Stock-Based Compensation And Earnings Per Share

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation And Earnings Per Share

Stock-Based Compensation And Earnings Per Share

 2. Stock-Based Compensation and Earnings Per Share

     On May 12, 2009, the Company adopted The St. Joe Company 2009 Equity Incentive Plan whereby options, stock appreciation rights, restricted stock, restricted stock units and performance awards may be granted to directors and employees. The 2009 Equity Incentive Plan provides for the issuance of a maximum of 2.0 million shares of the Company's common stock.

Stock-Based Compensation

     Stock-based compensation cost is measured at the grant date based on the fair value of the award and is typically recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. Stock-based compensation cost may be recognized over a shorter requisite service period if an employee meets retirement eligibility requirements. Upon exercise of stock options, the Company will issue new common stock. Additionally, the 15% discount at which employees purchased the Company's common stock through payroll deductions was being recognized as compensation expense. The Company discontinued the employee stock purchase plan as of July 1, 2011.

     The changes to the composition of the Company's board of directors which occurred during the first quarter of 2011 constituted a "change in control event" under the terms of certain of our incentive plans. As a result, during March 2011, the Company accelerated the vesting of approximately 300,000 shares of restricted stock resulting in $6.2 million in accelerated stock compensation expense.

Service-Based Grants

     A summary of service-based non-vested restricted stock activity as of June 30, 2011 and changes during the six month period are presented below:

				Weighted Average
	Number of			Grant Date Fair
Service-Based Non-Vested Restricted Stock	Shares			Value
Balance at December 31, 2010		266,659		$	30.91
Granted		106,790			28.09
Vested		(288,363	)		30.33
Forfeited		(20,900	)		28.55
Balance at June 30, 2011		64,186		$	29.59

     As of June 30, 2011 there was $0.2 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested restricted stock and stock option compensation arrangements which will be recognized over a weighted average period of four years.

Market Condition Grants

     The Company has granted to select executives and other key employees non-vested restricted stock whose vesting is based upon the achievement of certain market conditions which are defined as the Company's total shareholder return as compared to the total shareholder return of certain peer groups during a three year performance period.

     The Company used a Monte Carlo simulation pricing model to determine the fair value of its market condition awards. The determination of the fair value of market condition-based awards is affected by the stock price as well as assumptions regarding a number of other variables. These variables included expected stock price volatility over the requisite performance term of the awards, the relative performance of the Company's stock price and shareholder returns to those companies in its peer groups and a risk-free interest rate assumption. Compensation cost is recognized regardless of the achievement of the market condition, provided the requisite service period is met.

     A summary of the activity for market condition non-vested restricted stock during the six months ended June 30, 2011 is presented below:

				Weighted Average
	Number of			Grant Date Fair
Market Condition Non-Vested Restricted Stock	Shares			Value
Balance at December 31, 2010		562,531		$	23.17
Granted		154,424			21.10
Vested		(291,304	)		19.12
Forfeited		(395,946	)		23.38
Balance at June 30, 2011		29,705		$	15.69

     As of June 30, 2011, there was $0.2 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to market condition non-vested restricted shares which will be recognized over a weighted average period of three years.

     Total stock-based compensation recognized in the consolidated statements of operations was as follows:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011			2010		2011		2010
Stock-based compensation expense	$	(87	)	$	2,314	$	8,383	$	3,845

     The Company is evaluating alternatives to its existing stock-based compensation programs.

Earnings (Loss) Per Share

     Basic earnings (loss) per share is calculated by dividing net income (loss) by the average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period, including all potentially dilutive shares issuable under outstanding stock options and service-based non-vested restricted stock. Stock options and non-vested restricted stock are not considered in any diluted earnings per share calculations when the Company has a loss from continuing operations. Non-vested restricted stock subject to vesting based on the achievement of market conditions are treated as contingently issuable shares and are considered outstanding only upon the satisfaction of the market conditions.

     The following table presents a reconciliation of average shares outstanding:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010
Basic average shares outstanding		92,207,304		91,727,508		92,401,380		91,594,812
Net effect of stock options assumed to be exercised		—		—		7,004		—
Diluted average shares outstanding		92,207,304		91,727,508		92,408,384		91,594,812

     Less than 0.1 million shares were excluded from the computation of diluted earnings (loss) per share during the three months and six months ended June 30, 2011 and 2010, respectively, as the effect would have been anti-dilutive.