Note 21 - Stock Based Compensation

12 Months Ended

Dec. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

21.      Stock Based Compensation

Determining Fair Value of Share-Based Payment Awards. We examine our historical pattern of option exercises in an effort to determine if there are any discernable activity patterns based on certain employee and non-employee populations. Based upon this evaluation, we have identified three distinct populations: (1) executives currently consisting of our Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and General Counsel (collectively, the “Executives”); (2) Non-Executive employees (“Non-Executives”); and (3) non-employee members of our board of directors (“Directors”). Accordingly, during 2014, 2013 and 2012 the Company used separate Black-Scholes option pricing model assumptions for each of the aforementioned employee and non-employee populations. The fair values for stock options granted for the years ended December 31, 2014, 2013 and 2012 were estimated using the Black-Scholes option pricing model with the following weighted-average assumptions.

	Year Ended December 31,
	2014	2013	2012
Expected lives of options (in years)	4.0	4.0	7.8
Expected volatility	43.2%	45.3%	44.6%
Risk free interest rate	1.3%	0.8%	1.7%
Dividend yield rate	3.5%	3.0%	4.0%

Based on calculations using the Black-Scholes option pricing model, the weighted-average grant date fair values of stock options granted during 2014, 2013 and 2012 were $7.48, $9.75 and $7.54, respectively. No stock options were granted to our CEO and COO during the years ended December 31, 2014 and 2013. As a result, the weighted average expected life of our options are higher in 2012 when compared to 2014 and 2013 as options were granted to our CEO and COO in 2012.

The expected life of employee stock options represents the weighted-average period for which the stock options are expected to remain outstanding and are derived primarily from historical exercise patterns. The expected volatility is based on the historical volatility in the price of our common stock over the most recent period commensurate with the estimated expected life of our stock options. The risk-free interest rate assumption is determined based upon observed interest rates appropriate for the expected term of our employee stock options. The dividend yield assumption is based on our history of dividend payouts.

An annual forfeiture rate is estimated at the time of grant for all share-based payment awards with service conditions only. That rate is revised, if necessary, in subsequent periods if the actual forfeiture rate differs from our estimate. For grants made in the year ended December 31, 2014, we estimated a forfeiture rate between 30% and 45% for those share-based payment awards granted to Non-Executives. We estimate the annual forfeiture rate to be 0% for share-based payment awards with service conditions only granted to our Executives. Additionally, we estimate the annual forfeiture rate to be 0% for share-based payment awards granted to our Directors as those grants vest immediately upon grant.

Stock Option Award Activity.  Stock option activity under our option plans for the years ended December 31, 2014, 2013 and 2012 were as follows.

	Year Ended December 31,
	2014					2013					2012
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding Stock Option Activity
Outstanding, beginning of year		5,282,366		$	40.83		5,879,573		$	41.29		5,306,506		$	42.69
Granted (1)		257,500			28.18		237,500			33.82		1,382,500			25.33
Exercised		(18,000	)		20.82		(153,665	)		32.94		(704,242	)		23.69
Forfeited		(23,750	)		25.16		(10,000	)		37.25		(55,710	)		27.46
Cancelled		(642,200	)		62.43		(671,042	)		44.25		(49,481	)		44.75
Outstanding, end of year		4,855,916		$	37.45		5,282,366		$	40.83		5,879,573		$	41.29

	Year Ended December 31,
	2014					2013					2012
				Weighted-					Weighted-					Weighted-
	Number of			Average		Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested Stock Option Activity
Outstanding, beginning of year		838,541		$	9.50		2,045,000		$	8.63		1,251,328		$	10.74
Granted (1)		257,500			7.48		237,500			9.75		1,382,500			7.54
Vested		(604,583	)		7.77		(1,433,959	)		8.28		(533,118	)		8.61
Forfeited		(23,750	)		7.60		(10,000	)		12.72		(55,710	)		8.45
Unvested, end of year		467,708		$	9.51		838,541		$	9.50		2,045,000		$	8.63
___________________________

(1) Total shares granted in 2012 include 1,000,000 performance based options granted to our CEO and COO. See further discussion regarding these grants in the “Performance Based Stock Award Activity” section below.

The total intrinsic value of options (difference between price per share as of the exercise date and the strike price, times the number of options outstanding) exercised during the years ended December 31, 2014, 2013 and 2012 was $0.1 million, $1.1 million and $7.0 million, respectively.

The following table provides data for our stock options that are vested or expected to vest as of December 31, 2014.

Exercisable or expected to vest
Number outstanding		4,810,204
Weighted-average exercise price	$	37.51
Aggregate intrinsic value (in thousands)	$	2,780
Weighted-average remaining contractual term (years)		4.49
Exercisable
Number outstanding		4,129,875
Weighted-average exercise price	$	38.74
Aggregate intrinsic value (in thousands)	$	2,173
Weighted-average remaining contractual term (years)		4.59

The aggregate intrinsic values in the tables above represent the total pretax intrinsic values (the difference between the closing price of MDC’s common stock on the last trading day of fiscal 2014 and the exercise price, multiplied by the number of in-the-money stock option shares) that would have been received by the option holders had all in-the-money outstanding stock options been exercised on December 31, 2014.

The following table summarizes information associated with outstanding and exercisable stock options at December 31, 2014.

		Options Outstanding						Options Exercisable
				Weighted-						Weighted-
				Average						Average
				Remaining		Weighted-				Remaining		Weighted-
				Contractual		Average				Contractual		Average
Range of		Number		Life (in		Exercise		Number		Life (in		Exercise
Exercise Price		Outstanding		years)		Price		Outstanding		years)		Price
$	15.84 - $ 23.77		142,500		7.00	$	20.94		42,500		6.79	$	21.83
$	23.78 - $ 39.61		3,230,416		6.14		29.61		2,912,708		6.01		29.51
$	39.62 - $ 47.53		578,000		2.88		42.88		528,000		2.39		43.17
$	55.45 - $ 63.38		600,000		1.65		60.49		600,000		1.65		60.49
$	63.39 - $ 71.30		180,000		1.00		68.18		180,000		1.00		68.18
$	71.31 - $ 100		125,000		0.75		78.89		125,000		0.75		78.89
Total			4,855,916		4.89	$	37.45		4,388,208		4.63	$	38.31

Total compensation expense relating to stock options was $3.3 million, $5.6 million and $10.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. Our recognized tax benefit from this expense for the years ended December 31, 2014 and 2013 was $1.3 million and $2.2 million, respectively. We did not have any recognized tax benefits from compensation expense for stock options for the year ended December 31, 2012 as we were in a full valuation allowance position.

As of December 31, 2014, $2.7 million of total unrecognized compensation cost related to stock options was expected to be recognized as an expense by the Company in the future over a weighted-average period of approximately 2.1 years.

Our realized tax benefit from stock options exercised for the years ended December 31, 2014, 2013 and 2012 was $0, $0.4 million and $1.7 million, respectively.

Performance Based Stock Award Activity. On March 8, 2012, we granted a long term performance-based non-qualified stock option to each of our Chief Executive Officer and our Chief Operating Officer for 500,000 shares of common stock under our 2011 Equity Incentive Plan. In accordance with ASC 718, the performance-based awards were assigned a fair value of $7.42 per share on the date of grant and, as of December 31, 2012, all performance targets had been achieved. Therefore, $6.2 million of compensation expense was recognized related to the grant of these awards during the year ended December 31, 2012 with the remaining balance of the unamortized stock-based compensation expense being amortized during the first two months of 2013, based on a vesting date of March 1, 2013.

Restricted and Unrestricted Stock Award Activity. Non-vested restricted stock awards at December 31, 2014, 2013 and 2012 and changes during those years were as follows:

	Year Ended December 31,
	2014					2013					2012
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Grant Date		Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested, beginning of year		298,991		$	32.87		507,367		$	31.69		667,849		$	33.19
Granted		39,021		$	30.85		25,072			37.52		48,613			27.85
Vested		(141,454	)	$	33.08		(144,841	)		31.88		(197,801	)		35.88
Forfeited		(12,717	)	$	33.05		(88,607	)		29.02		(11,294	)		30.62
Unvested, end of year		183,841		$	32.27		298,991		$	32.87		507,367		$	31.69

Total compensation expense relating to restricted stock awards was $2.7 million, $4.0 million and $5.6 million for the years ended December 31, 2014, 2013 and 2012, respectively. Our recognized tax benefit from this expense for the years ended December 31, 2014 and 2013 was $1.0 million $1.6 million, respectively. We did not have any recognized tax benefits from compensation expense for restricted stock awards for the year ended December 31, 2012 as we were in a full valuation allowance position.

At December 31, 2014, there was $3.4 million of unrecognized compensation expense related to non-vested restricted stock awards that is expected to be recognized as an expense by us in the future over a weighted-average period of approximately 1.1 years. The total intrinsic value of unvested restricted stock awards (the closing price of MDC’s common stock on the last trading day of fiscal 2014 multiplied by the number of unvested awards) at December 31, 2014 was $4.7 million. The total intrinsic value of restricted stock which vested during each of the years ended December 31, 2014, 2013 and 2012 was $4.2 million, $5.5 million and $5.9 million, respectively.