Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation

Stock-Based Compensation

Note F — Stock-Based Compensation

We recognized $0.9 million and $0.6 million of stock-based compensation during the three months ended September 30, 2013 and 2012, respectively.  We recognized $4.4 million and $2.8 million of stock-based compensation during the nine months ended September 30, 2013 and 2012, respectively.

In May 2013 our stockholders approved the 2013 Omnibus Incentive 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, but awards previously granted thereunder will remain outstanding in accordance with their respective terms.

As reported for the second quarter of 2013, in connection with the hiring of Robert Philpott (our President and CEO) in July of 2013, we granted him stock-based inducement awards outside of 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
Unvested stock	100,000	$	9.29
Performance stock units	150,000	$	8.57

In estimating the fair value of these awards, we made reference to the fair market value of the common stock on the date of grant, which was defined as the closing price of the common stock on the previous trading day ($9.29).

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 an exercise price equal to the fair market value of the common stock on the date of grant ($9.29).

The fair value of each unvested share granted was estimated as the fair market value of the common stock on the date of grant.  These unvested 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 using the date of grant fair market value of the common stock, minus the present value of anticipated dividend payments.  Performance stock units are a form of share-based award similar to unvested shares, except that the awards may be settled in cash or shares (at the discretion of the Compensation Committee of the Board), and the number of shares ultimately issuable is based on our performance against specific performance goals measured at the end of 2015.  At the end of the performance period, the number of shares of stock issuable will be determined in a range between 0% and 100%.

On September 27, 2013, in connection with the closing of the sale of the California Shoppers operations and the termination of all California Shoppers employees from the Company and its affiliates, all vested and unvested stock options and all restricted stock awards held by California Shoppers employees were cancelled. In exchange, the value of all “in-the-money” vested and unvested stock options and restricted stock awards was paid in cash. In accordance with ASC 718, Compensation — Stock Compensation, all vested outstanding options were treated as a modification of award and the new fair value calculated at the date of modification. For unvested outstanding options and awards, the remaining unrecognized compensation expense using the original calculated fair value was recognized immediately. As a result, $1.1 million was recorded and classified as a transaction cost related to the sale of California Shoppers in discontinued operations.

We did not have any other significant stock-based compensation activity in the third 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.