Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Stock-Based Compensation

Stock-Based Compensation

Note F — Stock-Based Compensation

We recognized $2.2 million and $1.2 million of stock-based compensation during the three months ended June 30, 2013 and 2012, respectively.  We recognized $3.5 million and $2.2 million of stock-based compensation during the six months ended June 30, 2013 and 2012, respectively.

In June 2013, we recognized $1.0 million of additional expense related to the June 30, 2013 retirement of Larry Franklin, our former President and Chief Executive Officer.  Under Mr. Franklin’s retirement and consulting agreement, all of his unvested stock awards vested on the date of his retirement, all of his outstanding options will continue to vest and expire in accordance with their original vesting and expiration schedules, and all of his outstanding performance stock units will continue to vest in accordance with their original terms based on the Company’s financial performance.

In connection with the hiring of our new President and CEO, Robert Philpott, in July of 2013, we granted Mr. Philpott stock-based awards.  These awards were inducement grants made outside of the 2005 Omnibus Incentive Plan and the 2013 Omnibus Incentive Plan, and without stockholder approval.  These grants consisted of:

		Weighted-
		Average
	Number	Grant-Date
	of Shares	Fair Value
Stock options	400,000	$	2.77
Non-vested stock	100,000	$	9.29
Performance stock units	150,000	$	8.57

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model.    These options vest and become exercisable in 25% increments on the first four anniversaries of their date of grant, and expire on the tenth anniversary of their date of grant, and have exercise prices equal to the market value of the common stock on the date of grant.  Market value is defined as the closing price on the previous trading day.  The weighted-average exercise price of these options was $9.29, which was the fair market value of the common stock on the grant date (and the closing price on the previous trading day).

The fair value of each non-vested share is estimated on the date of grant as the closing market price of our common stock on the previous trading day.  These non-vested shares vest in three equal increments on the first three anniversaries of their date of grant.

The fair value of each performance stock unit is estimated on the date of grant as the closing market price of our common stock on the previous trading day, minus the present value of anticipated dividend payments.  Performance stock units are a form of share-based awards similar to non-vested shares, except that the number of shares ultimately issued is based on our performance against specific performance goals over a three-year period.  At the end of the performance period, the number of shares of stock issued will be determined by adjusting upward or downward from the maximum in a range between 0% and 100%.

In June 2013 we adopted the 2013 Omnibus Incentive Plan, a stockholder approved plan, pursuant to which we may issue up to 5.0 million shares of stock-based awards to directors employees and consultants.  No additional stock-based awards will be granted under the 2005 Omnibus Incentive Plan.

We did not have any additional significant stock-based compensation activity in the second quarter of 2013.  Our annual grant of stock-based awards occurred in the first quarter of 2013, which is consistent with the timing of previous annual grants.