Share Capital | 9 Months Ended |
Sep. 30, 2013 |
Equity [Abstract] | ' |
Share Capital | ' |
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. SHARE CAPITAL |
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(a) Cash Distribution |
On June 27, 2013, we completed a $200.0 million special cash distribution, by way of a reduction of the paid-up capital of the Company’s common shares (the “Cash Distribution”). The Cash Distribution was approved by the Company’s shareholders at QLT’s annual and special shareholder’s meeting on June 14, 2013. All shareholders of record as at June 24, 2013 (the “Record Date”) were eligible to participate in the Cash Distribution and received a payment of approximately $3.92 per share based upon the 51,081,878 common shares issued and outstanding on the Record Date. |
(b) Share Repurchase Program |
On October 2, 2012, we commenced a normal course issuer bid to repurchase up to 3,438,683 of our common shares, which represented 10% of our public float as of September 26, 2012. The bid was completed in March 2013. All purchases were effected in the open market through the facilities of the NASDAQ Stock Market, and in accordance with applicable regulatory requirements. All common shares repurchased were cancelled. Total purchases under this program were 3,438,683 common shares at an average price of $7.86 per share, for a total cost of $27.0 million. |
(c) Stock Options |
On April 25, 2013, the Company’s board of directors amended and restated the QLT 2000 Incentive Stock Plan (the “Plan”) to increase the number of shares of the Company’s common stock, without par value, available for grant under the Plan from 7,800,000 to 11,800,000 and to make certain other amendments to the Plan. The amendment and restatement of the Plan was subject to shareholder approval, which was obtained on June 14, 2013. On July 29, 2013, the Company filed a registration statement to register the issuance of up to 4,000,000 additional common shares that may be issued under the Plan as a result of the amendment to the Plan. |
On July 15, 2013, the Board of Directors granted an aggregate of 862,000 stock options to employees and 100,000 stock options to directors. The stock options vest and become exercisable in thirty-six (36) successive and equal monthly installments beginning on the one-month anniversary of the date of grant and have an exercise price of CAD $4.54 per share, which is equal to the closing price of the Company’s common shares on the Toronto Stock Exchange on the date of grant. |
We used the Black-Scholes option pricing model to estimate the value of the options at each grant date. The Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting restrictions and are fully transferable. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility. We project expected volatility and expected life of our stock options based upon historical and other economic data trended into future years. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected life of our stock options. We used the following weighted average assumptions (no dividends are assumed) to value the 962,000 stock options on the July 15, 2013 grant date: |
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| | Three months ended | | | Nine months ended | |
September 30, | September 30, |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Annualized volatility | | | 46.1 | % | | | — | | | | 46.1 | % | | | 46.8 | % |
Risk-free interest rate | | | 2.1 | % | | | — | | | | 2.1 | % | | | 1 | % |
Expected life (years) | | | 6.5 | | | | — | | | | 6.5 | | | | 3.8 | |
The weighted average grant date fair value of stock options granted during the three and nine months ended September 30, 2013 was CAD $2.18 (three months ended September 30, 2012—$nil; nine months ended September 30, 2012—CAD $2.55). |
The impact on our results of operations of recording stock-based compensation for the three and nine months ended September 30, 2013 and 2012 was as follows: |
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| | Three months ended | | | Nine months ended | |
September 30, | September 30, |
(In thousands of U.S. dollars) | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Research and development | | $ | 77 | | | $ | 39 | | | $ | 171 | | | $ | 1,503 | |
Selling, general and administrative | | | 45 | | | | 40 | | | | 90 | | | | 1,764 | |
Discontinued operations | | | — | | | | 61 | | | | 3 | | | | 2,425 | |
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Stock-based compensation expense before income taxes | | | 122 | | | | 140 | | | | 264 | | | | 5,692 | |
Related income tax benefits | | | — | | | | (5 | ) | | | — | | | | (537 | ) |
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Stock-based compensation, net of income taxes | | $ | 122 | | | $ | 135 | | | $ | 264 | | | $ | 5,155 | |
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As at September 30, 2013, 959,249 stock options were unvested (December 30, 2012—143,965). As at September 30, 2013, the total estimated unrecognized compensation cost related to unvested stock options and the expected and weighted average periods over which such costs are expected to be recognized is as follows: |
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| | September 30, | | | | | | | | | | | | | |
2013 | | | | | | | | | | | | |
Unrecognized estimated compensation costs (in thousands of U.S. dollars) | | $ | 1,786 | | | | | | | | | | | | | |
Expected period of recognition of compensation cost (in months) | | | 36 | | | | | | | | | | | | | |
Expected weighted average period of compensation cost to be recognized (in years) | | | 2.72 | | | | | | | | | | | | | |
We issue new common shares upon exercise of stock options. The intrinsic value of stock options exercised and the related cash from exercise of stock options during the three and nine months ended September 30, 2013 and 2012 was as follows: |
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| | Three months ended | | | Nine months ended | |
September 30, | September 30, |
(In thousands of U.S. dollars) | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Intrinsic value of stock options exercised | | $ | — | | | $ | 6,199 | | | $ | 2,142 | | | $ | 7,858 | |
Cash from exercise of stock options | | | — | | | | 9,302 | | | | 7,217 | | | | 11,293 | |
(d) Deferred Share Units |
On July 15, 2013, 88,000 DSU’s were issued to directors in accordance with the terms of the DDSU Plan. The DSU’s vest in thirty-six (36) successive and equal monthly installments beginning on the first day of the first month after the date of grant. A vested DSU can only be settled by conversion to cash (no share is issued), and is automatically converted after the director ceases to be a member of the Board unless the director is removed from the Board for just cause. |
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No cash payments were made under the DDSU Plan during the three and nine months ended September 30, 2013. On June 4, 2012, a new board of directors was elected at the Company’s annual shareholders’ meeting. As a result, upon departure of the previous board of directors, $2.5 million was paid out to these former directors during the nine months ended September 30, 2012 in accordance with the terms of the DDSU Plan. |
The impact on our results of operations of recording DSU compensation for the three and nine months ended September 30, 2013 and 2012 was as follows: |
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| | Three months ended | | | Nine months ended | |
September 30, | September 30, |
(In thousands of U.S. dollars) | | 2013 | | | 2012(1) | | | 2013 | | | 2012(1) | |
Research and development | | $ | 22 | | | $ | 11 | | | $ | 33 | | | $ | 232 | |
Selling, general and administrative | | | 37 | | | | 27 | | | | 56 | | | | 536 | |
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Deferred share unit compensation expense | | | 59 | | | | 38 | | | | 89 | | | | 768 | |
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-1 | The DSU compensation for the nine months ended September 30, 2012 includes a $0.3 million charge related to the accelerated vesting of 42,500 DSU’s held by the previous board of directors as a result of the election of a new board of directors at the Company’s annual shareholders’ meeting on June 4, 2012 and the consequent departure of the previous board of directors. | | | | | | | | | | | | | | | |
(e) Restricted Stock Units |
On July 15, 2013, 48,000 RSU’s were issued to directors under the Plan in consideration of their provision of future services as directors. The RSU’s vest in three (3) successive and equal yearly installments on the date of each of the first three annual general meetings of the Company held after the date of grant. Upon vesting, each RSU represents the right to receive one common share of the Company. |
Restricted stock based compensation expense was measured at fair value based on the CAD $4.54 market price of QLT’s common shares on the July 15, 2013 grant date. The weighted average grant date fair value of the RSU’s during the three and nine months ended September 30, 2013 was therefore CAD $4.54. The full cost of the restricted stock based compensation expense will be recognized over the three year vesting period, which is the requisite service period. During the three and nine months ended September 30, 2013, we recognized $0.02 million of restricted stock based compensation expense as follows: |
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| | Three months | | | Nine months | | | | | | | | | |
ended | ended | | | | | | | | |
September 30, | September 30, | | | | | | | | |
(In thousands of U.S. dollars) | | 2013 | | | 2013 | | | | | | | | | |
Research and development | | $ | 6 | | | $ | 6 | | | | | | | | | |
Selling, general and administrative | | | 9 | | | | 9 | | | | | | | | | |
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Restricted stock unit compensation expense | | $ | 15 | | | $ | 15 | | | | | | | | | |
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As at September 30, 2013, 48,000 RSU’s remain unvested. As at September 30, 2013, the total estimated unrecognized compensation cost related to RSU’s was $0.2 million and the weighted average periods over which such costs are expected to be recognized is 2.79 years. |