Note 12 - Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 12 – Stock–Based Compensation

NHC recognizes stock–based compensation expense for all stock options and restricted stock granted over the requisite service period using the fair value for these grants as estimated at the date of grant either using the Black–Scholes pricing model for stock options or the quoted market price for restricted stock.

The 2005 and 2010 Stock–Based Compensation Plans

The Compensation Committee of the Board of Directors (“the Committee”) has the authority to select the participants to be granted options; to designate whether the option granted is an incentive stock option (“ISO”), a non–qualified option, or a stock appreciation right; to establish the number of shares of common stock that may be issued upon exercise of the option; to establish the vesting provision for any award; and to establish the term any award may be outstanding.  The exercise price of any ISO’s granted will not be less than the fair market value of the shares of common stock on the date granted and the term of an ISO may not be any more than ten years.  The exercise price of any non–qualified options granted will not be less than the fair market value of the shares of common stock on the date granted unless so determined by the Committee.

In May 2005, our stockholders approved the 2005 Stock Option, Employee Stock Purchase, Physician Stock Purchase and Stock Appreciation Rights Plan (“the 2005 Plan”) pursuant to which 1,200,000 shares of our common stock were available to grant as stock–based payments to key employees, directors, and non–employee consultants.  At March 31, 2013, 145,620 shares were available for future grants under the 2005 Plan.

In May 2010, our stockholders approved the 2010 Omnibus Equity Incentive Plan (“the 2010 Plan”) pursuant to which 1,200,000 shares of our common stock were available to grant as stock–based payments to key employees, directors, and non–employee consultants.  The shares granted during the three months ended March 31, 2013 consisted of 21,640 shares through the Employee Stock Purchase Plan.  At March 31, 2013, 449,092 shares were available for future grants under the 2010 Plan.

Compensation expense is recognized only for the awards that ultimately vest.  Stock–based compensation totaled $498,000 and $543,000 for the three months ended March 31, 2013 and 2012, respectively.  At March 31, 2013, we had $5,463,000 of unrecognized compensation cost related to unvested stock–based compensation awards, which consisted of $5,029,000 for stock options and $434,000 for restricted stock.  This expense will be recognized over the remaining weighted average vesting period, which is approximately 2.9 years for stock options and 1.1 years for restricted stock.  Stock–based compensation is included in “Salaries, wages and benefits” in the interim condensed consolidated statements of income.

Stock Options

The following table summarizes the significant assumptions used to value the options granted for the three months ended March 31, 2013 and for the year ended December 31, 2012.

	2013			2012
Risk–free interest rate		0.15	%		0.28	%
Expected volatility		22.5	%		38.8	%
Expected life, in years		1.0			2.1
Expected dividend yield		2.55	%		2.91	%

The following table summarizes our outstanding stock options for the three months ended March 31, 2013 and for the year ended December 31, 2012.

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2012		1,482,077		$	46.92	$	–
Options granted		63,516			44.24		–
Options exercised		(295,371	)		45.41		–
Options cancelled		(115,620	)		50.99		–
Options outstanding at December 31, 2012		1,134,602			46.75		–
Options granted		21,640			49.50		–
Options outstanding at March 31, 2013		1,156,242		$	46.80	$	265,000
Options exercisable at March 31, 2013		197,602		$	47.03	$	265,000

Options Outstanding March 31, 2013		Exercise Prices				Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years
	28,800			37.70			37.70		1.1
	1,015,802		45.80	–	46.69		46.58		3.0
	111,640		49.50	–	51.50		51.11		0.2
	1,156,242						46.80		2.7

Restricted Stock

The following table summarizes our restricted stock activity for the three months ended March 31, 2013 and for the year ended December 31, 2012.

	Number of Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Non–vested restricted shares at January 1, 2012		24,000	$	34.46	$	–
Award shares granted		–		–		–
Award shares vested		6,000		34.46		–
Non–vested restricted shares at December 31, 2012		18,000		34.46		–
Award shares granted		–		–		–
Award shares vested		–		–		–
Non–vested restricted shares at March 31, 2013		18,000	$	34.46	$	203,000

The weighted average remaining contractual life of restricted stock at March 31, 2013 is 1.1 years.