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Stock Based Compensation | 12 Months Ended
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Dec. 31, 2011
Stock Based Compensation [Abstract] |
STOCK BASED COMPENSATION | NOTE 7 — STOCK BASED COMPENSATION We have a stock compensation plan, the Meritage Stock Option Plan (the “Plan”), that was adopted in 2006, and superceded a prior stock compensation plan which has been amended from time to time. The Plan was approved by our stockholders and is administered by our Board of Directors. The provisions of the Plan allow for the grant of stock appreciation rights, restricted stock awards, performance share awards and performance-based awards in addition to non-qualified and incentive stock options. The Plan authorizes awards to officers, key employees, non-employee directors and consultants for up to 7,750,000 shares of common stock, of which 724,381 shares remain available for grant at December 31, 2011. We believe that such awards provide a means of performance-based compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Option awards are granted with an exercise price equal to the market price of Meritage stock at the date of grant, and generally have a five-year ratable vesting period and a seven-year contractual term. Restricted stock awards are usually granted with either a three-year or five-year ratable vesting period. The fair value of option awards is estimated using a Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on a combination of implied volatilities from traded options on our stock and historical volatility of our stock. Expected term/life, which represents the period of time that options granted are expected to be outstanding, is estimated using historical data. The risk-free interest rate is based on the U.S. Treasury yield curve for the expected term of the grant. Groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. We did not grant any stock options in 2010 or 2011.
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Expected dividend yield |  |  | N/A |  |  |  | N/A |  |  |  | 0 | %
Risk-free interest rate |  |  | N/A |  |  |  | N/A |  |  |  | 1.66 | %
Expected volatility |  |  | N/A |  |  |  | N/A |  |  |  | 86.60 | %
Expected life (in years) |  |  | N/A |  |  |  | N/A |  |  |  | 4 |
Weighted average fair value of options |  |  | N/A |  |  |  | N/A |  |  | $ | 8.75 |
Summary of Stock Option Activity:
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Year Ended December 31, 2011 |
|  | Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life |  |  | Aggregate Intrinsic Value |
|  |  |  |  |  |  |  |  |  |  | (In thousands) |
Options outstanding at beginning of year |  |  | 1,332,767 |  |  | $ | 23.80 |  |  |  |  |  |  |  |  |
Granted |  |  | 0 |  |  |  | N/A |  |  |  |  |  |  |  |  |
Exercised |  |  | (171,800 | ) |  | $ | 15.21 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (263,200 | ) |  | $ | 30.24 |  |  |  |  |  |  |  |  |
Outstanding at end of year |  |  | 897,767 |  |  | $ | 23.56 |  |  |  | 2.98 |  |  | $ | 4,565 |
Vested and expected to vest at end of year |  |  | 880,167 |  |  | $ | 23.71 |  |  |  | 2.96 |  |  | $ | 4,435 |
Exercisable at end of year |  |  | 550,359 |  |  | $ | 26.29 |  |  |  | 2.75 |  |  | $ | 2,316 |
Price range of options exercised |  | $ | 8.06 - $21.10 |  |  |  |  |  |  |  |  |  |  |  |  |
Price range of options outstanding |  | $ | 8.06 - $44.44 |  |  |  |  |  |  |  |  |  |  |  |  |
Total shares reserved for existing or future grants at end of year |  |  | 2,782,405 |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Years Ended December 31, |
|  | 2010 |  |  | 2009 |
|  | Options |  |  | Weighted Average Exercise Price |  |  | Options |  |  | Weighted Average Exercise Price |
Options outstanding at beginning of year: |  |  | 1,620,167 |  |  | $ | 23.19 |  |  |  | 2,017,527 |  |  | $ | 24.16 |
Granted |  |  | 0 |  |  |  | N/A |  |  |  | 369,500 |  |  | $ | 14.75 |
Exercised |  |  | (133,400 | ) |  | $ | 15.46 |  |  |  | (275,140 | ) |  | $ | 17.30 |
Cancelled |  |  | (154,000 | ) |  | $ | 24.58 |  |  |  | (491,720 | ) |  | $ | 24.07 |
Outstanding at end of year |  |  | 1,332,767 |  |  | $ | 23.80 |  |  |  | 1,620,167 |  |  | $ | 23.19 |
Exercisable at end of year |  |  | 740,376 |  |  | $ | 26.79 |  |  |  | 668,442 |  |  | $ | 26.83 |
Price range of options exercised |  | $ | 8.06 - $21.10 |  |  |  |  |  |  | $ | 8.06 - $19.30 |  |  |  |  |
Price range of options outstanding |  | $ | 8.06 - $44.44 |  |  |  |  |  |  | $ | 8.06 - $44.44 |  |  |  |  |
Stock options Outstanding at December 31, 2011:
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Stock Options Outstanding |  |  | Stock Options Exercisable |
Range of Exercise Prices |  | Number Outstanding |  |  | Weighted Average Contractual Life |  |  | Weighted Average Exercise Price |  |  | Number Exercisable |  |  | Weighted Average Exercise Price |
$8.06 - $14.00 |  |  | 268,736 |  |  |  | 3.51 |  |  | $ | 13.71 |  |  |  | 101,622 |  |  | $ | 13.72 |
$15.98 - $15.98 |  |  | 208,214 |  |  |  | 2.93 |  |  | $ | 15.98 |  |  |  | 146,422 |  |  | $ | 15.98 |
$17.98 - $40.55 |  |  | 177,390 |  |  |  | 3.49 |  |  | $ | 20.95 |  |  |  | 103,054 |  |  | $ | 21.34 |
$42.82 - $42.82 |  |  | 242,427 |  |  |  | 2.07 |  |  | $ | 42.82 |  |  |  | 198,261 |  |  | $ | 42.82 |
$44.44 - $44.44 |  |  | 1,000 |  |  |  | 1.77 |  |  | $ | 44.44 |  |  |  | 1,000 |  |  | $ | 44.44 |
|  |  | 897,767 |  |  |  |  |  |  |  |  |  |  |  | 550,359 |  |  |  |  |
The total intrinsic value of option exercises for the years ended December 31, 2011, 2010 and 2009 was $1.4 million, $0.8 million and $1.2 million, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the stock option. In addition to time-based restricted shares, in 2009 we began granting restricted shares with performance requirements to our executive management group. The 2009 awards vest in equal tranches over three years from the anniversary of the date of grant. The 2010 and 2011 awards vest in total on the third anniversary of the date of grant. All performance shares only vest upon the attainment of certain financial and operational criteria as established and approved by our Board of Directors Summary of Nonvested (Restricted) Shares Activity:
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Nonvested Restricted Share Activity (time-based) |  |  | Weighted Average Grant Date Fair Value |  |  | Nonvested Restricted Share Activity (performance- Based) |  |  | Weighted Average Grant Date Fair Value |
Outstanding at 1/1/09 |  |  | 137,832 |  |  | $ | 44.93 |  |  |  | — |  |  |  | N/A |
Granted |  |  | 234,000 |  |  | $ | 14.36 |  |  |  | 202,500 |  |  | $ | 14.27 |
Vested (Earned/Released) |  |  | (64,553 | ) |  | $ | 38.47 |  |  |  | — |  |  |  | N/A |
Forfeited (2) |  |  | (2,000 | ) |  | $ | 42.82 |  |  |  | — |  |  |  | N/A |
Outstanding as of 12/31/09 |  |  | 305,279 |  |  | $ | 19.11 |  |  |  | 202,500 |  |  | $ | 14.27 |
Granted |  |  | 315,000 |  |  | $ | 21.30 |  |  |  | 67,500 |  |  | $ | 22.18 |
Vested (Earned/Released) |  |  | (118,278 | ) |  | $ | 24.75 |  |  |  | (67,500 | ) |  | $ | 14.27 |
Forfeited (2) |  |  | (36,750 | ) |  | $ | 20.99 |  |  |  | — |  |  |  | N/A |
Outstanding at 12/31/10 |  |  | 465,251 |  |  | $ | 19.01 |  |  |  | 202,500 |  |  | $ | 16.91 |
Granted |  |  | 357,000 |  |  | $ | 25.57 |  |  |  | 56,250 |  |  | $ | 25.65 |
Vested (Earned/Released) (1) |  |  | (141,335 | ) |  | $ | 17.76 |  |  |  | (33,750 | ) |  | $ | 14.27 |
Forfeited (2) |  |  | (31,400 | ) |  | $ | 23.23 |  |  |  | (33,750 | ) |  | $ | 14.27 |
Outstanding at 12/31/11 |  |  | 649,516 |  |  | $ | 22.68 |  |  |  | 191,250 |  |  | $ | 20.41 |
(1) | Amounts based on 2011 performance targets; shares to be released during the first quarter of 2012.
(2) | Forfeitures on time-based nonvested shares as a result of terminations of employment, while forfeitures on performance-based nonvested shares are a result of failing to attain certain goals as outlined in our executive management’s group compensation agreements.
. Compensation cost related to stock-based compensation arrangements granted under the Plans are recognized on a straight-line basis over the remaining respective vesting periods. Below is a summary of compensation expense and stock award activity (dollars in thousands):
|  |  | September 30, |  |  |  | September 30, |  |  |  | September 30, |
|  | Twelve Months Ended December 31, |
|  | 2011 |  |  | 2010 |  |  | 2009 |
Stock-based compensation expense |  | $ | 7,410 |  |  | $ | 5,358 |  |  | $ | 6,204 |
Cash Received from exercises |  | $ | 2,613 |  |  | $ | 2,062 |  |  | $ | 4,753 |
The following table includes additional information regarding our Plans (dollars in thousands):
|  |  | September 30, |  |  |  | September 30, |
|  | As of |
|  | December 31, 2011 |  |  | December 31, 2010 |
Unrecognized stock-based compensation cost |  | $ | 9,058 |  |  | $ | 7,816 |
Weighted average years remaining vesting period |  |  | 2.05 |  |  |  | 2.16 |
Total equity awards outstanding (vested and unvested shares) |  |  | 1,738,533 |  |  |  | 2,000,518 |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 + Details
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