Stockholders' Equity and Equity Based Awards | 9 Months Ended |
Sep. 30, 2013 |
Stockholders' Equity and Equity Based Awards | ' |
Note 7 — Stockholders’ Equity and Equity Based Awards |
Preferred Stock |
The Company is authorized to issue up to 1,000,000 shares of preferred stock, par value $0.0001 with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. No shares were issued and outstanding as of September 30, 2013 or December 31, 2012. |
Common Stock |
The authorized common stock of the Company consists of 225,000,000 shares. The holders of the common shares are entitled to one vote for each share of common stock. In addition, the holders of the common stock are entitled to receive dividends when, as and if declared by the Board of Directors. At September 30, 2013 and December 31, 2012, the Company had 76,756,967 and 61,872,694 shares of common stock issued and outstanding, respectively. |
During the second quarter of 2013, the Company issued 13.3 million shares of common stock in a public offering at $8.00 per share for net proceeds of $101.8 million, after underwriting discounts and commissions. The net proceeds were used to repay outstanding borrowings under the Credit Facility. |
During the nine months ended September 30, 2013, no warrants were repurchased. During the second quarter of 2012, the Company repurchased 9,634,821 warrants for aggregate consideration of approximately $10.0 million in a private transaction at an average price of $1.04 per warrant. During the nine months ended September 30, 2013 and 2012, no warrants were exercised. At September 30, 2013, 33,040,682 warrants remain outstanding. |
Share-Based Compensation |
The Company accounts for share-based compensation in accordance with FASB ASC Topic 718, Stock Compensation. |
On July 31, 2009, the Company adopted the Incentive Plan, providing for long-term share-based awards intended as a means for the Company to attract, motivate, retain and reward directors, officers, employees and other eligible persons through the grant of awards and incentives for high levels of individual performance and improved financial performance of the Company. The share-based awards are also intended to further align the interests of award recipients and the Company’s stockholders. The maximum number of shares of common stock that may be issued under the Incentive Plan is 9,157,744. |
Time-Based Awards |
Shares of time-based restricted stock generally vest in three or four year increments at specified dates based on continued employment. The compensation expense to be recognized for the time-based awards was measured based on the Company’s closing stock price on the dates of grant, utilizing estimated forfeiture rates between 0% and 10% which are updated periodically based on actual employee turnover. During the nine months ended September 30, 2013, the Company granted 1,534,988 time-based shares of restricted stock to employees and directors, pursuant to the Incentive Plan. |
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The following table summarizes the changes in non-vested time-based awards for the nine month period ended September 30, 2013: |
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| | Shares | | | Weighted | | | | | | | | | |
Average | | | | | | | | |
Grant Date | | | | | | | | |
Fair Value | | | | | | | | |
Non-vested, beginning of period | | | 1,176,890 | | | $ | 12 | | | | | | | | | |
Granted | | | 1,534,988 | | | | 10.33 | | | | | | | | | |
Vested | | | (88,760 | ) | | | 12 | | | | | | | | | |
Forfeited | | | (161,988 | ) | | | 11.25 | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Non-vested, end of period | | | 2,461,130 | | | $ | 11.01 | | | | | | | | | |
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For the three months ended September 30, 2013 and 2012, the Company recorded $2.7 million and $2.2 million of share-based compensation expense related to time-based awards, net of amounts billed to partners, respectively. For the nine months ended September 30, 2013 and 2012, the Company recorded $7.8 million and $5.3 million of share-based compensation expense related to time-based awards, net of amounts billed to partners, respectively. There was unrecognized compensation expense of approximately $19.1 million at September 30, 2013, which is expected to be recognized over a weighted-average period of 2.1 years. |
Performance-Based Awards |
For grants made through year-end 2012, performance-based shares generally vest in equal tranches beginning on December 31 of the year of the grant if there has been a 10% annual appreciation in the trading price of the Company’s common stock, compounded annually, from the twenty trading day average stock price ended on December 31 of the year prior to the grant (which was $11.134 for 2010 grants, $14.227 for 2011 grants and $11.639 for 2012 grants). At the end of each year, the twenty trading day average stock price will be measured, and if the 10% threshold is met, the stock subject to the performance criteria will vest. If the 10% threshold is not met, shares that have not vested will be carried forward to the following year subject to a four year maximum vesting period. These awards are referred to as “Stock Appreciation Awards.” |
In March 2013, the Compensation Committee awarded 354,517 performance-based restricted shares to executive officers of the Company under the Incentive Plan. The restricted stock grants vest only upon achievement of thresholds of cumulative total shareholder return (“TSR”) as compared to a specified peer group (the “Performance-Vested Shares”). A TSR percentile (the “TSR Percentile”) is calculated based on the change in the value of the Company’s common stock between the grant date and the applicable vesting date, including any dividends paid during the period, as compared to the respective TSRs of a specified group of 17 peer companies. The Performance-Vested Shares vest in three installments to the extent that the applicable TSR Percentile ranking thresholds are met upon the one-, two- and three-year anniversaries of the grant date. Performance-Vested Shares that are eligible to vest on a vesting date but do not qualify for vesting become eligible for vesting again on the next vesting date. All Performance-Vested Shares that do not vest as of the final vesting date will be forfeited on such date. |
In March 2013, the Compensation Committee also granted rights to earn additional shares of common stock upon achievement of a higher TSR Percentile (“Outperformance Shares”). The Outperformance Shares are earned in increasing increments based on a TSR Percentile attained over a specified threshold. Outperformance Shares may be earned on any vesting date to the extent that the applicable TSR Percentile ranking thresholds are met in three installments on the one-, two- and three-year anniversaries of the grant date. Outperformance Shares that are earned at a vesting date will be issued to the recipient; however, prior to such issuance, the recipient is not entitled to stockholder rights with respect to Outperformance Shares. Outperformance Shares that are eligible to be earned but remain unearned on a vesting date become eligible to be earned again on the next vesting date. The right to earn any theretofore unearned Outperformance Shares terminates immediately following the final vesting date. The Performance-Vested Shares and the Outperformance Shares are referred to as the “TSR Awards.” |
The compensation expense to be recognized for the TSR Awards and Stock Appreciation Awards was measured based on the estimated fair value at the date of grant using a Monte Carlo simulation model and utilize estimated forfeiture rates between 4% and 15% which are updated periodically based on actual employee turnover. |
The valuation model for the TSR Awards used the following assumptions: |
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Grant Year | | Average Expected Volatility | | Expected Dividend Yield | | Risk-Free Interest Rate | | | | | | | | | | |
2013 | | 35.00% | | 0% | | 0.42% | | | | | | | | | | |
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Share-based compensation expense related to the TSR Awards and the Stock Appreciation Awards for the three months ended September 30, 2013 and 2012, was $0.7 million and $0.6 million, respectively. Share-based compensation expense related to the TSR Awards and Stock Appreciation Awards for the nine months ended September 30, 2013 and 2012, was $2.7 million and $1.6 million, respectively. There was unrecognized compensation expense for TSR and Stock Appreciation Awards of approximately $3.2 million and $0.5 million at September 30, 2013, which is expected to be recognized over a weighted-average period of 2.4 and 1.1 years, respectively. The following table summarizes changes in non-vested Performance-Based Awards for the nine month period ended September 30, 2013: |
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| | 2013 | | | 2012 and prior | |
| | TSR Awards | | | Stock Appreciation Awards | |
| | Shares | | | Weighted | | | Shares | | | Weighted | |
Average | Average |
Grant Date | Grant Date |
Fair Value | Fair Value |
Non-vested, beginning of period | | | — | | | $ | — | | | | 895,892 | | | $ | 8.43 | |
Granted | | | 354,517 | | | | 15.91 | | | | — | | | | — | |
Vested | | | — | | | | — | | | | — | | | | — | |
Forfeited | | | (14,351 | ) | | | 15.91 | | | | (56,157 | ) | | | 8.14 | |
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Non-vested, end of period | | | 340,166 | | | $ | 15.91 | | | | 839,735 | | | $ | 8.41 | |
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