XML 37 R16.htm IDEA: XBRL DOCUMENT v2.4.0.6
SHARE-BASED COMPENSATION
 3 Months Ended
Mar. 31, 2012
SHARE-BASED COMPENSATION  
SHARE-BASED COMPENSATION

 

 

NOTE 11 — SHARE-BASED COMPENSATION

 

Overview of Share-Based Compensation Plans

 

2007 Equity Incentive Plan

 

The Company grants incentive stock options and other equity awards pursuant to the Amended and Restated Broadwind Energy, Inc. 2007 Equity Incentive Plan (the “2007 EIP”), which was approved by the Company’s Board of Directors in October 2007 and by the Company’s stockholders in June 2008. The 2007 EIP has been amended periodically since its original approval. Specifically, (i) the 2007 EIP was amended by the Company’s stockholders in June 2009 to increase the number of shares of common stock authorized for issuance under the 2007 EIP, (ii) the 2007 EIP was further amended and restated in March 2011 by the Company’s Board of Directors to limit share recycling under the 2007 EIP, to include a minimum vesting period for time-vesting restricted stock awards and restricted stock units and to add a clawback provision, and (iii) the 2007 EIP was further amended at the Company’s Annual Meeting of Stockholders on May 4, 2012 to increase the number of shares of common stock authorized for issuance under the 2007 EIP to provide sufficient authorized shares to settle certain awards granted in December 2011. As amended, the 2007 EIP reserves 6,910,510 shares of the Company’s common stock for grants to officers, directors, employees, consultants and advisors upon whose efforts the success of the Company and its affiliates will depend to a large degree. As of March 31, 2012, the Company had reserved 1,250,636 shares for the exercise of stock options outstanding, 3,400,641 shares for restricted stock unit awards outstanding and 256,513 additional shares for future stock awards under the 2007 EIP. As of March 31, 2012, 592,210 shares of common stock reserved for stock options and restricted stock unit awards under the 2007 EIP have been issued in the form of common stock.

 

2012 Equity Incentive Plan

 

On March 8, 2012, the Company’s Board of Directors approved the Broadwind Energy, Inc. 2012 Equity Incentive Plan (the “2012 EIP” and together with the 2007 EIP, the “Equity Incentive Plans”), and at the Company’s Annual Meeting of Stockholders on May 4, 2012, the Company’s stockholders approved the adoption of the 2012 EIP. The purposes of the 2012 EIP are (i) to align the interests of the Company’s stockholders and recipients of awards under the 2012 EIP by increasing the proprietary interest of such recipients in the Company’s growth and success; (ii) to advance the interests of the Company by attracting and retaining officers, other employees, non-employee directors, and independent contractors; and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders. Under the 2012 EIP, the Company may grant (i) non-qualified stock options; (ii) “incentive stock options” (within the meaning of IRC Section 422); (iii) stock appreciation rights (“SARs”); (iv) restricted stock and restricted stock units; and (v) performance awards. As of March 31, 2012, the Company had not reserved any shares for awards under the 2012 EIP and no shares had been issued in the form of common stock.

 

Stock Options.  The exercise price of stock options granted under the Equity Incentive Plans is equal to the closing price of the Company’s common stock on the date of grant. Stock options generally become exercisable on the anniversary of the grant date, with vesting terms that may range from one to five years from the date of grant. Additionally, stock options expire ten years after the date of grant. If a plan participant’s employment is terminated during the vesting period, he or she forfeits the right to unvested stock option awards. The fair value of stock options granted is expensed ratably over their vesting term.

 

Restricted Stock Units.  The granting of restricted stock units is provided for under the Equity Incentive Plans. Restricted stock units generally vest on the anniversary of the grant date, with vesting terms that range from immediate vesting to five years from the date of grant. The fair value of each unit granted is equal to the closing price of the Company’s common stock on the date of grant and is expensed ratably over the vesting term of the restricted stock unit award. If a plan participant’s employment is terminated during the vesting period, he or she forfeits the right to any unvested portion of the restricted stock units.

 

The following table summarizes stock option activity during the three months ended March 31, 2012 under the Equity Incentive Plans, as follows:

 

 

 

Options

 

Weighted Average
Exercise Price

 

Outstanding as of December 31, 2011

 

1,275,115

 

$

6.01

 

Granted

 

—

 

$

—

 

Exercised

 

—

 

$

—

 

Forfeited

 

(24,479

)

$

5.98

 

Expired

 

—

 

$

—

 

Outstanding as of March 31, 2012

 

1,250,636

 

$

6.01

 

 

 

 

 

 

 

Exercisable as of March 31, 2012

 

1,072,237

 

$

6.30

 

 

The following table summarizes restricted stock unit activity during the three months ended March 31, 2012 under the Equity Incentive Plans, as follows:

 

 

 

Number of Units

 

Weighted Average
Grant-Date Fair Value
Per Unit

 

Outstanding as of December 31, 2011

 

3,646,299

 

$

1.32

 

Granted

 

—

 

$

—

 

Vested

 

(111,149

)

$

2.15

 

Forfeited

 

(134,509

)

$

1.42

 

Outstanding as of March 31, 2012

 

3,400,641

 

$

1.28

 

 

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The determination of the fair value of each stock option is affected by the Company’s stock price on the date of grant, as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the Company’s expected stock price volatility over the expected life of the awards and actual and projected stock option exercise behavior. There were no stock options issued in the first quarter of 2012. The weighted average fair value per share of stock option awards granted during the three months ended March 31, 2011 and the assumptions used to value these stock options, are as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

Dividend yield

 

—

 

—

 

Risk-free interest rate

 

—

 

2.6

%

Weighted average volatility

 

—

 

96.1

%

Expected life (in years)

 

—

 

6.3

 

Weighted average grant date fair value per share of options granted

 

—

 

$

1.05

 

 

Dividend yield is zero as the Company currently does not pay a dividend.

 

Risk-free rate is based on the implied yield currently available on U.S. Treasury zero coupon issues with a remaining term equal to the expected life of the award.

 

During the three months ended March 31, 2011, the Company utilized a standard volatility assumption of 96.1% for estimating the fair value of stock options awarded based on comparable volatility averages for the energy related sector.

 

The expected life of each stock option award granted is derived using the “simplified method” for estimating the expected term of a “vanilla-option” in accordance with Staff Accounting Bulletin (“SAB”) No. 107, “Share-Based Payment,” as amended by SAB No. 110, “Share-Based Payment.” The fair value of each unit of restricted stock is equal to the fair market value of the Company’s common stock as of the date of grant.

 

The Company utilized a forfeiture rate of 25% during the three months ended March 31, 2011 for estimating the forfeitures of stock options granted.

 

The following table summarizes share-based compensation expense included in the Company’s condensed consolidated statements of operations for the three months ended March 31, 2012 and 2011, as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2012

 

2011

 

Share-based compensation expense:

 

 

 

 

 

Selling, general and administrative

 

$

665

 

$

369

 

Income tax benefit (1)

 

—

 

—

 

Net effect of share-based compensation expense on net loss

 

$

665

 

$

369

 

 

 

 

 

 

 

Reduction in earnings per share:

 

 

 

 

 

Basic and diluted earnings per share (2)

 

$

0.00

 

$

0.00

 

 

(1) Income tax benefit is not illustrated because the Company is currently operating at a loss and an actual income tax benefit was not realized for the three months ended March 31, 2012 and 2011. The result of the loss situation creates a timing difference, resulting in a deferred tax asset, which is fully reserved for in the Company’s valuation allowance.

 

(2) Diluted earnings per share for the three months ended March 31, 2012 and 2011 does not include common stock equivalents due to their anti-dilutive nature as a result of the Company’s net losses for these respective periods. Accordingly, basic earnings per share and diluted earnings per share are identical for all periods presented.

 

As of March 31, 2012, the Company estimates that pre-tax compensation expense for all unvested share-based awards, including both stock options and restricted stock units, in the amount of approximately $3,484 will be recognized through the year 2016. The Company expects to satisfy the exercise of stock options and future distribution of shares of restricted stock by issuing new shares of common stock.