BENEFIT PLANS | 3 Months Ended |
Jun. 30, 2014 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
BENEFIT PLANS | ' |
BENEFIT PLANS |
Compuware Stock-Based Compensation Plans |
As the Company is a majority-owned subsidiary of Compuware, certain Covisint employees have been granted Compuware stock compensation awards. In accordance with the provisions of Staff Accounting Bulletin (“SAB”) 1.B.1, “Costs Reflected in Historical Financial Statements,” the expense for these awards is included within the condensed consolidated statements of comprehensive loss. |
Compuware Stock Option Activity |
A summary of option activity for Covisint employees under Compuware’s stock-based compensation plans as of June 30, 2014, and changes during the three months then ended is presented below. Shares and intrinsic value are presented in thousands. |
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| Three Months Ended June 30, 2014 | | | | | | | |
| Number of | | Weighted | | Weighted | | Aggregate | | | | | | | |
Options | Average | Average | Intrinsic | | | | | | | |
| Exercise | Remaining | Value | | | | | | | |
| Price | Contractual | | | | | | | | |
| | Term in Years | | | | | | | | |
Options outstanding as of April 1, 2014 | 472 | | | | $9.23 | | | | | | | | | | | | |
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Granted | — | | | | | | | | | | | | | | |
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Exercised | (29 | ) | | 8.12 | | | | | | $59 | | | | | | | | |
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Forfeited | (26 | ) | | 9.84 | | | | | | | | | | | | |
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Cancelled/expired | (12 | ) | | 11.16 | | | | | | | | | | | | |
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Options outstanding as of June 30, 2014 | 405 | | | | $9.21 | | | 1.77 | | | $366 | | | | | | | | |
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Options vested and expected to vest, net of estimated forfeitures, as of June 30, 2014 | 393 | | | | $9.19 | | | 1.72 | | | $366 | | | | | | | | |
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Options exercisable as of June 30, 2014 | 279 | | | | $8.90 | | | 1.23 | | | $357 | | | | | | | | |
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The vesting schedule of options has varied over the years with the following vesting terms being the most common: (1) 50 percent of shares vest on the third anniversary date and 25 percent on the fourth and fifth anniversary dates; (2) 25 percent of shares vest on each annual anniversary date over four years; or (3) 30 percent of shares vest on the first and second anniversary dates and 40 percent vest on the third anniversary date. |
All options were granted with exercise prices at or above fair market value on the date of grant and expire ten years from the date of grant. Option expense is recognized on a straight-line basis over the vesting period unless the options vest more quickly than the expense would be recognized. In this case, additional expense is taken to ensure the expense is proportionate to the percent of options vested at any point in time. |
During the three months ended June 30, 2014, 1,376 Compuware option shares granted to Covisint employees vested, with an average fair value of $8.63 per share. |
Compuware Restricted Stock Units |
A summary of non-vested restricted stock units (“RSUs”) activity for Covisint employees and directors under the Compuware LTIP as of June 30, 2014, and changes during the three months then ended is presented below. Shares and intrinsic value are presented in thousands. |
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| Three Months Ended June 30, 2014 | | | | | | | | | |
| Shares | | Weighted | | Aggregate | | | | | | | | | |
Average | Intrinsic | | | | | | | | | |
Grant-Date | Value | | | | | | | | | |
Fair Value | | | | | | | | | | |
Non-vested RSU outstanding at April 1, 2014 | 182 | | | | | | | | | | | | | | |
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Granted | — | | | | | | | | | | | | | | | |
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Released | (32 | ) | | | | | $320 | | | | | | | | | | |
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Forfeited | (4 | ) | | | | | | | | | | | | | |
Dividend equivalents, net | 1 | | | | $9.74 | | | | | | | | | | | | |
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Non-vested RSU outstanding at June 30, 2014 | 147 | | | | | | | | | | | | | | |
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RSUs have various vesting terms related to the purpose of the award. The most common vesting term is 25 percent of shares vest on each annual anniversary date over four years. |
The awards are settled by the issuance of one common share of Compuware stock for each unit upon vesting and vesting accelerates upon death, disability or a change in control of Compuware. |
Compuware paid quarterly dividends of $0.125 per share. As a result of these dividend payments, approximately 967 dividend equivalent shares were issued to participants holding non-vested RSUs as of the dividend record date during the three months ended June 30, 2014, respectively. |
Covisint 401(k) Plan |
The Company matches 33 percent of employees’ 401(k) contributions up to 2 percent of eligible earnings. Matching contributions vest 100 percent when an employee attains one year of service. During the three months ended June 30, 2014 and 2013, the Company expensed $0.2 million and $0.2 million related to this program. |
Covisint Stock-Based Compensation Plan |
In August 2009, Covisint established a 2009 Long-Term Incentive Plan (“2009 Covisint LTIP”) allowing the Board of Directors of Covisint to grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance-based cash or restricted stock unit awards and annual cash incentive awards to employees and directors of Covisint and its affiliates. The 2009 Covisint LTIP reserves 4.5 million common shares of Covisint for issuance under this plan. On December 30, 2013, the Board of Directors of Covisint Corporation adopted the First Amendment to the 2009 Covisint LTIP, subject to shareholder approval. The Amendment increased the number of shares of Covisint’s common stock available for issuance pursuant to stock-based awards granted under the LTIP by 3 million shares (increasing the number of shares available for issuance under the LTIP from 4.5 million to 7.5 million). On January 2, 2014, Compuware, as holder of the majority of the outstanding shares of the Company's common stock, approved the Amendment to increase the shares available. The increase in shares set forth in the Amendment became effective on February 13, 2014, twenty (20) days after the date of mailing of the Company’s Schedule 14C Information Statement to the Company's shareholders. |
As of June 30, 2014, there were 4.4 million stock options outstanding from the 2009 Covisint LTIP. The Company recognized stock compensation expense of $2.6 million for the three months ended June 30, 2014. |
Certain individuals, who received stock options from the 2009 Covisint LTIP, were also eligible to be awarded performance-based stock awards (“PSAs”) from the Compuware 2007 LTIP. As of June 30, 2013, there were 631,000 PSAs that were cancelled upon the closing of the Covisint IPO. PSA expense totaling $0.2 was recorded to “general and administrative” during the three months ended June 30, 2013. As the PSAs were cancelled upon IPO, no expense was recognized during the three months ended June 30, 2014. |
Stock Option Activity |
A summary of option activity under the Company’s stock-based compensation plans as of June 30, 2014, and changes during the three months then ended is presented below (shares and intrinsic value in thousands): |
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| Three Months Ended June 30, 2014 | | | | | | | | |
| Number of | Weighted | | Weighted | | Aggregate | | | | | | | | |
Options | Average | Average | Intrinsic | | | | | | | | |
| Exercise | Remaining | Value | | | | | | | | |
| Price | Contractual | | | | | | | | | |
| | Term in Years | | | | | | | | | |
Options outstanding as of April 1, 2014 | 4,458 | | | $3.48 | | | | | | | | | | | | | |
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Granted | 140 | | 7.2 | | | | | | | | | | | | | |
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Exercised | (111 | ) | 1.77 | | | | | | | | | | | | | |
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Forfeited | (69 | ) | 9.39 | | | | | | | | | | | | | |
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Options outstanding as of June 30, 2014 | 4,418 | | | $3.54 | | | 3.38 | | | $9,698 | | | | | | | | | |
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Options vested and expected to vest, net of estimated forfeitures, as of June 30, 2014 | 4,346 | | | $3.42 | | | 3.28 | | | $9,698 | | | | | | | | | |
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Options exercisable as of June 30, 2014 | 1,954 | | | $2.58 | | | 2.11 | | | $5,002 | | | | | | | | | |
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All options were originally granted at estimated fair market value for those granted prior to IPO, and at fair market value for those granted post IPO. Options expire 10 years from the date of grant unless expiration has been otherwise accelerated in accordance with a termination and/or separation agreement. |
For the quarter ended June 30, 2014, 110,519 options were exercised by participants of the 2009 Covisint LTIP. |
Stock Awards Compensation |
For the three months ended June 30, 2014 and 2013, respectively, stock awards compensation expense was recorded as follows in thousands: |
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| Three Months Ended June 30, | | | | | | | | | | | | |
| 2014 | | 2013 | | | | | | | | | | | | |
Stock awards compensation classified as: | | | | | | | | | | | | | | | |
Cost of revenue | | $515 | | | | $5 | | | | | | | | | | | | | |
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Research and development | 66 | | | 47 | | | | | | | | | | | | | |
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Sales and marketing | 605 | | | 47 | | | | | | | | | | | | | |
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General and administrative | 1,432 | | | 387 | | | | | | | | | | | | | |
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Total stock awards compensation expense before income taxes | | $2,618 | | | | $486 | | | | | | | | | | | | | |
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Total stock awards compensation expense before income taxes of $2.6 million for the three months ended June 30, 2014, is comprised of $1.5 million of stock compensation expense according to the normal expense recognition schedule of the grant and $1.1 million of expense recognized due to employee terminations, which, pursuant to the terms of these options, accelerated vesting. |
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As of June 30, 2014, total unrecognized compensation cost of $5.5 million, net of estimated forfeitures, related to nonvested equity awards granted is expected to be recognized over a weighted-average period of approximately 1.5 years. The following table summarizes the Company’s future recognition of its unrecognized compensation cost related to stock awards as of June 30, 2014 (in thousands). |
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| Year Ending March 31, |
Stock-Based Compensation Plan: | Total | | 2015 | | 2016 | | 2017 | | 2018 |
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Covisint | | $5,381 | | | | $2,761 | | | | $1,715 | | | | $543 | | | | $362 | |
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Compuware | 156 | | | 30 | | | 89 | | | 37 | | | — | |
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Total | | $5,537 | | | | $2,791 | | | | $1,804 | | | | $580 | | | | $362 | |
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In order for Compuware to retain over eighty percent (80%) ownership of Covisint common stock to qualify under the United States Internal Revenue Code Section 355 for a subsequent tax-free distribution of its shares in Covisint to Compuware shareholders, in early June 2014, (a) Covisint issued tandem stock appreciation rights (“SARs”) to its option holders who had options exercisable in 2014; and (b) Covisint and Compuware entered into a Purchase Agreement for Compuware to purchase from Covisint shares of Covisint common stock to fund Covisint’s cash outlay resulting from the exercise of the SARs. Due to Compuware's purchase of 1,381,920 shares of Covisint common stock in the open market during June 2014, Compuware owns sufficient shares of Covisint to maintain its ownership percentage despite the exercise of outstanding vested Covisint options. Accordingly, the tandem SARs were no longer necessary, and, on June 17, 2014, Covisint rescinded the tandem SARs granted to its option holders. On June 20, 2014, Compuware and Covisint agreed to terminate the Purchase Agreement, with a termination date of June 20, 2014. |