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STOCK-BASED COMPENSATION
9 Months Ended
Sep. 30, 2011
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] 
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION
 
Equity Incentive Plans
 
Forest maintains the 2001 and 2007 Stock Incentive Plans (the “Plans”) under which qualified and non-qualified stock options, restricted stock, performance units, and phantom stock units may be granted to employees, consultants, and non-employee directors of Forest and its subsidiaries.
 
Compensation Costs
 
The table below sets forth total stock-based compensation of continuing operations recorded during the three and nine months ended September 30, 2011 and 2010, and the remaining unamortized amounts and weighted average amortization period as of September 30, 2011.
 
 
Stock
Options(1)
 
Restricted
Stock(2)
 
Performance
Units
 
Phantom
Stock Units
 
 
Total(3)(4)
 
(In Thousands)
Three months ended September 30, 2011:
 

 
 

 
 

 
 

 
 
 

Total stock-based compensation costs
$
1,095

 
$
15,434

 
$
775

 
$
(1,456
)
 
 
$
15,848

Less: stock-based compensation costs capitalized
(437
)
 
(6,994
)
 
(253
)
 
529

 
 
(7,155
)
Stock-based compensation costs expensed
$
658

 
$
8,440

 
$
522

 
$
(927
)
 
 
$
8,693

Nine months ended September 30, 2011:
 

 
 

 
 

 
 

 
 
 

Total stock-based compensation costs
$
1,536

 
$
26,566

 
$
2,181

 
$
(1,788
)
 
 
$
28,495

Less: stock-based compensation costs capitalized
(663
)
 
(11,522
)
 
(683
)
 
696

 
 
(12,172
)
Stock-based compensation costs expensed
$
873

 
$
15,044

 
$
1,498

 
$
(1,092
)
 
 
$
16,323

Unamortized stock-based compensation costs
$
—

 
$
25,086

 
$
8,378

 
$
655

(5) 
 
$
34,119

Weighted average amortization period remaining
—

 
2.2 years

 
2.0 years

 
.8 years

 
 
2.1 years

Three months ended September 30, 2010:
 

 
 

 
 

 
 

 
 
 

Total stock-based compensation costs
$
166

 
$
6,205

 
$
552

 
$
639

 
 
$
7,562

Less: stock-based compensation costs capitalized
(73
)
 
(2,440
)
 
(94
)
 
(207
)
 
 
(2,814
)
Stock-based compensation costs expensed
$
93

 
$
3,765

 
$
458

 
$
432

 
 
$
4,748

Nine months ended September 30, 2010:
 

 
 

 
 

 
 

 
 
 

Total stock-based compensation costs
$
396

 
$
18,918

 
$
1,260

 
$
1,749

 
 
$
22,323

Less: stock-based compensation costs capitalized
(169
)
 
(6,937
)
 
(310
)
 
(558
)
 
 
(7,974
)
Stock-based compensation costs expensed
$
227

 
$
11,981

 
$
950

 
$
1,191

 
 
$
14,349

____________________________________________
(1)
In conjunction with the spin-off of Lone Pine, both the number of options outstanding and the option exercise prices were adjusted in accordance with antidilution provisions provided for by the Plans, which were designed to equalize an award’s value before and after an equity restructuring. Because the actual option modifications were calculated based on Forest’s average stock price over a period of time before and after the spin-off of Lone Pine rather than the stock price immediately before and after the spin-off, $1.1 million in incremental compensation cost resulted, $.4 million of which was capitalized. This cost was recognized in its entirety on September 30, 2011 because all options outstanding were vested as of that date.
(2)
In conjunction with the spin-off, the forfeiture restrictions on a portion of each outstanding restricted stock award lapsed because the holders of the restricted stock awards received unrestricted Lone Pine common shares in the spin-off. This resulted in an acceleration of the recognition of $10.9 million of compensation costs associated with the restricted stock awards, $4.9 million of which was capitalized.
(3)
The Company also maintains an employee stock purchase plan (which is not included in the table) under which $.1 million and $.4 million of compensation cost was recognized for the three and nine month periods ended September 30, 2011, respectively, and $.1 million and $.4 million of compensation cost was recognized for the three and nine month periods ended September 30, 2010, respectively.
(4)
In addition to the compensation costs set forth in the table above, in June 2011 the Company granted a cash-based long-term incentive award under which $35,000 and $44,000 in compensation costs were recognized for the three and nine month periods ended September 30, 2011, respectively, and under which $.3 million remains as unamortized stock-based compensation costs at September 30, 2011.  The award is comprised of time-based and performance-based components.  Under the time-based component, a cash payment will be made after three years dependent on the change in value of Forest’s common stock during the three-year period, and under the performance-based component, a cash payment will be made after three years dependent on the total shareholder return on Forest’s common stock in comparison to that of a peer group during the three-year period.
(5)
Based on the closing price of Forest’s common stock on September 30, 2011.
 
Stock Options
 
The following table summarizes stock option activity in the Plans for the nine months ended September 30, 2011. 
 
Number of
Options
 
Weighted
Average Exercise
Price
 
Aggregate
Intrinsic Value
(In Thousands)(2)
 
Number of
Options
Exercisable
Outstanding at January 1, 2011
1,327,695

 
$
21.67

 
$
22,531

 
1,283,232

Granted
—

 
—

 
 

 
 

Exercised
(29,711
)
 
18.55

 
331

 
 

Cancelled
(13,273
)
 
25.11

 
 

 
 

Spin-off adjustment(1)
673,189

 
 
 
 
 
 
Outstanding at September 30, 2011
1,957,900

 
$
14.29

 
$
187

 
1,957,900

____________________________________________
(1)
In conjunction with the spin-off of Lone Pine, both the number of options outstanding and the option exercise prices were adjusted in accordance with antidilution provisions provided for by the Plans. In conjunction with the spin-off, Lone Pine employees were deemed to have been involuntarily terminated under the terms of their option agreements and, therefore, have three months from September 30, 2011 to exercise their vested options before they are canceled. Lone Pine has agreed to reimburse Forest for the market value of any stock issued upon exercise of these options by Lone Pine employees.
(2)
The intrinsic value of a stock option is the amount by which the market value of the underlying stock, as of the date outstanding or exercised, exceeds the exercise price of the option.
 
Restricted Stock, Performance Units, and Phantom Stock Units
 
The following table summarizes the restricted stock, performance unit, and phantom stock unit activity in the Plans for the nine months ended September 30, 2011.
 
 
Restricted Stock
 
Performance Units
 
Phantom Stock Units
 
Number of
Shares
 
Weighted
Average
Grant
Date
Fair
Value
 
Vest Date
Fair
Value
(In
Thousands)
 
Number
of
Units(3)
 
Weighted
Average
Grant
Date
Fair
Value
 
Vest Date
Fair
Value
(In
Thousands)
 
Number
of
Units(4)
 
Weighted
Average
Grant
Date
Fair
Value
 
Vest Date
Fair
Value
(In
Thousands)
Unvested at January 1, 2011
2,272,321

 
$
32.71

 
 

 
264,500

 
$
31.63

 
 

 
510,609

 
$
24.79

 
 

Awarded
1,025,782

 
27.30

 
 

 
226,000

 
27.53

 
 

 
500

 
28.24

 
 

Vested
(610,681
)
 
61.33

 
$
18,416

 
—

 
—

 
$
—

 
(52,587
)
 
60.04

 
$
1,449

Forfeited
(131,330
)
 
23.51

 
 

 
(41,000
)
 
29.98

 
 

 
(25,737
)
 
19.12

 
 

Spin-off adjustment(1)
—

 
 
 
 
 
233,740

 


 
 
 
225,004

 
 
 
 
Vested due to spin-off(2)
—

 
 
 
 
 
(19,000
)
 
20.81

 
$
—

 
(342,765
)
 
15.15

 
$
3,246

Unvested at September 30, 2011
2,556,092

 
$
24.18

 
 

 
664,240

 
$
19.52

 
 

 
315,024

 
$
12.15

 
 

 ____________________________________________
(1)
In conjunction with the spin-off of Lone Pine, the number of performance units and phantom stock units outstanding was adjusted in accordance with antidilution provisions provided for by the Plans. In addition, the initial stock prices used to measure Forest’s total shareholder returns over the performance periods of the performance units were adjusted in accordance with the antidilution provisions provided for by the Plans. The number of restricted stock awards outstanding was not adjusted as a result of the spin-off since holders of restricted stock awards received Lone Pine common shares in the spin-off.
(2)
In conjunction with the spin-off of Lone Pine, Lone Pine employees were deemed to have been involuntarily terminated under the terms of their phantom stock agreements, and, therefore, all phantom stock units held by Lone Pine employees vested on September 30, 2011 and were settled in cash by Lone Pine. The single Lone Pine employee who held a performance unit award was deemed to have been involuntarily terminated under the terms of his performance unit agreement at the time of the spin-off and, therefore, his performance units vested on September 30, 2011, but with no shares deliverable under his agreement. No Forest restricted stock awards are held by Lone Pine employees.
(3)
Forest granted 226,000 performance units on June 10, 2011, with a grant date fair value of $27.53 each. Under the terms of the award agreements, each performance unit represents a contractual right to receive one share of Forest’s common stock; provided that the actual number of shares that may be deliverable under an award will range from 0% to 200% of the number of performance units awarded, depending on Forest’s relative total shareholder return in comparison to an identified peer group during the thirty-six month performance period ending on March 31, 2014.
(4)
Of the unvested phantom stock units at September 30, 2011, 6,080 units can be settled in cash, shares of common stock, or a combination of both, while the remaining 308,944 units can only be settled in cash. The phantom stock units have been accounted for as a liability within the Condensed Consolidated Financial Statements. Of the 395,352 phantom stock units that vested during the nine months ended September 30, 2011, 5,500 units were settled in shares of common stock and 389,852 units were settled in cash.