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Stock-Based Compensation Plans
9 Months Ended
Sep. 30, 2011
Stock-Based Compensation Plans 
Stock-Based Compensation Plans

Note 10 – Stock-Based Compensation Plans

The Company has certain stock-based compensation plans with stock options and restricted share grants outstanding as of September 30, 2011: the 1994 Stock Option Plan for Non-Employee Directors; the 2003 Employee Stock Incentive Plan, as amended (the "2003 ESPP"); and the Amended and Restated 2003 Stock Incentive Plan for Non-Employees, as amended. Under these plans, there were a total of 3,554,318 options and/or restricted shares available for grant as of September 30, 2011. As of July 1, the MasTec, Inc. 2011 Employee Stock Purchase Plan (the "2011 ESPP") became effective. Under the 2011 ESPP, 1,000,000 shares of the Company's common stock are available for purchase by eligible employees. The 2011 ESPP replaced the 2003 ESPP effective July 1, 2011.

Share-based payments, to the extent they are compensatory, are recognized based on their grant date fair values and the estimated number of shares ultimately expected to vest. The Company records a deferred tax asset, or future tax benefit, based on the amount of share-based compensation recognized in the financial statements over the vesting period of share-based awards. If the exercise date fair value of a stock option, or the vesting date fair value of a restricted share award, exceeds its grant date fair value, the tax effect of this difference ("excess tax benefit") is recorded as an increase to additional paid-in capital ("APIC"), creating an "APIC Pool." If the exercise date fair value of a stock option, or the vesting date fair value of a restricted share award, is less than its grant date fair value, the tax effect of this difference would reduce the APIC Pool. If the APIC Pool is reduced to zero, subsequent shortfalls would increase tax expense.

Restricted Share Awards

MasTec grants restricted share awards, which are valued based on the market price of MasTec common stock on the date of grant. Total unearned compensation related to restricted share awards as of September 30, 2011 was approximately $5.1 million, which is expected to be recognized over a weighted average period of approximately one year. The total intrinsic value of restricted share awards that vested during the three months ended September 30, 2011 and 2010, which is based on the market price on the date of vesting, totaled $0.4 million and $0.2 million, respectively, and totaled $6.3 million and $0.9 million, respectively, for restricted share awards that vested during the nine months ended September 30, 2011 and 2010.

Following is a summary of restricted share award activity during the nine months ended September 30, 2011:

 

     Restricted
Shares		     Weighted Average
Grant Date
Fair Value		  

Non-vested restricted shares, December 31, 2010

      1,044,470      $ 9.44   
  

 

 

    

 

 

  

Granted

      205,700        19.34   

Vested

      (316,190 )      8.37   

Forfeited

      (5,250 )      9.84   
  

 

 

    

 

 

  

Non-vested restricted shares, September 30, 2011

      928,730      $ 12.00   
  

 

 

    

 

 

  

For certain restricted share awards, the number of shares issued on the vesting date is net of the equivalent number of shares required to satisfy the recipient's minimum statutory tax withholding requirements. The Company then pays the corresponding withholding taxes to the appropriate taxing authorities in cash on behalf of the recipient. Although the withheld shares are not issued, they are treated as common stock repurchases in the consolidated financial statements, as they reduce the number of shares that would have been issued upon vesting.

 

Stock Options

The Company has granted options to purchase its common stock to employees and members of the Board of Directors and affiliates under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. No stock options have been granted since 2006.

The following is a summary of stock option activity during the nine months ended September 30, 2011:

 

     Stock
Options		     Weighted
Average
Exercise  Price		      Weighted  Average
Remaining
Contractual Life
(years)		      Aggregate
Intrinsic
Value (1)
(in millions)		  

Options outstanding December 31, 2010

      2,588,170      $ 10.27         3.87       $ 11.2   
  

 

 

    

 

 

     

 

 

     

 

 

  

Exercised

      (1,118,826 )      10.22         
  

 

 

    

 

 

        

Options outstanding September 30, 2011

      1,469,344        10.30         
  

 

 

    

 

 

     

 

 

     

 

 

  

Options exercisable September 30, 2011

      1,469,344      $ 10.30         3.44       $ 10.7   
  

 

 

    

 

 

     

 

 

     

 

 

  

 

  (1) Amount represents the difference between the exercise price and the market price of the Company's stock on the last trading day of the corresponding period, multiplied by the number of in-the-money options.  

As of September 30, 2011, all outstanding stock options were fully vested. The total intrinsic value of options exercised during the three months ended September 30, 2011, which is based on the difference between the exercise price and the market price of the Company's stock at the date of exercise, was $1.5 million. There were no options exercised during the three months ended September 30, 2010. For the nine months ended September 30, 2011 and 2010, the total intrinsic value of options exercised was $10.9 million and $0.2 million, respectively. Proceeds from options exercised during the three months ended September 30, 2011 totaled $1.2 million. Proceeds from options exercised during the nine months ended September 30, 2011 and 2010 totaled $11.9 million and $1.2 million, respectively.

Stock Based Compensation Expense and Related Tax Benefit

Stock based compensation expense and related tax benefits for the periods indicated are as follows (in millions):

 

     Three Months  Ended
September 30,		      Nine Months  Ended
September 30,		  
     2011      2010      2011      2010  

Stock based compensation expense:

            

Restricted share awards

    $ 1.0       $ 1.0       $ 2.8       $ 2.9   

Stock options

    $ —         $ —         $ —         $ 0.1   
  

 

 

     

 

 

     

 

 

     

 

 

  

Total stock based compensation expense

    $ 1.0       $ 1.0       $ 2.8       $ 3.0   
  

 

 

     

 

 

     

 

 

     

 

 

  

Income tax benefit from stock based compensation:

            

Restricted share awards

    $ 0.4       $ 0.3       $ 2.1       $ 0.9   

Stock options

      0.5         —           2.9         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total income tax benefit from stock based compensation

    $ 0.9       $ 0.3       $ 5.0       $ 0.9   
  

 

 

     

 

 

     

 

 

     

 

 

  

Excess tax benefit from stock based compensation:

            

Vested restricted shares (1)

    $ —         $ —         $ 1.0       $ —     

Stock options exercised (1)

      0.5         —           2.9         —     
  

 

 

     

 

 

     

 

 

     

 

 

  

Total excess tax benefit from stock based compensation

    $ 0.5       $ —         $ 3.9       $ —     
  

 

 

     

 

 

     

 

 

     

 

 

  

 

  (1) Excess tax benefits, which represent cash flows from tax deductions in excess of compensation expense recognized for stock options exercised and vested restricted shares, are classified as financing cash flows in the Company's consolidated statement of cash flows.