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Note 12—Stock-Based Compensation
Compensation Plans
We have: four plans under which outstanding options to purchase common stock and/or shares or units of restricted stock have been, or may be, granted to officers, employees and non-employee directors (the 2000 Incentive Compensation Plan (Employee Plan), the 2004 Stock Plan for Directors, the 2006 Incentive Plan, and the 2006 Stock Plan for Directors); one plan under which executive officers may receive common stock in lieu of compensation (the Executive Deferred Stock Compensation Plan); and two plans under which certain directors have received or may receive common stock in lieu of director fees (the Common Stock Purchase Plan for Directors (the "Directors Stock Purchase Plan") and the Nonemployee Directors' Deferred Stock Compensation Plan). These plans are referred to collectively as the "Plans."
During the year ended December 31, 2011, we were permitted to make option, restricted stock and restricted stock unit grants and stock issuances only under the Executive Deferred Stock Compensation Plan, the Nonemployee Directors' Deferred Stock Compensation Plan, the 2006 Incentive Plan and the 2006 Stock Plan for Directors.
The number of shares initially reserved for issuance and the number of shares available for future grants or issuance under these Plans as of December 31, 2011 were as follows:
-
- •
- Executive Deferred Stock Compensation Plan—500,000 shares were reserved initially for issuance to our executive officers in lieu of the payment of all or a portion of their salary, at their option, and 500,000 shares were available for future issuance as of December 31, 2011.
- •
- Nonemployee Directors' Deferred Stock Compensation Plan—500,000 shares were reserved initially for issuance to nonemployee directors in lieu of the payment of all or a portion of their retainer and meeting fees, at their option, and 443,135 shares were available for future issuance as of December 31, 2011.
- •
- 2006 Incentive Plan—5,000,000 shares were reserved initially for grants or issuance to employees, and 1,905,338 shares were available for future grants or issuance as of December 31, 2011. This plan replaced the 2000 Incentive Compensation Plan (Employee Plan).
- •
- 2006 Stock Plan for Directors—400,000 shares were reserved initially for grants or issuance to non-employee directors and 165,313 shares were available for future grants or issuance as of December 31, 2011. This plan replaced the 2004 Stock Plan for Directors.
Under the Plans that provide for the issuance of stock options, outstanding options are exercisable at the market price on the date of grant, expire ten years from the date of grant, and vest over periods of two or three years. Vesting of certain options may accelerate upon a change of control of Ventas, as defined in the applicable Plan, and other specified events.
In connection with the NHP acquisition, we assumed certain outstanding options, shares of restricted stock and restricted stock units previously issued to NHP employees pursuant to the Nationwide Health Properties, Inc. 2005 Performance Incentive Plan, as amended (the "NHP Plan"). The outstanding awards continue to be subject to the terms and conditions of the NHP Plan and the applicable award agreements.
Stock Options
In determining the estimated fair value of our stock options as of the date of grant, we used the Black-Scholes option pricing model with the following assumptions:
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2011 |
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2010 |
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2009 |
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|
Risk-free interest rate |
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|
1.22 - 2.78 |
% |
|
2.00 - 3.45 |
% |
|
1.37 - 2.32 |
% |
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Dividend yield |
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|
6.75 |
% |
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6.75 |
% |
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5.75 |
% |
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Volatility factors of the expected market price for our common stock |
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35.7 - 44.3 |
% |
|
37.1 - 44.6 |
% |
|
36.1 - 42.7 |
% |
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Weighted average expected life of options |
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4.25 - 7.0 years |
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4.25 - 7.0 years |
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3.5 - 6.0 years |
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The following is a summary of stock option activity in 2011:
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Activity |
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Shares |
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Range of Exercise
Prices |
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Weighted Average
Exercise Price |
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Weighted
Average
Remaining
Contractual
Life (years) |
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Intrinsic
Value
($000's) |
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Outstanding as of December 31, 2010 |
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1,656,558 |
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$ |
11.34 - $45.26 |
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$ |
38.12 |
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Options granted |
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376,451 |
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52.48 - 57.19 |
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53.64 |
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Options assumed from NHP |
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108,785 |
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48.60 - 48.60 |
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48.60 |
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Options exercised |
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(94,789 |
) |
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11.34 - 48.60 |
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26.00 |
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Options canceled |
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— |
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— |
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— |
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| |
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Outstanding as of December 31, 2011 |
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2,047,005 |
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11.45 - 57.19 |
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42.10 |
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6.9 |
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$ |
26,734 |
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| |
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Exercisable as of December 31, 2011 |
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1,685,965 |
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$ |
11.45 - $57.19 |
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$ |
40.22 |
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6.5 |
|
$ |
25,158 |
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| |
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Compensation costs for all share-based awards are based on the grant date fair value and are recognized on a straight-line basis during the requisite service periods. Compensation costs related to stock options for the years ended December 31, 2011, 2010 and 2009 were $4.2 million, $3.1 million and $2.9 million, respectively.
A summary of the status of our nonvested stock options as of December 31, 2011 and changes during the year then ended follows:
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Activity |
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Shares |
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Weighted Average
Grant Date Fair
Value |
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Nonvested at beginning of year |
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340,203 |
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$ |
8.33 |
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Granted |
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376,451 |
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11.17 |
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Assumed from NHP |
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108,785 |
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9.93 |
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Vested |
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(464,399 |
) |
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9.12 |
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Forfeited |
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— |
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— |
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| |
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Nonvested at end of year |
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361,040 |
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$ |
10.76 |
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| |
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As of December 31, 2011, we had $1.3 million of total unrecognized compensation cost related to nonvested stock options granted under the Plans and $0.1 million in total unrecognized compensation cost related to nonvested options assumed in the NHP acquisition. We expect to recognize that cost over a weighted average period of one year. Proceeds received from options exercised under the Plans for the years ended December 31, 2011, 2010 and 2009 were $2.5 million, $10.9 million and $2.2 million, respectively.
Restricted Stock and Restricted Stock Units
We recognize the market value of shares of restricted stock and restricted stock units on the date of the award as stock-based compensation expense over the service period, with charges to general and administrative expenses of approximately $15.1 million in 2011, $11.0 million in 2010 and $9.0 million in 2009. Restricted stock and restricted stock units generally vest over periods ranging from two to five years. The vesting of restricted stock and restricted stock units may accelerate upon a change of control of Ventas, as defined in the applicable Plan, and other specified events.
A summary of the status of our nonvested restricted stock and restricted stock units as of December 31, 2011, and changes during the year ended December 31, 2011 follows:
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Restricted
Stock |
|
Weighted
Average
Grant Date
Fair Value |
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Restricted
Stock Units |
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Weighted
Average
Grant Date
Fair Value |
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Nonvested at December 31, 2010 |
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493,967 |
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$ |
43.10 |
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4,690 |
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$ |
39.28 |
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Granted |
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393,764 |
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|
53.33 |
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2,050 |
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52.48 |
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Assumed from NHP |
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1,337 |
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53.74 |
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41,495 |
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53.74 |
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Vested |
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(281,090 |
) |
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42.29 |
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(14,946 |
) |
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50.08 |
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Forfeited |
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(15,780 |
) |
|
51.22 |
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— |
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— |
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Nonvested at December 31, 2011 |
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592,198 |
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$ |
50.09 |
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33,289 |
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$ |
53.27 |
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As of December 31, 2011, we had $19.5 million of unrecognized compensation cost related to nonvested restricted stock and restricted stock units under the Plans and $0.3 million of unrecognized compensation cost related to nonvested restricted stock and restricted stock units assumed in the NHP acquistion. We expect to recognize that cost over a weighted average period of 3.1 years.
Employee and Director Stock Purchase Plan
We have in effect an Employee and Director Stock Purchase Plan ("ESPP") under which our employees and directors may purchase shares of our common stock at a discount. Pursuant to the terms of the ESPP, on each purchase date, participants may purchase shares of common stock at a price not less than 90% of the market price on that date (with respect to the employee tax-favored portion of the plan) and not less than 95% of the market price on that date (with respect to the additional employee and director portion of the plan). We initially reserved 2,500,000 shares for issuance under the ESPP. As of December 31, 2011, 44,238 shares had been purchased under the ESPP and 2,455,762 shares were available for future issuance.
Employee Benefit Plan
We maintain a 401(K) plan that allows eligible employees to defer compensation subject to certain limitations imposed by the Code. In 2011, 2010 and 2009, we made contributions for each qualifying employee of up to 3% of his or her salary, subject to certain limitations, regardless of the employee's individual contribution. During 2011, 2010 and 2009, our aggregate contributions were approximately $267,000, $200,000 and $189,000, respectively. |