Share-Based Compensation | 9 Months Ended |
Sep. 30, 2013 |
Share-based Compensation [Abstract] | |
Share-Based Compensation | Share-Based Compensation |
Stock Option and Incentive Plans |
We have four share-based compensation plans: the Life Time Fitness, Inc. 1998 Stock Option Plan (the “1998 Plan”); the Amended and Restated Life Time Fitness, Inc. 2004 Long-Term Incentive Plan (the “2004 Plan”); the Life Time Fitness, Inc. 2011 Long-Term Incentive Plan (the “2011 Plan”) and an Employee Stock Purchase Plan (the “ESPP”), collectively, the share-based compensation plans. We no longer make grants under the 1998 Plan and the 2004 Plan. There are 2,500,000 shares of common stock reserved for grant under the 2011 Plan and, as of September 30, 2013, there were 1,149,485 shares available for grant. The types of awards that may be granted under the 2011 Plan include incentive and non-qualified options to purchase shares of common stock, stock appreciation rights, restricted shares, restricted share units, performance awards and other types of share-based awards. |
As of September 30, 2013, we had granted a total of 5,587,165 options to purchase common stock under all of the share-based compensation plans, of which options to purchase 221,668 shares were outstanding and vested, and a total of 4,740,571 restricted shares were granted, of which 1,517,185 restricted shares were outstanding and unvested. We use the term “restricted shares” to define unvested shares granted to employees and non-employee directors. We use the term "vest" to define the lapse of vesting restrictions on restricted shares. |
Total share-based compensation expense included in our consolidated statements of operations for the three and nine months ended September 30, 2013 and 2012, was as follows: |
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| For the Three Months Ended | | For the Nine Months Ended |
| September 30, | | September 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Share-based compensation expense related to restricted shares | $ | 3,094 | | | $ | 3,520 | | | $ | 9,320 | | | $ | 10,772 | |
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Share-based compensation expense related to ESPP | 30 | | | 30 | | | 90 | | | 90 | |
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Total share-based compensation expense | $ | 3,124 | | | $ | 3,550 | | | $ | 9,410 | | | $ | 10,862 | |
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Summary of Restricted Stock Activity |
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| Shares | | Weighted Average Grant Date Fair Value | | | | | | | | | | | |
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Outstanding at December 31, 2012 | 2,069,168 | | | $36.55 | | | | | | | | | | | |
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Granted | 328,550 | | | $41.94 | | | | | | | | | | | |
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Canceled | (10,995 | ) | | $34.63 | | | | | | | | | | | |
Vested | (817,688 | ) | | $24.55 | | | | | | | | | | | |
Outstanding at March 31, 2013 | 1,569,035 | | | $43.95 | | | | | | | | | | | |
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Granted | 25,406 | | | $47.58 | | | | | | | | | | | |
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Canceled | (39,476 | ) | | $43.40 | | | | | | | | | | | |
Vested | (31,809 | ) | | $39.54 | | | | | | | | | | | |
Outstanding at June 30, 2013 | 1,523,156 | | | $44.11 | | | | | | | | | | | |
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Granted | 9,150 | | | $48.77 | | | | | | | | | | | |
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Canceled | (6,375 | ) | | $42.70 | | | | | | | | | | | |
Vested | (8,746 | ) | | $41.99 | | | | | | | | | | | |
Outstanding at September 30, 2013 | 1,517,185 | | | $44.16 | | | | | | | | | | | |
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During the nine months ended September 30, 2013 and 2012, we issued 363,106 and 1,039,526 shares of restricted stock, respectively, with an aggregate grant date fair value of $15.4 million and $49.2 million, respectively. The grant date fair value of restricted shares that vested during the nine months ended September 30, 2013 and 2012 was $21.7 million and $19.1 million, respectively. The total value of each restricted stock grant, based on the fair value of the stock on the date of grant, is amortized to compensation expense on a straight-line basis over the related vesting period. As of September 30, 2013, there was $29.4 million of unrecognized compensation expense related to restricted stock that is expected to vest. We plan to recognize this amount over a weighted average period of 2.4 years. |
Special 2012 Long-Term Performance-Based Restricted Stock Grant |
In May 2012, the Compensation Committee of our Board of Directors approved the grant of 598,000 shares of long-term performance-based restricted stock to serve as an incentive to our senior management team to achieve certain cumulative diluted earnings per share ("EPS") and return on invested capital (“ROIC”) targets during performance periods that end on December 31, 2015 and December 31, 2016. In July and August 2012, an additional 40,500 and 20,000 shares, respectively, of long-term performance-based restricted stock were granted to members of management using the same cumulative diluted EPS and ROIC targets and vesting schedule. These shares are included in the overall number of restricted shares granted in 2012. |
The cumulative diluted EPS target measures cumulative diluted EPS for each quarter during the period from April 1, 2012 to the end of the applicable performance period. The ROIC target is measured in the last year of the applicable performance period. If the specified cumulative diluted EPS and ROIC targets are both met or exceeded for the performance period ending December 31, 2015, 50% of the restricted shares will vest. If the specified cumulative diluted EPS and ROIC targets are both met or exceeded for the performance period ending December 31, 2016, then all of the restricted shares will vest. For example, if the 2015 performance targets were satisfied and 50% of the shares vested, the remaining 50% of the restricted shares will vest if the 2016 performance targets were satisfied. If the 2015 performance targets were not satisfied, but the 2016 performance targets are both met, 100% of the restricted shares will vest. In the event that we do not achieve both of the specified cumulative diluted EPS and ROIC targets for the performance period ending December 31, 2016, the restricted shares will be forfeited. As of September 30, 2013, 651,500 shares were still outstanding and unvested. A maximum of $29.9 million of compensation expense could be recognized under this grant if all cumulative diluted EPS and ROIC targets are met. |
We consider the specific cumulative diluted EPS and ROIC targets to be competitively sensitive information during the performance period. However, the Compensation Committee set the cumulative diluted EPS targets at 1.5 times the compound annual growth rate under our then-current long range plan and the ROIC targets at 1.1 times the ROIC under our then-current long range plan. We do not believe that achievement of the cumulative diluted EPS and the ROIC targets are currently probable, and, therefore, we did not recognize any compensation expense associated with the grant during the nine months ended September 30, 2013. If all of the targets had been considered probable at September 30, 2013, we would have recognized $10.2 million of non-cash performance share-based compensation expense during the nine months ended September 30, 2013. If it becomes probable that the cumulative diluted EPS and ROIC performance targets will be achieved, a cumulative adjustment would be recorded and the remaining compensation expense would be recognized over the remaining performance period. The probability of reaching the targets is evaluated each reporting period. If we later determine that it is no longer probable that the minimum cumulative diluted EPS and ROIC performance targets for the grants would be met, no further compensation expense would be recognized and any previously recognized compensation expense would be reversed. In accordance with the related accounting guidance, none of the unvested restricted shares were included in our share count since the date of grant. |
Summary of Stock Option Activity |
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| Shares | | Weighted Average Exercise Price | | Weighted Average Remaining Contractual Term (Years) | | Aggregate Intrinsic Value | | | | | | | |
Outstanding at December 31, 2012 | 291,510 | | | $24.96 | | 2 | | $7,073 | | | | | | | |
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Exercised | (40,675 | ) | | $21.44 | | | | | | | | | | | |
Canceled | — | | | $— | | | | | | | | | | | |
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Outstanding at March 31, 2013 | 250,835 | | | $25.53 | | 1.8 | | $4,441 | | | | | | | |
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Exercised | (8,967 | ) | | $26.33 | | | | | | | | | | | |
Canceled | (1,600 | ) | | $8.00 | | | | | | | | | | | |
Outstanding at June 30, 2013 | 240,268 | | | $25.62 | | 1.6 | | $5,886 | | | | | | | |
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Exercised | (18,600 | ) | | $24.47 | | | | | | | | | | | |
Canceled | — | | | $— | | | | | | | | | | | |
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Outstanding at September 30, 2013 | 221,668 | | | $25.72 | | 1.3 | | $5,709 | | | | | | | |
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Vested at September 30, 2013 | 221,668 | | | $25.72 | | 1.3 | | $5,709 | | | | | | | |
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No stock options have been granted since 2007. As of September 30, 2013, there was no unrecognized compensation expense related to stock options. |
The aggregate intrinsic values in the table above represent the total pretax intrinsic values (the differences between our 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 option holders exercised their options on that date. This amount changes based on the fair market value of our stock. Total intrinsic value of options exercised during the nine months ended September 30, 2013 and 2012 was $1.6 million and $3.1 million, respectively. |
Our net cash proceeds from the exercise of stock options were $1.6 million and $2.1 million for the nine months ended September 30, 2013 and 2012, respectively. The excess income tax benefit realized from stock option exercises and restricted stock vesting was $6.6 million and $9.1 million, respectively, for those same periods. In accordance with the related accounting guidance, this tax benefit is presented as a financing cash inflow. There is a corresponding cash outflow included in cash flows from operating activities. |
Employee Stock Purchase Plan |
Our ESPP provides for the sale of up to 1,500,000 shares of our common stock to our employees at discounted purchase prices. The cost per share under this plan is 90% of the fair market value of our common stock on the last day of the purchase period, as defined. The current purchase period for employees under the ESPP began July 1, 2013 and ends December 31, 2013. Compensation expense under the ESPP is estimated based on the discount of 10% at the end of the purchase period. During the nine months ended September 30, 2013, $1.1 million was withheld from employees for the purpose of purchasing shares under the ESPP. There were 1,260,727 shares of common stock available for purchase under the ESPP as of September 30, 2013. |
Share Repurchase Plans |
In June 2006, our Board of Directors authorized the repurchase of up to 500,000 shares of our common stock from time to time in the open market or otherwise for the primary purpose of offsetting the dilutive effect of shares issued under our ESPP. During the nine months ended September 30, 2013, we repurchased 27,093 shares for approximately $1.3 million. As of September 30, 2013, there were 260,727 remaining shares authorized to be repurchased for this purpose. |
In August 2011, our Board of Directors authorized the repurchase of up to $60.0 million of our outstanding common stock from time to time. During the nine months ended September 30, 2013, we repurchased 682,634 shares under this program for approximately $31.0 million. This authorization terminated in August 2013 with the authorization of a new share repurchase program. |
In August 2013, our Board of Directors authorized the repurchase of up to $200.0 million of our outstanding common stock from time to time through open market or privately negotiated transactions. The authorization to repurchase shares terminates when the aggregate repurchase amount totals $200.0 million or at the close of business on August 16, 2015, whichever occurs first. The share repurchase program does not obligate us to repurchase any dollar amount or number of shares of our common stock and the program may be extended, modified, suspended or discontinued at any time. During the nine months ended September 30, 2013, we repurchased 186,701 shares under this program for approximately $9.3 million. As of September 30, 2013, there was $190.7 million remaining authorized under this program. |