Stock-Based Compensation Plan

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

(7)   Stock–Based Compensation Plan

The following table summarizes the activity in the Company's stock option plan for the nine months ended September 30, 2012 and 2011:

	Nine months Ended September 30,
	2012					2011
	Number of Shares			Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
Options outstanding at January 1		1,192,680		$	12.89		972,680	$	10.32
Options granted - employees		111,000		$	17.77		180,000	$	24.82
Options forfeited- employees		(8,000	)	$	17.77		-		-
Options granted - directors		40,000		$	17.77		40,000	$	21.62
Options outstanding at September 30		1,335,680		$	13.41		1,192,680	$	12.89
Options exercisable		991,430		$	12.11		775,805	$	11.52
Weighted average remaining term	6.0 years					7.3 years

Stock options granted to employees have a vesting period of four years from grant date, with 25% vesting after one year, and 1/48th vesting each month thereafter until fully vested. Stock options granted to independent directors vest in one year. The estimated fair value of stock options granted to employees during the nine months ended September 30, 2012 and 2011 was $0.9 million, or $8.46 per option share, and $2.2 million, or $12.44 per option share, respectively. The options granted to the independent directors during the nine months ended September 30, 2012 and 2011 were valued at $0.3 million, or $8.09 per option share, and $0.4 million, or $10.22 per option share, respectively.

The fair value of the stock options granted to the Company's employees and independent directors was estimated using the Black-Scholes-Merton pricing model using the following weighted average assumption:

	Nine Months Ended September 30,
	2012			2011
Stock price	$	17.77		$	24.24
Exercise price	$	17.77		$	24.24
Expected term:
Employees	6.25 years			6.25 years
Directors	5.5 years			5.5 years
Expected volatility:
Employees		49.5	%		50.2	%
Directors		50.2	%		50.8	%
Dividend yield		0	%		0	%
Risk free rate		0.75	%		1.89	%

As the Company has insufficient historical data, the expected option term is calculated using the simplified method in accordance with SEC guidance. In the absence of sufficient historical data, 50% of the assumed volatility factor used in the calculation was derived from the average volatility of common shares for similar companies over a period approximating the expected term of the options. The remaining 50% of the assumed volatility factor was derived from the average volatility of the Company's common shares since their initial public offering in 2007. The risk-free rate is based on daily U.S. Treasury yield curve with a term approximating the expected term of the option. No forfeiture was estimated on all options granted during the nine months ended September 30, 2012 and 2011 as management believes that the impact of grantees leaving the Company within the option vesting period will be insignificant.

The Company recorded stock-based compensation expense of $0.3 million in both the three months ended September 30, 2012 and 2011, and $0.9 million in both the nine months ended September 30, 2012 and 2011. As of September 30, 2012, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company's employees was approximately $2.4 million which is to be recognized over the remaining weighted average vesting period of approximately 2.8 years. Unamortized stock-based compensation cost relating to independent directors' options as of September 30, 2012 was approximately $0.2 million which is to be recognized over a remaining weighted average vesting period of approximately 8 months. The aggregate intrinsic value of all options outstanding as of September 30, 2012 was $10.3 million based on the closing price of the Company's common stock of $20.52 per share on September 28, 2012, the last trading day of the quarter.

Stock-based compensation expense is recorded as a component of marketing, general and administrative expense in the Company's consolidated statements of income.