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Share-based compensation plans | 12 Months Ended
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Dec. 31, 2011
Share-based compensation plans |
Share-based compensation plans |
17. | Share-based compensation plans
At December 31, 2011, the Company had three stock option and award plans and one stock purchase plan which are described below. 2004 Long Term Incentive Plan The 2004 Long Term Incentive Plan (the “2004 LTIP Plan”) is a long term incentive plan that was originally adopted in April 2004. The 2004 LTIP Plan was approved by shareholders on June 29, 2004 and 2.0 million shares were reserved for issuance under this plan (in addition to shares (i) available for future awards as of June 29, 2004 under prior plans or (ii) that become available for future issuance upon the expiration or forfeiture after June 29, 2004 of awards upon prior plans). Awards generally vest on years of service with all awards fully vesting within three years from the date of grant for employees and either three or five years from the date of grant for non-employee directors. Awards can be in the form of a stock option, restricted stock, restricted share unit, performance share unit, or other award form determined by the Board of Directors. Awards granted under the 2004 LTIP Plan expire no later than ten years after the date of the grant. On June 20, 2007, the Company’s shareholders approved amendments and a restatement of the 2004 LTIP Plan, providing for the following major changes: an increase in the number of shares available for grant from 2.0 million shares to 2.8 million shares, a specific allowance for grants of restricted stock awards, and a provision for fixed awards to non-employee directors on the date of their first election to the Board and on each subsequent re-election. On June 19, 2008, the Company’s shareholders approved further amendments to the 2004 LTIP Plan to increase the number of shares available for grant from 2.8 million shares to 3.1 million shares, to increase the annual grant to non-employee directors from 3,000 shares to 5,000 shares, and to limit in the future the number of shares that may be awarded under the plan as full value awards to 100,000 shares. At December 31, 2011, there were 2,371,147 options outstanding under the 2004 LTIP Plan, of which 1,891,828 were exercisable; in addition, there were 69,000 shares of restricted stock outstanding, none of which were vested. Staff Share Option Plan The Staff Stock Option Plan (the “Staff Plan”) is a fixed stock option plan which was adopted in April 1992. Under the Staff Plan, the Company granted options to its employees at the estimated fair market value of such options at the date of grant. Options generally vest based on years of service with all options to be fully vested within five years from date of grant. Options granted under the Staff Plan expire ten years after the date of grant. There are no options left to be granted under the Staff Plan. At December 31, 2011, there were 58,125 options outstanding and exercisable under the Staff Plan. Performance Accelerated Stock Option Inducement Grants On December 30, 2003, the Company granted inducement stock option awards to two key executives of Breg, in conjunction with the acquisition of Breg. The exercise price was fixed at $38.00 per share on November 20, 2003, when the Company announced it had entered into an agreement to acquire Breg. The inducement grants included both service-based and performance-based vesting provisions. The inducement grants became 100% vested on the fourth anniversary of the grant date but are subject to certain exercisability limitations. Following vesting on December 30, 2007, the original inducement grants limited the executives’ ability to exercise specific numbers of options during the years 2008 through 2012. Prior to the options fully vesting and as an inducement for the executives to extend the term of their employment agreements for one year, in November 2007 the Company entered into amended award agreements with the two executives. The amended agreements did not change the vesting date of the options, but provided that the options granted thereunder will only be exercisable during the fixed period beginning January 1, 2009 and ending on December 31, 2010. In December 2008, in order to meet certain requirements of Code Section 409A and the Treasury Regulations promulgated thereunder, and fulfill the Company’s desire to extend each of the executives’ terms of employment with the Company, the Company and the executives entered into second amended and restated award agreements. The second amended agreements provided for the election by the executives of respective periods during which they can exercise options. Bradley Mason elected to exercise 50,000 options in each of the following periods: April 1, 2010 through December 31, 2010, January 1, 2011 through December 31, 2011 and January 1, 2012 through December 31, 2012. William Hopson elected to exercise his 50,000 options in the period between January 1, 2011 and December 31, 2011. Subject to certain termination of employment provisions and notwithstanding any other provisions of the second amended agreements, any portion of the options that are not exercised during their respective exercise periods will not be exercisable thereafter and will lapse and be cancelled. At December 31, 2011, there were 130,000 options outstanding and exercisable under the inducement grants. Stock Purchase Plan The Orthofix International N.V. Amended and Restated Stock Purchase Plan (the “Stock Purchase Plan”) provides for the issuance of shares of the Company’s common stock to eligible employees and directors of the Company and its subsidiaries that elect to participate in the plan and acquire shares of common stock through payroll deductions (including executive officers). On June 20, 2008, the Company’s shareholders approved an amendment and restatement of the plan, providing for the following major change: (i) to allow officers and directors of Orthofix Inc. to participate in the plan on the same basis as our other employees, (ii) to provide that the Company will assume and adopt the plan, as amended, in lieu of Orthofix Inc. acting as sponsor of the plan, (iii) to allow non-employee directors of the Company to participate in the plan, (iv) to increase by 500,000 shares the maximum number of shares available for issuance under the plan, and (v) to provide that the determination of the value of common stock under the plan will be determined either on the first or last day of the plan year, whichever date renders the lower value. These changes were generally effective for the plan year starting January 1, 2009. In June 2009, the Company’s shareholders approved a further amendment to the Stock Purchase Plan to increase the number of shares available for grant from 950,000 shares to 1,400,000 shares. In May 2010, the Company’s shareholders approved an additional increase of 450,000 shares available for grant for a total of 1,850,000 shares. During each purchase period, eligible employees may designate between 1% and 25% of their compensation to be deducted for the purchase of common stock under the plan (up to 25% for employees working in North America, South America and Asia, and up to 15% for employees working in Europe). For eligible directors, the designated percentage will be an amount equal to his or her annual or other director compensation paid in cash for the current plan year. The purchase price of the shares under the plan is equal to 85% of the fair market value on the first day of the plan year (which is a calendar year, running from January 1 to December 31) or, if lower, on the last day of the plan year. Due to the compensatory nature of such plan, the Company has recorded the related share based compensation in the consolidated statement of operations. The aggregate number of shares reserved for issuance under the Employee Stock Purchase Plan is 1,850,000 shares. As of December 31, 2011, 1,224,756 shares had been issued under the Stock Purchase Plan. Share-Based Compensation: As of December 31, 2011, the unamortized compensation expense relating to options granted and expected to be recognized was $3.4 million. This amount is expected to be recognized through August 2016. The following table shows the detail of share-based compensation by line item in the consolidated statements of operations for the years ended December 31, 2011, 2010 and 2009 and the assumptions for each of these years in which grants were awarded:
(US$ in thousands, except assumptions) |  | Year Ended December 31, 2011 |  | Year Ended December 31, 2010 (1) |  | Year Ended December 31, 2009 |
Cost of sales |  | $ | 153 |  | $ | 210 |  | $ | 677 |
Sales and marketing |  | 2,031 |  | 3,505 |  | 3,045 |
General and administrative |  | 4,322 |  | 4,105 |  | 6,467 |
Research and development |  | 142 |  | 318 |  | 563 |
Total |  | $ | 6,648 |  | $ | 8,138 |  | $ | 10,752 |
Assumptions: |  |  |  |  |  |  |
Expected term |  | 4.58 years |  | — |  | 4.00 years |
Expected volatility |  | 49.6% – 49.9% |  | — |  | 45.0% – 48.7% |
Risk free interest rate |  | 0.90%–2.26% |  | — |  | 1.60% – 2.57% |
Dividend rate |  | — |  | — |  | — |
Weighted average fair value of options granted during the year |  | $ | 14.21 |  | $ | — |  | $ | 9.29 |
(1) The Company did not grant any options during 2010. Stock Option Activity: Summaries of the status of the Company’s stock option plans as of December 31, 2011 and 2010 and changes during the year ended December 31, 2011 are presented below:
|  | 2011 |
|  | Options |  | Weighted Average Exercise Price |
Outstanding at December 31, 2010 |  | 2,989,469 |  | $ | 33.20 |
Granted |  | 386,000 |  | $ | 33.08 |
Exercised |  | (587,407 | ) | $ | 29.99 |
Forfeited |  | (228,790 | ) | $ | 38.88 |
Outstanding at December 31, 2011 |  | 2,559,272 |  | $ | 33.41 |
Options exercisable at December 31, 2011 |  | 2,079,953 |  |  |
Outstanding and exercisable by price range as of December 31, 2011
|  | Options Outstanding |  | Options Exercisable |
Range of Exercise Prices |  | Number Outstanding |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |  | Number Exercisable |  | Weighted Average Exercise Price |
$10.42 – $25.01 |  | 452,162 |  | 5.80 |  | $ | 22.73 |  | 343,009 |  | $ | 22.57 |
$25.05 – $28.50 |  | 189,500 |  | 6.63 |  | $ | 25.45 |  | 168,500 |  | $ | 25.31 |
$28.95 – $28.95 |  | 267,447 |  | 5.57 |  | $ | 28.95 |  | 267,447 |  | $ | 28.95 |
$29.17 – $32.77 |  | 265,709 |  | 5.86 |  | $ | 30.59 |  | 171,543 |  | $ | 31.32 |
$33.00 – $37.36 |  | 274,750 |  | 8.32 |  | $ | 34.36 |  | 44,750 |  | $ | 34.63 |
$37.76 – $38.00 |  | 275,499 |  | 1.94 |  | $ | 37.83 |  | 275,499 |  | $ | 37.87 |
$38.11 – $39.24 |  | 279,224 |  | 3.94 |  | $ | 38.23 |  | 279,224 |  | $ | 38.23 |
$39.94 – $43.04 |  | 325,698 |  | 3.96 |  | $ | 41.40 |  | 300,698 |  | $ | 41.50 |
$44.87 – $50.50 |  | 221,783 |  | 4.24 |  | $ | 45.64 |  | 221,783 |  | $ | 45.64 |
$50.99 – $50.99 |  | 7,500 |  | 5.04 |  | $ | 50.99 |  | 7,500 |  | $ | 50.99 |
$10.42 – $50.99 |  | 2,559,272 |  | 5.12 |  | $ | 33.41 |  | 2,079,953 |  | $ | 34.02 |
The weighted average remaining contractual life of exercisable options was 4.28 years at December 31, 2011. The total intrinsic value of options exercised was $4.2 million, $3.0 million and $0.1 million for the years ended December 31, 2011, 2010 and 2009, respectively. The aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2011 is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for the shares that had exercise prices that were lower than the $35.23 closing price of the Company’s stock on December 31, 2011. The aggregate intrinsic value of options outstanding was $10.8 million, $4.8 million and $10.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. The aggregate intrinsic value of options exercisable was $8.4 million, $2.1 million and $1.9 million for the years ended December 31, 2011, 2010 and 2009, respectively. Restricted Stock: During the year ended December 31, 2008, the Company granted to employees 83,434 shares of restricted stock, which vest at various dates through December 2011. During the year ended December 31, 2011, the Company granted to employees 94,000 shares of restricted stock, which vest at various dates through February 2014. The compensation expense, which represents the fair value of the stock measured at the market price at the date of grant, less estimated forfeitures, is recognized on a straight-line basis over the vesting period. Unamortized compensation expense related to restricted stock amounted to $1.8 million at December 31, 2011. A summary of the status of our restricted stock as of December 31, 2011 and 2010 and changes during the year ended December 31, 2011 are presented below:
|  | Shares |  | Weighted Average Grant Date Fair Value |
Non-vested as of December 31, 2010 |  | 16,647 |  | $ | 32.38 |
Granted |  | 94,000 |  | $ | 29.23 |
Vested |  | (36,647 | ) | $ | 30.66 |
Cancelled |  | (5,000 | ) | $ | 29.23 |
Non-vested as of December 31, 2011 |  | 69,000 |  | $ | 29.23 |

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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 FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 2: 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 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 4: 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 5: 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 6: 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 7: 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 8: 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 + Details
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