|
Note 14. Stock Option Plans and Share-Based Compensation
Stock Option Plans
At September 30, 2011, a total of 2,818,935 shares of common stock was reserved for future issuance under our 2009 Equity Incentive Plan (the “2009 Plan”). At September 30, 2011, $5.9 million of total unrecognized compensation cost related to non-vested stock options was expected to be recognized over a weighted average period of 2.5 years.
A summary of aggregate option activity for the nine months ended September 30, 2011 is presented below:
|
Options: |
|
Number of Shares |
|
Weighted-
Average
Exercise Price |
|
|
|
|
(in thousands) |
|
|
|
|
Outstanding at December 31, 2010 |
|
4,740 |
|
$ |
12.86 |
|
|
Granted |
|
287 |
|
$ |
14.53 |
|
|
Exercised |
|
(318 |
) |
$ |
8.05 |
|
|
Forfeited |
|
(58 |
) |
$ |
13.71 |
|
|
Expired |
|
(35 |
) |
$ |
20.70 |
|
|
Outstanding at September 30, 2011 |
|
4,616 |
|
$ |
13.23 |
|
|
Exercisable at September 30, 2011 |
|
3,560 |
|
$ |
13.40 |
|
Restricted Stock and Time-based Restricted Stock Units
The non-employee members of our Board of Directors are granted restricted stock on the day of our annual meeting of stockholders and such shares of restricted stock vest on the date of the subsequent year’s annual meeting of stockholders, provided such non-employee director remains a director on such date. Restricted stock units (“RSUs”) are granted to certain of our employees and generally vest over a period of four years and are expensed ratably on a straight-line basis over the vesting period. The fair value of both restricted stock and RSUs granted pursuant to our stock option plans is the product of the number of shares granted and the grant date fair value of our common stock. Our unrecognized compensation cost related to non-vested restricted stock at September 30, 2011 was approximately $0.6 million and is expected to be recognized over a weighted-average period of 0.7 years. Expected future compensation expense relating to RSUs outstanding on September 30, 2011 is $3.5 million over a weighted-average period of 2.3 years.
A summary of activity of both restricted stock and RSUs for the nine months ended September 30, 2011 is presented below:
|
|
|
Restricted Stock |
|
Restricted Stock Units |
|
|
|
|
|
|
Weighted - |
|
|
|
Weighted - |
|
|
|
|
|
|
Average |
|
|
|
Average |
|
|
|
|
|
|
Grant Date |
|
|
|
Grant Date |
|
|
|
|
Number of |
|
Fair Value Per |
|
Number of |
|
Fair Value Per |
|
|
|
|
Shares |
|
Share |
|
Shares |
|
Share |
|
|
|
|
(in thousands) |
|
|
|
(in thousands) |
|
|
|
|
Non-vested, December 31, 2010 |
|
77 |
|
$ |
12.91 |
|
308 |
|
$ |
12.98 |
|
|
Granted |
|
68 |
|
$ |
14.71 |
|
87 |
|
$ |
14.22 |
|
|
Vested |
|
(77 |
) |
$ |
12.91 |
|
(85 |
) |
$ |
14.77 |
|
|
Forfeited |
|
— |
|
|
|
(8 |
) |
$ |
12.85 |
|
|
Non-vested, September 30, 2011 |
|
68 |
|
$ |
14.71 |
|
302 |
|
$ |
12.64 |
|
Performance-based Restricted Stock Units
In 2011, we began incorporating performance-based restricted stock units (“PSUs”) as an element of our executive compensation plans. For the executive officers, the 2011 grants totaled 100,000 stock options, 50,000 time-based RSUs and 100,000 PSUs. Our unrecognized compensation cost related to non-vested performance-based restricted stock units at September 30, 2011 was approximately $0.6 million and is expected to be recognized over a weighted-average period of 1.5 years.
Vesting for the PSU awards is based on the percentile placement of our total shareholder return among the companies listed in the NASDAQ Healthcare Index (the “Index”) and time-based vesting. We calculate total shareholder return based on the one year annualized rates of return reflecting price appreciation plus reinvestment of dividends. Stock price appreciation is calculated based on the average closing prices of the applicable company’s common stock for the 20 trading days ending on the last trading day of the year prior to the date of grant as compared to the average closing prices for the 20 trading days ended on the last trading day of the year of grant. The following table shows the percent of PSUs eligible for further time-based vesting based on our percentile placement:
|
Percentile Placement of
Our Total Shareholder
Return |
|
% of PSUs Eligible for Time-
Based Vesting |
|
|
Below the 35th percentile |
|
0% |
|
|
At least the 35th percentile, but below the 50th percentile |
|
50% |
|
|
At least the 50th percentile, but below the 65th percentile |
|
100% |
|
|
At least the 65th percentile, but below the 75th percentile |
|
110% to 119%(1) |
|
|
At or above the 75th percentile |
|
120% |
|
(1) The actual percentage of PSUs eligible for further time-based vesting is based on straight-line interpolation, where, for example, if the ranking is the 70th percentile, then the vesting percentage is 115%.
After the last trading day of 2011, the Compensation Committee of our Board of Directors will determine the percentile rank of the company’s total shareholder return and the number of PSU awards eligible for further time-based vesting. The eligible PSU awards will vest as follows: 25% of the eligible awards will vest immediately with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three year period. Vesting is contingent upon continued service. Depending on our market-based performance, the 100,000 PSUs awarded in 2011 could result in actual shares released of none, 50,000, 100,000 or linear interpolation between 110,000 and 120,000 shares, with 120,000 shares as the maximum result for market performance at or above the 75th percentile in the industry.
The fair value of a PSU award is the average of trial-specific values of the award over each of one million Monte Carlo trials. Each trial-specific value is the market value of the award at the end of the one-year performance period discounted back to the grant date. The market value of the award for each trial at the end of the performance period is the product of (a) the per share value of Omnicell stock at the end of the performance period and (b) the number of shares that vest. The number of shares that vest at the end of the performance period depends on the percentile ranking of the total shareholder return for Omnicell stock over the performance period relative to the total shareholder return of each of the other companies in the Index as shown in the table above.
A summary of activity of the PSUs for the nine months ended September 30, 2011 is presented below:
|
|
|
|
|
Weighted - |
|
|
|
|
|
|
Average |
|
|
|
|
|
|
Grant Date |
|
|
|
|
|
|
Fair Value Per |
|
|
Performance-based Stock Units |
|
Number of Shares |
|
Share |
|
|
|
|
(in thousands) |
|
|
|
|
Non-vested, December 31, 2010 |
|
— |
|
— |
|
|
Granted |
|
100 |
|
$ |
11.15 |
|
|
Vested |
|
— |
|
— |
|
|
Forfeited |
|
— |
|
— |
|
|
Non-vested, September 30, 2011 |
|
100 |
|
$ |
11.15 |
|
Employee Stock Purchase Plan
We have an Employee Stock Purchase Plan (“ESPP”), under which employees can purchase shares of our common stock based on a percentage of their compensation, but not greater than 15% of their earnings, up to a maximum of $25,000 of fair value per year. The purchase price per share must be equal to the lower of 85% of the fair value of the common stock at the beginning of a 24-month offering period or the end of each six-month purchasing period. As of September 30, 2011, 3,404,995 shares had been issued under the ESPP. As of September 30, 2011 there were a total of 1,926,560 shares reserved for future issuance under the ESPP. During the three months and nine months ended September 30, 2011, 166,762 and 445, 965 shares of common stock, respectively, were purchased under the ESPP.
Share-based Compensation
We account for share-based awards granted to employees and directors including employee stock option awards, restricted stock, PSUs and RSUs issued pursuant to the 2009 Plan and employee stock purchases made under our ESPP using the estimated grant date fair value method of accounting in accordance with ASC 718, Stock Compensation.
The impact on our results for share-based compensation for the three months and nine months ended September 30, 2011 and 2010 was as follows (in thousands):
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
|
Cost of product and service revenues |
|
$ |
358 |
|
$ |
293 |
|
$ |
1,108 |
|
$ |
993 |
|
|
Research and development expenses |
|
333 |
|
159 |
|
1,005 |
|
537 |
|
|
Selling, general and administrative expenses |
|
1,720 |
|
1,746 |
|
5,141 |
|
4,922 |
|
|
Total share-based compensation expenses |
|
$ |
2,411 |
|
$ |
2,198 |
|
$ |
7,254 |
|
$ |
6,452 |
|
We value options and ESPP shares using the Black-Scholes-Merton option-pricing model. Restricted stock and time-based RSUs are valued at the grant date fair value of the underlying common shares. The PSUs are valued via Monte Carlo simulation, as described above. |