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Share-based compensation plans | 12 Months Ended
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Dec. 31, 2012
Share-based compensation plans |
18. |  | Share-based compensation plans
At December 31, 2012, the Company had stock option and award plans, and an employee stock purchase plan which are described below. 2012 Long Term Incentive Plan The Board of Directors adopted the Orthofix International N.V. 2012 Long-Term Incentive Plan (the “2012 LTIP”) on April 13, 2012, subject to shareholder approval which was subsequently provided by shareholder ratification. The 2012 LTIP provides for the grant of options to purchase shares of the Company’s common stock, stock awards (including restricted stock, unrestricted stock, and stock units), stock appreciation rights, performance-based awards and other equity-based awards. All of the Company’s employees and the employees of the Company’s subsidiaries and affiliates are eligible to receive awards under the 2012 LTIP. In addition, the Company’s non-employee directors and consultants and advisors who perform services for the Company and the Company’s subsidiaries and affiliates may receive awards under the 2012 LTIP. Incentive share options, however, are only available to the Company’s employees. The Company reserves a total of 1,600,000 shares of common stock for issuance pursuant to the 2012 LTIP, subject to certain adjustments set forth in the 2012 LTIP. At December 31, 2012, there were 156,000 options outstanding under the 2012 LTIP Plan, of which none were exercisable; in addition, there were 125,500 shares of restricted stock outstanding, none of which were vested. 2004 Long Term Incentive Plan The 2004 Long Term Incentive Plan (the “2004 LTIP Plan”) reserves 3.1 million shares for issuance (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. The 2004 LTIP Plan provides an annual grant to non-employee directors of 5,000 shares and limits the future the number of shares that may be awarded under the plan as full value awards to 100,000 shares. At December 31, 2012, there were 1,460,355 options outstanding under the 2004 LTIP Plan, of which 1,218,693 were exercisable; in addition, there were 35,331 shares of restricted stock outstanding, none of which were vested. Staff Share Option Plan The Staff Share Stock Option Plan (the “Staff Share Plan”) is a fixed stock option plan which was adopted in April 1992. Under the Staff Share 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 Share Plan expire ten years after the date of grant. There are no options left to be granted under the Staff Plan. At December 31, 2012, there were 29,600 options outstanding and exercisable under the Staff Share Plan. Employee 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). 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, 2012, 1,362,808 shares had been issued under the Stock Purchase Plan. Share-Based Compensation: As of December 31, 2012, the unamortized compensation expense relating to options granted and expected to be recognized was $3.9 million. This amount is expected to be recognized through August 2016. The following table shows the detail of share-based compensation by line item in the consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010 and the assumptions for each of these years in which grants were awarded:
(US$ in thousands, except assumptions) |  | Year Ended December 31, 2012 |  |  | Year Ended December 31, 2011 |  |  | Year Ended December 31, 2010 (1) |
Cost of sales |  | $ | 592 |  |  | $ | 153 |  |  | $ | 210 |
Sales and marketing |  |  | 1,550 |  |  |  | 2,031 |  |  |  | 3,505 |
General and administrative |  |  | 4,023 |  |  |  | 4,322 |  |  |  | 4,105 |
Research and development |  |  | 138 |  |  |  | 142 |  |  |  | 318 |
Total |  | $ | 6,303 |  |  | $ | 6,648 |  |  | $ | 8,138 |
Assumptions: |  |  |  |  |  |  |  |  |  |  |  |
Expected term |  |  | 4.50 years |  |  |  | 4.58 years |  |  |  | — |
Expected volatility |  |  | 50.9% – 51.8 | % |  |  | 49.6% – 49.9 | % |  |  | — |
Risk free interest rate |  |  | 0.76% – 0.84 | % |  |  | 0.90% – 2.26 | % |  |  | — |
Dividend rate |  |  | — |  |  |  | — |  |  |  | — |
Weighted average fair value of options granted during the year |  | $ | 16.99 |  |  | $ | 14.21 |  |  | $ | — |
(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, 2012 and 2011 and changes during the year ended December 31, 2012 are presented below:
|  | Options |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term |
Outstanding at December 31, 2011 |  |  | 2,559,272 |  |  | $ | 33.41 |  |  |  |  |
Granted |  |  | 347,250 |  |  | $ | 40.46 |  |  |  |  |
Exercised |  |  | (716,564 | ) |  | $ | 31.50 |  |  |  |  |
Forfeited |  |  | (244,003 | ) |  | $ | 40.50 |  |  |  |  |
Outstanding at December 31, 2012 |  |  | 1,945,955 |  |  | $ | 34.50 |  |  |  | 5.39 |
Vested and expected to vest at December 31, 2012 |  |  | 1,903,616 |  |  | $ | 34.42 |  |  |  | 5.31 |
Options exercisable at December 31, 2012 |  |  | 1,448,293 |  |  |  |  |  |  |  | 4.20 |
Outstanding and exercisable by price range as of December 31, 2012
|  | 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 |  |  | 253,661 |  |  |  | 5.09 |  |  | $ | 23.40 |  |  |  | 253,661 |  |  | $ | 23.40 |
$25.05 – $28.95 |  |  | 326,383 |  |  |  | 5.30 |  |  | $ | 26.96 |  |  |  | 314,383 |  |  | $ | 26.97 |
$29.23 – $33.01 |  |  | 314,433 |  |  |  | 6.84 |  |  | $ | 31.60 |  |  |  | 167,102 |  |  | $ | 31.44 |
$33.08 – $38.11 |  |  | 347,859 |  |  |  | 3.50 |  |  | $ | 37.49 |  |  |  | 307,194 |  |  | $ | 37.51 |
$38.40 – $39.94 |  |  | 282,687 |  |  |  | 6.61 |  |  | $ | 39.68 |  |  |  | 126,687 |  |  | $ | 39.69 |
$40.27 – $41.37 |  |  | 210,000 |  |  |  | 7.05 |  |  | $ | 41.22 |  |  |  | 68,334 |  |  | $ | 41.20 |
$43.04 – $45.84 |  |  | 188,932 |  |  |  | 3.47 |  |  | $ | 44.63 |  |  |  | 188,932 |  |  | $ | 44.63 |
$50.15 – $50.15 |  |  | 12,500 |  |  |  | 4.29 |  |  | $ | 50.15 |  |  |  | 12,500 |  |  | $ | 50.15 |
$50.50 – $50.50 |  |  | 2,000 |  |  |  | 4.01 |  |  | $ | 50.50 |  |  |  | 2,000 |  |  | $ | 50.50 |
$50.99 – $50.99 |  |  | 7,500 |  |  |  | 4.04 |  |  | $ | 50.99 |  |  |  | 7,500 |  |  | $ | 50.99 |
$10.42 – $50.99 |  |  | 1,945,955 |  |  |  | 5.39 |  |  | $ | 34.50 |  |  |  | 1,448,293 |  |  | $ | 33.54 |
The weighted average remaining contractual life of exercisable options was 4.2 years at December 31, 2012. The total intrinsic value of options exercised was $7.2 million, $4.2 million and $3.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. The aggregate intrinsic value of options outstanding and options exercisable as of December 31, 2012 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 $39.33 closing price of the Company’s stock on December 31, 2012. The aggregate intrinsic value of options outstanding was $11.2 million, $10.8 million and $4.8 million for the years ended December 31, 2012, 2011, and 2010, respectively. The aggregate intrinsic value of options exercisable was $9.8 million, $8.4 million and $2.1 million for the years ended December 31, 2012, 2011 and 2010, respectively. Restricted Stock: During the year ended December 31, 2012, the Company granted to employees and non-employee directors 149,500 shares of restricted stock, which vest at various dates through November 2015. 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 $4.8 million at December 31, 2012. A summary of the status of our restricted stock as of December 31, 2012 and 2011 and changes during the year ended December 31, 2012 are presented below:
|  | Shares |  |  | Weighted Average Grant Date Fair Value |
Non-vested as of December 31, 2011 |  |  | 69,000 |  |  | $ | 29.23 |
Granted |  |  | 149,500 |  |  | $ | 40.93 |
Vested |  |  | (28,336 | ) |  | $ | 29.23 |
Cancelled |  |  | (29,333 | ) |  | $ | 38.87 |
Non-vested as of December 31, 2012 |  |  | 160,831 |  |  | $ | 38.34 |

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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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