Stock Based Compensation

6 Months Ended

Jun. 30, 2012

Stock Based Compensation

14. Stock Based Compensation

We account for share-based awards in accordance with Accounting Standards Codification (“ASC”) 718, Compensation-Stock Compensation, which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at the fair value on the date of grant.

During the three and six months ended June 30, 2012, the Company recognized $3.6 million and $4.7 million, respectively, for option grants, compared to $2.2 million and $4.1 million, respectively, during the same periods in the prior year. The Company recognized $1.5 million and $3.0 million for restricted stock awards during the three and six months ended June 30, 2012, respectively, compared to $1.4 million and $2.5 million, respectively, during the same periods in the prior year.

On March 8, 2012, the Company granted a long term performance-based non-qualified stock option to each of the Chief Executive Officer and the Chief Operating Officer for 500,000 shares of common stock under the Company’s 2011 Equity Incentive Plan. The terms of the performance-based options provide that, over a three year period, one third of the option shares will vest as of March 1 following any fiscal year in which, in addition to the Company achieving a Home Gross Margin of at least 16.7% (as calculated in the Company’s 2011 Form 10-K, excluding warranty adjustments and interest), the Company achieves: (1) at least a 10% increase in total revenue over 2011 (166,667 option shares vest); (2) at least a 15% increase in total revenue over 2011 (166,667 option shares vest); or (3) at least a 20% increase in total revenue over 2011 (166,666 option shares vest). Any of the three tranches of option shares that are not performance vested by March 1, 2015 shall be forfeited. ASC 718 prohibits recognition of expense associated with performance based stock awards until achievement of the performance targets are probable of occurring. As of June 30, 2012, the Company had concluded that achievement of all the performance targets had met the level of probability required to record compensation expense at that time, and as such, $2.5 million of compensation expense was recognized related to the grant of these awards during the 2012 second quarter.

In accordance with ASC 718, the performance-based awards are valued at the fair value on the date of grant. The grant date fair value of these awards was $7.42 per share. The maximum potential expense that would be recognized by the Company if all of the performance targets were met would be approximately $7.4 million.