Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation Plan

v2.4.1.9
Stock-Based Compensation Plan
12 Months Ended
Dec. 31, 2014
Stock-Based Compensation Plan [Abstract]  
Stock-Based Compensation Plan

NOTE 14.  STOCK-BASED COMPENSATION PLAN

 

Under the Company’s 2005 Stock Incentive Plan (the “2005 Plan”), the Company’s Board of Directors (the “Board of Directors”) has flexibility to determine the type and amount of awards to be granted to eligible participants, who must be employees, directors, officers or consultants of the Company or its subsidiaries.  The 2005 Plan allows for grants of incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation rights, and restricted units.  The aggregate number of shares of common stock that may be granted through awards under the 2005 Plan to any employee in any calendar year may not exceed 500 shares.  The 2005 Plan will continue in effect until June 2015 unless terminated sooner.  As of December 31, 2014, the number of shares authorized and reserved for issuance under the 2005 Plan is 6,405, subject to automatic annual increase equal to 4% of the total number of shares of the Company’s outstanding common stock.

 

Options Granted:

 

During the year ended December 31, 2014, the Company issued 529 stock options, under the Company’s 2005 Plan, to directors and employees of the Company.  Of the 529 options issued, 30 will vest in four equal consecutive quarterly tranches from the date of grant.  300 will vest in four equal consecutive annual tranches starting December 31, 2015.  The remaining 199 options will vest in three installments as follows: 80 shall vest on December 31, 2016, and the remaining shares shall vest equally on December 31, 2017 and December 31, 2018.

 

 

 

 

 

 

 

 

 

 

For computing the fair value of the stock-based awards, the fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model with the following assumptions:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Number of options

 

529

 

143

 

485

 

270

 

500

Option vesting period

 

1-5 Years

 

1-5 Years

 

Immediate

 

1-5 Years

 

3-6 Years

Grant price

 

$7.36 - $14.02

 

$8.02 - $13.38

 

$10.40 - $14.71

 

$7.64 - $9.89

 

$13.00 - $16.00

Dividend yield

 

0.0%

 

0.0%

 

0.0%

 

0.0%

 

0.0%

Expected volatility (a)

 

45.7% - 55.1%

 

52.8% - 55.2%

 

51.6% - 53.9%

 

53.3% - 59.2%

 

50.3% - 58.6%

Risk-free interest rate

 

1.63% - 2.31%

 

1.04% - 2.45%

 

1.36% - 1.62%

 

.71% - 1.44%

 

.39% - 1.04%

Expected life (years)

 

5.31 - 6.95 (b)

 

5.31 - 7.08 (b)

 

5.00 (c)

 

5.31 - 7.08 (b)

 

3.25 - 6.25 (b)

Discount for post-vesting restrictions (d)

 

0.0%

 

0.0%

 

11.5% - 35.0%

 

0.0%

 

0.0%

Weighted average fair value

 

$3.89 - $7.82

 

$4.23 - $7.53

 

$1.59 - $5.25

 

$4.40 - $5.34

 

$2.64 - $3.94

 

(a)

Since the Company’s historical volatility was not representative of the ongoing future business, the Company’s historical volatility was based on a combination of the Company’s volatility and the historical volatility of a peer group of companies within similar industries and similar size as the Company.

 

(b)

Because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for these grants, the Company utilized the simplified method in developing an estimate of the expected term of these options.

 

(c)

The Company considered the applicable employee groups as well as the anticipated exercise behavior over the contractual term of the award in developing an estimate of the expected term of these options.

 

(d)

Because options with post-vesting restrictions create a lack of marketability, the Company discounted the market price used in the Black-Scholes option-pricing model. The Company utilized the Finnerty and Forward Sale models to calculate the discount.

 

Using these assumptions, the fair value of the stock options granted during the years ended December 31, 2014, 2013, and 2012 was $2,747, $2,303, and $3,011, respectively, which will be amortized over the vesting period of the options.

 

Restricted Stock Awards:

 

On August 11, 2014, the Company issued and granted to an employee a restricted stock award of 300 restricted shares under the 2005 Plan, of which (i) 50 restricted shares vested and become nonforteitable on August 25, 2014; (ii) 205 restricted shares will vest and become nonforteitable as follows: (A) 45 restricted shares will vest if, on or before June 30, 2017, the Fair Market Value (as defined in the Plan) of the Company’s common stock shall have equaled or exceeded $15.00 per share for five consecutive trading days; (B) 80 restricted shares will vest if, on or before December 31, 2019, the Fair Market Value of the Company’s common stock shall have equaled or exceeded $20.00 per share for five consecutive trading days; (C) 80 restricted shares will vest if, on or before December 31, 2019, the Fair Market Value of the Company’s common stock shall have equaled or exceeded $22.00 per share for five consecutive trading days; and (iii) 15 restricted shares will vest and become nonforfeitable on each of December 31, 2015, December 31, 2016 and December 31, 2017.  All vested restricted shares will be subject to a lock-up provision restricting sales, dispositions, pledges and transfers of such shares through December 31, 2016.  For computing the fair value of the 205 restricted shares with a market condition, the fair value of each restricted stock award grant has been estimated as of the date of grant using the Monte-Carlo pricing model with the assumptions below.  The restricted stock awards of 95 that vest over time were valued at $7.74 per share, which includes a discount for the lock-up provision.

 

 

 

 

 

 

 

 

Market Condition Restricted Shares Granted on August 11, 2014

 

 

 

 

 

 

 

 

 

Number issued

 

45

 

80

 

80

Vesting period

 

$15.00 stock price target

 

$20.00 stock price target

 

$22.00 stock price target

Grant price

 

$8.87

 

$8.87

 

$8.87

Dividend yield

 

0.0%

 

0.0%

 

0.0%

Expected volatility

 

38.2%

 

38.2%

 

38.2%

Risk-free interest rate

 

0.93%

 

1.62%

 

1.62%

Expected term (years)

 

1.32

 

2.64

 

2.89

Weighted average fair value

 

$4.63

 

$4.72

 

$4.22

 

Using these assumptions, the fair value of the market condition restricted stock awards granted on August 11, 2014 was approximately $923, which is being amortized over the expected life of the awards.

 

The total non-cash stock compensation expense related to stock options and restricted stock awards recorded by the Company was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2014

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

Restricted stock awards

 

$

589 

 

$

81 

 

$

739 

Stock options

 

 

1,264 

 

 

2,904 

 

 

1,027 

Stock awards

 

 

 -

 

 

25 

 

 

 -

Total

 

$

1,853 

 

$

3,010 

 

$

1,766 

 

 

For the years ended December 31, 2014, 2013, and 2012, the majority of stock-based compensation costs were classified as selling, general and administrative expense.  A summary of changes in outstanding options and restricted stock awards during the year ended December 31, 2014 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options

 

Weighted Average Exercise Price

 

Aggregate Intrinsic Value

 

Restricted Stock Awards

Outstanding at December 31, 2013

 

 

3,081 

 

$

9.33 

 

$

12,320 

 

 

340 

 

 

 

 

 

 

 

 

 

 

 

 

 

Granted

 

 

529 

 

 

9.79 

 

 

 

 

 

300 

Exercised or vested

 

 

(225)

 

 

6.92 

 

 

 

 

 

(50)

Expired

 

 

(93)

 

 

9.89 

 

 

 

 

 

 -

Forfeited

 

 

(172)

 

 

8.55 

 

 

 

 

 

(30)

Outstanding at December 31, 2014

 

 

3,120 

 

$

9.58 

 

$

 -

 

 

560 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at December 31, 2014

 

 

2,028 

 

$

8.56 

 

$

385 

 

 

 

 

The following table summarizes the exercise price range, weighted average exercise price, and remaining contractual lives by significant ranges for options outstanding and exercisable as of December 31, 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise Price Range

 

Outstanding

 

Exercisable

 

Remaining Life In Years

 

Weighted Average Exercise Price

$4.00 - $10.03

 

 

2,055 

 

 

1,563 

 

 

5.9 

 

$

7.98 

$10.04 - $16.00

 

 

1,065 

 

 

465 

 

 

8.8 

 

$

10.51 

 

 

 

3,120 

 

 

2,028 

 

 

6.9 

 

$

8.56 

 

 

 

The fair value of unvested restricted stock awards is determined based on the market price of our shares of common stock on the grant date or using the Monte-Carlo pricing model.  As of December 31, 2014, there were 1,092 unvested stock options and unrecognized compensation cost of $3,384 related to unvested stock options, as well as 560 unvested restricted stock awards and unrecognized compensation cost of $1,112 related to unvested restricted stock awards.