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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2012
Share-Based Compensation [Abstract] |
SHARE-BASED COMPENSATION | NOTE 9 – SHARE-BASED COMPENSATION Equity Compensation Plan On October 13, 2009, the Company’s Board of Directors approved, and recommended that the Company’s stockholders approve, the 2009 Omnibus Incentive Plan (“Incentive Plan”). On November 16, 2009, the Company’s stockholders approved the Incentive Plan by written consent. An aggregate of 1.8 million shares of Common Stock was initially reserved for issuance and available for awards under the Incentive Plan. Awards under the Incentive Plan may include incentive stock options, nonqualified stock options, stock appreciation rights, non-vested shares of Common Stock (“Restricted Stock”), restricted stock units, performance share or unit awards, other share-based awards and cash-based incentive awards. Awards under the Incentive Plan may be granted to employees, directors, consultants or other persons providing services to the Company or its affiliates. The Incentive Plan also provides for awards that are intended to qualify as “performance-based compensation” in order to preserve the deductibility of such compensation by the Company under Section 162(m) of the Internal Revenue Code. At the 2011 Annual Meeting of Shareholders held on May 11, 2011, shareholders voted to approve the recommendation of the Company’s Board of Directors to amend the Incentive Plan. The Incentive Plan allows for amendments which are intended for the plan to remain a flexible and effective source of incentive compensation in terms of the number of shares of stock available for awards, in terms of its design, as well as whether it generally conforms with the best practices in today’s business environment. Significant aspects of the amendment include: an increase of 2.4 million in the shares reserved for grant, an adjustment to the annual maximum awards limits, a prohibition against re-pricing of options and stock appreciation rights without shareholder approval, and an addition of specific elements to the performance goals. At the 2012 Annual Meeting of Shareholders held on June 8, 2012, shareholders voted to approve the recommendation of the Company’s Board of Directors to amend the Incentive Plan (Second Amendment). Significant aspects of the Second Amendment include: an increase of 3 million in the shares reserved for grant, an extension of the term, an expansion of the list of performance goals, a provision for recovery compensation in connection with financial restatements, and certain modifications in order to provide internal consistency. As of December 31, 2012, 1,850 thousand shares remained reserved for issuance and were available for awards under the Incentive Plan. The following table provides certain information related to stock options and restricted stock during the year ended December 31, 2012 (in thousands, except per share data):
|  | Year Ended December 31, 2012 |
|  | Stock Options |  |  | Restricted Stock |
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value |  |  | Weighted Average Remaining Term (Years) |  |  | Number of Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding as of December 31, 2011 |  |  | 6,720 |  |  | $ | 4.78 |  |  |  |  |  |  |  |  |  |  |  | 801 |  |  | $ | 5.67 |
Granted |  |  | 500 |  |  |  | 3.51 |  |  |  |  |  |  |  |  |  |  |  | 650 |  |  |  | 3.37 |
Forfeited |  |  | (30 | ) |  |  | 4.70 |  |  |  |  |  |  |  |  |  |  |  | — |  |  |  | — |
Exercised(1) |  |  | (285 | ) |  |  | 2.35 |  |  |  |  |  |  |  |  |  |  |  | n/a |  |  |  | n/a |
Vested |  |  | n/a |  |  |  | n/a |  |  |  |  |  |  |  |  |  |  |  | (299 | ) |  |  | 5.69 |
Expired |  |  | (1,575 | ) |  |  | 6.50 |  |  |  |  |  |  |  |  |  |  |  | n/a |  |  |  | n/a |
Outstanding as of December 31, 2012(2) |  |  | 5,330 |  |  | $ | 4.29 |  |  | $ | 2,126 |  |  |  | 3.0 |  |  |  | 1,152 |  |  | $ | 4.37 |
Exercisable as of December 31, 2012 |  |  | 4,417 |  |  | $ | 4.34 |  |  | $ | 1,691 |  |  |  | 2.3 |  |  |  |  |  |  |  |  |
(1) | Unless otherwise specified, such as in the case of the exercise of stock options, the per share prices were determined using the closing price of the Company’s Common Stock as quoted on the NYSE MKT LLC. Shares issued upon exercise of options represent original issuances in private transactions pursuant to Section 4(2) of the Securities Act of 1933, as amended.
(2) | All shares outstanding as of December 31, 2012 are expected to vest.
n/a - Not applicable The following table provides certain information in connection with the Company’s share-based compensation arrangements for the periods presented (in thousands):
|  | Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Compensation expense: |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  | $ | 1,188 |  |  | $ | 1,450 |  |  | $ | 2,109 |
Restricted stock |  |  | 2,642 |  |  |  | 1,398 |  |  |  | 853 |
Total |  | $ | 3,830 |  |  | $ | 2,848 |  |  | $ | 2,962 |
Deferred tax benefits: |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  | $ | 458 |  |  | $ | 559 |  |  | $ | 814 |
Restricted stock |  |  | 468 |  |  |  | 315 |  |  |  | 329 |
Total |  | $ | 926 |  |  | $ | 874 |  |  | $ | 1,143 |
Realized tax benefits: |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  | $ | 168 |  |  | $ | 195 |  |  | $ | 4,650 |
Restricted stock |  |  | 291 |  |  |  | — |  |  |  | (324 | )
Total |  | $ | 459 |  |  | $ | 195 |  |  | $ | 4,326 |
Excess tax benefits(shortfall): |  |  |  |  |  |  |  |  |  |  |  |
Stock options |  | $ | (1,618 | ) |  | $ | 195 |  |  | $ | 4,289 |
Restricted stock |  |  | (142 | ) |  |  | — |  |  |  | (190 | )
Total |  | $ | (1,760 | ) |  | $ | 195 |  |  | $ | 4,099 |
Weighted average fair value per share: |  |  |  |  |  |  |  |  |  |  |  |
Stock option grants |  | $ | 0.87 |  |  | $ | 1.67 |  |  | $ | 1.46 |
Restricted stock grants |  | $ | 3.37 |  |  | $ | 5.61 |  |  | $ | 5.84 |
Intrinsic value of options exercised |  | $ | 437 |  |  | $ | 507 |  |  | $ | 12,055 |
Fair value of restricted stock vested |  | $ | 1,164 |  |  | $ | 540 |  |  | $ | 723 |
Cash received for strike price and tax withholdings |  | $ | 652 |  |  | $ | 204 |  |  | $ | 278 |
Shares acquired through cashless exercise(1) |  |  | 147 |  |  |  | 70 |  |  |  | 1,314 |
Value of shares acquired |  | $ | 583 |  |  | $ | 263 |  |  | $ | 7,878 |
(1) | All shares acquired represent shares tendered to cover the strike price for options and tax withholdings on the intrinsic value of options exercised or restricted stock vested. These shares have been cancelled by the Company.
The following table provides the amount of unrecognized compensation expense as of the most recent balance sheet date and the weighted average period over which those expenses will be recorded for both stock options and restricted stock (dollars in thousands):
|  | As of December 31, 2012 |
|  | Stock Options |  |  | Restricted Stock |
Unrecognized expense |  | $ | 824 |  |  | $ | 2,737 |
Weighted average remaining years |  |  | 1.0 |  |  |  | 1.5 |
Stock Options Non-qualified stock option awards (“stock options”) granted by the Company generally expire between 5 to 10 years from the grant date and generally vest over a 2 to 3 year service period commencing on the grant date. The Company used the modified Black-Scholes model to estimate the fair value of employee stock options on the date of grant utilizing the assumptions noted below. The risk-free rate is based on the U.S. Treasury bill yield curve in effect at the time of grant for the expected term of the option. The expected term of options granted represents the period of time that the options are expected to be outstanding. Expected volatilities are based on historical volatilities of our Common Stock. The dividend yield was based on expected dividends at the time of grant. The following table provides the assumptions utilized in the Black-Scholes model for stock options granted during the periods presented:
|  | Year Ended December 31, |
|  | 2012 |  |  | 2011 |  |  | 2010 |
Weighted-average risk-free interest rate |  |  | 0.62 | % |  |  | 1.34 | % |  |  | 0.91 | %
Expected term of option in years |  |  | 4.25 |  |  |  | 3.92 |  |  |  | 2.13 |
Weighted-average volatility |  |  | 48.4 | % |  |  | 58.5 | % |  |  | 59.6 | %
Dividend yield |  |  | 11.4 | % |  |  | 8.9 | % |  |  | 9.8 | %
Weighted average grant date fair value per share |  | $ | 0.87 |  |  | $ | 1.67 |  |  | $ | 1.46 |
On September 4, 2012, the Company granted stock options for an aggregate 500 thousand shares of Common Stock to the Company’s Senior Vice President and Chief Operating Officer (“COO”) in consideration for services rendered pursuant to terms of an employment agreement and to provide the COO with a continued incentive to share in the success of the Company. The options have an exercise price of $3.51, expire on September 4, 2019 and vest over two years as follows: options for 250 thousand shares on the one year anniversary of the grant date and options for 250 thousand shares on the two year anniversary of the grant date. On June 23, 2011, the Company granted options to purchase an aggregate of 1,495 thousand shares of common stock to the Company’s directors (225 thousand shares), executive officers (675 thousand shares) and management (595 thousand shares). Options granted to directors vest in full on the earlier of (i) the first anniversary of the date of grant, and (ii) the first annual meeting of the Company’s shareholders, following the date of grant, at which the shareholders elect or reelect any directors to the Board. Options granted to executive officers and management vest as follows: (i) one third on the six (6) month anniversary of the date of grant, (ii) one third on the one (1) year anniversary of the date of grant, and (iii) one third on the two (2) year anniversary of the date of grant. The options have an exercise price of $4.70 per share and expire on June 23, 2016 for directors and June 23, 2018 for executive officers and management. On May 19, 2010, the Company granted options to purchase an aggregate of 1,315 thousand shares of Common Stock to the Company’s directors (225 thousand shares), executive officers (775 thousand shares) and management (315 thousand shares) of which 50% of the options vested immediately and 50% vested on May 19, 2011. The options have an exercise price of $4.87 per share and expire on May 19, 2015. The options granted to the Company’s President and Chief Executive Officer and to the Company’s COO are only exercisable on such date or dates as the fair market value, as defined in 2009 Omnibus Incentive Plan, of the Company’s Common Stock is and has been at least one-hundred fifty percent (150%) of the exercise price for the previous twenty (20) consecutive trading days. On February 2, 2010, the Company granted stock options for an aggregate 350 thousand shares of Common Stock to the COO in consideration for services rendered pursuant to terms of an employment agreement and to provide the COO with a continued incentive to share in the success of the Company. The options have an exercise price of $5.84, expire on February 2, 2015 and vest over two years as follows: options for 150 thousand shares on the grant date; options for 100 thousand shares on the one year anniversary of the grant date and options for 100 thousand shares on the two year anniversary of the grant date. Restricted Stock Grants Restricted stock grants are awarded to certain employees in consideration for services rendered pursuant to terms of employment agreements and or to provide to those employees with a continued incentive to share in the success of the Company. Non-vested shares (“restricted stock”) generally vest over a three year service period commencing on the grant date. Effective August 23, 2012, the Company issued 650 thousand shares of restricted Common Stock at a price of $3.37 per share to its COO. The stock vests cumulatively over a three-year period as follows: 38.5 percent, 77 percent and 100 percent, respectively, on January 1, 2013, January 1, 2014 and December 31, 2014. The Company issued 600 thousand shares of performance-based restricted common stock at a price of $5.61 per share to its COO. Shares of 200 thousand vest on each of the first, second and third anniversary of the grant date which was March 28, 2011, subject to shareholder approval and annual performance criteria. This grant was not effective until shareholder approval which took place May 11, 2011. Effective February 2, 2010, the Company issued 300 thousand shares of restricted Common Stock at a price of $5.84 per share to its COO. The stock vests cumulatively over a three-year period as follows: 33 percent, 66 percent and 100 percent, respectively, on the first, second and third anniversaries of the issue date. Stock Grantor Trust On April 3, 2000, the Company established the Universal Insurance Holdings, Inc. Stock Grantor Trust (“SGT”) to fund its obligations arising from its various stock option agreements. The Company funded the SGT with 2.9 million shares of Company Common Stock. In exchange, the SGT delivered $29 thousand and a promissory note to the Company for approximately $2.3 million which together represents the purchase price of the shares. Amounts owed by the SGT to the Company will be repaid by cash received by the SGT, which will result in the SGT releasing shares to satisfy Company obligations for stock options. The assets of the SGT are subject to the claims of the Company’s general creditors under federal and state law. The consolidated financial statements include the accounts of the SGT. Dividends paid by the Company and received by the SGT on shares of Common Stock held in trust are eliminated in consolidation and shown net in the Consolidated Financial Statements. The agreement governing the operation of the SGT provides that the SGT shall terminate upon the later of the date that (i) all shares of Common Stock available for issuance under the SGT have been distributed or (ii) the promissory note is paid in full. The promissory note was paid in full on March 15, 2010, and promptly thereafter all shares of Common Stock remaining in the SGT were distributed to holders of Company options in satisfaction of the Company’s obligations under certain of its stock option agreements. The SGT was terminated upon this final distribution of shares of Common Stock from the SGT, and as of March 31, 2010, the SGT did not hold any shares of Common Stock.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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