Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2014 |
Postemployment Benefits [Abstract] | |
Employee Benefit Plans | 17. Employee Benefit Plans |
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The Company has numerous employee retirement benefit plans, which cover substantially all eligible employees in the countries where the plans are offered either voluntarily or statutorily. Contributions are primarily discretionary, except in some countries where contributions are contractually required. |
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Defined Contribution Plans |
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Defined contribution or profit sharing style plans are offered in Austria, Belgium, Bulgaria, Canada, the Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Ireland, Israel, Malaysia, the Netherlands, Poland, Slovakia, South Africa, Sweden, Switzerland, Thailand, the United States and the United Kingdom. In some cases these plans are required by local laws or regulations. |
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In the United States, the Company has a 401(k) Plan under which the Company matches employee deferrals at varying percentages, set at the discretion of the Board. In 2014, 2013 and 2012, the Company expensed $31.2 million, $26.1 million and $24.3 million, respectively, related to matching contributions. |
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Defined Benefit Plans |
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Defined benefit plans are offered in Austria, France, Germany, Greece, India, Israel, Japan, Mexico, Philippines, Poland, Turkey and the United Kingdom. The following table summarizes the components of pension expense related to these defined benefit plans (in thousands): |
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| | Year Ended December 31, | | | | | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | |
Service cost | | $ | 12,944 | | | $ | 13,227 | | | $ | 13,839 | | | | | | | | | | | |
Interest cost | | | 3,821 | | | | 3,684 | | | | 3,775 | | | | | | | | | | | |
Expected return on plan assets | | | (4,277 | ) | | | (3,442 | ) | | | (2,822 | ) | | | | | | | | | | |
Amortization of prior service costs | | | 107 | | | | 336 | | | | 411 | | | | | | | | | | | |
Amortization of actuarial losses | | | 636 | | | | 708 | | | | 758 | | | | | | | | | | | |
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| | $ | 13,231 | | | $ | 14,513 | | | $ | 15,961 | | | | | | | | | | | |
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The Company expects to recognize approximately $996,000 in its pension expense in 2015 related to the amortization of net actuarial losses. |
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The weighted average assumptions used in determining pension expense were as follows: |
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| | Year Ended December 31, | | | | | | | | | | | |
| | 2014 | | | 2013 | | | 2012 | | | | | | | | | | | |
Discount rate | | | 3.01 | % | | | 3.06 | % | | | 3.32 | % | | | | | | | | | | |
Rate of compensation increases | | | 4.36 | % | | | 4.74 | % | | | 4.96 | % | | | | | | | | | | |
Expected return on plan assets | | | 5.21 | % | | | 5.33 | % | | | 5.23 | % | | | | | | | | | | |
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The following table summarizes financial information about the Company’s defined benefit plans as measured on December 31 (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | |
Projected benefit obligation January 1 | | $ | 135,110 | | | $ | 130,323 | | | | | | | | | | | | | | | |
Service costs | | | 12,944 | | | | 13,227 | | | | | | | | | | | | | | | |
Interest cost | | | 3,821 | | | | 3,684 | | | | | | | | | | | | | | | |
Expected return on plan assets | | | (4,277 | ) | | | (3,442 | ) | | | | | | | | | | | | | | |
Actuarial losses | | | 16,396 | | | | 1,890 | | | | | | | | | | | | | | | |
Benefits paid | | | (7,409 | ) | | | (5,917 | ) | | | | | | | | | | | | | | |
Foreign currency fluctuations and other | | | (9,458 | ) | | | (4,655 | ) | | | | | | | | | | | | | | |
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Projected benefit obligation December 31 | | $ | 147,127 | | | $ | 135,110 | | | | | | | | | | | | | | | |
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Plan assets at fair value, January 1 | | $ | 82,787 | | | $ | 68,258 | | | | | | | | | | | | | | | |
Actual return on plan assets | | | 10,004 | | | | 5,928 | | | | | | | | | | | | | | | |
Contributions | | | 8,594 | | | | 8,620 | | | | | | | | | | | | | | | |
Benefits paid | | | (7,409 | ) | | | (5,917 | ) | | | | | | | | | | | | | | |
Foreign currency fluctuations and other | | | (5,556 | ) | | | 5,898 | | | | | | | | | | | | | | | |
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Plan assets at fair value, December 31 | | $ | 88,420 | | | $ | 82,787 | | | | | | | | | | | | | | | |
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Unfunded balance | | $ | 58,707 | | | $ | 52,323 | | | | | | | | | | | | | | | |
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The accumulated benefit obligation for all defined benefit plans was approximately $127.9 million and $118.4 million as of December 31, 2014 and 2013, respectively. |
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As of December 31, 2014, the projected benefit obligation and accumulated benefit obligation for the defined benefit plans with accumulated benefit obligations in excess of plan assets were $83.4 million and $66.4 million, respectively, and were primarily related to unfunded plans. As of December 31, 2013, the projected benefit obligation and accumulated benefit obligation for the defined benefit plans with accumulated benefit obligations in excess of plan assets were $77.7 million and $63.6 million, respectively, and were primarily related to unfunded plans. As of December 31, 2014 and 2013, the projected benefit obligation exceeded the fair value of the plan assets for each defined benefit plan except for the defined benefit plan in the United Kingdom. |
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The following table summarizes the amounts recognized in the consolidated balance sheets related to the defined benefit plans as of December 31 (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | |
Deposits and other assets | | $ | 18,690 | | | $ | 18,835 | | | | | | | | | | | | | | | |
Accrued expenses | | | 6,075 | | | | 8,622 | | | | | | | | | | | | | | | |
Other long-term liabilities | | | 71,322 | | | | 62,536 | | | | | | | | | | | | | | | |
AOCI | | $ | (14,519 | ) | | $ | (5,044 | ) | | | | | | | | | | | | | | |
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The following table summarizes the amounts recognized in AOCI related to the defined benefit plans (in thousands): |
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| | Prior Service | | | Actuarial | | | Deferred | | | Total | | | | | | | |
Costs | Net (Gain) | Income | | | | | | |
| Loss | Taxes | | | | | | |
Balance as of December 31, 2012 | | $ | (443 | ) | | $ | (7,792 | ) | | $ | 3,214 | | | $ | (5,021 | ) | | | | | | |
Reclassification adjustments included in pension expense: | | | | | | | | | | | | | | | | | | | | | | |
Amortization | | | 336 | | | | 708 | | | | (389 | ) | | | 655 | | | | | | | |
Amounts arising during the period: | | | | | | | | | | | | | | | | | | | | | | |
Tax rate adjustments | | | — | | | | — | | | | (26 | ) | | | (26 | ) | | | | | | |
Actuarial changes in benefit obligation | | | — | | | | 2,147 | | | | 157 | | | | 2,304 | | | | | | | |
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Balance as of December 31, 2013 | | | (107 | ) | | | (4,937 | ) | | | 2,956 | | | | (2,088 | ) | | | | | | |
Reclassification adjustments included in pension expense: | | | | | | | | | | | | | | | | | | | | | | |
Amortization | | | 107 | | | | 636 | | | | (275 | ) | | | 468 | | | | | | | |
Amounts arising during the period: | | | | | | | | | | | | | | | | | | | | | | |
Actuarial changes in benefit obligation | | | — | | | | (10,218 | ) | | | 2,981 | | | | (7,237 | ) | | | | | | |
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Balance as of December 31, 2014 | | $ | — | | | $ | (14,519 | ) | | $ | 5,662 | | | $ | (8,857 | ) | | | | | | |
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The following table summarizes the weighted average assumptions used in determining the pension obligations as of December 31: |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | |
Discount rate | | | 2.46 | % | | | 3.01 | % | | | | | | | | | | | | | | |
Rate of compensation increases | | | 4.32 | % | | | 4.36 | % | | | | | | | | | | | | | | |
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The discount rate represents the interest rate used to determine the present value of the future cash flows currently expected to be required to settle the Company’s defined benefit plan obligations. The discount rates are derived using weighted average yield curves on AA-rated corporate bonds. The cash flows from the Company’s expected benefit obligation payments are then matched to the yield curve to derive the discount rates. |
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The Company’s assumption for the expected return on plan assets was determined by the weighted average of the long-term expected rate of return on each of the asset classes invested as of the balance sheet date. For plan assets invested in government bonds, the expected return was based on the yields on the relevant indices as of the balance sheet date. There is considerable uncertainty for the expected return on plan assets invested in equity and diversified growth funds. The expected return on these plan assets was based on the expected return on long-term fixed interest rate government bonds as of the balance sheet date with a premium of 3% to 4% added to reflect the expected long-term returns expected from these types of investments. |
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The investment objective for defined benefit plan assets is to meet the plan’s benefit obligations and maintaining adequate funding, while minimizing the potential for future required Company contributions. The defined benefit plans in the United Kingdom, India and Israel are funded. The plan assets of the defined benefit plans in India and Israel are held in a fund which holds debt investments, primarily government bonds in accordance with local laws and regulations. The plan assets of the defined benefit plan in the United Kingdom, which are held in a trust, are primarily held in funds which hold investments in government bonds, equity investments and diversified growth funds. The equity investments are diversified to include domestic (United Kingdom) and global equity investments. A “horizon based” approach is used to determine the asset allocation. Funds intended to meet the plan’s benefit obligation payments in a horizon period are invested in low risk assets such as bond investments. Funds intended to meet the plan’s benefit obligation payments outside of the horizon period are invested in more volatile assets which are expected to provide a higher return such as equity investments and diversified growth funds. The target allocation percentage for 2015 is approximately 40-50% in bond investments, 35-45% in equity investments and 15-25% in diversified growth funds. However, the trustees may reallocate the plan assets between equity investments and bond investments depending upon the actual investment performances. |
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The Company’s plan assets have been identified within the fair value hierarchy as Level 2. Funds are valued using the net asset value reported by the managers of the funds. The following table summarizes the fair value of the Company’s defined benefit plans assets as of December 31, 2014 and 2013 (in thousands): |
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| | 2014 | | | 2013 | | | | | | | | | | | | | | | |
Funds that hold debt investments primarily government bonds | | $ | 47,473 | | | $ | 42,738 | | | | | | | | | | | | | | | |
Funds that hold United Kingdom equity investments | | | 19,547 | | | | 19,826 | | | | | | | | | | | | | | | |
Funds that hold global equity investments | | | 8,255 | | | | 8,393 | | | | | | | | | | | | | | | |
Diversified growth fund | | | 12,569 | | | | 11,169 | | | | | | | | | | | | | | | |
Other | | | 576 | | | | 661 | | | | | | | | | | | | | | | |
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Total | | $ | 88,420 | | | $ | 82,787 | | | | | | | | | | | | | | | |
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The Company estimates that it will make contributions totaling approximately $5.6 million to the defined benefit plans in 2015. |
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The following table summarizes the Company’s expected benefit payments under the defined benefit plans for each of the next five years and the aggregate of the five years thereafter (in thousands): |
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2015 | | $ | 4,810 | | | | | | | | | | | | | | | | | | | |
2016 | | | 4,541 | | | | | | | | | | | | | | | | | | | |
2017 | | | 5,188 | | | | | | | | | | | | | | | | | | | |
2018 | | | 5,884 | | | | | | | | | | | | | | | | | | | |
2019 | | | 6,175 | | | | | | | | | | | | | | | | | | | |
Years 2020 through 2024 | | | 36,360 | | | | | | | | | | | | | | | | | | | |
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| | $ | 62,958 | | | | | | | | | | | | | | | | | | | |
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Stock Incentive Plans |
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The stock incentive plans provide incentives to eligible employees, officers and directors in the form of non-qualified stock options, incentive stock options, SARs, restricted stock, RSUs, performance shares, performance units, covered annual incentive awards, cash-based awards and other share-based awards, in each case subject to the terms of the stock incentive plans. As of December 31, 2014, there were 8,369,995 shares available for future grants under the stock incentive plans. |
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The following assumptions were used to estimate the fair value of stock options and SARs: |
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| | Year Ended December 31, | | | | | | | | | | | | | | | | |
| | 2014 | | 2013 | | 2012 | | | | | | | | | | | | | | | | |
Expected volatility | | 26 – 43% | | 18 – 47% | | 33 – 53% | | | | | | | | | | | | | | | | |
Weighted average expected volatility | | 36% | | 40% | | 40% | | | | | | | | | | | | | | | | |
Expected dividends | | 0.00% | | 0.0 – 5.45% | | 4.82% | | | | | | | | | | | | | | | | |
Expected term (in years) | | 1.5 – 6.7 | | 0.25 – 6.4 | | 2.0 – 7.0 | | | | | | | | | | | | | | | | |
Risk-free interest rate | | 0.28 – 2.21% | | 0.04 – 2.24% | | 0.29 – 1.31% | | | | | | | | | | | | | | | | |
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Stock Options |
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The option price is determined by the Board at the date of grant and the options expire 10 years from the date of grant. The vesting schedule for options granted to employees is either (i) 20% per year beginning on the first anniversary of the date of grant; (ii) 25% per year beginning on the first anniversary of the date of grant; or (iii) 33% on the third anniversary of the date of grant and 67% on the fourth anniversary of the date of grant. In addition, an option to acquire 38,580 shares of the Company’s common stock was granted to the Company’s Chief Executive Officer on May 31, 2012 which vests monthly over three years. Options granted to our non-employee directors vest 34% on the first anniversary of the date of grant and 33% on the second and third anniversaries of the date of grant. |
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The Company’s stock option activity in 2014 is as follows: |
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| | Year Ended December 31, | | | | | | | | | | | |
| | Number of | | | Weighted | | | Aggregate | | | | | | | | | | | |
Options | Average | Intrinsic Value | | | | | | | | | | |
| Exercise Price | | | | | | | | | | | |
| | | | | | | | (in thousands) | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 10,100,160 | | | $ | 23 | | | $ | 235,729 | | | | | | | | | | | |
Granted | | | 1,622,000 | | | $ | 52.82 | | | | | | | | | | | | | | | |
Exercised | | | (2,022,576 | ) | | $ | 16.37 | | | | | | | | | | | | | | | |
Canceled | | | (574,630 | ) | | $ | 32.91 | | | | | | | | | | | | | | | |
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Outstanding at December 31, 2014 | | | 9,124,954 | | | $ | 29.15 | | | $ | 271,216 | | | | | | | | | | | |
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The weighted average fair value per share of the options granted in 2014, 2013 and 2012 was $18.72, $14.39 and $6.34, respectively. The total intrinsic value of options exercised was approximately $77.3 million, $27.1 million and $4.6 million in 2014, 2013 and 2012, respectively. The Company received cash of approximately $33.1 million, $12.5 million and $2.5 million in 2014, 2013 and 2012, respectively, from options exercised. |
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Under the Repurchase Program discussed further in Note 12, in 2013 the Company repurchased 1,990,540 vested in-the-money employee stock options with an intrinsic value of $59.1 million. |
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Selected information regarding the Company’s stock options as of December 31, 2014 is as follows: |
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Options Outstanding | | | Options Exercisable | |
Number of Options | | | Exercise Price Range | | | Weighted Average | | | Weighted Average | | | Number of Options | | | Weighted Average | |
Exercise Price | Remaining Life | Exercise Price |
| (in Years) | |
| 2,122,427 | | | $ | 4.70 - $15.88 | | | $ | 13.37 | | | | 2.9 | | | | 2,122,427 | | | $ | 13.37 | |
| 2,290,827 | | | $ | 17.11 - $23.83 | | | $ | 21.42 | | | | 6.6 | | | | 1,220,640 | | | $ | 20.84 | |
| 1,373,850 | | | $ | 24.59 - $30.07 | | | $ | 24.93 | | | | 7.36 | | | | 592,500 | | | $ | 24.8 | |
| 1,523,750 | | | $ | 40.00 - $40.00 | | | $ | 40 | | | | 8.15 | | | | 282,000 | | | $ | 40 | |
| 1,551,700 | | | $ | 42.74 - $53.26 | | | $ | 50.45 | | | | 9.1 | | | | 65,750 | | | $ | 43.54 | |
| 262,400 | | | $ | 57.00 - $57.95 | | | $ | 57.42 | | | | 9.91 | | | | — | | | $ | — | |
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The weighted average remaining contractual life of the options outstanding and exercisable as of December 31, 2014 is 6.63 years and 4.86 years, respectively. The total aggregate intrinsic value of the exercisable stock options and the stock options expected to vest as of December 31, 2014 was approximately $267.3 million. |
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In connection with the November 2012 per share dividend discussed further in Note 12, the Board authorized a $2.09 per share reduction in the exercise price of certain non-vested and vested options outstanding on October 24, 2012. As such, the Company repriced 10,166,820 options previously granted to 228 employees and directors. The other terms, including the vesting schedules, remained unchanged. The aggregate incremental share-based compensation expense resulting from the modification of these outstanding stock options was approximately $11.4 million, of which approximately $9.2 million was recognized during the three months ended December 31, 2012, and the remaining $2.2 million is being recognized over the remaining vesting periods of the respective stock options. |
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In connection with the February 2012 per share dividend discussed further in Note 12, the Board authorized a $2.82 per share reduction in the exercise price of all non-vested options and certain vested options outstanding on February 29, 2012. As such, the Company repriced 5,561,700 options previously granted to 222 employees and directors. The other terms, including the vesting schedules, remained unchanged. The aggregate incremental share-based compensation expense resulting from the modification of these outstanding stock options was approximately $7.1 million, of which approximately $4.5 million was recognized during the three months ended March 31, 2012, and the remaining $2.6 million is being recognized over the remaining vesting periods of the respective stock options. |
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Stock Appreciation Rights |
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The Company’s SARs require the Company to settle in cash an amount equal to the difference between the fair value of the Company’s common stock on the date of exercise and the grant price, multiplied by the number of SARs being exercised. These awards either (i) vest 25% per year or (ii) vest 33% on the third anniversary of the date of grant and 67% on the fourth anniversary of the date of grant. |
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The Company’s SAR activity in 2014 is as follows: |
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| | Year Ended December 31, | | | | | | | | | | | |
| | Number of | | | Weighted | | | Aggregate | | | | | | | | | | | |
SARs | Average | Intrinsic Value | | | | | | | | | | |
| Exercise Price | | | | | | | | | | | |
| | | | | | | | (in thousands) | | | | | | | | | | | |
Outstanding at December 31, 2013 | | | 258,025 | | | $ | 35.26 | | | $ | 2,858 | | | | | | | | | | | |
Granted | | | 186,300 | | | $ | 53.5 | | | | | | | | | | | | | | | |
Exercised | | | (15,349 | ) | | $ | 28.76 | | | | | | | | | | | | | | | |
Canceled | | | (10,175 | ) | | $ | 37.96 | | | | | | | | | | | | | | | |
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Outstanding at December 31, 2014 | | | 418,801 | | | $ | 43.55 | | | $ | 6,417 | | | | | | | | | | | |
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As of December 31, 2014, 2013 and 2012, the weighted average fair value per share of the SARs granted was $27.17, $19.07 and $8.16, respectively. The Company paid approximately $408,000 and $83,000 to settle exercised SARs in 2014 and 2013, respectively. There were no SARs exercised in 2012. |
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The weighted average remaining contractual life of the SARs outstanding and exercisable as of December 31, 2014 is 8.6 years and 8.0 years, respectively. The total aggregate intrinsic value of the exercisable SARs and the SARs expected to vest as of December 31, 2014 was approximately $6.2 million. |
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In connection with the November 2012 per share dividend discussed further in Note 12, the Company’s Board authorized a $2.09 per share reduction in the exercise price of all non-vested cash-settled SARs outstanding on October 24, 2012. |
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Restricted Stock Units |
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The Company’s RSUs will settle in shares of the Company’s common stock within 45 days of the applicable vesting date. RSUs granted to employees vest 33% on the third anniversary of the date of grant and 67% on the fourth anniversary of the date of grant. RSUs granted to our non-employee directors vest 34% on the first anniversary of the date of grant and 33% on the second and third anniversaries of the date of grant. |
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The Company’s RSU activity in 2014 is as follows: |
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| | Year Ended December 31, | | | | | | | | | | | | | | | |
| | Number of | | | Weighted Average | | | | | | | | | | | | | | | |
RSUs | Grant-Date Fair | | | | | | | | | | | | | | |
| Value | | | | | | | | | | | | | | |
Non-vested at December 31, 2013 | | | 57,167 | | | $ | 44.62 | | | | | | | | | | | | | | | |
Granted | | | 36,500 | | | $ | 47.87 | | | | | | | | | | | | | | | |
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Non-vested at December 31, 2014 | | | 93,667 | | | $ | 45.89 | | | | | | | | | | | | | | | |
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As of December 31, 2014, there are 93,667 RSUs outstanding with an intrinsic value of approximately $5.5 million. |
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Employee Stock Purchase Plan |
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In November 2013, the Board approved an Employee Stock Purchase Plan (“ESPP”) which was approved by the Company’s shareholders in May 2014. Beginning in 2014, the ESPP allows eligible employees to authorize payroll deductions of up to 10% of their base salary to be applied toward the purchase of full shares of the Company’s common stock on the last day of the offering period. Offering periods under the ESPP are six months in duration. During 2014, the offering periods under the ESPP began on March 1 and September 1. In November 2014, the ESPP was amended to change the start of the offering periods to begin on April 1 and October 1 of each year, beginning April 1, 2015. Participating employees purchase shares on the last day of each offering period at a discount of 15% of the closing price of the common stock on such date as reported on the NYSE. The aggregate number of shares of the Company’s common stock that may be issued under the ESPP may not exceed 2,500,000 shares and no one employee may purchase any shares under the ESPP having a collective fair market value greater than $25,000 in any one calendar year. The shares available for purchase under the ESPP will be drawn from authorized but unissued shares of common stock. During 2014, the Company issued 46,032 shares of common stock for purchases under the ESPP. |
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Other |
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The Company sponsors a supplemental non-qualified deferred compensation plan, covering certain management employees, and maintains other statutory indemnity plans as required by local laws or regulations. |
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As of December 31, 2014 and 2013, the Company has a severance accrual included in accrued expenses on the accompanying consolidated balance sheets of $6.3 million and $14.1 million, respectively. The Company recognizes obligations associated with severance related to contractual termination benefits at fair value on the date that it is probable that the affected employees will be entitled to the benefit and the amount can reasonably be estimated. The severance accrual is related to cost reduction programs that will result in severance for approximately 270 positions, which are expected to lower operating costs and improve profitability by reducing excess capacity. In 2014, the Company recognized approximately $1.7 million of net reversals related to these cost reduction programs, primarily as a result of affected individuals transferring into other positions within the Company. Of the $1.7 million decrease from net reversals recognized for these cost reduction programs, approximately ($1.8) million, $100,000 and ($16,000) were related to activities in the Product Development segment, Integrated Healthcare Services segment and corporate activities, respectively. The Company expects the majority of the severance accruals at December 31, 2014 will be paid in 2015. |
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The following amounts were recorded for the severance associated with cost reduction programs (in thousands): |
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Balance at December 31, 2013 | | $ | 14,056 | | | | | | | | | | | | | | | | | | | |
Expense, net of reversals | | | (1,665 | ) | | | | | | | | | | | | | | | | | | |
Payments | | | (6,036 | ) | | | | | | | | | | | | | | | | | | |
Foreign currency translation | | | (81 | ) | | | | | | | | | | | | | | | | | | |
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Balance at December 31, 2014 | | $ | 6,274 | | | | | | | | | | | | | | | | | | | |
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