Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Stock-Based Compensation

Stock-Based Compensation

(10) Stock-Based Compensation

        As of December 31, 2012, the Company has reserved 271,402 shares of common stock for options and other stock-based incentive awards that are still available for grant under the Company's 2006 stock incentive plan, and 838,662 shares for options that have been granted under either the Company's 2006 stock incentive plan or 1998 stock option plan but have not yet been exercised. The Company issues new shares of common stock upon exercise of stock options.

        Under the Company's stock-based incentive plans, option exercise prices are 100% of the market value of the common stock at the date of grant, except if incentive options granted under the 1998 and 2006 plans were granted to persons owning more than 10% of the Company's stock, in which case the option price would be 110% of the market value. Exercise periods are generally for seven to ten years. Certain of the plans allow for the granting of nonqualified stock options. Upon the exercise of these nonqualified options, the Company may realize a compensation deduction allowable for income tax purposes. The after-tax effect of these tax deductions is included in the accompanying consolidated financial statements as an addition to additional paid-in capital.

        Stock-based compensation expense is calculated and recognized primarily on a straight-line basis over the vesting periods of the related stock-based reward. The Company generally provides for the vesting of stock options in equal annual installments over a four-year period commencing on the one-year anniversary of the date of grant, or over a one-year period with one-fourth of the underlying shares vesting at the end of each three-month period following the grant date. Stock-based compensation expense recognized in the consolidated financial statements for 2012, 2011 and 2010 was as shown below:

	Years Ended December 31,
	2012			2011			2010
Total cost of stock-based compensation	$	464,470		$	388,904		$	261,859
Amount of income tax benefit recognized in earnings		(77,009	)		(111,882	)		(28,646	)
Amount charged against net income	$	387,461		$	277,022		$	233,213

        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes). The Company uses historical data to estimate the expected price volatility, expected option life and expected forfeiture rate. The Company based its estimate of expected volatility for awards granted in 2012, 2011 and 2010 on daily historical trading data of its common stock for a period equivalent to the expected term of the award. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the estimated life of the option. The Company estimated the expected term consistent with historical exercise and cancellation activity of its previous share-based grants with a seven-year contractual term. Forfeitures were based on historical experience. The dividend yield is calculated based upon the dividend payments made during the prior four quarters as a percent of the average stock price for that period. The following assumptions were used to estimate the fair value of options granted during 2012, 2011 and 2010 using the Black-Scholes model:

	2012			2011			2010
Dividend yield		2.7	%		2.7	%		3.3	%
Expected volatility		42	%		42	%		41	%
Risk-free interest rate		1.0	%		1.1	%		2.0	%
Expected lives (in years)		5.6			5.6			5.7

        Information regarding the Company's stock option plans for 2010, 2011 and 2012 was as follows:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Options outstanding, December 31, 2009		937,250		$	8.84		4.2	$	881,656
Granted		123,600			12.96
Exercised		(134,865	)		6.76
Cancelled or expired		(13,423	)		8.41
Options outstanding, December 31, 2010		912,562			9.71		4.1		2,962,426
Granted		132,900			16.00
Exercised		(203,801	)		8.41
Cancelled or expired		(11,875	)		9.08
Options outstanding, December 31, 2011		829,786			11.05		4.1		4,108,291
Granted		128,700			14.40		7.0
Exercised		(108,624	)		8.56
Cancelled or expired		(11,200	)		14.30
Options outstanding, December 31, 2012		838,662		$	11.84		3.9	$	2,346,063
Options exercisable, December 31, 2012		628,737		$	11.01		3.1	$	2,256,812

        The weighted average grant date fair value based on the Black-Scholes model for options granted in 2012, 2011 and 2010 was $4.18, $4.60 and $3.73, respectively. The total intrinsic value of options exercised was $794,345, $1,341,057 and $674,963 during the years ended December 31, 2012, 2011 and 2010, respectively. The aggregate intrinsic values are based upon the closing price of our common stock on the last day of the respective fiscal year.

        A summary of the status of the Company's unvested option shares as of December 31, 2012 is as follows:

	Number of Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2011		204,225		$	4.00
Options granted		128,700			4.18
Options cancelled		(10,050	)		4.26
Options vested		(112,950	)		4.11
Unvested at December 31, 2012		209,925		$	4.04

        As of December 31, 2012, there was $847,922 of total unrecognized compensation cost related to unvested stock-based compensation granted under the Company's plans. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of option shares vested during the years 2012, 2011 and 2010 was $464,470, $388,904 and $261,860, respectively.

        In 2012, the Company introduced a Direct Stock Purchase Plan (DSPP) which allows employees to purchase shares of the Company's common stock directly through payroll withholding. Employees buy stock through the plan at market prices on the date of purchase and are not required to pay a fee for the transaction. The plan also allows non-employees to purchase shares electronically or through the mail with no brokerage commission. The plan has a dividend reinvestment feature which is optional for all shareholders. There are no shares that are solely authorized to be issued from the DSPP, as all shares are purchased from the open market.