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Stock-based Compensation and Awards
 12 Months Ended
Dec. 31, 2011
Stock-based Compensation and Awards [Abstract]  
Stock-based Compensation and Awards

17. Stock-based Compensation and Awards

The following table presents the stock-based compensation expense included in our results of operations (in thousands):

 

 

                         
    Years Ended December 31,  
    2011     2010     2009  

Stock options

   $ 3,916     $ 5,273     $ 5,673  

Restricted stock, restricted stock units and phantom units

     14,970       17,796       17,983  

Employee stock purchase plan

     278       282       935  
   

 

 

    

 

 

    

 

 

  

Total stock-based compensation expense

   $  19,164     $  23,351     $  24,591  
   

 

 

    

 

 

    

 

 

  

Stock Incentive Plan

In August 2007, we adopted the Exterran Holdings, Inc. 2007 Stock Incentive Plan (as amended and restated, the “2007 Plan”) that provides for the granting of stock-based awards in the form of options, restricted stock, restricted stock units, stock appreciation rights and performance awards to our employees and directors. In May 2011, our stockholders approved an amendment to the 2007 Plan that increased the aggregate number of shares of common stock that may be issued under the 2007 Plan to 12,500,000 from 9,750,000. Each option and stock appreciation right granted counts as one share against the aggregate share limit, and each share of restricted stock and restricted stock unit granted counts as two shares against the aggregate share limit. Awards granted under the 2007 Plan that are subsequently cancelled, terminated or forfeited are available for future grant.

Stock Options

Under the 2007 Plan, stock options are granted at fair market value at the date of grant, are exercisable in accordance with the vesting schedule established by the compensation committee of our board of directors in its sole discretion and expire no later than seven years after the date of grant. Options generally vest 33 1/3% on each of the first three anniversaries of the grant date.

The weighted average fair value at date of grant for options granted during the years ended December 31, 2011, 2010 and 2009 was $5.81, $8.71 and $5.87, respectively, and was estimated using the Black-Scholes option valuation model with the following weighted average assumptions:

 

 

                         
    Years Ended December 31,  
    2011     2010     2009  

Expected life in years

     4.5       4.5       4.5  

Risk-free interest rate

     1.23 %      2.13 %      1.84 % 

Volatility

     45.17 %      42.94 %      40.51 % 

Dividend yield

     0.0 %      0.0 %      0.0 % 

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for a period commensurate with the estimated expected life of the stock options. Expected volatility is based on the historical volatility of our stock over the period commensurate with the expected life of the stock options and other factors. We have not historically paid a dividend and do not expect to pay a dividend during the expected life of the stock options.

The following table presents stock option activity for the year ended December 31, 2011 (in thousands, except per share data and remaining life in years):

 

 

                                 
    Stock
Options		     Weighted
Average
Exercise Price		     Weighted
Average
Remaining
Life		     Aggregate
Intrinsic
Value		  

Options outstanding, December 31, 2010

     3,124     $ 31.20                  

Granted

     924       15.33                  

Exercised

     (33 )      16.16                  

Cancelled

     (744 )      28.90                  
   

 

 

                          

Options outstanding, December 31, 2011

     3,271       27.39       4.1     $ —    
   

 

 

                          

Options exercisable, December 31, 2011

     2,029       34.20       2.9       —    
   

 

 

                          

Intrinsic value is the difference between the market value of our stock and the exercise price of each option multiplied by the number of options outstanding for those options where the market value exceeds their exercise price. The total intrinsic value of stock options exercised during 2011 and 2010 was $0.2 million and $0.5 million, respectively. No stock options were exercised during the year ended December 31, 2009. As of December 31, 2011, $5.2 million of unrecognized compensation cost related to unvested stock options is expected to be recognized over the weighted-average period of 2.0 years.

Restricted Stock and Restricted Stock Units

For grants of restricted stock and restricted stock units, we recognize compensation expense over the vesting period equal to the fair value of our common stock at the date of grant. Our restricted stock and restricted stock unit grants generally vest 33 1/3% on each of the first three anniversaries of the grant date.

 

The following table presents restricted stock and restricted stock unit activity for the year ended December 31, 2011 (in thousands, except per share data):

 

 

                 
    Shares     Weighted
Average
Grant-Date
Fair Value
Per Share		  

Non-vested restricted stock and restricted stock units, December 31, 2010

     1,421     $ 23.20  

Granted

     1,212       19.22  

Vested

     (743 )      25.36  

Cancelled

     (220 )      22.11  
   

 

 

          

Non-vested restricted stock and restricted stock units, December 31, 2011

     1,670       19.49  
   

 

 

          

As of December 31, 2011, $21.1 million of unrecognized compensation cost related to unvested restricted stock and restricted stock units is expected to be recognized over the weighted-average period of 2.0 years.

Our compensation committee’s general practice has been to grant equity-based awards once a year, in late February or early March after fourth quarter earnings information for the prior year has been released for at least two full trading days. The schedule for making equity-based awards is typically established several months in advance, and is not set based on knowledge of material nonpublic information or in response to our stock price. This practice results in awards being granted on a regular, predictable annual cycle, after annual earnings information has been disseminated to the marketplace. Equity-based awards are occasionally granted at other times during the year, such as upon the hiring of a new employee or following the promotion of an employee. In some instances, the compensation committee may be aware, at the time grants are made, of matters or potential developments that are not ripe for public disclosure at that time but that may result in public announcement of material information at a later date. In March 2011, the compensation committee of our board of directors authorized annual long-term incentive awards of stock options, restricted stock, restricted stock units and performance shares to our executive officers, other employees and non-employee directors.

Employee Stock Purchase Plan

In August 2007, we adopted the Exterran Holdings, Inc. Employee Stock Purchase Plan (“ESPP”), which is intended to provide employees with an opportunity to participate in our long-term performance and success through the purchase of shares of common stock at a price that may be less than fair market value. The ESPP is designed to comply with Section 423 of the Internal Revenue Code of 1986, as amended. Each quarter, an eligible employee may elect to withhold a portion of his or her salary up to the lesser of $25,000 per year or 10% of his or her eligible pay to purchase shares of our common stock at a price equal to 85% to 100% of the fair market value of the stock as of the first trading day of the quarter, the last trading day of the quarter or the lower of the first trading day of the quarter and the last trading day of the quarter, as the compensation committee of our board of directors may determine. The ESPP will terminate on the date that all shares of common stock authorized for sale under the ESPP have been purchased, unless it is extended. In May 2011, our stockholders approved an amendment to the ESPP that increased the aggregate number of shares of common stock available for purchase under the ESPP to 1,000,000. At December 31, 2011, 491,533 shares remained available for purchase under the ESPP. Our ESPP is compensatory and, as a result, we record an expense on our consolidated statements of operations related to the ESPP. Since July 2009, the purchase discount under the ESPP has been 5% of the fair market value of our common stock on the first trading day of the quarter or the last trading day of the quarter, whichever is lower.

Directors’ Stock and Deferral Plan

On August 20, 2007, we adopted the Exterran Holdings, Inc. Directors’ Stock and Deferral Plan. The purpose of the Directors’ Stock and Deferral Plan is to provide non-employee directors of the board of directors with an opportunity to elect to receive our common stock as payment for a portion or all of their retainer and meeting fees. The number of shares to be paid each quarter will be determined by dividing the dollar amount of fees elected to be paid in common stock by the closing sales price per share of the common stock on the last day of the quarter. In addition, directors who elect to receive a portion or all of their fees in the form of common stock may also elect to defer, until a later date, the receipt of a portion or all of their fees to be received in common stock. We have reserved 100,000 shares under the Directors’ Stock and Deferral Plan, and as of December 31, 2011, 69,629 shares remain available to be issued under the plan.

Employment Inducement Plan

In anticipation of certain key management changes discussed above, in November 2011, our board of directors adopted the Exterran Holdings, Inc. 2011 Employment Inducement Long-Term Equity Plan (the “Employment Inducement Plan”), which authorizes the issuance of up to 1,000,000 of non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and performance awards to certain newly-hired employees of us or our affiliates. The Employment Inducement Plan is only available to grant awards to an individual, as a material inducement to such individual to enter into employment with us, who (i) has not previously been an employee of us or our affiliates or (ii) is rehired following a bona fide period of non-employment with us and our affiliates. Awards granted under the Employment Inducement Plan that are subsequently cancelled, terminated or forfeited are available for future grant. As of December 31, 2011, 539,982 shares remain available to be issued under the Employment Inducement Plan. We do not intend to issue any additional equity under the Employment Inducement Plan, other than as necessary to materially induce a high-level executive to enter into employment with us.

Partnership Long-Term Incentive Plan

The Partnership has a long-term incentive plan that was adopted by Exterran GP LLC, the general partner of the Partnership’s general partner, in October 2006 for employees, directors and consultants of the Partnership, us or our respective affiliates. The long-term incentive plan currently permits the grant of awards covering an aggregate of 1,035,378 common units, common unit options, restricted units and phantom units. The long-term incentive plan is administered by the board of directors of Exterran GP LLC or a committee thereof (the “Plan Administrator”).

Unit options will have an exercise price that is not less than the fair market value of a common unit on the date of grant and will become exercisable over a period determined by the Plan Administrator. Phantom units are notional units that entitle the grantee to receive a common unit upon the vesting of the phantom unit or, at the discretion of the Plan Administrator, cash equal to the fair value of a common unit.

Partnership Phantom Units

During the year ended December 31, 2011, the Partnership granted 49,082 phantom units to officers and directors of Exterran GP LLC and certain of our employees, which vest 33 1/3% on each of the first three anniversaries of the grant date.

The following table presents phantom unit activity for the year ended December 31, 2011:

 

 

                 
    Phantom
Units		     Weighted
Average
Grant-Date
Fair Value
per Unit		  

Phantom units outstanding, December 31, 2010

     98,537     $ 19.23  

Granted

     49,082       24.70  

Vested

     (67,026 )      20.47  

Cancelled

     (5,326 )      22.56  
   

 

 

          

Phantom units outstanding, December 31, 2011

     75,267       21.45  
   

 

 

          

 

As of December 31, 2011, $1.4 million of unrecognized compensation cost related to unvested phantom units is expected to be recognized over the weighted-average period of 1.8 years.