Equity-Based Compensation | 12 Months Ended |
Dec. 31, 2013 |
Equity-Based Compensation | ' |
12. Equity-Based Compensation |
As of December 31, 2013, equity-based compensation awards may be granted to ICG employees, directors and consultants under ICG’s 2005 Omnibus Equity Compensation Plan, as such has been amended from time to time (the “Plan”). Generally, the grants vest over a period from one to four years and expire eight to ten years after the grant date. Most businesses in which ICG holds equity ownership interests also maintain their own equity incentive/compensation plans. |
ICG issues the following types of equity-based compensation to its employees and non-employee directors: (1) stock appreciation rights (SARs), (2) stock options, (3) restricted stock (often subject to performance-based or market-based conditions) and (4) deferred stock units (DSUs). ICG’s grants of equity-based compensation are approved by the Compensation Committee of its Board of Directors. The following table summarizes the equity-based compensation recognized in the respective periods; that equity-based compensation is included in operating expenses, primarily in the line item “General and administrative” on ICG’s Consolidated Statements of Operations. |
Equity-Based Compensation (in thousands, except weighted average years): |
|
| | Year Ended December 31, | | | Unrecognized | | | Weighted | |
Equity-Based | Average Years |
Compensation | Remaining of |
as of | Equity-Based |
| Compensation |
| as of |
| | 2013 | | | 2012 | | | 2011 | | | Dec. 31, 2013 | | | Dec. 31, 2013 | |
SARs | | $ | 2,377 | | | $ | 2,488 | | | $ | 2,252 | | | $ | 1,338 | | | | 1.8 | |
Restricted Stock | | | 2,958 | | | | 2,871 | | | | 832 | | | | 7,526 | | | | 2 | |
Deferred Stock Units | | | 377 | | | | 419 | | | | 703 | | | | 64 | | | | 0.2 | |
| | | 5,712 | | | | 5,778 | | | | 3,787 | | | | 8,928 | | | | | |
Equity-Based Compensation for Consolidated Businesses | | | 699 | | | | 458 | | | | 74 | | | | 1,492 | | | | 2.6 | |
Total Equity-Based Compensation | | $ | 6,411 | | | $ | 6,236 | | | $ | 3,861 | | | $ | 10,420 | | | | | |
SARs |
Each SAR represents the right of the holder to receive, upon exercise of that SAR, shares of ICG Common Stock equal to the amount by which the fair market value of a share of that Common Stock on the date of exercise of the SAR exceeds the base price of the SAR. The base price is determined by the NASDAQ closing price of ICG’s Common Stock on the date of grant (or the closing price on the next trading day if there are no trades in ICG’s stock on the date of grant). The fair value of each SAR is estimated on the grant date using the Black-Scholes option-pricing model. SARs generally vest over four years, with 25% vesting on the first anniversary of the grant date, and the remaining 75% vesting ratably each month over the subsequent 36 months. |
Activity with respect to SARs during the years ended December 31, 2013, 2012 and 2011 was as follows: |
|
| | Number of SARs | | | Weighted | | | Weighted | | | | | | | | | |
Average | Average | | | | | | | | |
Base Price | Fair Value | | | | | | | | |
Outstanding as of December 31, 2010 | | | 3,971,885 | | | $ | 7.45 | | | $ | 4.43 | | | | | | | | | |
Granted | | | 275,625 | | | $ | 12.15 | | | $ | 6.58 | | | | | | | | | |
Exercised (1) | | | (100,119 | ) | | $ | 9.74 | | | $ | 5.82 | | | | | | | | | |
Outstanding as of December 31, 2011 | | | 4,147,391 | | | $ | 7.71 | | | $ | 4.54 | | | | | | | | | |
Granted | | | 260,125 | | | $ | 9.25 | | | $ | 4.9 | | | | | | | | | |
Exercised (1) | | | (54,873 | ) | | $ | 7.89 | | | $ | 4.65 | | | | | | | | | |
Forfeited | | | (1,598 | ) | | $ | 10.54 | | | $ | 5.83 | | | | | | | | | |
Cancelled | | | (12,795 | ) | | $ | 6.7 | | | $ | 3.93 | | | | | | | | | |
Outstanding as of December 31, 2012 | | | 4,338,250 | | | $ | 7.8 | | | $ | 4.56 | | | | | | | | | |
Granted | | | 2,500 | | | $ | 16.19 | | | $ | 9.83 | | | | | | | | | |
Exercised (1) | | | -3,045,700 | | | $ | 14.42 | | | $ | 8.64 | | | | | | | | | |
Forfeited | | | -62,242 | | | $ | 10.25 | | | $ | 5.51 | | | | | | | | | |
Outstanding as of December 31, 2013 | | | 1,232,808 | | | $ | 8.86 | | | $ | 4.99 | | | | | | | | | |
(1) | The exercise of SARs listed in this table resulted in the issuance of 992,390 shares, 9,818 shares and 20,229 shares of ICG’s Common Stock during the years ended December 31, 2013, 2012 and 2011. | | | | | | | | | | | | | | | | | | | |
The following table summarizes information about SARs outstanding as of December 31, 2013: |
|
Grant Price | | Number of | | | Number of | | | Weighted Average | | | Aggregate Intrinsic | | | | | |
SARs | SARs | Remaining | Value of SARs | | | | |
Outstanding | Exercisable | Contractual Life of | Outstanding as of | | | | |
| | SARs Outstanding | Dec. 31, 2013 | | | | |
| | (in years) | | | | | |
| | | (in thousands) | | | | |
$6.70-$7.00 | | | 530,557 | | | | 505,366 | | | | 6.02 | | | $ | 6,322,045 | | | | | |
$7.34-$8.76 | | | 139,602 | | | | 130,288 | | | | 4.98 | | | $ | 1,434,848 | | | | | |
$9.50-$16.19 | | | 562,649 | | | | 330,391 | | | | 7.41 | | | $ | 4,289,943 | | | | | |
| | | 1,232,808 | | | | 966,045 | | | | | | | $ | 12,046,835 | | | | | |
As of December 31, 2013, 2012 and 2011, there were 966,045 SARs, 3,468,805 SARs and 2,979,552 SARs exercisable, respectively, at a weighted average base price of $8.50 per share, $7.53 per share and $7.42 per share, respectively, under the Plan. As of December 31, 2013, ICG expects an additional 966,045 SARs to vest in the future. |
Stock Options |
The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. Stock options generally vest ratably over four years: 25% vest on the first anniversary of the grant date, and the remaining 75% vest ratably on a monthly basis over the subsequent 36 months. |
Activity with respect to stock options during the years ended December 31, 2013, 2012 and 2011 was as follows: |
|
| | Number of Options | | | Weighted | | | Weighted | | | | | | | | | |
Average | Average | | | | | | | | |
Base Price | Fair Value | | | | | | | | |
Outstanding as of December 31, 2010 | | | 311,169 | | | $ | 16.64 | | | $ | 14.3 | | | | | | | | | |
Exercised (1) | | | (18,725 | ) | | $ | 8.06 | | | $ | 6.22 | | | | | | | | | |
Cancelled | | | (109,236 | ) | | $ | 42.07 | | | $ | 36.36 | | | | | | | | | |
Outstanding as of December 31, 2011 | | | 183,208 | | | $ | 6.25 | | | $ | 4.97 | | | | | | | | | |
Exercised (1) | | | (173,208 | ) | | $ | 6.03 | | | $ | 4.83 | | | | | | | | | |
Forfeited | | | (21 | ) | | $ | 8.41 | | | $ | 4.96 | | | | | | | | | |
Cancelled | | | (8,229 | ) | | $ | 10.62 | | | $ | 8.16 | | | | | | | | | |
Outstanding as of December 31, 2012 | | | 1,750 | | | $ | 6.91 | | | $ | 4.14 | | | | | | | | | |
Exercised (1) | | | (1,500 | ) | | $ | 7.34 | | | $ | 4.42 | | | | | | | | | |
Outstanding as of December 31, 2013 | | | 250 | | | $ | 4.3 | | | $ | 2.47 | | | | | | | | | |
(1) | ICG received cash of less than $0.1 million, $1.0 million and $0.2 million related to stock options exercised during the years ended December 31, 2013, 2012 and 2011. | | | | | | | | | | | | | | | | | | | |
As of December 31, 2013, there were 250, 1,729 and 183,082 stock options exercisable at a weighted average exercise price of $4.30, $6.94 and $6.25 per share, respectively, under the Plan. The weighted average remaining contractual life of the stock options outstanding as of December 31, 2013 was 5.3 years; those stock options had an aggregate intrinsic value as of December 31, 2013 of less than $0.1 million. |
SARs and Stock Options Fair Value Assumptions |
ICG estimates the grant date fair value of SARs and stock options using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. Those assumptions include estimating the expected life of the award and estimating volatility of ICG’s stock price over the expected term. Expected volatility approximates the historical volatility of ICG’s Common Stock over the period commensurate with the expected term of the award. The expected term calculation is based on an average of the award vesting term and the life of the award. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the award. Changes in the above assumptions, the estimated forfeitures and/or the requisite service period can materially affect the amount of equity-based compensation recognized on ICG’s Consolidated Statements of Operations. |
The following assumptions were used to determine the fair value of SARs granted to employees and a non-management director by ICG during the years ended December 31, 2013, 2012 and 2011: |
|
| | Years Ended December 31, | | | | | | | | | |
| | 2013 | | | 2012 | | | 2011 | | | | | | | | | |
Expected volatility | | | 56 | % | | | 56 | % | | | 56 | % | | | | | | | | |
Average expected life of SAR (in years) | | | 6.25 | | | | 6.25 | | | | 5.25-6.25 | | | | | | | | | |
Risk-free interest rate | | | 1.86 | % | | | 0.92 | % | | | 1.62-1.97 | % | | | | | | | | |
Dividend yield | | | 0 | % | | | 0 | % | | | 0 | % | | | | | | | | |
Restricted Stock |
ICG periodically issues shares of restricted stock to its employees and non-management directors. Recipients of restricted stock do not pay cash consideration for the shares and have the right to vote all shares subject to the grant and receive all dividends with respect to the shares, whether or not the shares have vested. As of December 31, 2013, issued and unvested shares of restricted stock granted to ICG’s employees vest as follows: (1) 57,248 shares of restricted stock vest 25% each year over a four-year period, (2) 49,967 shares of restricted stock vest 12.5% on the nine-month anniversary of the grant date, and the remaining 87.5% every six months subsequent to the first vesting date and (3) 130,440 shares of restricted stock vest upon the achievement of certain performance goals, as discussed below. Additionally, as of December 31, 2013, 916,666 shares of restricted stock granted to ICG’s Chief Executive Officer and ICG’s President are subject to vesting in accordance with the lapse of specified service periods, and the achievement of certain performance goals and market conditions, as discussed below. |
During the year ended December 31, 2013, in lieu of their right to receive 50% of their respective target bonus amounts under the ICG 2013 Performance Plan (the “Performance Plan”) in cash, senior ICG employees, including each of ICG’s executive officers, were issued a total of 130,440 shares of restricted stock (the “Performance Shares”) (determined based on the value of 50% of their respective individual target bonuses under the Performance Plan and the closing price of ICG’s common stock of $13.09 per share on March 1, 2013, the date of the restricted stock grant). If and to the extent that an individual’s achievement percentage under the Performance Plan (1) is greater than or equal to 50%, all of that employee’s Performance Shares will vest or (2) is greater than 0% but less than 50%, a portion of that employee’s Performance Shares equal to two times the achievement percentage will vest. All of those performance-based restricted stock awards vested during the first quarter of 2014. |
|
As of December 31, 2013, outstanding shares of restricted stock granted to ICG’s Chief Executive Officer and ICG’s President vest as follows: (1) 183,334 shares of restricted stock vest in equal installments each November and May through November 9, 2015, (2) 366,666 shares of restricted stock vest based on the achievement of stipulated performance goals related to ICG’s consolidated revenue and EBITDA performance on or before December 31, 2015, and (3) 366,666 shares of restricted stock vest based on stipulated market thresholds related to ICG’s Common Stock price through December 31, 2015. As of December 31, 2013, ICG determined that, following the closing of the sale of Procurian to an affiliate of Accenture on December 4, 2013, the stipulated performance goals related to the performance-based restricted stock awards are improbable of achievement. Accordingly, ICG has reversed previously-recorded equity compensation cost related to those awards in the amount of $1.5 million. That equity compensation cost had been recognized as follows: $0.4 million, $0.9 million and $0.2 million was recognized during the years ended December 31, 2013, 2012 and 2011, respectively. Subsequent to December 31, 2013, in light of the sale of Procurian and the improbability of the achievement of the performance-based awards, both ICG’s Chief Executive Officer and ICG’s President elected to forfeit those shares of restricted stock. In the event of a change of control (as defined by the Plan) before December 31, 2015, all of the shares contingent upon the achievement of the stock price metrics would automatically vest, and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized. Additionally, in the event of a change of control during which ICG’s Chief Executive Officer and ICG’s President are terminated, any remaining service-based awards would automatically vest, and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized. |
|
During the years ended December 31, 2013 and 2012, ICG granted 30,750 shares and 18,750 shares, respectively, of restricted stock under ICG’s Amended and Restated Non-Management Director Compensation Plan (the “Director Plan”), which are included in the table below. See “Non-Management Director Equity-Based Compensation” in this Note 12 for additional details related to vesting. |
Share activity with respect to restricted stock awards during the years ended December 31, 2013, 2012 and 2011 was as follows: |
|
| | Number of | | | Weighted Average | | | | | | | | | | | | | |
Shares | Grant Date | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | |
Issued and unvested as of December 31, 2010 | | | 60,500 | | | $ | 8.23 | | | | | | | | | | | | | |
Granted | | | 1,181,910 | | | $ | 9.15 | | | | | | | | | | | | | |
Vested | | | (16,625 | ) | | $ | 8.12 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2011 | | | 1,225,785 | | | $ | 9.12 | | | | | | | | | | | | | |
Granted | | | 116,973 | | | $ | 9.11 | | | | | | | | | | | | | |
Vested | | | (124,920 | ) | | $ | 10.01 | | | | | | | | | | | | | |
Forfeited | | | (375 | ) | | $ | 12.15 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2012 | | | 1,217,463 | | | $ | 9.03 | | | | | | | | | | | | | |
Granted | | | 183,190 | | | $ | 13.35 | | | | | | | | | | | | | |
Vested | | | (202,689 | ) | | $ | 10.02 | | | | | | | | | | | | | |
Forfeited | | | (12,893 | ) | | $ | 10.55 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2013 | | | 1,185,071 | | | $ | 9.52 | | | | | | | | | | | | | |
|
The total aggregate fair value of restricted stock awards that vested and were converted to ICG’s Common Stock during the years ended December 31, 2013, 2012 and 2011 was $2.6 million, $1.3 million and $0.2 million, respectively. During the years ended December 31, 2013, 2012 and 2011, 46,616 shares, 39,817 shares and 3,351 shares, respectively, were surrendered for satisfying withholding taxes. As of December 31, 2013, ICG expects 818,405 shares of restricted stock to vest in the future. |
|
Subsequent to December 31, 2013, ICG granted 158,942 shares of restricted stock to certain ICG employees that will vest upon the achievement of performance metrics in accordance with ICG’s established 2014 performance plan. These shares were valued at approximately $3.2 million. |
|
Subsequent to December 31, 2013, ICG granted 2,575,000 shares of restricted stock to ICG’s executive officers and management valued at $52.3 million. These shares vest upon the achievement of stipulated market thresholds related to ICG’s Common Stock price through February 28, 2016. |
Non-Management Director Equity-Based Compensation |
ICG periodically issues DSUs and/or shares of restricted stock to its non-management directors in accordance with the Director Plan. Each DSU represents a share of Common Stock into which that DSU will be converted upon the termination of the recipient’s service at ICG. DSUs issued annually under the Director Plan vest on the one-year anniversary of the grant date. |
Share activity with respect to the annual DSU awards for the years ended December 31, 2013, 2012 and 2011 are as follows: |
|
| | Number of | | | Weighted Average | | | | | | | | | | | | | |
DSUs | Grant Date | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | |
Issued and unvested as of December 31, 2010 | | | 31,500 | | | $ | 6.8 | | | | | | | | | | | | | |
Granted | | | 60,000 | | | $ | 13.32 | | | | | | | | | | | | | |
Vested | | | (39,000 | ) | | $ | 8.05 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2011 | | | 52,500 | | | $ | 13.32 | | | | | | | | | | | | | |
Granted | | | 41,250 | | | $ | 8.4 | | | | | | | | | | | | | |
Vested | | | (52,500 | ) | | $ | 13.32 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2012 | | | 41,250 | | | $ | 8.4 | | | | | | | | | | | | | |
Granted | | | 29,250 | | | $ | 13.09 | | | | | | | | | | | | | |
Vested | | | (41,250 | ) | | $ | 8.4 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2013 | | | 29,250 | | | $ | 13.09 | | | | | | | | | | | | | |
As of December 31, 2013, ICG expects 29,250 DSUs related to the annual grant program under the Director Plan to vest in the future. |
Each non-management director is also entitled to receive quarterly cash payments for his service on the Board of Directors and its committees, as applicable, under the Director Plan. Each director may elect to receive DSUs in lieu of all or a portion of those cash fees. Each participating director receives DSUs representing shares of ICG’s Common Stock with a fair market value equal to the relevant cash fees (with such fair market value determined by reference to the closing Common Stock price reported by NASDAQ on the date these cash fees otherwise would have been paid). DSUs received in lieu of cash fees are fully vested at the time they are granted and are settled in shares of ICG’s Common Stock upon the termination of the recipient’s service at ICG. The expense for those DSUs is recorded when the fees to which the DSUs relate are earned and is included in the line item “general and administrative” on ICG’s Consolidated Statements of Operations (but is not reflected in the summarized Equity-Based Compensation table above). |
Share activity with respect to periodically-issued DSUs for the years ended December 31, 2013, 2012 and 2011 was as follows: |
|
| | Number of | | | Weighted Average | | | | | | | | | | | | | |
DSUs | Grant Date | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | |
Issued and unvested as of December 31, 2010 | | | — | | | $ | — | | | | | | | | | | | | | |
Granted | | | 13,571 | | | $ | 12.02 | | | | | | | | | | | | | |
Vested | | | (13,571 | ) | | $ | 12.02 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2011 | | | — | | | $ | — | | | | | | | | | | | | | |
Granted | | | 32,923 | | | $ | 9.42 | | | | | | | | | | | | | |
Vested | | | (32,923 | ) | | $ | 9.42 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2012 | | | — | | | $ | — | | | | | | | | | | | | | |
Granted | | | 30,540 | | | $ | 12.3 | | | | | | | | | | | | | |
Vested | | | (30,540 | ) | | $ | 12.3 | | | | | | | | | | | | | |
Issued and unvested as of December 31, 2013 | | | — | | | $ | — | | | | | | | | | | | | | |
Expense associated with the DSUs periodically issued in lieu of cash for the years ended December 31, 2013, 2012 and 2011 was $0.4 million, $0.3 million and $0.2 million, respectively. |
Consolidated Businesses |
All of ICG’s consolidated businesses issue equity-based compensation awards to their employees. Those awards are most often in the form of stock options that vest over four years. The fair value of the stock option awards is estimated on the grant date using the Black-Scholes option pricing model. The majority of the stock options vest 25% on the first anniversary of the grant date, and the remaining 75% vest ratably each month over the subsequent 36 months. The other awards generally vest ratably over four years, with 25% vesting on each anniversary date over that term. |