Equity And Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Equity And Stock-Based Compensation [Abstract]

Equity And Stock-Based Compensation

Note 2 – Equity and Stock Based Compensation

Stock-Based Compensation

During the nine months ended September 30, 2012 and 2011, we issued 155,925and 174,825, respectively, of Class A Nonvoting shares to an executive employee associated with the vesting of his prior years’ stock grants, and, during the nine months ended September 30, 2012, we issued 9,680 as a one-time stock grant of Class A Nonvoting shares to our employees valued at $44,000which we accounted for as compensation expense.  During the three and nine months ended September 30, 2012, we accrued $238,000and $714,000, respectively, in compensation expense associated with the vesting of executive employee stock grants. During the three and nine months ended September 30, 2011, we accrued $188,000and $563,000, respectively, in compensation expense associated with the vesting of executive employee stock grants.

Employee/Director Stock Option Plan

We have a long-term incentive stock option plan that provides for the grant to eligible employees, directors, and consultants of incentive or nonstatutory options to purchase shares of our Class A Nonvoting Common Stock and Class B Voting Common Stock.  Our 1999 Stock Option Plan expired in November 2009, and was replaced by our new 2010 Stock Incentive Plan, which was approved by the holders of our Class B Voting Common Stock in May 2010. 

When the Company’s tax deduction from an option exercise exceeds the compensation cost resulting from the option, a tax benefit is created.  FASB ASC 718-20 relating to Stock-Based Compensation (“FASB ASC 718-20”), requires that excess tax benefits related to stock option exercises be reflected as financing cash inflows instead of operating cash inflows.  For the three and nine months ended September 30, 2012 and 2011, there was no impact to the unaudited condensed consolidated statement of cash flows because there were no recognized tax benefits from stock option exercises during these periods.

FASB ASC 718-20 requires companies to estimate forfeitures.  Based on our historical experience and the relative market price to strike price of the options, we do not currently estimate any forfeitures of vested or unvested options.

In accordance with FASB ASC 718-20, we estimate the fair value of our options using the Black-Scholes option-pricing model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options.  As we intend to retain all earnings, we exclude the dividend yield from the calculation.  We expense the estimated grant date fair values of options issued on a straight-line basis over the vesting period.

For the 90,000 options granted during 2012, we estimated the fair value of these options at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions: 

	2012
Stock option exercise price	$5.56
Risk-free interest rate	1.630%
Expected dividend yield	--
Expected option life	10 yrs
Expected volatility	32.12%
Weighted average fair value	$5.56

We did not grant any options during the three or nine months ended September 30, 2011.

Based on the above calculation and prior years’ assumptions, and, in accordance with the FASB ASC 718-20, we recorded compensation expense for the total estimated grant date fair value $27,000 and $197,000for the three and nine months ended September 30, 2012, respectively, and $47,000 and $142,000 for the three and nine months ended September 30, 2011, respectively.  At September 30, 2012, the total unrecognized estimated compensation cost related to non-vested stock options granted was $132,000, which we expect to recognize over a weighted average vesting period of 2.44years.  95,000options were exercised during the nine months ended September 30, 2012 having a realized value of $136,000for which we received $308,000of cash.  Additionally, 41,000options were exercised during the nine months ended September 30, 2012 having a realized value of $103,000for which we did not receive any cash but the consultant elected to receive the net incremental number of in-the-money shares of 15,822based on an exercise price of $4.01 and a market price of $6.53.  There were no options exercised during the nine months ended September 30, 2011.  The intrinsic, unrealized value of all options outstanding, vested and expected to vest, at September 30, 2012was $477,000of which 100.0%are currently exercisable.

Pursuant to both our 1999 Stock Option Plan and our 2010 Stock Incentive Plan, all stock options expire within ten years of their grant date.  The aggregate total number of shares of Class A Nonvoting Common Stock and Class B Voting Common Stock authorized for issuance under our 2010 Stock Incentive Plan is 1,250,000.  At the discretion of our Compensation and Stock Options Committee, the vesting period of stock options is usually between zero and four years. 

We had the following stock options outstanding and exercisable as of September 30, 2012 and December 31, 2011:

			Weighted							Weighted Average
	Common Stock		Average Exercise				Common Stock			Price of
	Options		Price of Options				Exercisable			Exercisable
	Outstanding		Outstanding				Options			Options
	Class A	Class B	Class A		Class B		Class A	Class B	Class A		Class B
Outstanding- January 1, 2011	622,350	185,100	$	5.65	$	9.90	449,750	150,000	$	6.22	$	10.24
No activity during the period	--	--	$	--	$	--
Outstanding-December 31, 2011	622,350	185,100	$	5.65	$	9.90	544,383	167,550	$	5.86	$	10.05
Granted	90,000	--	$	5.56	$	--
Exercised	(136,000)	--	$	4.68	$	--
Expired	(20,000)	--	$	3.75	$	--
Outstanding-September 30, 2012	556,350	185,100	$	6.24	$	9.90	506,350	185,100	$	6.26	$	9.90

The weighted average remaining contractual life of all options outstanding, vested, and expected to vest at September 30, 2012 and December 31, 2011 was approximately 4.86and 4.13 years, respectively.  The weighted average remaining contractual life of the exercisable options outstanding at September 30, 2012 and December 31, 2011 was approximately 4.50and 3.85 years, respectively.