Mercury Insurance 2012 Annual Report Download - page 97

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76
allocation to the Plan participants in 2012, 2011, and 2010, respectively. The Company recognized compensation expense equal
to such amounts.
14. Share-Based Compensation
In May 2005, the Company adopted the 2005 Plan which succeeded a prior plan. A maximum of 4,957,250 shares of
common stock under the 2005 Plan are authorized for issuance upon exercise of options, stock appreciation rights and other awards,
or upon vesting of restricted or deferred stock awards. As of December 31, 2012, only options and restricted stock awards have
been granted under these plans. Beginning January 1, 2008, options granted, for which the Company has recognized share-based
compensation expense become exercisable at a rate of 25% per year beginning one year from the date granted, are granted at the
market price on the date of grant, and expire after 10 years. Prior to January 1, 2008, shares became exercisable at a rate of 20% per
year.
Cash received from option exercises was $2,492,000, $1,951,000, and $733,000 during 2012, 2011, and 2010, respectively.
Total compensation costs were $168,000, $439,000, and $651,000 during 2012, 2011, and 2010, respectively. The excess tax
benefit realized for the tax deduction from option exercises of the share-based payment awards totaled $86,000, $56,000, and
$132,000 during 2012, 2011, and 2010, respectively. No stock options were awarded in the past three years.
A summary of the stock option activity under the Company’s plans as of December 31, 2012 and changes during the year
then ended is presented below:
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual Term
(Years)
Aggregate
Intrinsic Value
(in 000’s)
Outstanding at January 1, 2012 544,225 $ 46.09
Granted 0
Exercised (65,450) $ 38.07
Canceled or expired (27,750)
Outstanding at December 31, 2012 451,025 $ 47.22 4.5 $ 724
Exercisable at December 31, 2012 408,775 $ 48.59 4.3 $ 479
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the
Company’s closing stock price and the exercise price, multiplied by the number of in-the-money options) that would have been
received by the option holders had all options been exercised on December 31, 2012. The aggregate intrinsic value of stock options
exercised was $392,000, $262,000, and $431,000 during 2012, 2011, and 2010, respectively. The total fair value of options vested
was $407,000, $467,000, and $498,000 during 2012, 2011, and 2010, respectively.
The following table presents information regarding stock options outstanding at December 31, 2012:
Options Outstanding Options Exercisable
Range of Exercise Prices
Number of
Options
Weighted-Avg.
Remaining
Contractual Life
(Years)
Weighted-
Avg. Exercise
Price
Number of
Options
Weighted-
Avg. Exercise
Price
$33.61-40.53 131,525 6.1 $ 34.21 89,275 $ 34.36
$47.61-51.51 166,000 4.6 $ 49.64 166,000 $ 49.64
$52.13-58.83 153,500 2.9 $ 55.73 153,500 $ 55.73
As of December 31, 2012, $42,000 of total unrecognized compensation cost related to non-vested stock options is expected
to be recognized over a weighted-average period of 0.4 years.
Under the 2005 Plan, the Compensation Committee of the Company’s Board of Directors granted performance vesting
restricted stock units to the Company’s senior management and key employees. See Note 1 for grants summary. A summary of
the restricted stock and restricted stock units activity as of December 31, 2012 and 2011, and changes during the years then ended
is as follows: