Share-Based Payment | 6 Months Ended |
Jun. 30, 2014 |
Share-based Compensation [Abstract] | ' |
Share-Based Payment | ' |
Share-Based Payment |
The Company has adopted ASC 718, “Compensation—Stock Compensation,” and has elected to follow the alternative transition method as described in ASC 718 for computing its beginning additional paid-in capital pool. In addition, the Company treats the tax deductions from stock options as being realized when they reduce taxes payable in accordance with the principles and timing under the relevant tax law. |
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Stock Option Plans and Awards |
In November 1999, the Company adopted an employee stock option plan (as amended and restated, the “1999 Equity Plan”) pursuant to which options and awards with respect to a total of 2,205,000 shares have become available for grant. As of June 30, 2014, a total of 550,605 shares remained available for grant under the 1999 Equity Plan. Options are granted with exercise prices equal to the fair value of the Company’s common stock at the date of grant. All options have 10-year terms. Options granted after January 1, 2008 are typically time based and vest in equal traunches over three or four years. During the year ended December 31, 2013, there were no options in which vesting was accelerated. During the six months ended June 30, 2014, there were no options in which vesting was accelerated. Prior to January 1, 2008, subsequent stock options granted under the 1999 Equity Plan to employees were always time options which vest 5% in the first year, 20% in the second year and 25% in years three through five. |
The Company uses the Black-Scholes option pricing model to value the compensation expense associated with share-based payment awards. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model using the assumptions noted in the table below. In addition, forfeitures are estimated when recognizing compensation expense and the estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods. |
The following weighted average assumptions were used in the estimated grant date fair value calculations for stock option awards: |
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| Six Months Ended June 30, | | | | | | | |
| 2013 | | 2014 | | | | | | | |
Risk free interest rate | 1.06 | % | | 1.83 | % | | | | | | | |
Expected dividend yield | — | % | | — | % | | | | | | | |
Expected stock price volatility | 65.7 | % | | 66.3 | % | | | | | | | |
Average expected life (in years) | 5.99 | | | 6 | | | | | | | | |
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Through March 31, 2012, the expected stock price volatility rates are based on the historical volatility of the Company’s common stock and peer implied volatility. The average expected life, representing the weighted-average period of time that options or awards granted are expected to be outstanding, is calculated using the simplified method described in ASC 718, as the Company did not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected terms and experienced a change in the types of employees that receive share grants. Beginning with the second quarter of 2012, the Company changed its calculation methodology for its stock price volatility and average expected life, which are now based on its own historical data. The risk free interest rates have been, and continue to be, based on the United States Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option or award. |
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The following table summarizes the Company’s stock option activity: |
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| Number of | | Weighted- | | Weighted- | | Aggregate |
Shares | Average | Average | Intrinsic |
| Exercise Price | Remaining | Value |
| | Contractual | |
| | Term | |
Outstanding at December 31, 2013 | 803,617 | | | $ | 20.83 | | | | | |
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Granted | 45,783 | | | 28.97 | | | | | |
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Exercised | (67,657 | ) | | 6.32 | | | | | |
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Canceled | (129,489 | ) | | 11.33 | | | | | |
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Outstanding at June 30, 2014 | 652,254 | | | $ | 21.64 | | | 6.26 | | $ | 6,124 | |
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Vested and expected to vest in the future at June 30, 2014 | 638,467 | | | $ | 21.6 | | | 6.28 | | $ | 6,053 | |
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Exercisable at June 30, 2014 | 432,247 | | | $ | 21.88 | | | 5.51 | | $ | 4,560 | |
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The weighted average grant date fair value of options granted during the six months ended June 30, 2013 and 2014 was $7.42 per share and $17.56 per share, respectively. Total stock options exercised was 67,657 during the six months ended June 30, 2014. There were 3,665 options exercised during the six months ended June 30, 2013. |
The following table summarizes the Company’s unvested stock option activity: |
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| Shares | | Weighted-Average | | | | | | |
Grant-Date | | | | | | |
Fair Value | | | | | | |
Unvested at December 31, 2013 | 376,024 | | | $ | 8.1 | | | | | | | |
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Granted | 45,783 | | | 17.56 | | | | | | | |
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Vested | (83,654 | ) | | 5.61 | | | | | | | |
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Canceled | (113,888 | ) | | 4.76 | | | | | | | |
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Unvested at June 30, 2014 | 224,265 | | | $ | 12.58 | | | | | | | |
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At June 30, 2014, the total unrecognized fair value share-based payment related to unvested stock options granted to employees was $2,074, which is expected to be recognized over a remaining weighted-average period of 2.50 years. The valuation model applied in this calculation utilizes highly subjective assumptions that could potentially change over time, including the expected forfeiture rate and performance targets. Therefore, the amount of unrecognized share-based payment noted above does not necessarily represent the value that will ultimately be realized by the Company in the consolidated statements of operations and comprehensive income (loss). The total fair value of shares vested during the six months ended June 30, 2013 and 2014 was $1,029 and $469, respectively. |
Restricted Stock Awards |
The 1999 Equity Plan, as amended and restated, permits the award of restricted stock, restricted stock units, stock bonus awards and performance-based awards. During 2012, awards to certain employees either cliff vested after one year, or vest annually in 33.3% increments over three years. During 2013, awards to certain employees vested immediately upon the date of grant, or cliff vest after one year provided that the employee remains continuously employed through the issuance date. The Company grants restricted stock awards to non-employee directors of the Company who are unaffiliated with Oaktree Capital Management, LLC (“Oaktree”) and MTS Health Investors, LLC (“MTS”) (“unaffiliated directors”). These awards to unaffiliated directors cliff vest after one year based on the unaffiliated directors’ continued service with the Company through that date. |
For the six months ended June 30, 2013 and 2014, the Company recorded share-based payment related to restricted stock awards of $251 and $245, respectively. The weighted-average grant-date fair value of restricted stock awards granted during the six months ended June 30, 2013 was $6.38 per share. Twenty-five thousand restricted stock units ("RSU") were granted to executive management in the second quarter of 2014, which vest based upon achieving certain market performance conditions. Specifically, the Company's closing stock price per common share must equal or exceed a value of $40.00 per share for 10 consecutive days between the dates of January 1, 2015 and April 21, 2017. If these conditions are not achieved before April 21, 2017, these RSUs will expire. In accordance with ASC 718, expense related to restricted stock units that vest based on achieving a market condition should not be recognized until the derived vesting period has been met, and at such time the derived vesting period becomes the requisite service period. Since the market condition is only able to be achieved on or after January 1, 2015, the derived service period has not yet began as of June 30, 2014. Based on this guidance, the Company has not recognized any expense related to these RSUs during the six months ended June 30, 2014. |
The following table summarizes the Company’s restricted stock activity: |
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| Shares | | Weighted-Average | | | | | | |
Grant-Date | | | | | | |
Fair Value | | | | | | |
Unvested at January 1, 2012 | 273,308 | | | | | | | | | |
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Granted to employees | 38,075 | | | | | | | | | |
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Granted to non-employee directors | 19,469 | | | | | | | | | |
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Vested | (119,968 | ) | | | | | | | | |
Canceled | (106,340 | ) | | | | | | | | |
Unvested at December 31, 2012 | 104,544 | | | | | | | | | |
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Granted to employees | 14,100 | | | | | | | | | |
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Granted to non-employee directors | 13,619 | | | | | | | | | |
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Vested | (54,038 | ) | | | | | | | | |
Canceled | (7,334 | ) | | | | | | | | |
Unvested at December 31, 2013 | 70,891 | | | $ | 7.01 | | | | | | | |
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Granted to employees | 25,000 | | | 30.33 | | | | | | | |
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Granted to non-employee directors | — | | | — | | | | | | | |
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Vested | (31,000 | ) | | 30.33 | | | | | | | |
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Canceled | (26,272 | ) | | 6.36 | | | | | | | |
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Unvested at June 30, 2014 | 38,619 | | | $ | 28.36 | | | | | | | |
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At June 30, 2014, the total unrecognized fair value share-based payment related to restricted stock awards granted to employees was $735, which is expected to be recognized over a remaining weighted-average period of 2.81 years. At June 30, 2014, the total unrecognized fair value share-based payment related to the restricted stock awards granted to unaffiliated directors was $349, which is expected to be recognized over a remaining weighted-average period of 0.50 years. |
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Directors' Compensation Program |
In 2012 and 2013, under the compensation program for non-employee directors in effect during 2012, non-employee directors earned an annual fee of $40 for their services as directors. In addition, each Unaffiliated Director, received a restricted stock unit award on December 31 for the number of shares of our Common Stock having a value equal to $40, using the average share price of our Common Stock over the 15-day period preceding the grant date. These restricted stock unit awards vest on the first anniversary of their respective date of grant contingent upon the Unaffiliated Director's continued service to the Company through that date. In addition, each Unaffiliated Director receives additional annual cash compensation of $40, paid in equal quarterly installments, for serving on the Board during 2012 and 2013. Beginning October 1, 2013, the Chairman of the Board, Mr. Buckelew, is entitled to restricted stock units having a value equal to $138 as compensation for a service period of one year, for the 24 month period following his resignation as the Company's CEO. The number of units Mr. Buckelew receives, having a value equal to $138, divided by the closing share price of the Company’s stock on December 31, rounded down to the nearest whole share. On December 31, 2012 and 2013, each Oaktree/MTS Director received additional cash compensation of $80, for serving on the Board during 2012 and 2013, respectively. Also during 2012 and 2013, non-employee directors who served as members of our Audit Committee received an additional $15, and the non-employee director who served as Chairman of our Audit Committee received an additional $30. In 2012 and 2013, non-employee directors who served as members of our Nominating Committee, Compensation Committee and Strategy & Finance Committee received an additional $5, and the non-employee director who served as Chairman of our Strategy and Finance Committee received an additional $25. In 2012 and 2013, non-employee directors were reimbursed for travel expenses related to their Board service. |
In 2014, under the revised compensation program for non-employee directors in effect during 2014, non-employee directors earn an annual fee of $40 for their services as directors. In addition, each Unaffiliated Director, will receive a restricted stock unit award on December 31 for the number of shares of our Common Stock having a value equal to $140, using the average share price of our Common Stock over the 15-day period preceding the grant date. These restricted stock unit awards vest on the first anniversary of their respective date of grant contingent upon the Unaffiliated Director's continued service to the Company through that date. In addition to the annual $40 fee for all non-employee directors, each Affiliated Director receives additional annual cash compensation of $140, paid in one annual installment, for serving on the Board during 2014. The Chairman of the Board and other committee chairs' and members' compensation program remains unaltered from the above discussion. |