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Employee Benefits and Share-Based Compensation
12 Months Ended
Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Employee Benefits and Share-Based Compensation
Employee Benefits and Share-Based Compensation
Stock purchase plan
1997 Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan ("ESPP"), under which employees can purchase shares of its common stock based on a percentage of their compensation, but not greater than 15% of their earnings; provided, however, an eligible employee's right to purchase shares of the Company's common stock may not accrue at a rate which exceeds $25,000 of the fair market value of such shares for each calendar year in which such rights are outstanding. The purchase price per share must be equal to the lower of 85% of the fair value of the common stock at the beginning of a 24-month offering period or the end of each six-month purchasing period.
At the Company's 2009 Annual Meeting of Stockholders (the "2009 Annual Meeting"), its stockholders approved an amendment to the ESPP, which added 2.6 million shares to the reserve for future issuance. At the Company's 2015 Annual Meeting of Stockholders (the "2015 Annual Meeting"), its stockholders approved an amendment to the ESPP, which added and additional 3.0 million shares to the reserve for future issuance. There was a total of 2.8 million shares reserved for future issuance under the ESPP as of December 31, 2016.
For the year ended December 31, 2016, employees purchased 0.4 million shares of common stock under the ESPP and an aggregate of 5.5 million shares were issued under the ESPP as of December 31, 2016.
Stock award plans
2009 Equity Incentive Plan
On May 19, 2009, at the Company's 2009 Annual Meeting, the stockholders approved the Omnicell, Inc. 2009 Equity Incentive Plan, and as subsequently amended, (the "2009 Plan"). The 2009 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other stock awards to the Company's employees, directors and consultants. The 2009 Plan succeeded the 1999 Equity Incentive Plan, the 2003 Equity Incentive Plan and the 2004 Equity Incentive Plan (collectively, the "Prior Plans"). No additional awards will be granted under any of the Prior Plans; however, all outstanding stock awards granted under the Prior Plans continue to be subject to the terms and conditions as set forth in the agreements evidencing such stock awards.
On December 16, 2010, at a Special Meeting of Stockholders, the Company's stockholders approved an amendment to increase the number of shares of common stock authorized for issuance under the 2009 Plan by 2.6 million shares and to provide that the number of common stock shares available for issuance under the 2009 Plan be reduced by 1.8 shares for each share granted as a full-value award granted on and after October 1, 2010. For each share granted as a full-value award granted prior to October 1, 2010, future shares available for grants under the 2009 Plan were reduced by 1.4 shares. Awards granted as stock options and stock appreciation rights continue to reduce the number of shares available for issuance under the 2009 Plan on a one-for-one basis. At the Company's 2013 Annual Meeting of Stockholders, the Company's stockholders approved an amendment to the 2009 Plan to increase the number of shares of common stock authorized for issuance by 2.5 million shares. At the 2015 Annual Meeting, the Company's stockholders approved an amendment to the 2009 Plan to increase the number of shares of common stock authorized for issuance by 3.2 million shares and to provide that number of common stock shares available for issuance under the 2009 Plan be reduced by 2.15 shares for each share granted as a full value award on or after December 31, 2014. In addition, at the 2015 Annual Meeting, the Company's stockholders approved amendments to the 2009 Plan Stock providing that: (i) awards granted under the 2009 Plan will be subject to recoupment in accordance with any clawback policy that the Company may be required to adopt pursuant to applicable law and listing requirements and (ii) that the 2009 Plan will not expire by its terms but that no incentive stock options may be granted after the ten year anniversary of the earlier of the date that the 2009 Plan was adopted by the Company's Board of Directors or the date that the 2009 Plan was approved by its stockholders. There were 7.1 million shares of common stock reserved for future issuance under the 2009 Plan as of December 31, 2016.
Options granted under the 2009 Plan become exercisable over periods of up to four years, with one-fourth of the shares vesting one year from the vesting commencement date with respect to initial grants, and the remaining shares vesting in 36 equal monthly installments thereafter. The Company also grants both restricted stock and restricted stock units to participants under the 2009 Plan. Awards of restricted stock to non-employee directors are granted on the date of the annual meeting of stockholders and vest in full on the date of the next annual meeting of stockholders, provided such non-employee director remains a director on such date. The fair value of the award on the date of issuance is amortized to expense from the date of grant to the date of vesting. RSUs granted to employees vest over a period of four years and are expensed ratably on a straight-line basis over the vesting period.
Performance-based Restricted Stock Units
In 2011, the Company began incorporating performance-based restricted stock units ("PSUs") as an element of its executive compensation plans. In 2012, the Company granted 125,000 PSUs to its executive officers, of which 62,500 PSUs became eligible for vesting upon the achievement of a certain level of shareholder return. In 2013, the Company granted 137,500 PSUs to its executive officers all of which became eligible for vesting upon the achievement of a certain level of shareholder return. In 2014, the Company granted 132,500 PSUs to its executive officers, a portion became eligible for vesting upon the achievement of a certain level of shareholder return. In 2015, the Company granted 60,000 PSUs to its executive officers, all of which became eligible for vesting upon the achievement of a certain level of shareholder return. In 2016, the Company granted 122,740 PSUs to its executive officers, all, none or a portion of which may become eligible for vesting depending on the level of shareholder return for the period from March 1, 2016 through March 1, 2017.
The fair value of a PSU award is determined using a Monte Carlo simulation model. The number of shares that vest at the end of the performance period depends on the percentile ranking of the total shareholder return for Omnicell stock over the performance period relative to the total shareholder return of each of the other companies in the NASDAQ Healthcare Index (the "Index").
Vesting for the PSUs is based both on the percentile placement of the Company's total stockholder return among the companies listed in the NASDAQ Health Care Index and time-based vesting. The Company calculates total stockholder return based on the one year annualized rates of return reflecting price appreciation plus reinvestment of dividends. For PSUs granted on February 4, 2016, stock price appreciation is calculated based on the trailing 20-day average stock price just prior the first trading day of March 2016, compared to the trailing 20-day average stock price just prior the first trading day of March 2017. For PSUs granted on February 6, 2015, stock price appreciation is calculated based on the trailing 20-day average stock price just prior the first trading day of March 2015, compared to the trailing 20-day average stock price just prior the first trading day of March 2016.
On March 3, 2015, the Compensation Committee confirmed 74.4% as the percentile rank of the Company's 2014 total stockholder return. This resulted in 100% of the 2014 PSUs, or 132,500 shares, as eligible for further time-based vesting. The eligible performance based restricted stock unit awards will vest as follows: 25% of the eligible shares vested immediately on March 3, 2015 with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three-year period beginning on June 15th and December 15th of the year after the date of grant and each subsequent year. Vesting is contingent upon continued service. Of the 132,500 shares eligible for time-based vesting under the 2014 PSUs 93,000 shares have vested as of December 31, 2016.
On March 7, 2016, the Compensation Committee confirmed 66.0% as the percentile rank of the Company's 2016 total stockholder return. This resulted in 100% of the 2015 PSUs, or 60,000 shares, as eligible for further time-based vesting. The eligible performance based restricted stock unit awards will vest as follows: 25% of the eligible shares vested immediately on March 7, 2016 with the remaining eligible awards vesting in equal increments, semi-annually, over the subsequent three-year period beginning on June 15th and December 15th of the year after the date of grant and each subsequent year. Vesting is contingent upon continued service. Of the 60,000 shares eligible for time-based vesting under the 2015 PSUs, 30,000 shares have vested as of December 31, 2016.
Valuation of share-based awards
The following assumptions were used to value share options and ESPP shares granted pursuant to our equity incentive
plans:
 
Year Ended
 
December 31,
2016
 
December 31,
2015
 
December 31,
2014
Stock Option Plans
 
 
 
 
 
Risk-free interest rate
1.5
%
 
1.7
%
 
1.6
%
Dividend yield
%
 
%
 
%
Expected volatility
30.6
%
 
32.0
%
 
34.9
%
Expected life (in years)
4.9 years

 
5.0 years

 
4.8 years


 
Year Ended
 
December 31,
2016
 
December 31,
2015
 
December 31,
2014
Employee Stock Purchase Plan
 
 
 
 
 
Risk-free interest rate
0.34% - 0.79%

 
0.03% - 0.79%

 
0.03% - 0.53%

Dividend yield
%
 
%
 
%
Expected volatility
25.8% - 34.8%

 
25.7% - 37.5%

 
29.5% - 42.1%

Expected life (in years)
0.5 - 2.0

 
0.5 - 2.0

 
0.5 - 2.0


Share-based compensation expense
The Company accounts for share-based awards granted to employees and directors, including employee stock option awards, restricted stock, PSUs and RSUs issued pursuant to the 2009 Plan and employee stock purchases made under its ESPP using the estimate grant date fair value method of accounting in accordance with ASC 718, Stock Compensation. The Company values options and ESPP shares using the Black-Scholes-Merton option-pricing model. Restricted stock and time-based RSUs are valued at the grant date fair value of the underlying common shares. The PSUs are valued using the Monte Carlo simulation model.
The following table sets forth the total share-based compensation expense recognized in the Company's Consolidated Statements of Income:
 
Year Ended
 
December 31,
2016
 
December 31,
2015
 
December 31,
2014
 
(In thousands)
Cost of product and service revenues
$
2,596

 
$
2,111

 
$
1,456

Research and development
3,128

 
2,060

 
1,655

Selling, general and administrative
13,776

 
10,750

 
9,674

Total share-based compensation expense
$
19,500

 
$
14,921

 
$
12,785


The Company did not capitalize any share-based compensation as inventory as such amounts were not material for the years ended December 31, 2016, December 31, 2015 and December 31, 2014. Income tax benefits realized from share-based compensation were $5.4 million, $5.0 million and $4.5 million, for the years ended December 31, 2016, December 31, 2015 and December 31, 2014, respectively.
Stock options activity
A summary of the stock option activity under the 2009 Plan is presented below:
 
Number of
Shares
 
Weighted-Average
Exercise Price
 
Weighted-Average
Remaining Years
 
Aggregate
Intrinsic Value
 
(In thousands, except per share data)
Outstanding at December 31, 2015
2,688

 
$
22.89

 
6.9
 
 
Granted (Awarded)
1,055

 
32.11

 
 
 
 
Exercised (Released)
(406
)
 
19.58

 
 
 
 
Expired
(8
)
 
30.43

 
 
 
 
Forfeited
(115
)
 
30.19

 
 
 
 
Outstanding at December 31, 2016
3,214

 
26.06

 
7.3
 
$
26,331

Exercisable at December 31, 2016
1,487

 
20.23

 
5.4
 
20,459

Vested and expected to vest at December 31, 2016 and thereafter
3,007

 
25.66

 
7.2
 
$
25,778


The weighted-average fair value per share of options granted during 2016, 2015 and 2014 was $9.33, $9.67 and $9.12, respectively. The intrinsic value of options exercised during 2016, 2015 and 2014 was $5.6 million, $11.3 million and $14.1 million, respectively.
As of December 31, 2016, total unrecognized compensation cost related to unvested stock options was $13.3 million, which is expected to be recognized over a weighted-average vesting period of 3.0 years. As of December 31, 2015, total unrecognized compensation cost related to unvested stock options was $11.2 million, which is expected to be recognized over a weighted-average vesting period of 2.9 years.
Restricted stock activity
Summaries of the restricted stock activity under the 2009 Plan are presented below:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value
 
Weighted-Average
Remaining Years
 
Aggregate
Intrinsic Value
 
(In thousands, except per share data)
Restricted Stock Units
 
 
 
 
 
 
 
Non-vested at December 31, 2015
417

 
$
28.49

 
1.6
 
 
Granted (Awarded)
289

 
32.58

 
 
 
 
Vested (Released)
(179
)
 
26.83

 
 
 
 
Forfeited
(22
)
 
28.37

 
 
 
 
Non-vested at December 31, 2016
505

 
31.42

 
1.6
 
$
17,135


The weighted-average grant date fair value per share of Restricted Stock Units ("RSUs") granted during 2016, 2015 and 2014 was $32.58, $31.44 and $28.88, respectively. The total fair value of RSUs that vested in 2016, 2015 and 2014 was $4.8 million, $4.7 million and $3.2 million, respectively.
As of December 31, 2016, total unrecognized compensation cost related to RSUs was $12.8 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.9 years. As of December 31, 2015, total unrecognized compensation cost related to RSUs was $11.2 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.9 years.
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value
 
(In thousands, except per share data)
Restricted Stock Awards
 
 
 
Non-vested at December 31, 2015
31

 
$
35.97

Granted (Awarded)
34

 
31.59

Vested (Released)
(35
)
 
35.45

Forfeited



Non-vested at December 31, 2016
30

 
$
31.57


The weighted-average grant date fair value per share of Restricted Stock Awards ("RSAs") granted during 2016, 2015 and 2014 was $31.59, $36.05 and $26.42, respectively. The total fair value of RSAs that vested in 2016, 2015 and 2014 was $1.2 million, $1.1 million and $1.0 million, respectively.
As of December 31, 2016, total unrecognized compensation cost related to RSAs was $0.4 million, which is expected to be recognized over the remaining weighted-average vesting period of 0.4 years. As of December 31, 2015, total unrecognized compensation cost related to RSAs was $0.4 million, which was expected to be recognized over the remaining weighted-average vesting period of 0.4 years.
Performance-based restricted stock unit activity
A summary of the performance-based restricted stock activity under the 2009 Plan is presented below:
 
Number of
Shares
 
Weighted-Average
Grant Date Fair Value Per Unit
 
(In thousands, except per share data)
Non-vested at December 31, 2015
151

 
$
23.33

Granted (Awarded)
123

 
24.66

Vested (Released)
(90
)
 
21.95

Forfeited

 

Nov-vested at December 31, 2016
184

 
$
24.89


The weighted-average grant date fair value per share of PSUs granted during 2016, 2015 and 2014 was $24.66, $29.56 and $20.94, respectively. The total fair value of PSUs that vested in 2016, 2015 and 2014 was $2.0 million, $1.9 million and $1.5 million, respectively.
As of December 31, 2016, total unrecognized compensation cost related to PSUs was approximately $1.6 million, which is expected to be recognized over the remaining weighted-average period of 1.2 years. As of December 31, 2015, total unrecognized compensation cost related to PSUs was approximately $1.5 million, which was expected to be recognized over the remaining weighted-average period of 1.2 years.
Employee Stock Purchase Plan
The unrecognized compensation cost related to the shares to be purchased under the ESPP was approximately $3.5 million, and is expected to be recognized over a weighted-average period of 1.2 years as of December 31, 2016.
Summary of Shares Reserved for Future Issuance under Equity Incentive Plans
The Company had the following ordinary shares reserved for future issuance under its equity incentive plans as of December 31, 2016:
 
 
Number of Shares
 
 
(In thousands)
Share options outstanding
 
3,214

Non-vested restricted stock awards
 
719

Shares authorized for future issuance
 
3,143

ESPP shares available for future issuance
 
2,831

Total shares reserved for future issuance
 
9,907


401(k) Plan
The Company has established a pre-tax savings plan under Section 401(k) of the Internal Revenue Code. The 401(k) Plan allows eligible employees in the United States to voluntarily contribute a portion of their pre-tax salary, subject to a maximum limit specified in the Internal Revenue Code. The Company matches 50% of employee contributions up to $2,000, annually. The Company's contributions under this plan were $1.9 million, $1.8 million and $1.3 million in 2016, 2015 and 2014, respectively.