Share-Based Compensation (WhiteWave Foods [Member]) | 6 Months Ended |
Jun. 30, 2014 |
WhiteWave Foods [Member] | ' |
Share-Based Compensation | ' |
Share-Based Compensation |
Twenty million shares of our common stock are reserved for issuance under the 2012 Stock Incentive Plan (the “2012 SIP”) upon the exercise of stock options, restricted stock units (“RSUs”), or restricted stock awards that may be issued to our employees, non-employee directors and consultants. The 2012 SIP also includes awards of stock appreciation rights (“SARs”) and phantom shares as part of our long-term incentive compensation program. In general, awards granted under the 2012 SIP vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date, and one-third on the third anniversary of the grant date. Unvested awards vest immediately upon a change of control and in the following additional circumstances: (i) an employee retires after reaching the age of 65, (ii) in certain cases upon death or qualified disability, and (iii) with the exception of the awards granted in connection with the initial public offering, an employee with 10 years of service retires after reaching the age of 55. |
Prior to the Distribution, certain of the Company’s employees participated in share-based compensation plans sponsored by Dean Foods. These plans provided employees with RSUs, options to purchase shares of Dean Foods’ common stock, and other stock-based awards. No new grants of Dean Foods’ equity were made to our employees after completion of our initial public offering. |
On May 23, 2013 and in connection with the Distribution, all Dean Foods equity-based awards held by 162 of our non-employee directors and employees were converted into equity-based awards with respect to our common stock. These Dean Foods equity-based awards included Dean Foods stock options (whether vested or unvested), unvested RSUs and unvested Dean Foods restricted stock awards held by our non-employee directors on the date of the Distribution. The options to purchase Dean Foods common stock held by our directors and employees were converted to options to purchase our common stock in a manner that preserved the life and aggregate intrinsic value in the converted stock option and continued the same proportionate relationship between the exercise price and the value of our common stock as existed with respect to the Dean Foods common stock immediately prior to the Distribution. The conversion was effected based on a formula using the volume weighted average price of Dean Foods common stock and our common stock during the five trading day period ended on the second trading day preceding the Distribution. The unvested Dean Foods RSUs held by our directors and employees were converted to WhiteWave RSUs in a manner that, on a unit-by-unit basis, preserved the life and intrinsic value of each outstanding Dean Foods RSU (determined using the same volume weighted average values as described above). The unvested Dean Foods phantom shares held by our employees were converted to WhiteWave phantom shares in a manner that, on a unit-by-unit basis, preserved the life and intrinsic value of each outstanding Dean Foods phantom share (determined using the same volume weighted average values as described above). Dean Foods restricted stock awards held by our directors on the date of the Distribution were converted into restricted stock awards with respect to our common stock by (i) applying the same volume weighted average values as described above and (ii) subtracting any shares of our common stock and Class B common stock received by our directors in the Distribution in respect of such Dean Foods restricted stock awards. We did not recognize any incremental expense in connection with the conversion of Dean Foods’ equity-based awards into WhiteWave awards. |
Share-Based Compensation Expense |
The following table summarizes the share-based compensation expense recognized for the Company’s equity and liability classified plans in the three and six months ended June 30, 2014 and 2013: |
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| Three months ended June 30 | | Six months ended June 30 |
| 2014 | | 2013 | | 2014 | | 2013 |
| (In thousands) |
Share-based compensation expense: | | | | | | | |
Stock options | $ | 2,065 | | | $ | 1,363 | | | $ | 6,605 | | | $ | 4,852 | |
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RSUs | 3,736 | | | 1,577 | | | 8,821 | | | 4,900 | |
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Phantom shares | 253 | | | 1,573 | | | 2,196 | | | 2,955 | |
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SARs | 388 | | | 80 | | | 559 | | | 396 | |
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Total share-based compensation expense | $ | 6,442 | | | $ | 4,593 | | | $ | 18,181 | | | $ | 13,103 | |
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Share-based compensation expense shown above reflect expenses for Dean Foods equity and liability plans that converted to equivalent WhiteWave equity and liability plans upon the spin-off transaction. |
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Stock Options |
Under the terms of the 2012 SIP, our employees may be granted options to purchase our common stock at a price equal to the market price on the date the option is granted. Our employee options vest one-third on each of the first, second and third anniversary of the grant date. |
Share-based compensation expense for stock options is recognized ratably over the vesting period. The expense totaled $2.1 million and $1.4 million for the three months ended June 30, 2014 and 2013, respectively, and $6.6 million and $4.9 million for the six months ended June 30, 2014 and 2013, respectively. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model with the following assumptions: |
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| Six months ended June 30, | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | |
Expected volatility | 28% - 29% | | 28% | | | | | | | | | | | | |
Expected dividend yield | 0% | | 0% | | | | | | | | | | | | |
Expected option term | 6 years | | 6 years | | | | | | | | | | | | |
Risk-free rate of return | 1.82% to 2.10% | | 1.13% | | | | | | | | | | | | |
Since the Company’s common stock did not have a long history of being publicly traded at grant date, the expected term was determined under the simplified method, using an average of the contractual term and vesting period of the stock options. The expected volatility assumption was calculated based on a compensation peer group analysis of stock price volatility with a six-year look back period ending on the grant date. The risk-free rates were based on the average implied yield available on five-year and seven-year U.S. Treasury issues. We have not paid, and do not anticipate paying, a cash dividend on our common stock. |
The following table summarizes stock option activity during the six months ended June 30, 2014: |
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| Number of options | | Weighted average | | Weighted average | | Aggregate | | | |
exercise price | contractual life | intrinsic value | | | |
Options outstanding at January 1, 2014 | 11,120,585 | | | $ | 17.12 | | | | | | | | |
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Granted | 1,209,850 | | | 26.49 | | | | | | | | |
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Forfeited, cancelled and expired (1) | (480,187 | ) | | 17.47 | | | | | | | | |
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Exercised | (392,112 | ) | | 19.22 | | | | | | | | |
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Options outstanding at June 30, 2014 | 11,458,136 | | | $ | 18.03 | | | 6.47 | | $ | 164,361,965 | | | | |
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Options vested and expected to vest at June 30, 2014 | 11,355,840 | | | $ | 17.99 | | | 6.45 | | $ | 163,254,278 | | | | |
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Options exercisable at June 30, 2014 | 7,388,163 | | | $ | 17.71 | | | 5.26 | | $ | 108,324,444 | | | | |
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-1 | Pursuant to the terms of the 2012 SIP, options that are cancelled or forfeited may be available for future grants. | | | | | | | | | | | | | | |
During the six months ended June 30, 2014, we received $1.3 million of cash from stock option exercises. At June 30, 2014, there was $14.0 million of total unrecognized stock option expense, all of which is related to non-vested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.67 years. |
RSUs |
RSUs are issued to certain senior employees under the 2012 SIP as part of the long-term incentive program. An RSU represents the right to receive one share of common stock in the future. RSUs have no exercise price. RSUs granted to employees vest ratably over three years. |
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The following table summarizes RSU activity during the six months ended June 30, 2014: |
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RSUs outstanding January 1, 2014 | 1,247,596 | | | | | | | | | | | | | |
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RSUs issued | 502,969 | | | | | | | | | | | | | |
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Shares issued upon vesting of RSUs | (255,948 | ) | | | | | | | | | | | | |
RSUs cancelled or forfeited (1) | (145,226 | ) | | | | | | | | | | | | |
Converted from phantom shares | 279,504 | | | | | | | | | | | | | |
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RSUs outstanding at June 30, 2014 | 1,628,895 | | | | | | | | | | | | | |
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Weighted average grant date fair value per share | $ | 21.62 | | | | | | | | | | | | | |
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-1 | Pursuant to the terms of the 2012 SIP, employees have the option of forfeiting RSUs to cover their minimum statutory tax withholding when shares are issued. RSUs that are cancelled or forfeited may be available for future grants. | | | | | | | | | | | | | | |
Compensation expense for RSUs is recognized ratably over the vesting period. RSU expense totaled $3.7 million and $1.6 million for the three months ended June 30, 2014 and 2013, respectively, and $8.8 million and $4.9 million for the six months ended June 30, 2014 and 2013, respectively. At June 30, 2014, there was $22.2 million of total unrecognized RSU expense, all of which is related to unvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.69 years. |
Phantom Shares |
We previously granted phantom shares under the 2012 SIP as part of our long-term incentive compensation program, which are similar to RSUs in that they are based on the price of WhiteWave stock and vest ratably over a three-year period, but are cash-settled based upon the value of WhiteWave stock at each vesting period. The fair value of the awards is re-measured at each reporting period. Compensation expense is recognized ratably over the vesting period, which is recorded in general and administrative expenses in the unaudited condensed consolidated statement of income. |
On November 14, 2013, the Company’s compensation committee approved the conversion into RSUs of all phantom shares outstanding and unvested, except for the phantom shares held by employees of the Europe Segment. For each phantom share that had a vesting event in February 2014, the conversion of the award was effective immediately after that vesting event. For each phantom share that had a vesting event on a date after February 2014, the conversion of the award was effective on March 1, 2014. Upon conversion, the corresponding liability was reclassified to additional paid-in capital in our unaudited condensed consolidated balance sheets as of the modification date. As of the conversion date, the converted awards are accounted for as equity-based awards and will not be re-measured at each reporting period. The RSUs vest ratably over the remaining term of the original phantom shares. |
Compensation expense for phantom shares totaled $0.3 million and $1.6 million for the three months ended June 30, 2014 and 2013, respectively, and $2.2 million and $3.0 million for the six months ended June 30, 2014 and 2013, respectively. A corresponding liability has been recorded in current liabilities in our consolidated balance sheet totaling $0.5 million and $4.8 million as of June 30, 2014 and December 31, 2013, respectively. The 2014 cash settlement of WhiteWave phantom shares was $5.4 million. |
The following table summarizes the phantom share activity during the six months ended June 30, 2014: |
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| Shares | | Weighted-average | | | | | | | | | |
grant date fair value | | | | | | | | | |
per share | | | | | | | | | |
Outstanding at January 1, 2014 | 571,079 | | | $ | 17.11 | | | | | | | | | | |
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Granted | 1,614 | | | 17 | | | | | | | | | | |
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Converted/paid | (206,833 | ) | | 17.68 | | | | | | | | | | |
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Forfeited | (32,320 | ) | | 17.11 | | | | | | | | | | |
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Converted to RSUs | (279,504 | ) | | 16.81 | | | | | | | | | | |
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Outstanding at June 30, 2014 | 54,036 | | | $ | 16.48 | | | | | | | | | | |
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SARs |
We previously granted SARs under the 2012 SIP as part of our long-term incentive compensation program, which are similar to stock options in that they are based on the price of WhiteWave stock and vest ratably over a three-year period, but are cash-settled based upon the value of WhiteWave stock at the exercise date. |
The fair value of each SAR is estimated on the date of grant using the Black-Scholes valuation model with the following assumptions: |
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| Six months ended June 30, | | | | | | | | | | | |
| 2014 (1) | | 2013 | | | | | | | | | | | |
Expected volatility | — | | | 28% | | | | | | | | | | | |
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Expected dividend yield | — | | | 0% | | | | | | | | | | | |
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Expected option term | — | | | 6 years | | | | | | | | | | | |
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Risk-free rate of return | — | | | 1.13% | | | | | | | | | | | |
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-1 | The Company did not grant any SARs to non-employee directors, executive officers, and employees in the three and six months ended June 30, 2014. | | | | | | | | | | | | | | |
Since the Company’s common stock did not have a long history of being publicly traded at grant date, the expected term was determined under the simplified method, using an average of the contractual term and vesting period of the stock options. The expected volatility assumption was calculated based on a compensation peer group analysis of stock price volatility with a six-year look back period ending on the grant date. The risk-free rates were based on the average implied yield available on five-year and seven-year U.S. Treasury issues. We have not paid, and do not anticipate paying, a cash dividend on our common stock. |
The fair value of the awards is re-measured at each reporting period. Compensation expense is recognized over the vesting period, which is recorded in general and administrative expenses in the consolidated statement of operations. The expense totaled $0.4 million and $0.1 million for the three months ended June 30, 2014 and 2013, respectively, and $0.6 million and $0.4 million for the six months ended June 30, 2014 and 2013, respectively. A corresponding liability has been recorded in current liabilities in our consolidated balance sheet totaling $1.4 million and $0.9 million as of June 30, 2014 and December 31, 2013, respectively. The following table summarizes SAR activity during the six months ended June 30, 2014: |
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| Number of | | Weighted | | Weighted | | Aggregate | | | |
SARs | average | average | intrinsic value | | | |
| exercise price | contractual life | | | | |
SARs outstanding at January 1, 2014 | 293,693 | | | $ | 16.48 | | | | | | | | |
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Granted | — | | | — | | | | | | | | |
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Forfeited and cancelled (1) | — | | | — | | | | | | | | |
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Exercised | (8,942 | ) | | 16.23 | | | | | | | | |
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SARs outstanding at June 30, 2014 | 284,751 | | | $ | 16.49 | | | 8.41 | | $ | 4,521,714 | | | | |
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SARs vested and expected to vest at June 30, 2014 | 281,204 | | | $ | 16.49 | | | 8.41 | | $ | 4,464,922 | | | | |
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SARs exercisable at June 30, 2014 | 88,963 | | | $ | 16.51 | | | 8.4 | | $ | 1,411,157 | | | | |
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-1 | Pursuant to the terms of the 2012 SIP, SARs that are cancelled or forfeited may be available for future grants. | | | | | | | | | | | | | | |