Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation

Stock-Based Compensation

Note 14.  Stock-Based Compensation

The Ryland Group, Inc. 2011 Equity and Incentive Plan (the “Plan”) permits the granting of stock options, restricted stock awards, stock units, cash incentive awards or any combination of the foregoing to employees. At June 30, 2012 and December 31, 2011, stock options or other awards or units available for grant under the Plan or its predecessor plans totaled 2,992,748 and 3,346,508, respectively.

The Ryland Group, Inc. 2011 Non-Employee Director Stock Plan (the “Director Plan”) provides for a stock award of 3,000 shares to each non-employee director on May 1 of each year. New non-employee directors will receive a pro rata stock award 30 days after their date of appointment or election based on the remaining portion of the plan year in which they are appointed or elected. Stock awards are fully vested and nonforfeitable on their applicable award dates. There were 158,000 and 176,000 stock awards available for future grant in accordance with the Director Plan at June 30, 2012 and December 31, 2011, respectively. Previously, The Ryland Group, Inc. 2004 Non-Employee Director Equity Plan and its predecessor plans provided for automatic grants of nonstatutory stock options to directors. These stock options are fully vested and have a maximum term of ten years.

All outstanding stock options, stock awards and restricted stock awards have been granted in accordance with the terms of the applicable Plan, Director Plan and their respective predecessor plans, all of which were approved by the Company’s stockholders. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the plans).

The Company recorded stock-based compensation expense of $3.8 million and $2.8 million for the three months ended June 30, 2012 and 2011, respectively. Stock-based compensation expense totaled $7.2 million and $5.0 million for the six months ended June 30, 2012 and 2011, respectively. Stock-based compensation expenses have been allocated to the Company’s business units and included in “Corporate,” “Financial services” and “Selling, general and administrative” expenses within the Consolidated Statements of Earnings.

A summary of stock option activity in accordance with the Company’s equity incentive plans as of June 30, 2012 and 2011, and changes for the six-month periods then ended, follows:

				WEIGHTED-
		WEIGHTED-		AVERAGE	AGGREGATE
		AVERAGE		REMAINING	INTRINSIC
		EXERCISE		CONTRACTUAL	VALUE
	SHARES	PRICE		LIFE (in years)	(in thousands)
Options outstanding at January 1, 2011	3,722,656	$	33.29	2.8
Granted	781,000	16.52
Exercised	(44,398)	11.97
Forfeited	(322,424)	55.57
Options outstanding at June 30, 2011	4,136,834	$	28.61	2.9	$	885
Available for future grant	3,233,548
Total shares reserved at June 30, 2011	7,370,382
Options exercisable at June 30, 2011	2,685,545	$	33.83	2.2	$	577
Options outstanding at January 1, 2012	3,948,874	$	28.91	2.4
Granted	736,000	18.22
Exercised	(53,736)	15.33
Forfeited	(600,958)	35.19
Options outstanding at June 30, 2012	4,030,180	$	26.20	3.0	$	19,230
Available for future grant	2,992,748
Total shares reserved at June 30, 2012	7,022,928
Options exercisable at June 30, 2012	2,590,876	$	30.54	1.9	$	8,883

Stock-based compensation expense related to employee stock options totaled $1.2 million and $1.1 million for the three-month periods ended June 30, 2012 and 2011, respectively. Stock-based compensation expense related to employee stock options totaled $2.3 million and $2.1 million for the six-month periods ended June 30, 2012 and 2011, respectively.

During the three-month periods ended June 30, 2012 and 2011, the total intrinsic values of stock options exercised were $8,000 and $29,000, respectively. During the six-month periods ended June 30, 2012 and 2011, the total intrinsic values of stock options exercised were $340,000 and $284,000, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

Compensation expense associated with restricted stock unit awards to senior executives totaled $2.5 million and $1.6 million for the three-month periods ended June 30, 2012 and 2011, respectively. For the six-month periods ended June 30, 2012 and 2011, compensation expense associated with restricted stock unit awards to senior executives totaled $4.8 million and $2.7 million, respectively.

The following table summarizes activity that relates to the Company’s restricted stock unit awards:

	2012		2011
Restricted stock units at January 1	657,825		727,317
Shares awarded	400,568		305,000
Shares vested	(350,349	)	(304,492	)
Shares forfeited	(6,667	)	(60,000	)
Restricted stock units at June 30	701,377		667,825

At June 30, 2012, the outstanding restricted stock units are expected to vest as follows: 2013–344,189; 2014–235,188; and 2015–122,000.

The Company has granted stock awards to its non-employee directors pursuant to the terms of the Director Plan. The Company recorded stock-based compensation expense related to Director Plan stock awards in the amounts of $108,000 and $102,000 for the three-month periods ended June 30, 2012 and 2011, respectively. For the six-month periods ended June 30, 2012 and 2011, stock-based compensation expense related to Director Plan stock awards totaled $189,000 and $210,000, respectively.