EMPLOYEE BENEFIT PLANS | 12 Months Ended |
Mar. 31, 2014 |
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract] | ' |
EMPLOYEE BENEFIT PLANS | ' |
Note 10 — EMPLOYEE BENEFIT PLANS |
Defined Contribution Plans |
The Bristow Group Inc. Employee Savings and Retirement Plan (“Bristow Plan”) covers Bristow Group Inc., Bristow U.S. LLC, Bristow Panama Inc. and Bristow Alaska Inc. employees. Under the Bristow Plan, we match each participant’s contributions up to 3% of the employee’s compensation. In addition, under the Bristow Plan, we contribute an additional 3% of the employee’s compensation at the end of each calendar year. |
Bristow Helicopters and Bristow International Aviation (Guernsey) Limited (“BIAGL”) have a defined contribution plan. This defined contribution plan replaced the defined benefit pension plans described below for future accrual. |
Our contributions to our defined contribution plans were $12.7 million, $10.9 million and $10.7 million for fiscal years 2014, 2013 and 2012, respectively. |
Defined Benefit Plans |
The defined benefit pension plans of Bristow Helicopters and BIAGL replaced by the defined contribution plans described above covered all full-time employees of Bristow Aviation and BIAGL employed on or before December 31, 1997. Both plans were closed to future accrual from February 1, 2004. The defined benefits for employee members were based on the employee’s annualized average last three years’ pensionable salaries up to February 1, 2004, increasing thereafter in line with retail price inflation (prior to 2011) and consumer price inflation (from 2011 onwards), and subject to maximum increases of 5% per year over the period to retirement. Any valuation deficits are funded by contributions by Bristow Helicopters and BIAGL. Plan assets are held in separate funds administered by the plans’ trustee (the “Trustee”), which are primarily invested in equities and debt securities. For members of the two closed defined benefit pension plans, since January 2005, Bristow Helicopters contributes a maximum of 7% of a participant’s non-variable salary, and since April 2006, the maximum employer contribution into the plan has been 7.35% for pilots. Each member is required to contribute a minimum of 5% of non-variable salary for Bristow Helicopters to match the contribution. In addition, there are three defined contribution plans for staff who were not members of the original defined benefit plans, two of which are closed to new members. |
Bristow Norway has a final salary defined benefit pension plan. Pilots may retire from age 58 and other employees from age 62 (after meeting certain criteria). Bristow Norway also participates in the standard Norwegian Avtalefestet pension (contractual pension or “AFP”) early retirement system, which is only applicable for non-pilots due to the higher retirement age. The pension benefit is a percentage of final salary in excess of a deductible. The maximum pension is available to those with 30 or more years of service as of the date of retirement. Additionally, there are associated death and disability benefits. Plan assets are held in an insurance policy with an insurance company and contributions follow Norwegian rules, which are based on an individual actuarial calculation for each plan member. |
The following tables provide a rollforward of the projected benefit obligation and the fair value of plan assets, set forth the defined benefit retirement plans’ funded status and provide detail of the components of net periodic pension cost calculated for the U.K. and Norway pension plans. The measurement date adopted is March 31. For the purposes of amortizing gains and losses, the 10% corridor approach has been adopted and assets are taken at fair market value. Any such gains or losses are amortized over the average remaining life expectancy of the plan members. |
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| Fiscal Year Ended | | | | | | | | |
March 31, | | | | | | | | |
| 2014 | | 2013 | | | | | | | | |
| (In thousands) | | | | | | | | |
Change in benefit obligation: | | | | | | | | | | | |
Projected benefit obligation (PBO) at beginning of period | $ | 606,313 | | | $ | 561,633 | | | | | | | | | |
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Service cost | 7,886 | | | 8,209 | | | | | | | | | |
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Interest cost | 26,861 | | | 25,683 | | | | | | | | | |
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Actuarial (gain) loss | (29,313 | ) | | 63,393 | | | | | | | | | |
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Benefit payments and expenses | (23,234 | ) | | (23,652 | ) | | | | | | | | |
Effect of exchange rate changes | 49,128 | | | (28,953 | ) | | | | | | | | |
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Projected benefit obligation (PBO) at end of period | $ | 637,641 | | | $ | 606,313 | | | | | | | | | |
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Change in plan assets: | | | | | | | | | | | |
Market value of assets at beginning of period | $ | 479,666 | | | $ | 449,891 | | | | | | | | | |
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Actual return on assets | 23,630 | | | 47,974 | | | | | | | | | |
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Employer contributions | 28,974 | | | 28,607 | | | | | | | | | |
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Benefit payments and expenses | (23,234 | ) | | (23,652 | ) | | | | | | | | |
Effect of exchange rate changes | 41,782 | | | (23,154 | ) | | | | | | | | |
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Market value of assets at end of period | $ | 550,818 | | | $ | 479,666 | | | | | | | | | |
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Reconciliation of funded status: | | | | | | | | | | | |
Accumulated benefit obligation (ABO) | $ | 611,782 | | | $ | 582,047 | | | | | | | | | |
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Projected benefit obligation (PBO) | $ | 637,641 | | | $ | 606,313 | | | | | | | | | |
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Fair value of assets | (550,818 | ) | | (479,666 | ) | | | | | | | | |
Net recognized pension liability | $ | 86,823 | | | $ | 126,647 | | | | | | | | | |
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Amounts recognized in accumulated other comprehensive loss | $ | 232,848 | | | $ | 244,322 | | | | | | | | | |
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| Fiscal Year Ended March 31, | | | | |
| 2014 | | 2013 | | 2012 | | | | |
| (In thousands) | | | | |
Components of net periodic pension cost: | | | | | | | | | |
Service cost for benefits earned during the period | $ | 7,886 | | | $ | 8,209 | | | $ | 6,332 | | | | | |
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Interest cost on PBO | 26,861 | | | 25,683 | | | 28,208 | | | | | |
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Expected return on assets | (29,282 | ) | | (29,068 | ) | | (29,639 | ) | | | | |
Amortization of unrecognized losses | 7,705 | | | 6,612 | | | 5,386 | | | | | |
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Net periodic pension cost | $ | 13,170 | | | $ | 11,436 | | | $ | 10,287 | | | | | |
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The amount in accumulated other comprehensive loss as of March 31, 2014 expected to be recognized as a component of net periodic pension cost in fiscal year 2015 is $4.8 million, net of tax, and represents amortization of the net actuarial losses. |
Actuarial assumptions used to develop the components of the U.K. plans were as follows: |
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| Fiscal Year Ended March 31, | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | |
Discount rate | 4.4 | % | | 4.9 | % | | 5.6 | % | | | | | | | |
Expected long-term rate of return on assets | 6.29 | % | | 6.9 | % | | 7.2 | % | | | | | | | |
Pension increase rate | 3.3 | % | | 3 | % | | 3.5 | % | | | | | | | |
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Actuarial assumptions used to develop the components of the Norway plan were as follows: |
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| Fiscal Year Ended March 31, | | | | | | | |
| 2014 | | 2013 | | 2012 | | | | | | | |
Discount rate | 4 | % | | 3.5 | % | | 4.75 | % | | | | | | | |
Rate of compensation increase | 4.25 | % | | 4.25 | % | | 4.5 | % | | | | | | | |
Social Security increase amount | 4 | % | | 4 | % | | 4.25 | % | | | | | | | |
Expected return on plan assets | 3.25 | % | | 4.5 | % | | 4.75 | % | | | | | | | |
Pension increase rate | 1.25 | % | | 0.75 | % | | 1.75 | % | | | | | | | |
We utilize a British pound sterling denominated AA corporate bond index as a basis for determining the discount rate for our U.K. plans and NOK-denominated corporate bonds available in Norway that are credit-rated as AA or AAA as a basis for determining the discount rate for our Norway plan. The expected rate of return assumptions have been determined following consultation with our actuarial advisors. In the case of bond investments, the rates assumed have been directly based on market redemption yields at the measurement date, and those on other asset classes represent forward-looking rates that have typically been based on other independent research by investment specialists. |
Under U.K. and Guernsey legislation, it is the Trustee who is responsible for the investment strategy of the plans, although day-to-day management of the assets is delegated to a team of regulated investment fund managers. The Trustee of the Bristow Staff Pension Scheme (the “Scheme”) has the following three stated primary objectives when determining investment strategy: |
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(i) | “funding objective” - to ensure that the Scheme is fully funded using assumptions that contain a modest margin for prudence. Where an actuarial valuation reveals a deficit, a recovery plan will be put in place which will take into account the financial covenant to the employer; | | | | | | | | | | | | | | |
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(ii) | “stability objective” - to have due regard to the likely level and volatility of required contributions when setting the Scheme’s investment strategy; and | | | | | | | | | | | | | | |
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(iii) | “security objective” - to ensure that the solvency position of the Scheme (as assessed on a gilt basis) is expected to improve. The Trustee will take into account the strength of the employer’s covenant when determining the expected improvement in the solvency position of the Scheme. | | | | | | | | | | | | | | |
The types of investments are held, and the relative allocation of assets to investments is selected, in light of the liability profile of the Scheme, its cash flow requirements, the funding level and the Trustee’s stated objectives. In addition, in order to avoid an undue concentration of risk, assets are diversified within and across asset classes. |
In determining the overall investment strategy for the plans, the Trustee undertakes regular asset and liability modeling (“ALM”) with the assistance of their U.K. actuary. The ALM looks at a number of different investment scenarios and projects both a range and a best estimate of likely return from each one. Based on these analyses, and following consultation with us, the Trustee determines the benchmark allocation for the plans’ assets. |
The market value of the plan assets as of March 31, 2014 and 2013 was allocated between asset classes as follows. Details of target allocation percentages under the Trustee’s investment strategies as of the same dates are also included. |
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| Target Allocation | | Actual Allocation | | | | |
as of March 31, | as of March 31, | | | | |
Asset Category | 2014 | | 2013 | | 2014 | | 2013 | | | | |
Equity securities | 57.8 | % | | 58.3 | % | | 59.1 | % | | 64.6 | % | | | | |
Debt securities | 30.8 | % | | 31.1 | % | | 27.6 | % | | 31 | % | | | | |
Property | — | % | | — | % | | 1.5 | % | | 1.8 | % | | | | |
Other assets | 11.4 | % | | 10.6 | % | | 11.8 | % | | 2.6 | % | | | | |
Total | 100 | % | | 100 | % | | 100 | % | | 100 | % | | | | |
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The following table summarizes, by level within the fair value hierarchy, the plan assets we had as of March 31, 2014, which are valued at fair value (in thousands): |
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| Quoted Prices | | Significant | | Significant | | Balance as of |
in Active | Other | Unobservable | March 31, |
Markets for | Observable | Inputs | 2014 |
Identical | Inputs | (Level 3) | |
Assets | (Level 2) | | |
(Level 1) | | | |
Cash and cash equivalents | $ | 48,685 | | | $ | — | | | $ | — | | | $ | 48,685 | |
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Equity investments - U.K. | — | | | 118,712 | | | — | | | 118,712 | |
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Equity investments - Non-U.K. | — | | | 96,537 | | | — | | | 96,537 | |
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Diversified growth (absolute return) funds | — | | | 105,207 | | | — | | | 105,207 | |
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Government debt securities | — | | | 51,853 | | | — | | | 51,853 | |
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Corporate debt securities | — | | | 68,526 | | | — | | | 68,526 | |
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Insurance policies | — | | | — | | | 61,298 | | | 61,298 | |
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Total investments | $ | 48,685 | | | $ | 440,835 | | | $ | 61,298 | | | $ | 550,818 | |
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The following table summarizes, by level within the fair value hierarchy, the plan assets we had as of March 31, 2013, which are valued at fair value (in thousands): |
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| Quoted Prices | | Significant | | Significant | | Balance as of |
in Active | Other | Unobservable | March 31, |
Markets for | Observable | Inputs | 2013 |
Identical | Inputs | (Level 3) | |
Assets | (Level 2) | | |
(Level 1) | | | |
Cash and cash equivalents | $ | 1,973 | | | $ | — | | | $ | — | | | $ | 1,973 | |
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Equity investments - U.K. | — | | | 119,626 | | | — | | | 119,626 | |
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Equity investments - Non-U.K. | — | | | 89,720 | | | — | | | 89,720 | |
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Diversified growth (absolute return) funds | — | | | 94,426 | | | — | | | 94,426 | |
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Government debt securities | — | | | 61,028 | | | — | | | 61,028 | |
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Corporate debt securities | — | | | 63,304 | | | — | | | 63,304 | |
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Insurance policies | — | | | — | | | 49,589 | | | 49,589 | |
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Total investments | $ | 1,973 | | | $ | 428,104 | | | $ | 49,589 | | | $ | 479,666 | |
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The investments’ fair value measurement level within the fair value hierarchy is classified in its entirety based on the lowest level of input that is significant to the measurement. The fair value of assets using Level 2 inputs is determined based on the fair value of the underlying investment using quoted prices in active markets or other significant inputs that are deemed observable. Our Norway pension plan is vested in an insurance policy which is designated as Level 3 within the valuation hierarchy and the fair value is based on the estimated value provided by the insurer. |
The following table summarizes the changes in the Level 3 plan assets for fiscal year 2014 (in thousands): |
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March 31, 2013 | $ | 49,589 | | | | | | | | | | | | | |
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Actual return on assets | 7,514 | | | | | | | | | | | | | |
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Net purchases, sales and settlements | 5,479 | | | | | | | | | | | | | |
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Effect of exchange rate changes | (1,284 | ) | | | | | | | | | | | | |
31-Mar-14 | $ | 61,298 | | | | | | | | | | | | | |
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Estimated future benefit payments over each of the next five fiscal years from March 31, 2014 and in aggregate for the following five fiscal years after fiscal year 2019, including life assurance premiums, are as follows (in thousands): |
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Projected Benefit Payments by the Plans for Fiscal Years Ending March 31, | Payments | | | | | | | | | | | | |
2015 | $ | 27,229 | | | | | | | | | | | | | |
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2016 | 28,464 | | | | | | | | | | | | | |
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2017 | 29,381 | | | | | | | | | | | | | |
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2018 | 30,305 | | | | | | | | | | | | | |
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2019 | 31,230 | | | | | | | | | | | | | |
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Aggregate 2020 - 2024 | 167,674 | | | | | | | | | | | | | |
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We expect to fund these payments with our cash contributions to the plans, plan assets and earnings on plan assets. We pre-funded our contributions of £12.5 million ($20.8 million) to the main U.K. plan for the fiscal year ending March 31, 2015 in fiscal year 2014. Our contributions to the U.K pension plans and Norwegian plan and the BIAGL plan for the fiscal year ending March 31, 2015 are expected to be $21.2 million and $7.9 million, respectively. |
Incentive Compensation |
Incentive and Stock Option Plans — Stock–based awards are currently made under the Bristow Group Inc. 2007 Long-Term Incentive Plan (the “2007 Plan”). As of March 31, 2014, a maximum of 5,400,000 shares of Common Stock are reserved, including 2,992,841 shares available for incentive awards under the 2007 Plan. Awards granted under the 2007 Plan may be in the form of stock options, stock appreciation rights, shares of restricted stock, other stock-based awards (payable in cash or Common Stock) or performance awards, or any combination thereof, and may be made to outside directors, employees or consultants. |
In addition, we have the following incentive and stock plans which have awards outstanding as of March 31, 2014 but under which we no longer make grants: |
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• | The 2004 Stock Incentive Plan (the “2004 Plan”), which provided for awards to officers and key employees in the form of stock options, stock appreciation rights, restricted stock, other stock-based awards or any combination thereof. Options become exercisable at such time or times as determined at the date of grant and expire no more than ten years after the date of grant. | | | | | | | | | | | | | | |
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• | The 2003 Non-qualified Stock Option Plan for Non-employee Directors (the “2003 Director Plan”), which provided for a maximum of 250,000 shares of Common Stock to be issued pursuant to such plan. As of the date of each annual meeting, each non-employee director who met certain attendance criteria was automatically granted an option to purchase 5,000 shares of our Common Stock. The exercise price of the options granted was equal to the fair market value of the Common Stock on the date of grant, and the options were exercisable not earlier than six months after the date of grant and expire no more than ten years after the date of grant. | | | | | | | | | | | | | | |
In June 2013, May 2012 and June 2011, the Compensation Committee of our board of directors authorized the grant of stock options, time vested restricted stock and long-term performance cash awards to participating employees. Each of the stock options has a ten-year term and has an exercise price equal to the fair market value (as defined in the 2007 Plan) of the Common Stock on the grant date of $62.66, $43.38 and $43.79 per share for the June 2013, May 2012 and June 2011 awards, respectively. The options will vest in annual installments of one-third each, beginning on the first anniversary of the grant date. Restricted stock grants vest at the end of three years. Performance cash awards allow the recipient to receive from 0 to 200% of the target amount at the end of three years depending on whether our total shareholder return meets the minimum return requirements and how our total shareholder return ranks among a peer group over the performance period. The value of the performance cash awards is calculated on a quarterly basis by comparing the performance of our Common Stock, including any dividends paid since the award date, against the peer group and has a maximum potential payout of $14.0 million, $9.3 million and $8.0 million for the June 2013, May 2012 and June 2011 awards, respectively. The total value of the awards is recognized as compensation expense over a three-year vesting period with the recognition amount being adjusted quarterly. Compensation expense related to the performance cash awards during fiscal years 2014, 2013 and 2012 was $8.7 million, $10.2 million and $4.1 million, respectively. Performance cash compensation expense has been allocated to our various business units. |
In 2007, we established a program to allow vesting of outstanding stock options and restricted stock grants and to waive forfeitures of outstanding performance restricted stock units upon retirement if the employee has achieved no less than five consecutive years of employment with the Company, voluntarily terminates employment after the age of 62 and enters into a noncompetition/nonsolicitation agreement in the form approved and provided by the Company. Subsequently, in 2010, we authorized an amendment to allow vesting of outstanding stock options and restricted stock grants, to continue the right to vest in performance cash awards and to waive forfeitures of outstanding performance restricted stock units upon retirement if the employee has accumulated a combined total of age and years of service with the Company of 80, voluntarily terminates employment and enters into a noncompetition/nonsolicitation agreement in the form approved and provided by the Company. Upon retirement, any unexercised options to purchase Common Stock and shares of restricted stock under the 2004 and 2007 Plans will automatically vest and options will remain exercisable for the remainder of the term specified in the applicable award document and any outstanding performance restricted stock units granted under the 2004 or 2007 Plans will not be forfeited solely due to termination of employment, so that the right remains to receive shares of Common Stock if the applicable performance measures are achieved in accordance with the 2004 or 2007 Plans. |
On August 3, 2011, we amended our director compensation scheme to allow non-employee directors to elect to receive up to 50 percent of their annual restricted stock unit award in cash. As this election was made prior to the actual award, the cash portion of the award is accounted for separate from the stock portion. The cash award is accounted for as a liability award with compensation expense being recognized for the eventual cash payout at the end of the six month terms over the six month service periods. One non-employee director made this election and we recognized expense of $0.1 million for fiscal year 2012. |
On November 4, 2013, the compensation committee of our board of directors authorized an amendment to all outstanding awards under the 2004 and 2007 Plans. The amendment modified the provisions of the awards with respect to vesting and exercise of such awards upon the involuntary termination by the Company of the recipient’s employment other than for “Cause” as defined in the recipient’s employment agreement, if any, or as defined in the amendment. The amendment is effective with respect to outstanding awards held by employees who are employed on or after November 4, 2013. The compensation committee retains the discretion to modify or revoke the amendment prospectively and retroactively to the extent such revocation or modification does not have a detrimental impact on an award granted prior to the date of such modification or revocation. If the terms of the amendment conflict with the provisions of an award recipient’s employment agreement, the provisions that are more favorable to the recipient apply. The treatment of awards under the plans pursuant to the amendment is similar to the treatment of awards pursuant to our policy for the treatment of awards upon retirement as described above. Upon retirement, however, vested stock options will be exercisable for the remainder of their original term, and performance-based restricted stock units will continue to vest on the original time and performance schedule. |
Total share-based compensation expense, which includes stock options, restricted stock and restricted stock units, was $15.4 million, $11.9 million and $11.5 million for fiscal years 2014, 2013 and 2012, respectively. Stock-based compensation expense is included in general and administrative expense in the consolidated statements of income and has been allocated to our various business units. |
On May 14, 2013, our board of directors approved an amendment and restatement of the 2007 Plan, which was subsequently approved by our stockholders, to (1) increase the number of shares authorized for issuance thereunder from 2,400,000 shares to 5,400,000 shares, (2) change the way shares are counted such that for each full-value share granted after stockholder approval of the amended and restated 2007 Plan, the available shares will be reduced by two shares whereas for each option and stock appreciation right granted thereafter the available shares will be reduced by only one share, (3) reapprove and update the material terms of the 2007 Plan applicable to performance-based awards, (4) increase the maximum share and cash based individual award limits, (5) remove the ten-year term of the 2007 Plan, and (6) make other administrative and updating changes. |
A summary of our stock option activity for fiscal year 2014 is presented below: |
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| Weighted Average Exercise Prices | | Number of Shares | | Weighted Average Remaining Contractual Life | | Aggregate Intrinsic Value | | |
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Outstanding at March 31, 2013 | $ | 40.03 | | | 1,150,519 | | | | | | | |
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Granted | 62.66 | | | 302,678 | | | | | | | |
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Exercised | 35.51 | | | (433,608 | ) | | | | | | |
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Expired or forfeited | 51.49 | | | (17,433 | ) | | | | | | |
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Outstanding at March 31, 2014 | 48.62 | | | 1,002,156 | | | 6.95 | | | $ | 15,228 | | | |
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Exercisable at March 31, 2014 | 43.22 | | | 471,431 | | | 5.13 | | | $ | 26,956 | | | |
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Stock options granted to employees under the 2004 and 2007 Plans vest ratably over three years on each anniversary from the date of grant and expire ten years from the date of grant. Stock options granted to non-employee directors under the 2003 Director Plans vest after six months. |
We use a Black-Scholes option pricing model to estimate the fair value of share-based awards. The Black-Scholes option pricing model incorporates various assumptions, including the risk-free interest rate, volatility, dividend yield and the expected term of the options. |
The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period equal to the expected term of the option. Expected volatilities are based on the historical volatility of shares of our Common Stock, which has not been adjusted for any expectation of future volatility given uncertainty related to the future performance of our Common Stock at this time. We also use historical data to estimate the expected term of the options within the option pricing model; groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of the options represents the period of time that the options granted are expected to be outstanding. Additionally, we estimate pre-vesting option forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual pre-vesting forfeitures differ from those estimates. We record stock-based compensation expense only for those awards expected to vest using an estimated forfeiture rate based on our historical forfeiture data. |
The following table shows the assumptions we used to compute the stock-based compensation expense for stock option grants issued during fiscal years 2014, 2013 and 2012. |
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| Fiscal Year Ended | | | | |
March 31, | | | | |
| 2014 | | 2013 | | 2012 | | | | |
Risk free interest rate | 1.01 | % | | 0.75 | % | | 1.5 | % | | | | |
Expected life (years) | 5 | | | 5 | | | 6 | | | | | |
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Volatility | 48.7 | % | | 50.2 | % | | 47.1 | % | | | | |
Dividend yield | 1.6 | % | | 1.83 | % | | 1.37 | % | | | | |
Weighted average grant-date fair value of options granted | $ | 23.77 | | | $ | 16.73 | | | $ | 17.32 | | | | | |
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Unrecognized stock-based compensation expense related to nonvested stock options was approximately $5.0 million as of March 31, 2014, relating to a total of 530,725 unvested stock options under our stock option plans. We expect to recognize this stock-based compensation expense over a weighted average period of approximately 1.7 years. The total fair value of options vested during fiscal years 2014, 2013 and 2012 was approximately $5.1 million, $3.9 million and $3.1 million, respectively. |
The total intrinsic value, determined as of the date of exercise, of options exercised during fiscal years 2014, 2013 and 2012 was $15.5 million, $6.3 million and $2.2 million, respectively. The total amount of cash we received from option exercises during fiscal years 2014, 2013 and 2012 was $15.4 million, $15.3 million and $5.3 million, respectively. The total tax benefit attributable to options exercised during fiscal years 2014, 2013 and 2012 was $5.4 million, $1.9 million and $0.5 million, respectively. |
The excess tax benefits from stock-based compensation for fiscal years 2014, 2013 and 2012 of $5.7 million, $0.5 million and $0.4 million, respectively, are reported on our consolidated statements of cash flows in financing activities. This represents the reduction in the provision for income taxes otherwise payable during the period attributable to the actual gross tax benefits in excess of the expected tax benefits for options exercised in current and prior periods. |
We have two forms of restricted stock units that vest under different conditions. The first form is a performance restricted stock unit which fully vests on the third anniversary from the date of grant if the “Cumulative Annual Shareholder Return” as defined in the restricted stock unit agreement (“CASR”) equals or exceeds 15%, or partially vests if the CASR is less than 15% but greater than or equal to 10%. Any unvested performance restricted stock units will vest on the fourth anniversary from the date of grant under the same conditions as outline above, or on the fifth anniversary from the date of grant if the CASR equals or exceeds 3%. Any performance restricted stock units that do not vest on the fifth anniversary from the date of grant will expire. |
The second form of performance restricted stock units fully vest on the third anniversary from the date of grant if the CASR equals or exceeds 3%. Any unvested performance restricted stock units will vest on the fifth anniversary date from the date of grant if the CASR equals or exceeds 3%. Any performance restricted stock units that do not vest on the fifth anniversary from the date of grant will expire. As of March 31, 2014, there were no non-vested restricted stock units. |
Additionally, we have restricted stock awards that cliff vest on the third anniversary from the date of grant provided the grantee is still employed by the Company, subject to the Company’s retirement policy. |
We record compensation expense for restricted stock units based on an estimate of the service period related to the awards, which is tied to the future performance of our stock over certain time periods under the terms of the award agreements. The estimated service period is reassessed quarterly. Changes in this estimate may cause the timing of expense recognized in future periods to accelerate. Compensation expense related to awards of restricted stock and restricted stock units for fiscal years 2014, 2013 and 2012 was $9.4 million, $7.4 million and $7.2 million, respectively. |
The following is a summary of non-vested restricted stock and restricted stock units as of March 31, 2014 and 2013 and changes during fiscal year 2014: |
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| Units | | Weighted | | | | | | | | | |
Average | | | | | | | | | |
Grant Date Fair | | | | | | | | | |
Value per Unit | | | | | | | | | |
Non-vested as of March 31, 2013 | 500,029 | | | $ | 38.63 | | | | | | | | | | |
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Granted | 232,364 | | | 64.99 | | | | | | | | | | |
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Forfeited | (34,554 | ) | | 57.3 | | | | | | | | | | |
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Vested | (238,122 | ) | | 35.59 | | | | | | | | | | |
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Non-vested as of March 31, 2014 | 459,717 | | | 52.13 | | | | | | | | | | |
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Unrecognized stock-based compensation expense related to non-vested restricted stock and restricted stock units was approximately $10.0 million as of March 31, 2014, relating to a total of 459,717 unvested restricted stock and restricted stock units. We expect to recognize this stock-based compensation expense over a weighted average period of approximately 2.0 years. |
The Annual Incentive Compensation Plan provides for an annual award of cash bonuses to key employees based primarily on pre-established objective measures of performance. The bonuses related to this plan were $17.2 million, $12.2 million and $9.7 million for fiscal years 2014, 2013 and 2012, respectively. Also, management awarded a one-time bonus to all non-officer employees meeting certain service criteria in March 2013 totaling $3.3 million in the aggregate. |
Additionally, we have a non-qualified deferred compensation plan for our senior executives. Under the terms of the plan, participants can elect to defer a portion of their compensation for distribution at a later date. In addition, we have the discretion to make annual tax deferred contributions to the plan on the participants’ behalf. We contributed $0.9 million, $0.7 million and $0.6 million to this plan in each of fiscal years 2014, 2013 and 2012, respectively. The assets of the plan are held in a rabbi trust and are subject to our general creditors. As of March 31, 2014, the amount held in trust was $6.6 million. |
Retirement of President and Chief Executive Officer — On February 3, 2014, we announced that William E. Chiles will resign as President and Chief Executive Officer of the Company effective upon the conclusion of the 2014 annual meeting of the stockholders of the Company, and he has elected not to run for re-election and will not continue to serve as a director after that meeting. Following his resignation as an officer, Mr. Chiles will remain an employee of the Company and will provide consulting services to the Company. |
Jonathan E. Baliff has been appointed President and Chief Executive Officer to succeed Mr. Chiles effective immediately following the resignation of Mr. Chiles as an officer of the Company. We expect to nominate Mr. Baliff as a member of our Board of Directors effective for the term beginning upon the conclusion of the 2014 annual meeting of the stockholders of the Company. |
Mr. Chiles and the Company have entered into a Retirement and Consulting Agreement, dated January 30, 2014 (the “Agreement”) to specify the terms of his continued employment with the Company. Upon his resignation as an officer, Mr. Chiles will be entitled to a lump sum cash payment of $3.8 million, which is equivalent to the amount that would be payable as severance under the employment agreement that was in effect prior to the execution of the Agreement. In addition, all outstanding long-term incentive awards other than awards granted in 2014 will fully vest. Under the terms of the Agreement, following his resignation as an officer and ending July 31, 2016, Mr. Chiles will provide consulting services to us relating to the achievement of certain business objectives and matters of strategy. Mr. Chiles is not eligible to receive grants of equity awards following the effective date of his resignation as an officer. The Agreement contains certain restrictive covenants and confidentiality provisions, including non-compete and non-solicitation obligations continuing for 18 months after Mr. Chiles terminates all employment and consulting services with us, and a mutual non-disparagement provision. We recorded compensation expense, included in general and administrative expense, of $1.9 million during fiscal year 2014 related to the Agreement. |
Retention awards of restricted stock units were granted on February 3, 2014 to Jeremy Akel, Mark B. Duncan, Hilary S. Ware and E. Chipman Earle in the amount of 12,784 shares, 14,330 shares, 13,206 shares and 12,223 shares, respectively, at a grant date fair value of $71.18. These retention awards will vest on February 3, 2017, subject to continued service through that date by the applicable executive, or if earlier upon the executive’s death or disability or a change of control of the Company. |
Other officer separation costs — On March 3, 2014, Mark B. Duncan announced his resignation as Senior Vice President, Commercial of the Company effective March 8, 2014. Mr. Duncan and the Company have entered into a Separation Agreement and Release, dated March 31, 2014 (the “Separation Agreement”) to specify the terms of his resignation from the Company, pursuant to which he will receive benefits generally consistent with the termination without cause terms set forth in his Amended and Restated Employment Agreement dated June 6, 2006, as amended March 10, 2008, and under our Executive Severance Benefits Plan dated November 3, 2010 and Vesting of Awards Upon Involuntary Termination Without Cause Policy dated November 6, 2013. During fiscal year 2014, we recorded compensation expense of $2.9 million (including expense recorded for the acceleration of unvested stock options and restricted stock), included in general and administrative expense related to the Separation Agreement. As part of the Separation Agreement, Mr. Duncan forfeited the retention award granted on February 3, 2014. |