Accounting for Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Accounting for Stock-Based Compensation

4. Accounting for Stock-Based Compensation:

Stock based compensation is recorded in accordance with ASC Topic 718, Compensation – Stock Compensation, which requires the measurement and recognition of compensation expense for all share-based payments to employees, including grants of stock and employee stock options, based on estimated fair values.

The Company granted options to purchase 10,000 shares of common stock during the six months ended June 30, 2011.  No options were granted during the six months ended June 30, 2010.

The following tables summarize stock option activity for the six months ended June 30, 2011 and 2010.

2011

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Options			Option Price		Term (years)		Value
Balance at January 1		718,343		$	3.85
Granted		10,000			5.85
Exercised		-			-
Expired/Forfeited		(25,650	)		6.86
Balance at June 30		702,693		$	3.77		1.49	$	1,339,659
Vested and exercisable		678,419		$	3.69		1.42	$	1,339,659

2010

						Weighted
						Average
				Weighted		Remaining		Aggregate
	Number of			Average		Contractual		Intrinsic
	Options			Option Price		Term (years)		Value
Balance at January 1		894,785		$	4.29
Granted		-			-
Exercised		(10,325	)		4.26
Expired/Forfeited		-			-
Balance at June 30		884,460		$	4.29		2.00	$	1,565,633
Vested and exercisable		851,760		$	4.23		1.92	$	1,561,911

 

No options were exercised during the six months ended June 30, 2011.  The aggregate intrinsic value of options exercised during the six months ended June 30, 2010 was $24,560.  There were 24,274 and 32,700 nonvested stock options outstanding as of June 30, 2011 and 2010, respectively.

The following table summarizes stock-based compensation expense related to all share-based payments recognized in the condensed consolidated statements of income.

	Three Months			Three Months
	Ended June 30,			Ended June 30,
	2011			2010
Stock options	$	7,310		$	-
Stock grants – other		16,384			10,882
Service based awards		23,599			32,037
Performance based awards		-			37,294
Tax benefit		(28,341	)		(33,098	)
Stock-based compensation expense, net of tax	$	18,952		$	47,115

	Six Months			Six Months
	Ended June 30,			Ended June 30,
	2011			2010
Stock options	$	36,101		$	-
Stock grants – other		32,765			21,759
Service based awards		47,198			64,072
Performance based awards		-			74,588
Tax benefit		(55,743	)		(65,772	)
Stock-based compensation expense, net of tax	$	60,321		$	94,647

Stock Grants - Other

The non-employee members of the Board of Directors have an option to elect at the beginning of each calendar year to receive either shares of common stock or cash at the end of each quarter as compensation for services provided as members of the Board of Directors and other committees.  Share grants issued vest immediately, but are subject to a one-year restriction on transfer.  In addition, stock grants may be issued to employees at the Board of Directors’ discretion.

Service Based Awards

In January 2006, May 2007, January 2009 and December 2010 the Company granted 50,000, 22,000, 12,000 (net of 9,500 shares waived by an executive) and 46,500 restricted shares, respectively, to certain executives in respect of services rendered but at no monetary cost.  These shares vest over periods ranging from 2 to 5 years, on December 31 of each year.  The Company records the compensation expense on a straight-line basis over the vesting period.  Fair value for restricted stock awards is based on the Company's closing common stock price on the date of grant.There were 84,000 shares and 63,000 shares vested as of June 30, 2011 and 2010, respectively.  The aggregate grant date fair value of restricted stock grants was $830,845.  The vesting period of the January 2006 and May 2007 grants expired on December 31, 2010.  As of June 30, 2011 and 2010, the Company had approximately $236,000 and $68,000, respectively, of total unrecognized compensation costs related to nonvested restricted stock units expected to be recognized over a weighted average period of 2.5 years.

Performance Based Awards

In January 2006 and May 2007, respectively, the Company granted share awards for up to 90,000 shares (up to 18,000 shares per year through December 31, 2010) and 46,000 shares (up to 11,500 shares per year through December 31, 2010) to certain executives.  Vesting of such shares was contingent upon the Company achieving certain specified consolidated gross revenue and Earnings before Interest and Taxes (“EBIT”) objectives in each of the fiscal years ending December 31, 2006 through December 31, 2010.  The fair value of the performance shares (aggregate value of $909,400) was based on the closing trade value of the Company’s stock on the date of grant and assumed that performance goals would be achieved.  The fair value of the shares was expensed over the performance period for those shares that were expected to ultimately vest.  If such objectives were not met, no compensation cost was recognized and any recognized compensation cost was reversed.  All performance based awards were either earned or forfeited as of December 31, 2010.  During 2011, there were no performance shares vesting and there were no unrecognized compensation costs related to performance share awards.  As of June 30, 2010, 57,250 shares were vested and there was approximately $75,000 of total unrecognized compensation costs related to nonvested share awards.