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STOCKHOLDERS' EQUITY | 12 Months Ended
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Dec. 31, 2013
STOCKHOLDERS' EQUITY |
13. | STOCKHOLDERS’ EQUITY
Dividends on Common Stock The tax characterization of dividends per share on common shares as reported to shareholders was as follows for the years ended December 31, 2013 and 2012:
Declaration Date |  | Record Date |  | Payable Date |  | Ordinary Income |  |  | Return of Capital |  |  | Total Per Share |
May 11, 2012 |  | June 8, 2012 |  | June 22, 2012 |  |  | 0.20 | (1) |  |  | — |  |  | $ | 0.20 |
August 20, 2012 |  | September 14, 2012 |  | September 28, 2012 |  |  | 0.20 | (1) |  |  | — |  |  | $ | 0.20 |
November 6, 2012 |  | November 30, 2012 |  | December 14, 2012 |  |  | 0.20 | (1) |  |  | — |  |  | $ | 0.20 |
February 22, 2013 |  | April 3, 2013 |  | April 15, 2013 |  |  | 0.346119 |  |  |  | 0.183881 |  |  | $ | 0.53 |
May 16, 2013 |  | July 3, 2013 |  | July 15, 2013 |  |  | 0.313466 |  |  |  | 0.166534 |  |  | $ | 0.48 |
August 16, 2013 |  | October 2, 2013 |  | October 15, 2013 |  |  | 0.313466 |  |  |  | 0.166534 |  |  | $ | 0.48 |
December 12, 2013 |  | January 2, 2014 |  | January 15, 2014 |  |  | — | (2) |  |  | — | (2) |  | $ | 0.48 |
(1) | The amount constitutes a “Qualified Dividend”, as defined by the Internal Revenue Service.
(2) | Taxable in 2014.
In addition, on April 8, 2013, CCA’s Board of Directors declared a special dividend to shareholders of $675.0 million, or approximately $6.66 per share of common stock, in connection with CCA’s previously announced plan to qualify and convert to a REIT for federal income tax purposes effective as of January 1, 2013. The special dividend was paid in satisfaction of requirements that CCA distribute its accumulated earnings and profits attributable to tax periods ending prior to January 1, 2013. CCA paid the special dividend on May 20, 2013 to shareholders of record as of April 19, 2013. The special dividend constituted a qualified dividend of which $6.647357 was taxable as ordinary income to shareholders in 2013, and $0.012643 constituted a return of capital. Each CCA shareholder could elect to receive payment of the special dividend either in all cash, all shares of CCA common stock or a combination of cash and CCA common stock, with the total amount of cash payable to shareholders limited to a maximum of 20% of the total value of the special dividend, or $135.0 million. The total amount of cash elected by shareholders exceeded 20% of the total value of the special dividend. As a result, the cash payment was prorated among those shareholders who elected to receive cash, and the remaining portion of the special dividend was paid in shares of CCA common stock. The total number of shares of CCA common stock distributed pursuant to the special dividend was 13.9 million and was determined based on shareholder elections and the average closing price per share of CCA common stock on the New York Stock Exchange for the three trading days after May 9, 2013, or $38.90 per share. Future dividends will depend on CCA’s distribution requirements as a REIT, future earnings, capital requirements, financial condition, opportunities for alternative uses of capital, and on such other factors as the Board of Directors of CCA may consider relevant. Common Stock Restricted shares. During 2013, CCA issued approximately 423,000 shares of restricted common stock and common stock units to certain of CCA’s employees and non-employee directors, with an aggregate value of $15.6 million, including 378,000 restricted shares or units to employees and non-employee directors whose compensation is charged to general and administrative expense and 45,000 restricted shares to employees whose compensation is charged to operating expense. During 2012, CCA issued approximately 349,000 shares of restricted common stock and common stock units to certain of its employees and non-employee directors, with an aggregate value of $9.2 million, including 290,000 restricted shares or units to employees and non-employee directors whose compensation is charged to general and administrative expense and 59,000 restricted shares to employees whose compensation is charged to operating expense. As a result of the aforementioned special dividend paid on May 20, 2013, CCA issued 139,000 shares of restricted common stock and common stock units to employee and non-employee directors who held unvested shares as of the record date. The shares of restricted common stock and common stock units were issued at the $38.90 price per share as previously described herein. The total special dividend to restricted stock and unit holders totaled $6.1 million, including $2.8 million to restricted stockholders and $3.3 million to restricted stock unit holders. Similar to other accumulated dividends on restricted stock and units, the special dividend remains subject to the same vesting conditions of the underlying shares or units. With respect to the shares and units issued in 2013, unless earlier vested under the terms of the restricted stock unit agreement, the restricted stock units issued to officers and executive officers vest evenly over a three-year period, while the shares issued to other employees “cliff” vest on the third anniversary of the award. Shares of restricted common stock units issued to non-employee directors vest on the first anniversary of the award. With respect to shares issued prior to 2013, CCA established performance-based vesting conditions on the shares of restricted common stock and common stock units awarded to its officers and executive officers. Unless earlier vested under the terms of the agreements, shares or units issued to officers and executive officers are subject to vesting over a three-year period based upon the satisfaction of certain performance criteria. No more than one-third of such shares or units may vest in the first performance period; however, the performance criteria are cumulative for the three-year period. Unless earlier vested under the terms of the agreements, the shares of restricted stock issued to the other employees vest after three years of continuous service, and restricted stock units issued to non-employee directors vest approximately one year from the issue date. Nonvested restricted common stock transactions as of December 31, 2013 and for the year then ended are summarized below (in thousands, except per share amounts).
|  | Shares of restricted common stock and units |  | Weighted average grant date fair value |
Nonvested at December 31, 2012 |  | 780 |  | $ | 24.59 |
Granted |  | 423 |  | $ | 36.87 |
Special dividend |  | 139 |  | $ | 38.90 |
Cancelled |  | (99) |  | $ | 30.92 |
Vested |  | (431) |  | $ | 24.31 |
Nonvested at December 31, 2013 |  | 812 |  | $ | 32.81 |
During 2013, 2012, and 2011, CCA expensed $9.8 million ($1.2 million of which was recorded in operating expenses and $8.6 million of which was recorded in general and administrative expenses), $7.6 million ($1.2 million of which was recorded in operating expenses and $6.4 million of which was recorded in general and administrative expenses), and $6.1 million ($1.1 million of which was recorded in operating expenses and $5.0 million of which was recorded in general and administrative expenses), net of forfeitures, relating to the restricted common stock and common stock units, respectively. As of December 31, 2013, CCA had $13.1 million of total unrecognized compensation cost related to restricted common stock and common stock units that is expected to be recognized over a remaining weighted-average period of 1.9 years. The total fair value of restricted common stock and common stock units that vested during 2013, 2012, and 2011 was $10.5 million, $5.4 million, and $6.1 million, respectively. Preferred Stock CCA has the authority to issue 50.0 million shares of $0.01 par value per share preferred stock (the “Preferred Stock”). The Preferred Stock may be issued from time to time upon authorization by the Board of Directors, in such series and with such preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or other provisions as may be fixed by CCA’s Board of Directors. Stock Option Plans CCA has equity incentive plans under which, among other things, incentive and non-qualified stock options are granted to certain employees and non-employee directors of CCA by the compensation committee of CCA’s Board of Directors. The options are granted with exercise prices equal to the fair market value on the date of grant. Vesting periods for options granted to employees generally range from three to four years. Options granted to non-employee directors vest on a date approximately following the first anniversary of the grant date. The term of such options is ten years from the date of grant. In February 2013, CCA elected not to issue stock options to its non-employee directors, officers, and executive officers as it had in the past and instead elected to issue all of its equity compensation in the form of restricted common stock and common stock units as previously described herein. During 2013, 2012, and 2011, CCA expensed $3.1 million, $4.7 million, and $4.2 million, respectively, net of estimated forfeitures relating to its outstanding stock options, all of which was charged to general and administrative expenses. In connection with mandatory anti-dilution provisions of CCA’s equity incentive plans, as it pertains to the special dividend, an adjustment was made to all options outstanding to (i) increase the number of shares subject to an option by multiplying the number of shares by 1.175 (the “Adjustment Factor”) and (ii) reduce the exercise price per share of common stock subject to the options by dividing the initial exercise price by the Adjustment Factor. The Adjustment Factor was determined by the percentage increase in CCA’s common stock resulting from the stock portion of the special dividend after taking into consideration the portion of the special dividend paid in cash. The adjustment affected all employees and non-employee directors who had outstanding option grants on May 20, 2013 (49 people) and resulted in approximately 0.5 million of incremental options awarded. As the adjustment was designed to equalize the fair value of the option award for the special dividend, and because CCA’s equity incentive plans included mandatory anti-dilution provisions, there was no incremental compensation cost resulting from the adjustments to the options outstanding. Stock option transactions relating to CCA’s non-qualified stock option plans are summarized below (in thousands, except exercise prices):
|  | No. of options |  |  | Weighted- Average Exercise Price of options |  |  | Weighted- Average Remaining Contractual Term |  |  | Aggregate Intrinsic Value |
Outstanding at December 31, 2012 |  |  | 4,047 |  |  | $ | 20.61 |  |  |  |  |  |  |  |  |
Granted |  |  | — |  |  |  | — |  |  |  |  |  |  |  |  |
Special dividend adjustment |  |  | 519 |  |  |  | — |  |  |  |  |  |  |  |  |
Exercised |  |  | (1,830 | ) |  |  | 16.48 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (134 | ) |  |  | 22.33 |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2013 |  |  | 2,602 |  |  | $ | 19.31 |  |  |  | 5.8 |  |  | $ | 33,197 |
Exercisable at December 31, 2013 |  |  | 1,923 |  |  | $ | 18.47 |  |  |  | 5.1 |  |  | $ | 26,141 |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between CCA’s stock price as of December 31, 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2013. This amount changes based on the fair market value of CCA’s stock. The total intrinsic value of options exercised during the years ended December 31, 2013, 2012, and 2011 was $36.9 million, $5.5 million, and $4.5 million, respectively. The weighted average fair value of options granted during 2012 and 2011 was $7.50, and $9.66 per option, respectively, based on the estimated fair value using the Black-Scholes option-pricing model. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
|  | 2013 |  |  | 2012 |  |  | 2011 |
Expected dividend yield |  |  | — |  |  |  | 3.0 | % |  |  | 0.0 | %
Expected stock price volatility |  |  | — |  |  |  | 42.2 | % |  |  | 42.1 | %
Risk-free interest rate |  |  | — |  |  |  | 1.0 | % |  |  | 2.1 | %
Expected life of options |  |  | — |  |  |  | 5 years |  |  |  | 5 years |
CCA estimates expected stock price volatility based on actual historical changes in the market value of CCA’s stock. The risk-free interest rate is based on the U.S. Treasury yield with a term that is consistent with the expected life of the stock options. The expected life of stock options is based on CCA’s historical experience and is calculated separately for groups of employees that have similar historical exercise behavior. Nonvested stock option transactions relating to CCA’s non-qualified stock option plans as of December 31, 2013 and changes during the year ended December 31, 2013 are summarized below (in thousands, except grant date fair values):
|  | Number of options |  | Weighted average grant date fair value |
Nonvested at December 31, 2012 |  | 1,321 |  | $ | 7.91 |
Granted |  | — |  | $ | — |
Special dividend adjustment |  | 133 |  | $ | — |
Cancelled |  | (133) |  | $ | 7.23 |
Vested |  | (642) |  | $ | 7.51 |
Nonvested at December 31, 2013 |  | 679 |  | $ | 6.88 |
As of December 31, 2013, CCA had $2.6 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a remaining weighted-average period of 1.5 years. At CCA’s 2011 annual meeting of stockholders held in May 2011, CCA’s stockholders approved an amendment to the 2008 Stock Incentive Plan that increased the authorized limit on issuance of new awards to an aggregate of up to 18.0 million shares. In addition, during the 2003 annual meeting the stockholders approved the adoption of CCA’s Non-Employee Directors’ Compensation Plan, authorizing CCA to issue up to 225,000 shares of common stock pursuant to the plan. As of December 31, 2013, CCA had 12.3 million shares available for issuance under the Amended and Restated 2008 Stock Incentive Plan and 0.2 million shares available for issuance under the Non-Employee Directors’ Compensation Plan.

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