v2.4.0.6
Share-Based Compensation
 12 Months Ended
Dec. 31, 2011
Share-Based Compensation [Abstract]  
Share-Based Compensation

Note 19 — Share-Based Compensation

Share-based compensation expense consists of:

 

                         
    For the Year  
    2011     2010     2009  
    (In thousands)  

Cash-settled awards

   $ 1,095     $ 6,023     $ 8,174  

Equity-settled awards

     941       —       —  

Restricted stock

     2,505       3,461       1,741  

Stock options

     2,526       2,112       2,083  
   

 

 

    

 

 

    

 

 

  
    $ 7,067     $ 11,596     $ 11,998  
   

 

 

    

 

 

    

 

 

  

Share-based compensation expense is included in:

 

                         
    For the Year  
    2011     2010     2009  
    (In thousands)  

General and administrative

   $ 3,216     $ 5,240     $ 7,527  

Other operating

     3,851       6,356       4,471  
   

 

 

    

 

 

    

 

 

  
    $ 7,067     $ 11,596     $ 11,998  
   

 

 

    

 

 

    

 

 

  

In 2011, share-based compensation decreased as a result of a decline in our stock price and its impact on cash-settled awards.

The fair value of awards granted to retirement-eligible employees and expensed at the date of grant was $654,000 in 2011, $286,000 in 2010 and $183,000 in 2009. Unrecognized share-based compensation expense related to non-vested equity-settled awards, restricted stock and stock options is $7,363,000 at year-end 2011. The weighted average period over which this amount will be recognized is estimated to be two years. We did not capitalize any share-based compensation in 2011, 2010 or 2009.

In 2011 and 2010, we withheld 87,357 and 3,247 shares having a value of $1,547,000 and $61,000 in connection with vesting of restricted stock awards and exercises of stock options. These shares are accounted for as treasury stock and are reflected in financing activities in our consolidated statements of cash flows.

A summary of awards granted under our 2007 Stock Incentive Plan follows:

    Cash-settled awards

Cash-settled awards granted to our employees in the form of restricted stock units or stock appreciation rights generally vest over three to four years from the date of grant and generally provide for accelerated vesting upon death, disability or if there is a change in control. Vesting for some restricted stock unit awards is also conditioned upon achievement of a minimum one percent annualized return on assets over a three-year period. Cash-settled stock appreciation rights have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, disability or if there is a change in control. Stock appreciation rights were granted with an exercise price equal to the market value of our stock on the date of grant.

Cash-settled awards granted to our directors in the form of restricted stock units are fully vested at the time of grant and payable upon retirement.

The following table summarizes the activity of cash-settled restricted stock unit awards in 2011:

 

         
    Equivalent
Units		   Weighted
Average
Grant
Date Fair
Value
    (In thousands)   (Per unit)

Non-vested at beginning of period

   376   $11.88

Granted

   171   17.89

Vested

   (88)   17.20

Forfeited

   (10)   11.55
   

 

  

 

Non-vested at end of period

   449   $13.13
   

 

  

 

The weighted average grant date fair value of our non-vested cash-settled restricted stock unit awards at year-end 2010 was $11.88 for 376,000 equivalent units and at year-end 2009 was $9.43 for 268,000 equivalent units.

The following table summarizes the activity of cash-settled stock appreciation rights in 2011:

 

                         
   

Rights

Outstanding

    

Weighted

Average

Exercise

      Price      

   

Weighted

Average

Remaining

Contractual
      Term      

 

Aggregate

Intrinsic

Value
(Current

Value Less

Exercise
    Price)    
    (In thousands)     (Per share)     (In years)   (In thousands)

Balance at beginning of period

     909       $11.28     8   $7,289

Granted

     —       —          

Exercised

     (14)       9.29          

Forfeited

     —       —          
   

 

 

    

 

 

    

 

  

 

Balance at end of period

     895       $11.31     7   $3,986
   

 

 

    

 

 

    

 

  

 

Exercisable at end of period

     393       $10.49     7   $1,970

The weighted average exercise price of our cash-settled stock appreciation rights at year-end 2010 was $11.28 for 909,000 awards and at year-end 2009 was $9.29 for 736,000 awards.

The fair value of awards settled in cash was $197,000 in 2011, $751,000 in 2010 and $23,000 in 2009. At year-end 2011, the fair value of vested cash-settled awards is $15,034,000 and is included in other liabilities. The aggregate current value of non-vested awards is $8,802,000 at year-end 2011 based on a year-end stock price of $15.13.

 

Equity-settled awards

Equity-settled awards granted to our employees include restricted stock units (RSU), which vest over or after three years from the date of grant, and beginning first quarter 2011, market-leveraged stock units (MSU), which vest after three years. The following table summarizes the activity of equity-settled awards in 2011:

 

                 
          Weighted  
    Equivalent
Units		     Average
Grant		  
      Date Fair
Value		  
    (In thousands)     (Per unit)  

Non-vested at beginning of period

     —     $ —  

Granted

     160       20.73  

Vested

     —       —  

Forfeited

     (1 )      18.59  
   

 

 

    

 

 

  

Non-vested at end of period

     159     $ 20.74  
   

 

 

    

 

 

  

In 2011, we granted 124,700 MSU awards. These awards will be settled in common stock based upon our stock price performance over three years from the date of grant. The number of shares to be issued could range from a high of 187,050 shares if our stock price increases by 50 percent or more, to a low of 62,350 shares if our stock price decreases by 50 percent, or could be zero if our stock price decreases by more than 50 percent, the minimum threshold performance. MSU awards are valued using a Monte Carlo simulation pricing model, which includes expected stock price volatility and risk-free interest rate assumptions. Compensation expense is recognized regardless of achievement of performance conditions, provided the requisite service period is satisfied.

Unrecognized share-based compensation expense related to non-vested equity-settled awards is $2,215,000 at year-end 2011. The weighted average period over which this amount will be recognized is estimated to be two years.

Restricted stock

Restricted stock awards vest either ratably over or after three years, generally if we achieve a minimum one percent annualized return on assets over such three-year period. The following table summarizes the activity of restricted stock awards in 2011:

 

                 
          Weighted  
    Restriced
Shares		     Average
Grant		  
      Date Fair
Value		  
    (In thousands)     (Per unit)  

Non-vested at beginning of period

     636     $ 17.56  

Granted

     40       13.89  

Vested

     (275 )      20.71  

Forfeited

     (2 )      17.80  
   

 

 

    

 

 

  

Non-vested at end of period

     399     $ 15.02  
   

 

 

    

 

 

  

The weighted average grant date fair value of our non-vested restricted stock awards at year-end 2010 was $17.56 for 636,000 non-vested restricted shares and at year-end 2009 was $17.43 for 331,000 non-vested restricted shares.

Unrecognized share-based compensation expense related to non-vested restricted stock awards is $2,525,000 at year-end 2011. The weighted average period over which this amount will be recognized is estimated to be one year.

 

Stock options

Stock options have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, disability or if there is a change in control. Options were granted with an exercise price equal to the market value of our stock on the date of grant. The following table summarizes the activity of stock option awards in 2011:

 

                                 
    Options
Outstanding		     Weighted
Average
Exercise Price		     Weighted
Average
Remaining
Contractual
Term		     Aggregate
Intrinsic Value
(Current
Value Less
Exercise Price)		  
    (In thousands)     (Per share)     (In years)     (In thousands)  

Balance at beginning of period

     957     $ 23.45       8     $ 1,890  

Granted

     327       18.59                  

Exercised

     —       —                  

Forfeited

     —       —                  
   

 

 

    

 

 

    

 

 

    

 

 

  

Balance at end of period

     1,284     $ 22.22       7     $ 944  
   

 

 

    

 

 

    

 

 

    

 

 

  

Exercisable at end of period

     646     $ 25.58       6     $ 472  

We estimate the fair value of stock options using the Black-Scholes option pricing model and the following assumptions:

 

                         
    For the Year  
    2011     2010     2009  

Expected stock price volatility

     56.2  %      51.0  %      41.8  % 

Risk-free interest rate

     2.4  %      2.3  %      1.8  % 

Expected life of options (years)

     6       6       6  

Weighted average estimated fair value of options at grant date

   $ 10.11     $ 8.98     $ 3.94  

We have limited historical experience as a stand-alone company so we utilized alternative methods in determining our valuation assumptions. The expected life was based on the simplified method utilizing the midpoint between the vesting period and the contractual life of the awards. In 2011, the expected stock price volatility was based on a blended rate utilizing our historical volatility and historical prices of our peers’ common stock for a period corresponding to the expected life of the options. In 2010 and 2009, the expected stock price volatility was based on historical prices of our peers’ common stock for a period corresponding to the expected life of the options. Pre-vesting forfeitures are estimated based upon the pool of participants and their expected activity and historical trends.

Unrecognized share-based compensation expense related to non-vested stock options is $2,623,000 at year-end 2011. The weighted average period over which this amount will be recognized is estimated to be two years.

Pre-Spin Awards

Certain of our employees participated in Temple-Inland’s share-based compensation plans. In conjunction with our 2007 spin-off, these awards were equitably adjusted into separate awards of the common stock of Temple-Inland and the spin-off entities.

Stock options have a ten-year term, generally become exercisable ratably over four years and provide for accelerated or continued vesting upon retirement, death, disability or if there is a change in control. A summary of stock option awards outstanding year-end 2011 follows:

 

                                 
    Options
Outstanding		     Weighted
Average
Exercise Price		     Weighted
Average
Remaining
Contractual
Term		     Aggregate
Intrinsic Value
(Current
Value Less
Exercise Price)		  
    (In thousands)     (Per share)     (In years)     (In thousands)  

Outstanding and exercisable on Forestar stock

     71     $ 22.86       4     $ 69  

Outstanding and exercisable on Temple-Inland stock

     102     $ 20.74       4       1,116  
                           

 

 

  
                            $ 1,185  
                           

 

 

  

 

The intrinsic value of options exercised was $766,000 in 2011, $578,000 in 2010 and $287,000 in 2009.