Stock Compensation

12 Months Ended

Dec. 31, 2011

Stock Compensation [Abstract]

Stock Compensation

NOTE 7.   STOCK COMPENSATION

Employee Stock Purchase Plan

Under the terms of our employee stock purchase plan, participating employees may acquire shares of common stock through payroll deductions of not more than 10% of their compensation. The price at which shares can be purchased is 85% of the fair market value for shares on one specified date, the end of the plan year. As of December 31, 2011, there were 500,000 common shares reserved for this plan and 400,701 shares still available for issuance. As of December 31, 2011 employees had subscribed to purchase approximately 17,461 shares for the plan year ended August 31, 2012. Employees purchased 18,564 shares for the plan year ended August 31, 2011. We recorded stock compensation expense in the amount of $27,000 during 2011, 2010 and 2009 respectively, related to this plan.

Retainer Stock Plans for Directors

Under the terms of a corporate retainer stock plan for directors, participating directors may acquire shares of common stock in exchange for their quarterly retainers. The price at which the shares can be purchased is 100% of the fair market value for such shares on the date of purchase. Beginning in January 2010, directors began to receive $25,000 of their annual retainer solely in shares of HickoryTech stock. As of December 31, 2011, there were 300,000 common shares reserved for this plan and 146,809 shares still available for future issuance.

Non-Employee Directors' Incentive Plan

The Non-Employee Directors' Incentive plan provided for each director to receive common stock contingent upon HickoryTech meeting pre-established objectives. This plan has not been utilized in 2011 or 2010. As of December 31, 2011 there were 200,000 common shares reserved for this plan and 152,000 shares available for future grants.

Stock Award Plan

HickoryTech's Stock Award Plan provides for the granting of non-qualified stock options, stock awards and restricted stock awards to employees. The plan provides for stock awards based on the attainment of certain financial targets and individual achievements. Stock options issued under the stock option component of the stock award plan may be exercised no later than ten years after the date of grant, with one-third of the options vesting each year. As of December 31, 2011, there were 1,750,000 common sharesreserved for this plan and 835,247 shares available for future grants.

Stock Awards

We recognize stock compensation charges related to stock award plans when management concludes it is probable that the participant will earn the award. Such compensation charges are recorded based upon the fair value of our stock and are recognized during the service period specified by the stock award plan. Changes in estimated compensation are recorded in the period in which the change occurs. Stock-based compensation expense recognized was $1,119,000, $951,000 and $1,021,000 in 2011, 2010 and 2009, respectively. This includes compensation expense for share-based payment awards granted prior to, but not vested as of December 31, 2011. Historical data is used to estimate pre-vesting forfeitures and are estimated at the time of the grant and revised, if necessary, in subsequent periods if actual forfeitures differ from the estimate.

Stock Options

The fair value of each option award is estimated on the date of the grant using a Black-Scholes option valuation model. We use a seven-year period to calculate the historical volatility of its stock price for use in the valuation model. The dividend yield rate is based on our current dividend payout pattern and current market price. The risk-free rate for options is based on a U.S. Treasury rate commensurate with the expected terms. The expected term of options granted is derived from historical experience and represents the period of time that options granted are expected to be outstanding.

We granted 10,000 options in April 2011 to the Chief Operating Officer as a condition of employment. The weighted average grant date fair value of options issued was $0.80 per share. Other than this stock award, options were last granted under the Company's Stock Award Plan in September 2006.The Stock Award Plan provides for the issuance of stock options, but no current compensation programs have options as a component. As of December 31, 2011, the total unrecognized compensation cost related to non-vested stock options granted under the Company's Stock Award Plan is not significant. This expense is expected to be recognized over a weighted average period of three years.

The following table details the key assumptions used in computing fair value using the Black-Scholes Option valuation model for the year ended December 31, 2011:

	2011
Volatility		24.7	%
Dividend Yield		7.7	%
Risk-Free Interest Rates		3.0	%
Expected Life in Years		7

A summary of all stock option activity for the three-year period ended December 31, 2011 is as follows:

	Options									Weighted Average Exercise Price
	2011			2010			2009			2011		2010		2009
Outstanding at Beginning of Year		343,250			430,950			471,200		$	12.45	$	12.87	$	12.79
Granted		10,000			-			-			9.03		-		-
Exercised		(13,000	)		-			-			8.94		-		-
Forfeited		(5,800	)		-			-			12.51		-		-
Expired		(86,800	)		(87,700	)		(40,250	)		15.94		14.52		11.87
Outstanding at End of Year		247,650			343,250			430,950		$	11.28	$	12.45	$	12.87
Exercisable at End of Year		237,650			343,250			430,950		$	11.37	$	12.45	$	12.87
Fair Value of Options Vesting During the Year	$	-		$	-		$	7,000
Intrinsic Value of Options Exercised During the Year	$	36,000		$	-		$	-

In 2011, we received $116,000 in cash and a $7,000 tax benefit related to stock options exercised during the year.

The following tables provide certain information with respect to stock options outstanding and exercisable at December 31, 2011:

						Weighted
		Stock Options		Weighted Average		Average Remaining
Range of Exercise Prices		Oustanding		Exercise Price		Contractual Life (Years)
	$6.00 - $8.00		15,000	$	6.95		4.7
	$8.00 - $12.00		149,650		10.23		2.5
	$12.00 - $16.00		83,000		13.95		0.3
			247,650	$	11.28		1.9
Aggregate Intrinsic Value				$	217,300

						Weighted
		Stock Options		Weighted Average		AverageRemaining
Range of Exercise Prices		Exercisable		Exercise Price		Contractual Life (Years)
	$6.00 - $8.00		15,000	$	6.95		4.7
	$8.00 - $12.00		139,650		10.32		2.0
	$12.00 - $16.00		83,000		13.95		0.3
			237,650	$	11.37		1.6
Aggregate Intrinsic Value				$	196,800