Share-Based Compensation | 3 Months Ended |
Mar. 31, 2014 |
Share-based Compensation [Abstract] | ' |
Share-Based Compensation | ' |
Share-Based Compensation |
Stock Option and Incentive Plans |
We have three share-based compensation plans: 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 2004 Plan. There are 2,500,000 shares of common stock reserved for grant under the 2011 Plan and, as of March 31, 2014, there were 933,817 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 March 31, 2014, we had granted a total of 1,929,665 options to purchase common stock under all of the share-based compensation plans, of which options to purchase 98,954 shares were outstanding and vested, and a total of 5,132,304 restricted shares were granted, of which 1,440,460 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 months ended March 31, 2014 and 2013, was as follows: |
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| For the Three Months Ended | | | |
| March 31, | | | |
| 2014 | | 2013 | | | |
Share-based compensation expense related to restricted shares | $ | 3,256 | | | $ | 2,800 | | | | |
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Share-based compensation expense related to ESPP | 30 | | | 30 | | | | |
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Total share-based compensation expense | $ | 3,286 | | | $ | 2,830 | | | | |
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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, 2013 | 1,429,730 | | | $44.19 | | | | | | |
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Granted | 391,733 | | | $44.38 | | | | | | |
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Canceled | (91,013 | ) | | $45.30 | | | | | | |
Vested | (289,990 | ) | | $40.31 | | | | | | |
Outstanding at March 31, 2014 | 1,440,460 | | | $44.95 | | | | | | |
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During the three months ended March 31, 2014 and 2013, we issued 391,733 and 328,550 shares of restricted stock, respectively, with an aggregate grant date fair value of $17.4 million and $13.8 million, respectively. The grant date fair value of restricted shares that vested during the three months ended March 31, 2014 and 2013 was $11.7 million and $20.1 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 March 31, 2014, there was $35.3 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 2.9 years. |
Special 2012 Long-Term Performance-Based Restricted Stock Grant |
In May, July and August 2012, the Compensation Committee of our Board of Directors approved the grant of a total of 658,500 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. On March 31, 2014, 576,500 shares remained outstanding under this grant. |
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. The following are the performance metrics underlying the targets: |
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| Cumulative Diluted EPS | | ROIC |
| Measurement Period | | EPS Target | | Measurement Period | | ROIC Target |
2015 Performance Period | 4/1/12 | | | | 1/1/15 | | |
50% vest if we achieve both performance targets | through | | | | through | | |
12/31/15 | | $ | 13.68 | | | 12/31/15 | | 8.9 | % |
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2016 Performance Period | 4/1/12 | | | | 1/1/16 | | |
All/remaining vest if we achieve both performance targets | through | | | | through | | |
12/31/16 | | $ | 18.96 | | | 12/31/16 | | 9 | % |
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A maximum of $26.5 million could be recognized as compensation expense under this grant if all cumulative diluted EPS and ROIC targets are met. We do not believe that achievement of either the cumulative diluted EPS or the ROIC targets is currently probable, and, therefore, we have not recognized any compensation expense associated with the grant. |
If it becomes probable that the cumulative diluted EPS and ROIC performance targets will be achieved, a cumulative adjustment will be recorded and the remaining compensation expense will be recognized over the remaining performance period. If all of the targets had been considered probable at March 31, 2014, we would have recognized $12.3 million of non-cash performance share-based compensation expense during the period ended March 31, 2014. The probability of reaching the targets is evaluated each reporting period. If we later determined that it is no longer probable that the minimum cumulative diluted EPS and ROIC performance targets for the grants will be met, no further compensation expense would be recognized and any previously recognized compensation expense would be reversed. In the event that we do not achieve the specified cumulative diluted EPS and ROIC targets for the performance period ending December 31, 2016, the restricted shares will be forfeited. None of these shares were included in our total diluted share count at March 31, 2014 or 2013. |
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, 2013 | 215,668 | | | $25.64 | | 1.1 | | $4,616 | | |
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Exercised | (111,675 | ) | | $19.16 | | | | | | |
Canceled | (5,039 | ) | | $44.66 | | | | | | |
Outstanding at March 31, 2014 | 98,954 | | | $31.99 | | 1.4 | | $1,601 | | |
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Vested at March 31, 2014 | 98,954 | | | $31.99 | | 1.4 | | $1,601 | | |
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No stock options have been granted since 2007. As of March 31, 2014, 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 three months ended March 31, 2014 and 2013 was $3.2 million and $0.9 million, respectively. |
Our net cash proceeds from the exercise of stock options were $2.1 million and $0.9 million for the three months ended March 31, 2014 and 2013, respectively. The excess income tax benefit realized from stock option exercises and restricted stock vesting was $0.8 million and $4.7 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 January 1, 2014 and ends June 30, 2014. Compensation expense under the ESPP is estimated based on the discount of 10% at the end of the purchase period. During the three months ended March 31, 2014, $0.5 million was withheld from employees for the purpose of purchasing shares under the ESPP. There were 1,245,581 shares of common stock available for purchase under the ESPP as of March 31, 2014. |
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 three months ended March 31, 2014, we repurchased 15,146 shares under this authorization for approximately $0.7 million. As of March 31, 2014, there were 245,581 remaining shares authorized to be repurchased for this purpose. |
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 three months ended March 31, 2014, we repurchased 1,250,000 shares under this program for approximately $60.5 million. As of March 31, 2014, $108.5 million remained authorized under this program. |