Company recorded $131,346 and $254,150, respectively, for the same periods ended June 30, 2011.

At its discretion, the Company allows option and RSU holders to surrender previously owned common stock in lieu of paying the minimum statutory withholding taxes due upon the exercise of options or the vesting of RSUs.  During the six-month periods ended June 30, 2012, and 2011, 39,707 and 35,930 shares were surrendered at an average market price of $16.93 and $17.78, respectively.