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Share-Based Compensation Plans
12 Months Ended
Dec. 31, 2013
Share-based compensation plans [Abstract]  
Share-based compensation plans

Note 16 – Share-Based Compensation Plans

 

We have share-based compensation plans to retain employees and nonemployee directors and to more closely align their interests with those of our shareholders.

 

Non-Vested Shares and Stock Options

The 2005 Equity Incentive Plan (the “2005 Plan”) and the 2013 Equity Incentive Plan (the “2013 Plan”) permit grants of restricted stock, restricted stock units, performance stock, performance units, stock appreciation rights, stock options, as well as other share-based awards to eligible employees. The 2013 Plan also permits cash awards to eligible employees. The 2005 Plan was replaced by the 2013 Equity Incentive Plan effective in February 2013. No further grants of awards will be made under the 2005 Plan.

 

Directors are eligible for share-based awards through the Non-Employee Directors' Equity Plan (the “Directors' Plan”). To date, we have granted only deferred stock units under the Directors' Plan. There are also outstanding stock options granted to directors under a prior plan, the Non-Employee Directors' Stock Option Plan (the “Prior Directors' Plan”).

 

There are 3.5 million shares underlying share-based plans that are authorized, but not yet granted. Outstanding awards at December 31, 2013 include performance share units (“PSUs”), market share units (“MSUs”), restricted stock units (“RSUs”), deferred stock units (“DSUs”) and stock options.

 

General Terms

PSUs granted in 2013 reward the achievement of pre-established financial goals over the performance period (April 1, 2013, through December 31, 2015) and will be paid out in shares of Brink's common stock. Threshold, target and maximum levels of the financial goal performance were established, which correspond to payouts between 0% and 200% of target. In addition, the number of shares issued are subject to a +/- 25% multiplier that will be applied to the payout based on Brink's total shareholder return (“TSR”) relative to companies in the S&P 500 index. TSR at or above the 75th percentile will result in the application of a +25% multiplier to PSU payouts while TSR at or below the 25th percentile will result in the application of a -25% multiplier to PSU payouts. There is no multiplier applied to PSU payouts if TSR performance is between the 25th and 75th percentile.

MSUs granted in 2013 will be paid out in shares of Brink's common stock at the end of the performance period (April 1, 2013, through December 31, 2015) at a rate of 0 to 150% of a target number of shares awarded. The multiplier is calculated as the ratio of the price of Brink's stock at the end of the performance period divided by the price of Brink's stock at the beginning of the performance period. If the price of Brink's common stock at the end of the performance period is less than 50% of the initial price, no payout for MSUs will occur.

 

RSUs granted will be paid out in shares of Brink's common stock when they vest, generally ratably in three equal annual installments.

Stock options (none granted in 2013) were granted at a price not less than the average quoted market price on the date of grant.  Options granted to employees have a maximum term of six years and options granted to directors have a maximum term of ten years.

 

Expense recognition

Compensation expense related to share-based awards granted to employees is recognized from the grant date to the earlier of the retirement eligible date or the stated vesting date. Compensation expense related to deferred stock units granted to directors is recognized in its entirety at the grant date. Compensation expense is classified as selling, general and administrative expenses in the consolidated statements of income. 

 

Method and Assumptions Used to Estimate Fair Value

The fair value of RSUs and DSUs was measured at the date of grant based on the price of Brink's common stock, adjusted for a discount on units that do not receive or accrue dividends.

The fair value of PSUs and MSUs was estimated using a Monte-Carlo simulation with the following estimated weighted-average assumptions:

 

 Assumptions Used to Estimate Fair Value of 2013 Grants of PSUs and MSUs  PSUs MSUs 
        
 Number of target shares, in thousands   210  96 
        
 Assumptions used to estimate fair value     
  Beginning average price of Brink’s common stock(a)$ 27.59  27.59 
  Expected dividend yield for the TSR provision of PSU awards(b) 0% n/a 
  Expected dividend yield for PSUs and MSUs(c) 0% 0% 
  Expected volatility(d)  39%  39% 
  Risk-free interest rate  0.3%  0.3% 
  Expected term in years(e)  2.7  2.7 
        
 Weighted-average fair value estimates at grant date(f):     
  In millions$ 5.5  2.5 
  Fair value per share$ 26.22  26.42 

  • The beginning average price of Brink's common stock was based on the 20-day trading average price from March 4, 2013 to April 1, 2013.
  • The expected dividend yield for the TSR provision of the PSU awards assumes that dividends are reinvested. The stock price projection assumes a 0% dividend yield, which is equivalent to reinvesting dividends over the performance period.
  • The expected yield is 0% because neither the PSUs nor the MSUs are entitled to dividends during the performance period.
  • The expected volatility was estimated after reviewing the historical volatility of our stock using daily close prices.
  • The expected term of the awards was based on the performance measurement period ending December 31, 2015.
  • For PSUs, the grant date fair value is based on the target level of the award. Total compensation cost of the PSUs recognized is subject to adjustment based on the actual level of achievement of the underlying financial goal.

 

The fair value of stock options was estimated at the time of grant using the Black-Scholes option-pricing model. For those awards subject to a ratable vesting schedule, fair value was measured for each separately vesting portion of the award as if the award were comprised of three separate individual awards. The fair value of options granted during 2012 and 2011 was calculated using the following estimated weighted-average assumptions:

 

     Years Ended December 31,
 Assumptions Used to Estimate Fair Value of Grants of Stock Options 2012 2011 
             
 Number of shares underlying options, in thousands     396    290 
 Weighted-average exercise price per share $   22.55    31.47 
             
 Assumptions used to estimate fair value         
  Expected dividend yield(a):         
   Weighted-average    1.8%    1.3% 
  Expected volatility(b):         
   Weighted-average     40%    36% 
   Range  39% 40%  36% 37% 
  Risk-free interest rate:         
   Weighted-average     0.6%    1.2% 
   Range  0.4% 0.9%  0.5% 1.9% 
  Expected term in years(c):         
   Weighted-average     4.3    3.8 
   Range  3.3 5.3  1.9 5.3 
             
 Weighted-average fair value estimates at grant date:         
  In millions$   2.5    2.4 
  Fair value per share$   6.32    8.17 

  • The expected dividend yield is the calculated yield on Brink's common stock at the time of the grant.
  • The expected volatility was estimated after reviewing the historical volatility of our stock using daily close prices.
  • The expected term of the options was based on historical option exercise, expiration and post-vesting cancellation behaviors.

 

As of December 31, 2013, total unrecognized compensation cost related to previously granted awards expected to be recognized are as follows:

  • $4.4 million associated with RSUs over a weighted average period of 1.7 years,
  • $3.8 million associated with PSUs over a weighted average period of 1.8 years,
  • $0.8 million associated with MSUs over a weighted average period of 0.4 years,
  • $0.3 million associated with options over a weighted average period of 1.1 years.

 

The following tables below summarize the activity in all plans for PSUs, MSUs, RSUs and DSUs.

 

Nonvested Share Activity - MSUs and PSUs
  Number of shares Weighted-Average 
         Grant-Date 
 (in thousands of shares, except for per share amounts)PSUs MSUs Total Fair Value 
               
 Balance as of December 31, 2012 -   -   - $ -  
 Granted 210.4   96.2   306.6   26.28  
 Cancelled awards (11.1)   -   (11.1)   26.22  
  Balance as of December 31, 2013 199.3   96.2   295.5 $ 26.28  

Nonvested Share Activity - RSUs and DSUs 
  Number of shares  Weighted-Average 
         Grant-Date 
 (in thousands of shares, except for per share amounts)RSUs DSUs Total Fair Value 
               
 Balance as of December 31, 2010 299.5   29.1   328.6 $ 22.84  
 Granted 143.7   15.8   159.5   30.43  
 Cancelled awards (16.5)   -   (16.5)   23.65  
 Vested (127.1)   (29.1)   (156.2)   24.13  
  Balance as of December 31, 2011 299.6   15.8   315.4   25.99  
 Granted 321.0   23.0   344.0   22.21  
 Cancelled awards (21.3)   -   (21.3)   24.53  
 Vested (191.4)   (15.8)   (207.2)   25.68  
  Balance as of December 31, 2012 407.9   23.0   430.9   23.19  
 Granted 206.6   19.2   225.8   26.22  
 Cancelled awards (66.9)   -   (66.9)   24.16  
 Vested (151.2)   (23.0)   (174.2)   23.19  
  Balance as of December 31, 2013 396.4   19.2   415.6 $ 24.68  

Option Activity

The table below summarizes the activity in all plans for options of our common stock.

          Weighted-Average Aggregate 
    Shares Weighted- Average Remaining Contractual Intrinsic Value 
   (in thousands) Exercise Price Per Share Term (in years) (in millions) 
                
 Outstanding at December 31, 2010  3,355   29.10        
 Granted  290   31.47        
 Exercised  (562)   20.66        
 Forfeited or expired  (116)   29.47        
                
 Outstanding at December 31, 2011  2,967   30.92        
 Granted  396   22.55        
 Exercised  (71)   19.04        
 Forfeited or expired  (680)   29.92        
               
 Outstanding at December 31, 2012  2,612   30.23        
 Granted  -   -        
 Exercised  (302)   22.30        
 Forfeited or expired   (835)   34.25        
 Outstanding at December 31, 2013             
    1,475 $ 29.58   2.3 $ 7.2  
                
 Of the above, as of December 31, 2013:             
  Exercisable  1,154 $ 30.92   1.7 $ 4.2  
  Expected to vest in future periods(a)  314 $ 24.81   4.3 $ 2.9  

(a)       The number of options expected to vest takes into account an estimate of expected forfeitures.

 

The intrinsic value of a stock option is the difference between the market price of the shares underlying the option and the exercise price of the option. The market price at December 31, 2013, was $34.14 per share. The total intrinsic value of options exercised was $2.0 million ($6.74 per share) in 2013, $0.6 million ($8.07 per share) in 2012, and $5.6 million ($9.99 per share) in 2011. The total grant-date fair value of options that vested during 2013 was $1.8 million, during 2012 was $1.8 million and during 2011 was $3.2 million.

 

There were 1.2 million shares of exercisable options with a weighted-average exercise price of $30.92 per share at December 31, 2013. There were 2.0 million shares of exercisable options with a weighted-average exercise price of $32.15 per share at December 31, 2012, and 2.4 million shares of exercisable options with a weighted-average exercise price of $32.03 per share at December 31, 2011.

 

Other Share-Based Compensation

We have a deferred compensation plan that allows participants to defer a portion of their compensation into common stock units. Units may be redeemed by employees for an equal number of shares of Brink's common stock. Employee accounts held 222,227 units at December 31, 2013, and 421,846 units at December 31, 2012.

 

We have a stock accumulation plan for our non-employee directors denominated in Brink's common stock units. Directors' accounts held 72,541 units at December 31, 2013, and 64,670 units at December 31, 2012.