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Stockholders' Equity and Stock-Based Compensation Plans

3 Months Ended

Mar. 31, 2013

Stockholders' Equity and Stock-Based Compensation Plans [Abstract]

STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION PLANS

NOTE 13—STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION PLANS

At March 31, 2013, the Company had authorized common stock of 40,000,000 shares (December 31, 2012—40,000,000). Issued shares at March 31, 2013, were 29,554,500 (December 31, 2012—29,554,500) and treasury stock amounted to 6,054,840 shares (December 31, 2012—6,222,076).

The Company grants stock options and stock equivalent units (“SEUs”) from time to time as a long-term performance incentive. In certain cases the grants are subject to performance conditions such as the Company’s stock price. Where performance conditions apply the Monte Carlo simulation model is used to determine the fair values. Otherwise the Black-Scholes model is used to determine the fair values.

Stock option plans

The Company has five active stock option plans, two of which provide for the grant of stock options to employees, one provides for the grant of stock options to non-employee directors, and another provides for the grant of stock options to key executives on a matching basis provided they use a proportion of their annual bonus to purchase common stock in the Company on the open market or from the Company. The fifth plan is a savings plan which provides for the grant of stock options to all Company employees provided they commit to make regular savings over a pre-defined period which can then be used to purchase common stock upon vesting of the options. The stock options have vesting periods ranging from 24 months to 6 years and in all cases stock options granted expire within 10 years of the date of grant. All grants are at the sole discretion of the Compensation Committee of the Board of Directors. Grants may be priced at market value or at a premium or discount (including at no cost). The aggregate number of shares of common stock reserved for issuance which can be granted under the plans is 2,640,000.

The following table summarizes the transactions of the Company’s stock option plans for the three months ended March 31, 2013:


		Number of Options				Weighted Average Exercise Price				Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2012			1,001,241			$	6.27
Granted—at discount			48,083			$	0.00			$	32.14
—at market value			21,053			$	41.31			$	16.09
Exercised			(195,478)			$	2.17
Forfeited			(4,438)			$	22.48

Outstanding at March 31, 2013			870,461			$	7.60

At March 31, 2013, there were 193,668 stock options that were exercisable, of which 100,664 had performance conditions attached.

The Company’s policy is to issue shares from treasury stock to holders of stock options who exercise those options, but if sufficient treasury stock is not available, the Company will issue previously unissued shares of stock to holders of stock options who exercise options.

The total compensation cost for the first three months of 2013 was $0.7 million (2012—$0.8 million). The total intrinsic value of options exercised in the first three months of 2013 was $1.9 million (2012—$0.1 million).

The total compensation cost related to non-vested stock options not yet recognized at March 31, 2013 was $3.2 million and this cost is expected to be recognized over the weighted-average period of 2.07 years.

Stock equivalent units

SEUs have vesting periods ranging from 11 months to 4 years and in all cases SEUs granted expire within 10 years of the date of grant. Grants may be priced at market value or at a premium or discount (including at no cost). There is no limit to the number of SEUs that can be granted. The liability for SEUs is located in accrued liabilities in the consolidated balance sheets until they are cash settled.

The following table summarizes the transactions of the Company’s SEUs for the three months ended March 31, 2013:


		Number of SEUs				Weighted Average Exercise Price				Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2012			623,828			$	2.95
Granted—at discount			45,028			$	0.00			$	32.06
—at market value			6,970			$	41.31			$	16.09
Exercised			(150,171	)		$	2.90
Forfeited			(2,361	)		$	10.38

Outstanding at March 31, 2013			523,294			$	3.18

At March 31, 2013, there were 185,451 SEUs that are exercisable, of which 150,308 had performance conditions attached.

The charges for SEUs are spread over the life of the award subject to a revaluation to fair value each quarter. The revaluation may result in a charge or a credit to the income statement in the quarter dependent upon our share price and other performance criteria.

The total compensation cost for the first three months of 2013 was $3.7 million (2012—$1.9 million). The total intrinsic value of SEUs exercised in the first three months of 2013 was $1.2 million (2012—$0.5 million).

The weighted-average remaining vesting period of non-vested SEUs is 1.44 years.