Stock-Based Compensation

Stock compensation consisted of the following:



	Years Ended December 31,
	2014		2013		2012
	(In millions)
Stock compensation expense	$	5.3	$	6.3	$	6.6

We have stock-based compensation awards outstanding under four plans (collectively, the Stock Plans). We have stock options outstanding under our 2000 Stock Incentive Plan (2000 Incentive Plan) and 2005 Stock Incentive Plan (2005 Incentive Plan), and we have stock options and restricted stock outstanding under our 2008 Stock Incentive Plan (2008 Incentive Plan). We have stock options, restricted stock and stock appreciations rights (SARs) outstanding under our 2011 Stock Incentive Plan (2011 Incentive Plan). Restricted stock granted and stock option awards exercised are issued from our treasury stock. The purchase of treasury stock is discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance and other factors.

No further shares are available for grant under the Directors Plan, the 2000 Incentive Plan, the 2005 Incentive Plan or the 2008 Incentive Plan. Stock-based compensation awards issued under these plans generally have terms of ten years and, for employees, vest over a four-year period. Awards issued to directors under these plans become fully exercisable on the first anniversary of the grant date. Stock options granted under these plans are not incentive stock options. Exercise prices of awards issued under these plans are equal to the fair value of the Company's stock on the date of grant. As of December 31, 2014, there were 2,591,649 stock-based compensation awards outstanding that were issued under these plans and consist of stock options and restricted stock.

The 2011 Incentive Plan was approved and adopted by our shareholders on May 4, 2011 and became effective immediately. The 2011 Incentive Plan was amended and approved by our shareholders on May 8, 2013. The 2011 Incentive Plan permits the grant of stock options, SARs, restricted stock, restricted stock units, dividend equivalents, performance awards, stock awards and other stock-based awards. The aggregate number of shares of our common stock that may be issued under all stock-based awards made under the 2011 Incentive Plan is 6.0 million. The number of shares available for awards, as well as the terms of outstanding awards, is subject to adjustments as provided in the 2011 Incentive Plan for stock splits, stock dividends, recapitalization and other similar events. Awards may be granted under the 2011 Incentive Plan until the earlier to occur of May 3, 2021 or the date on which all shares available for awards under the 2011 Incentive Plan have been granted; provided, however, that incentive stock options may not be granted after February 10, 2021.

Stock-based compensation awards issued under the 2011 Incentive Plan generally have a term of ten years and, for employees, vest over a three-year period. Awards issued to directors under this plan become fully exercisable on the first anniversary of the grant date. Stock options granted under these plans are not incentive stock options. Exercise prices of awards issued under these plans are equal to the fair value of the Company's stock on the date of grant.

As of December 31, 2014 we had 2,655,254 of stock-based compensation awards consisting of stock options and restricted stock outstanding under the 2011 Incentive Plan. As of December 31, 2014 there were 1,929,545 shares available for grant under our 2011 Incentive Plan.

Stock Options

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in the valuation model are supported primarily by historical indicators and current market conditions. Volatility was calculated using the historical weekly close rate for a period of time equal to the expected term. The risk-free rate of return was determined by using the U.S. Treasury yield curve in effect at the time of grant. The expected term was calculated on an aggregated basis and estimated based on an analysis of options already exercised and any foreseeable trends or changes in recipients’ behavior. In determining the expected term, we considered the vesting period of the awards, the contractual term of the awards, historical average holding periods, stock price history, impacts from recent restructuring initiatives and the relative weight for each of these factors. The dividend yield was based on the latest dividend payments made on or announced by the date of the grant.

The following table summarizes our weighted average assumptions used in the valuation of options for the years ended December 31:



	2014		2013		2012
Volatility	46	%	43	%	45	%
Risk-free interest rate	1.93	%	1.05	%	1.07	%
Expected life (months)	73		72		71
Dividend yield	—	%	—	%	—	%

The following table summarizes our stock option activity:



	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
						(millions)
Outstanding December 31, 2011	5,679,579		$	19.87	6.0	$	—
Granted	1,178,780		5.80
Exercised	—		—
Canceled	(752,415	)	26.61
Forfeited	(287,472	)	9.24
Outstanding December 31, 2012	5,818,472		$	16.57	5.9	$	—
Granted	1,034,406		3.85
Exercised	—		—
Canceled	(1,069,192	)	25.22
Forfeited	(412,148	)	7.13
Outstanding December 31, 2013	5,371,538		$	13.11	6.1	$	0.8
Granted	61,275		3.72
Exercised	(87,569	)	3.97
Canceled	(881,069	)	19.05
Forfeited	(566,189	)	4.14
Outstanding December 31, 2014	3,897,986		$	13.07	4.8	$	—

Of the options granted during the year ended December 31, 2014 and 2013, 61,275 and 113,125, respectively, were performance-based options that vest based on the Company's performance against Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) targets for the subsequent three year period. Our 2014 performance was met and, accordingly, some of the options for 2014 vested. Our 2013 performance was partially met and, accordingly, some of the options for 2013 vested. No performance-based options were granted for the year ended December 31, 2012.

The aggregate intrinsic value of all outstanding stock options was less than $0.1 million, $0.8 million and less than $0.1 million as of December 31, 2014, 2013 and 2012, respectively. The intrinsic value of options exercised during 2014 was less than $0.1 million. The weighted average grant date fair value of options granted during the years 2014, 2013 and 2012 was $1.72, $1.61 and $2.53, respectively.

The following table summarizes exercisable options and options expected to vest as of December 31, 2014:



	Exercisable Options				Options Expected to Vest
		Weighted Average Remaining	Weighted Average			Weighted Average Remaining	Weighted Average
Range of Exercise	Stock	Contractual	Exercise		Stock	Contractual	Exercise
Prices	Options	Life (Years)	Price		Options	Life (Years)	Price
$3.48 to $6.16	618,973	6.6	$	5.32	481,243	8.0	$	4.61
$6.17 to $9.64	475,772	4.4	8.66		4,094	7.1	6.19
$9.65 to $19.20	1,417,382	4.8	10.06		3,062	6.2	11.31
$19.21 to $23.95	9,500	3.0	20.20		—	0.0	—
$23.96 to $28.70	403,837	2.4	24.62		—	0.0	—
$28.71 to $39.38	323,487	1.1	35.97		—	0.0	—
$39.39 to $41.75	118,900	1.2	41.62		—	0.0	—
$41.76 to $46.97	2,500	1.4	45.76		—	0.0	—
$3.48 to $46.97	3,370,351	4.3	$	14.39	488,399	8.0	$	4.67

Total stock-based compensation expense associated with stock options related to continuing operations recognized in our Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 was $1.4 million, $2.7 million and $3.3 million, respectively. This expense would result in related tax benefits of $0.5 million, $0.9 million and $1.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. However, these tax benefits are included in the U.S. deferred tax assets which are subject to a full valuation allowance, and due to the valuation allowance, we did not recognize the related tax benefits in 2014, 2013 or 2012. As of December 31, 2014 there was $0.5 million of total unrecognized compensation expense related to outstanding stock options. That expense is expected to be recognized over a weighted average period of 1.1 years.

No related stock-based compensation was capitalized as part of an asset for the years ended December 31, 2014, 2013 or 2012.

Restricted Stock

The following table summarizes our restricted stock activity:



	Restricted Stock		Weighted Average Grant Date Fair Value Per Share
Nonvested as of December 31, 2011	795,046		$	10.02
Granted	708,573		5.67
Vested	(321,103	)	10.30
Forfeited	(156,712	)	8.72
Nonvested as of December 31, 2012	1,025,804		$	7.12
Granted	837,443		3.75
Vested	(561,099	)	6.99
Forfeited	(109,827	)	6.59
Nonvested as of December 31, 2013	1,192,321		$	4.87
Granted	1,229,249		3.65
Vested	(734,533	)	5.19
Forfeited	(338,120	)	3.95
Nonvested as of December 31, 2014	1,348,917		$	3.81

Of the restricted stock granted during the year ended December 31, 2014 and 2013, 914,768 and 529,141, respectively, were performance-based restricted stock that vest based on the Company's cost reduction efforts and performance against EBITDA targets for the subsequent three year period. Our 2014 performance was met and, accordingly, some of the restricted stock for 2014 vested and will be issued subsequent to December 31, 2014. Our 2013 performance was partially met and, accordingly, some of the restricted stock for 2013 vested and will be issued subsequent to December 31, 2013. No performance-based restricted shares were granted during the year ended December 31, 2012.

The total fair value of shares that vested during the years 2014, 2013 and 2012 was $3.8 million, $3.9 million and $3.3 million, respectively.

Total stock-based compensation expense associated with restricted stock relating to continuing operations recognized in our Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012 was $3.9 million, $3.6 million and $3.3 million, respectively. This expense would result in related tax benefits of $1.5 million, $1.5 million and $1.4 million for the years ended December 31, 2014, 2013 and 2012, respectively. However, these tax benefits are included in the U.S. deferred tax assets which are subject to a full valuation allowance and due to the valuation allowance, we did not recognize the related tax benefit in 2014, 2013 and 2012. As of December 31, 2014 there was $2.4 million of total unrecognized compensation expense related to outstanding restricted stock. That expense is expected to be recognized over a weighted average period of 1.5 years.

No related stock-based compensation was capitalized as part of an asset for the years ended December 31, 2014, 2013 or 2012.

Stock Appreciation Rights (SARs)

During the years ended December 31, 2014 and 2013, we granted 0.7 million and 3.1 million SARs under the 2011 Incentive Plan to certain employees associated with our Nexsan and Mobile Security operations. These awards were issued to incentivize employees to grow revenues. These awards expire in five years and only vest when both of the market and performance conditions specified by the terms of the SARs are met. For the market conditions, based on the terms of the awards, 50 percent of the SARs may vest if the 30-day average Imation stock price reaches $10 per share or more by December 31, 2016 and the remaining 50 percent of the SARs may vest if the 30-day average Imation stock price reaches $15 per share or more by December 31, 2016. Additionally, for the performance condition, as a condition necessary for vesting, the net revenue of Nexsan or Mobile Security (depending on the award) must reach certain specified stretch targets by December 31, 2016. If exercised, the SARs require a cash payment to the holder in an amount based on the Imation stock price at the date of exercise as compared to the stock priced at the date of grant. As of December 31, 2014 and 2013 we have not recorded any compensation expense associated with these SARs based on the applicable accounting rules. We will continue to assess these SARs each quarter to determine if any expense should be recorded.