Stock Based Compensation

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Stock Based Compensation

In 2012, our shareholders approved The Stanley Furniture Company, Inc. 2012 Incentive Compensation Plan (Incentive Compensation Plan).  This plan provides for the granting of performance grants, performance shares, stock options, restricted stock, restricted stock units, and stock appreciation rights to employees and certain service providers.  Under this plan, the aggregate number of common shares that may be issued through awards of any form is 1.6 million. In addition, shares authorized under the 2008 Incentive Compensation Plan are also available for issuance under the Incentive Compensation Plan if they are unissued or subsequently expire, are forfeited or terminate unexercised.  

Stock Options

The options are issued at market value on the date of grant and have a term of 10 years from the grant date.   In general, employee grants vest ratably over a four to five year period and Director grants vest immediately.  The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date.  We have estimated the fair value of all stock option awards as of the date of the grant by applying the Black-Scholes pricing valuation model.  

The application of this valuation model involves assumptions that are judgmental and sensitive in the determination of compensation expense.  The weighted average for key assumptions used in determining the fair value of options granted follows:

	2012	2011	2010
Expected price volatility	53.25%	45.89%	53.21%
Risk-free interest rate	0.91%	1.34%	2.30%
Weighted average expected life in years	5.5	5.7	5.6
Forfeiture rate	21.87%	19.82%	14.27%

Historical information was the primary basis for the selection of the expected volatility, expected dividend yield, forfeiture rate and the expected lives of the options.  The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.

Stock option activity for the three years ended December 31, 2012, follows:

	Number of shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2009	1,640,624	$11.71	6.8
Exercised	(12,500)	9.22
Lapsed	(70,000)	9.43
Expired	(175,000)	12.47
Granted	710,530	3.40
Outstanding at December 31, 2010	2,093,654	$  8.91	7.6
Lapsed	(566,000)	11.14
Expired	(164,000)	13.94
Granted	451,302	3.38
Outstanding at December 31, 2011	1,814,956	$  6.39	7.1
Expired	(22,000)	17.62
Granted	297,014	4.43
Outstanding at December 31, 2012	2,089,970	$  5.99	6.4	$1,451
Exercisable at December 31, 2012	1,090,742	$  7.94	6.7	$574

As of December 31, 2012, there was $1.3 million of total unrecognized compensation cost related to non-vested stock option awards, which is expected to be recognized over a weighted-average remaining vesting period of 2.2 years.

The average fair market value of options granted in 2012, 2011 and 2010, and cash proceeds, tax benefits and intrinsic value related to total stock options exercised during 2010 are as follows (in thousands, except per share data):

	2012	2011	2010
Average fair market value of options granted  (per share)	$  2.12	$  1.51	$  1.72
Proceeds from stock options exercised			$   116
Intrinsic value of stock options exercised			$   126

Restricted Stock

The restricted stock awards are accounted for as “non-vested equity shares” until the awards vest or are forfeited.  In general, restricted stock awards for employees vest at the end of a four year period from the date of grant and for non-employee directors vest at the end of their current term on the Board.  The fair value of each share of restricted stock is the market price of our stock on the grant date.  The fair value of each award is amortized into compensation expense on a straight-line basis between the award date and the vesting date.  No restricted stock awards have vested as of December 31, 2012.

The following table summarizes information about non-vested share awards as of and for the year ended December 31, 2012:

	Number of shares	Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2010	-	-
Granted	179,336	$3.07
Outstanding at December 31, 2011	179,336	$3.07
Granted	188,099	$  4.48
Outstanding at December 31, 2012	367,435	$  3.79

As of December 31, 2012, there was $1.1 million of total unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a weighted-average remaining vesting period of 3.4 years.