SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2011

SHARE-BASED COMPENSATION [Abstract]

SHARE-BASED COMPENSATION

NOTE 12. SHARE–BASED COMPENSATION

Share-Based Compensation Plans

The Company has four shareholder approved equity incentive plans, which are administered by the Compensation Committee of the Board of Directors (the “Committee”). The Committee determines which employees receive grants, the number of shares or options granted and the exercise prices of the shares covered by each grant.

The Company’s 1993 Equity Incentive Plan (the “1993 Plan”) expired in April 2003.  The 1993 Plan permitted the Company to grant incentive stock options, nonqualified stock options, stock appreciation rights, awards of nontransferable shares of restricted common stock and deferred grants of common stock. The option price of incentive stock options was not less than the fair market value at the time the option was granted. The option period was not greater than 10 years from the date the option was granted. Normally the stock options were exercisable in three equal installments beginning one year from the date of the grant. Through shareholder approval, 580,800 shares were reserved for the 1993 Plan. A total of 5,000 options, 9,500 options and 10,000 options were outstanding and exercisable under the 1993 Plan at December 31, 2011, 2010 and 2009, respectively.

The Company’s 1995 Stock Option Plan for Non-employee Directors (the “1995 Plan”) expired in April 2006.  The 1995 Plan provided for each outside director to receive options to purchase 5,000 shares of common stock at the first annual meeting at which the director was elected. As long as he or she remained an eligible director, the director received options to purchase 1,000 shares of common stock at each annual meeting. Eligible directors could not be an employee of the Company or one of its subsidiaries or a holder of five percent or more of the Company’s common stock. The exercise price of these options was the fair market value of the common stock on the date of grant. Each option was non-transferable except upon death and expires 10 years after the date of grant. The options became exercisable in three equal installments on the first, second and third anniversaries of the date of grant. A total of 132,000 shares were reserved for issuance. A total of 10,000 options were outstanding and exercisable under the 1995 Plan at December 31, 2011 and 2010 and 11,000 options were outstanding and exercisable at December 31, 2009.

The Company’s 2000 Incentive Plan (the “2000 Plan”) expired in November 2009.  The 2000 Plan allowed the Company to grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards and deferred grants of common stock. In the case of incentive stock options, the option price was not less than the fair market value of the stock at the date of grant. The option period did not exceed 10 years from the date of grant. The terms of the 2000 Plan were substantially similar to those of the 1993 Plan. A total of 35,840 options, 412,990 options and 585,843 options were outstanding and exercisable under the 2000 Plan at December 31, 2011, 2010 and 2009, respectively.

The Company’s 2003 Incentive Plan (the “2003 Plan”) allows the Company to grant incentive stock options, non-qualified stock options, stock appreciation rights, awards of nontransferable shares of restricted common stock and deferred grants of common stock up to directors or key employees of the Company. The terms of the 2003 Plan are substantially similar to those of the 2000 Plan.  A total of 400,000 shares were reserved for issuance of which 269,924 shares remained available at December 31, 2011.  A total of 40,000 options were outstanding under the 2003 Plan at December 31, 2011 and 2010. At December 31, 2011, 10,000 options were exercisable and 30,000 options were non-exercisable.  At December 31, 2010, all options were non-exercisable.  The 2003 Plan expires in December 2012.

Restricted stock awards granted by the Company were issued under the 2000 Plan and 2003 Plan. Shares of restricted stock of the Company may be granted at no cost to employees.  Restrictions limit the sale or transfer of these shares until they vest, which is typically over three years.  The Company granted a total of 49,500 and 30,300 restricted stock awards from the 2003 Plan during the year ended December 31, 2011 and 2010, respectively.  During 2009, the Company granted a total of 100,748 restricted stock awards of which 66,750 and 33,998 restricted stock awards were granted from the 2000 Plan and the 2003 Plan, respectively.  Restricted stock awards of 15,650, 56,404 and 137,725 were unvested and outstanding under the 2000 Plan as of December 31, 2011, 2010 and 2009, respectively, and 64,429, 42,351 and 27,976 awards were unvested and outstanding under the 2003 Plan as of December 31, 2011, 2010 and 2009, respectively.

The Company’s Executive Long Term Incentive Program (the “ELTIP”) provides incentives to program participants through a combination of cash incentives, stock options and restricted stock grants.  During 2010, the Company’s shareholders approved the 2010 ELTIP which is administered by the Compensation Committee of the Company.  The Company recorded compensation costs for all share-based compensation that is expected to be issued based on the achievement of certain goals.

Employee Stock Purchase Plan

The Company’s shareholders approved the 2000 Employee Stock Purchase Plan (the “2000 ESPP”) which is designed to give eligible employees an opportunity to purchase common stock of the Company through accumulated payroll deductions. All employees of the Company who customarily work at least 20 hours per week and do not own five percent or more of the Company’s common stock are eligible to participate in the 2000 ESPP. The 2000 ESPP allows stock to be purchased at a discount of 5% and does not include a “look-back” option, therefore the accounting for shares purchased is not considered compensatory.  Shares issued under the 2000 ESPP were 12,803 in 2011, 34,266 in 2010 and 38,953 in 2009.  The Company's 2000 ESPP expired in August 2011.

The Company’s 2011 Employee Stock Purchase Plan (the “2011 ESPP”) replaced the 2000 ESPP and has a total of 250,000 shares available for issuance, of which 237,151 shares were remaining at December 31, 2011.  Shares issued under the 2011 ESPP were 12,849 in 2011.  The terms of the 2011 ESPP are substantially similar to those of the 2000 ESPP.

Share-Based Compensation Costs

Total share-based compensation cost reported in the consolidated statements of operations was as follows:

	Year ended December 31,
	2011		2010		2009
Cost of products and services	$	397	$	324	$	319
Selling, general and administrative		289		394		417
Total share-based compensation expense	$	686	$	718	$	736

Stock Option Award Activity

The following table summarizes stock option activity under all plans:

						Weighted
						Average
				Weighted		Remaining
				Average		Contractual		Aggregate
	Number of			Exercise		Term		Intrinsic
	Shares			Price		(in years)		Value
Outstanding at December 31, 2010		472,490		$	10.23		1.5	$	1,688
Granted		-		$	-
Exercised		(377,000	)	$	8.96
Cancelled		(4,650	)	$	18.67
Outstanding at December 31, 2011		90,840		$	15.04		4.8	$	-
Exercisable at December 31, 2011		64,173		$	15.73		3.2	$	-
Exercisable at December 31, 2010		432,490		$	9.94		0.7	$	1,684

As of December 31, 2011 the total unrecognized compensation cost related to stock option awards was $0.1 million which is expected to be amortized over approximately 1.5 years.

The fair value of share-based awards for employee stock option awards was estimated using the Black-Scholes pricing model.  The following weighted average assumptions were used to calculate the weighted per share fair value of $6.43 for stock options issued during 2010:  risk-free rate of 2.4%; dividend yield of zero; volatility of 47.7%; and expected life of 6 years.

The Company selected the assumptions used in the Black-Scholes pricing model using the following criteria:

Risk-free interest rate.  The Company bases the risk-free interest rate on implied yields available on a U.S. Treasury note with a maturity term equal to or approximating the expected term of the underlying award.

Dividend yield.  The Company does not intend to pay dividends on its common stock for the foreseeable future and, accordingly, uses a dividend yield of zero.

Volatility.  The expected volatility of the Company’s shares was estimated based upon the historical volatility of the Company’s share price with consideration given to the expected life of the award.

Expected life.  The expected term was estimated based upon exercise experience made in the past to employees.

Cash proceeds received, the intrinsic value and the total tax benefits realized resulting from stock option exercises were as follows:

	Year Ended December 31,
	2011		2010		2009
Amounts realized or received from stock option exercises:
Cash proceeds received	$	1,541	$	1,108	$	631
Intrinsic value realized	$	2,415	$	598	$	1,972
Income tax benefit realized	$	846	$	166	$	84

Restricted Stock Award Activity

The following table summarizes restricted stock activity:

				Weighted
				Average
	Number of			Grant-Date
	Shares			Fair Value
Nonvested at December 31, 2010		98,755		$	9.57
Granted		49,500		$	14.35
Vested		(53,509	)	$	9.55
Cancelled		(14,667	)	$	13.10
Nonvested at December 31, 2011		80,079		$	11.89

The total fair value of restricted shares vested during 2011, 2010 and 2009 was $0.5 million, $0.7 million and $0.8 million, respectively. As of December 31, 2011, the total unrecognized compensation cost related to restricted stock awards was $0.6 million which is expected to be amortized over a weighted-average period of approximately 1.9 years.