Annual report pursuant to Section 13 and 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
12 Months Ended
Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK-BASED COMPENSATION
14. STOCK-BASED COMPENSATION

 

Stock Compensation Plans

 

Stock options and time lapse restricted shares (TLRSs) have been issued to officers and other management employees under the Company’s Employee Stock Incentive Plan.

 

Stock Options

 

The Company’s stock options generally vest over a five-year period and expire ten years from the issuance date. For the year ended December 31, 2014, the Company did not issue any shares of common stock upon exercise of stock options by employees. The Company issued 1 thousand shares in 2013.

 

In order to estimate the fair value of stock options, the Company used the Black-Scholes option valuation model, which was developed for use in estimating the fair value of publicly traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions and these assumptions can vary over time.

Option activity under the Company’s stock option plan as of December 31, 2014, 2013 and 2012 and changes during the year ended December 31, 2014 were as follows:

 

(in thousands except per share data)   Shares     Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Contractual Term
(in years)
    Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2011     33     $ 5.26       0.93     $ 553  
Exercised     (32 )     5.25                  
Outstanding at December 31, 2012     1       5.52       0.08       17  
Exercised     (1 )     5.52                  
Outstanding at December 31, 2013     —     $ —       —     $ —  
Exercised     —       —       —       —  
Outstanding at December 31, 2014     —     $ —       —     $ —  
Exercisable at December 31, 2014     —     $ —       —     $ —  

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that day. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s stock.

 

The aggregate intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was zero, less than $0.1 million, and, $0.5 million, respectively. Exercise of options during the years ended December 31, 2014, 2013, and 2012 resulted in cash receipts of zero, less than $10 thousand, and less than $1 thousand, respectively.

 

Time Lapse Restricted Shares and Restricted Stock Units

 

TLRSs provide for the issuance of a share of the Company’s Common Stock at no cost to the holder and generally vest after a certain stipulated number of years from the grant date, depending on the terms of the issue. TLRSs vest in 20 percent increments starting with the second anniversary of the grant, over six years from the date of grant. During these years, grantees receive all dividends declared and retain voting rights for the granted shares. The agreements under which the restricted stock is issued provide that shares awarded may not be sold or otherwise transferred until restrictions established under the plans have lapsed.

 

The Company issued time lapse restricted shares of 0.4 million, 0.5 million, and 0.8 million for the years ended December 31, 2014, 2013, and 2012, respectively.

 

The Company issues new shares from its authorized but unissued share pool. At December 31, 2014, approximately 5.7 million shares of the Company’s common stock were reserved for issuance. In accordance with the FASB ASC Topic 718, “Compensation – Stock Compensation,” the Company recognizes the fair value of the award on a straight line basis over the service periods of each award. The Company estimates restricted share forfeiture rates based on its historical experience.

 

The following table summarizes the components of the Company’s stock-based compensation programs recorded as expense ($ in thousands):

 

Years ended December 31,   2014     2013     2012  
Time Lapse Restricted Stock:                        
Pre-tax compensation expense   $ 10,579     $ 10,427     $ 9,494  
Tax benefit     (4,094 )     (4,014 )     (3,655 )
Restricted stock expense, net of tax   $ 6,485     $ 6,413     $ 5,839  

 

As of December 31, 2014 and 2013, $29.4 million and $30.7 million, respectively, of total unrecognized compensation cost related to time-lapse restricted shares are expected to be recognized over a weighted average period of approximately 3.7 years at December 31, 2014 and approximately 3.8 years at December 31, 2013.

The following table summarizes information on unvested restricted stock units outstanding as of December 31, 2014, 2013 and 2012:

 

    Number of Shares
(in thousands)
    Weighted-Average
Grant-Date Fair
Value
 
Unvested Restricted Stock Grants                
Unvested as of December 31, 2011     2,686     $ 13.30  
Forfeited     (92 )     16.41  
Vested     (627 )     10.87  
Granted     776       22.69  
Unvested as of December 31, 2012     2,743       16.41  
Forfeited     (56 )     17.52  
Vested     (696 )     13.34  
Granted     463       24.29  
Unvested as of December 31, 2013     2,454       18.75  
Forfeited     (119 )     21.40  
Vested     (679 )     15.47  
Granted     411       28.74  
Unvested as of December 31, 2014     2,067     $ 21.67