| Stock-Based Compensation | 8. STOCK-BASED COMPENSATION
2006 Executive Incentive Plan
Stock options granted under the West Corporation 2006 Executive
Incentive Plan (“2006 EIP”) prior to 2012 vest over a
period of five years, with 20% of the stock option becoming
exercisable on each of the first through fifth anniversaries of the
grant date. Stock options granted under the 2006 EIP in 2012 and
2013 vest over a period of four years, with 25% of the stock option
becoming exercisable on each of the first through fourth
anniversaries of the grant date. Once an option has vested, it
generally remains exercisable until the tenth anniversary of the
grant date so long as the participant continues to provide services
to the Company.
2013 Long-Term Incentive Plan
Prior to the completion of our initial public offering
(“IPO”) on March 27, 2013, we adopted, and
subsequently amended, the 2013 Long-Term Incentive Plan (as
amended, “2013 LTIP”), which is intended to provide our
officers, employees, non-employee directors and consultants with
added incentive to remain employed by or perform services for us
and align such individuals’ interests with those of our
stockholders. Under the terms of the 2013 LTIP, 8,500,000 shares of
common stock were made available for stock options, restricted
stock or other types of equity awards, subject to adjustment for
stock splits and other similar changes in capitalization. The
number of available shares under the 2013 LTIP is reduced by the
aggregate number of shares underlying each award. To the extent
that shares subject to an outstanding award granted under the 2013
LTIP are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such award or by reason
of the settlement of such award in cash, then such shares will
again be available under the 2013 LTIP (excluding shares withheld
by the Company to pay withholding taxes related to an award under
the 2013 LTIP).
Stock options granted under the 2013 LTIP vest over a period of
four years, with 25% of the stock option becoming exercisable on
each of the first through fourth anniversaries of the grant date.
Once an option has vested, it generally remains exercisable until
the tenth anniversary of the grant date so long as the participant
continues to provide services to the Company. Restricted stock
granted under the 2013 LTIP, which is time-vested, vests over a
period of three or four years (excluding awards to directors which
vest over a six to twelve month period), with a ratable portion of
the restricted stock award vested on each anniversary of the grant
date until fully vested, unless earlier forfeited as a result of
termination of service to the Company prior to the applicable
vesting date. Dividends are payable in respect of shares of
unvested restricted stock either at the time the dividend is paid
to stockholders or upon vesting of the restricted stock in
accordance with the terms of the applicable restricted stock award
agreement.
2006 Executive Incentive Plan and 2013 Long-Term Incentive Plan
– Stock Options
The following table presents the stock or stock option activity
under the 2006 EIP and 2013 LTIP for the nine months ended
September 30, 2015.
Stock or Options Outstanding
Options Weighted
Available Number Average
for Grant of Options Exercise Price
Balance at January 1, 2015 6,278,516 2,954,227 $ 27.05
Options granted
—
—
—
Options exercised
— (396,113 ) 24.65
Canceled or forfeited (2013 LTIP) 32,525 (32,525 ) 23.92
Canceled or forfeited (2006 EIP)
— (227,580 ) 31.45
Restricted stock granted (641,060 )
—
—
Restricted stock cancelled 191,590
—
—
Balance at September 30, 2015 5,861,571 2,298,009 $ 27.07
At September 30, 2015, we expect that approximately
2.2 million options granted and outstanding will vest in the
future. At September 30, 2015, the intrinsic value of options
vested and exercisable was approximately $0.7 million. The
aggregate intrinsic value of options outstanding at
September 30, 2015, was approximately $0.7 million. The
aggregate intrinsic value of options outstanding, vested and
expected to vest at September 30, 2015 was approximately $0.7
million.
The following table summarizes the information on the options
granted under the 2006 EIP and 2013 LTIP at September 30,
2015:
Outstanding
Vested and Exercisable
Average Weighted Weighted
Remaining Average Average
Range
of Number of Contractual Exercise Number of Exercise
Exercise Prices
Options
Life (years)
Price
Options
Price
$0.00 - $13.12 69,136 1.18
$ 13.12 69,136
$ 13.12
13.13 - 28.88 1,711,378 6.82 25.11 982,873 25.32
28.89 - 50.88 499,497 5.94 33.89 499,497 33.89
50.89 - 84.80 17,998 4.92 77.74 16,434 77.06
$0.00 - $84.80 2,298,009 6.45
$ 27.07 1,567,940
$ 28.05
Options Outstanding
Executive Management Rollover Options Weighted
Number Average
of Shares Exercise Price
Balance at January 1, 2015 12,416 $ 5.47
Exercised (12,416 ) 5.47
Balance at September 30, 2015
— $
—
We account for the stock option grants under the 2006 EIP and 2013
LTIP in accordance with Accounting Standards Codification
718, Compensation - Stock
Compensation
Nine months ended
September 30,
2014
Risk-free interest rate 2.02 %
Dividend yield 3.64 %
Expected volatility 29.10 %
Expected life (years) 6.25
Fair value of option award $ 4.90
The risk-free interest rate is based on the U.S. Treasury yield at
the time of grant; the dividend yield is calculated as the ratio of
dividends paid per share of common stock to the stock price on the
date of grant; volatility is based on the five-year historical
volatility of twelve public companies we consider guideline or peer
companies; and the expected life is based on Staff Accounting
Bulletin 107. This bulletin provides a simplified method for
estimating the expected life of options.
Restricted Shares, Restricted Stock Units and Performance-Based
Restricted Stock Units
During the nine months ended September 30, 2015, pursuant to
our agreement with our non-employee directors who are not
affiliated with our former sponsors, we issued 12,660 shares of
common stock with an aggregate fair value of approximately
$400,000. These shares vest on the six-month anniversary of the
date of grant in the case of initial awards and on the one-year
anniversary for all other awards.
On January 2, 2015, 37,500 restricted shares with an aggregate
fair value of approximately $1.2 million were awarded to our Chief
Financial Officer. These shares vest over a period of four years
with 25% of the restricted shares becoming unrestricted on each of
the first through fourth anniversaries of the award.
On May 1, 2015, 100,000 restricted stock units with an
aggregate fair value of approximately $3.1 million were granted to
our President and Chief Operating Officer. These restricted stock
units vest over a period of four years with 25% of the restricted
stock units vesting on each of the first through fourth
anniversaries of the award.
During September 2015, we issued 333,400 restricted stock awards
and restricted stock units to certain key employees. These awards
vest ratably with 25% of the award vesting on each of the first
through fourth anniversaries of the award date. The fair value of
these awards at the date of grant was approximately $7.9 million
and will be recognized over the remaining vesting period of
approximately 3.9 years as of September 30, 2015.
During September 2015, we issued 157,500 performance-based
restricted stock units to certain key executives. Each
performance-based restricted stock unit represents a contingent
right to receive between zero and 1.75 shares of West common stock.
These performance-based restricted stock units will vest based on
the Company’s total shareholder return (“TSR”)
percentile ranking over the applicable performance period as
compared to the TSR of companies included in the Russell 2000 on
both the first and last day of the performance period, which began
on September 1, 2015 and ends on August 31, 2018. The
fair value of these awards at the date of grant was approximately
$4.3 million and will be recognized over the remaining vesting
period of approximately 2.9 years as of September 30,
2015.
2013 Employee Stock Purchase Plan
During the fourth quarter of 2013, we implemented the 2013 Employee
Stock Purchase Plan (“ESPP”), under which the sale of
1.0 million shares of our common stock has been authorized and
reserved. Employees may designate up to 50% of their annual
compensation for the purchase of stock, subject to a per person
limit of 2,000 shares in any offering period or calendar year. The
price for shares purchased under the ESPP is 85% of the market
closing price on the last day of the quarterly purchase period. No
employee will be authorized to purchase common stock through the
ESPP if, immediately after the purchase, the employee (or any other
person whose stock would be attributed to such employee under U.S.
tax law) would own stock and/or hold outstanding options to
purchase stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the
Company or of any parent of the Company or any subsidiary. In
addition, no participant will be entitled to purchase stock under
the ESPP at a rate which, when aggregated with his or her rights to
purchase stock under all other employee stock purchase plans of the
Company and its subsidiaries, exceeds $25,000 in fair market value,
determined as of the date of grant (or such other limit as may be
imposed by U.S. tax law), for each calendar year in which any
option granted to the participant under any such plans is
outstanding at any time. As of September 30, 2015, 479,814
shares had been issued under the ESPP. For the three and nine
months ended September 30, 2015, we recognized compensation
expense for this plan of $0.3 million and $1.0 million,
respectively. For the three and nine months ended
September 30, 2014, we recognized compensation expense for
this plan of $0.2 million and $0.8 million, respectively.
Stock-Based Compensation Expense
For the three months ended September 30, 2015 and 2014,
stock-based compensation expense was $5.4 million and $3.9 million,
respectively. For the nine months ended September 30, 2015 and
2014, stock-based compensation expense was $16.8 million and $10.1
million, respectively.
At September 30, 2015 and 2014, there was approximately $3.6
million and $11.3 million, respectively, of unrecorded and
unrecognized compensation expense related to unvested stock options
under the 2006 EIP and 2013 LTIP, which will be recognized over the
remaining vesting period of approximately 1.0 years as of
September 30, 2015.
At September 30, 2015 and 2014, there was approximately $46.3
million and $43.5 million, respectively, of unrecorded and
unrecognized compensation expense related to unvested share-based
compensation on restricted stock under the 2013 LTIP, which will be
recognized over the remaining vesting period of approximately 3.9
years as of September 30, 2015. |
