Common Stock and Share-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2013

Weighted Average Assumptions Used to Estimate Fair Value of Grants Issued

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model, using the following assumptions:


	Year Ended December 31
	2012			2011
Expected volatility		44	%		41	%
Expected dividend yield		0	%		0	%
Expected option term		5 years			5 years
Risk-free rate of return		0.62 to 0.89	%		1.32 to 2.30	%

Summary of Stock Option Activity

The following table summarizes stock option activity during the year ended December 31, 2013(1):


	Options			Weighted Average Exercise Price		Weighted Average Contractual Life		Aggregate Intrinsic Value
Options outstanding at January 1, 2013		4,145,843		$	41.24
Granted		—			—
Forfeited and cancelled(2)		(1,321,760	)		29.66
Exercised		(1,860,105	)		18.17
Adjustment to options outstanding at the time of WhiteWave spin-off (3)		4,091,057			18.74

Options outstanding at December 31, 2013		5,055,035			19.35		3.56	$	6,404,283

Options vested and expected to vest at December 31, 2013		5,051,347			19.35		3.56	$	6,380,657
Options exercisable at December 31, 2012		3,626,897			43.79
Options exercisable at December 31, 2013		4,721,948			19.98		3.26	$	4,119,637

(1)

On August 26, 2013 we effected a 1-for-2 reverse stock split of our issued common stock. The number and weighted average exercise price of stock options outstanding as of January 1, 2013 and any stock option activity during 2013 prior to the date of the reverse stock split have been adjusted retroactively to reflect the reverse stock split.

(2)

Pursuant to the terms of our stock option plans, options that are forfeited or canceled may be available for future grants. Effective May 15, 2013, any stock options surrendered or cancelled in satisfaction of participants’ exercise proceeds or tax withholding obligations will no longer become available for future grants under the plans.

(3)	The number and exercise prices of certain options outstanding at the time of the WhiteWave spin-off were proportionately adjusted to maintain the aggregate intrinsic value of the options before and after the WhiteWave spin-off.

Summary of Options Outstanding and Exercisable

The following table summarizes information about options outstanding and exercisable at December 31, 2013:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable		Weighted- Average Exercise Price
$8.96 to $10.44		602,181		7.54	$	9.89		293,790	$	9.69
11.46 to 15.84		806,928		2.77		14.74		782,232		14.78
16.18 to 16.98		81,332		4.61		16.81		81,332		16.81
17.36		659,567		4.89		17.36		659,567		17.36
17.48 to 21.90		332,709		1.69		20.10		332,709		20.10
21.96		562,454		3.52		21.96		562,454		21.96
22.22		937,290		1.90		22.22		937,290		22.22
22.34 to 25.18		273,995		3.74		23.18		273,995		23.18
26.06		711,305		2.82		26.06		711,305		26.06
26.52 to 27.60		87,274		3.28		27.27		87,274		27.27

Additional Information on Stock Option Activity

The following table summarizes additional information regarding our stock option activity (in thousands, except per share amounts):


	Year Ended December 31
	2013		2012		2011
Weighted-average per share grant date fair value of options granted	$	—	$	5.44	$	5.35
Intrinsic value of options exercised		9,540		6,084		1,183
Fair value of shares vested		4,084		12,580		12,718
Tax benefit related to stock option expense		2,534		2,661		3,678

Summary of Restricted Stock Unit Activity

The following table summarizes RSU activity during the year ended December 31, 2013(1):


	Employees			Directors			Total
RSUs outstanding January 1, 2013		492,629			32,470			525,099
RSUs issued		188,926			33,725			222,651
Shares issued upon vesting		(194,746	)		(19,160	)		(213,906	)
RSUs cancelled or forfeited(2)		(277,663	)		(5,361	)		(283,024	)
Adjustment to stock units outstanding at the time of WhiteWave spin-off (3)		470,871			54,599			525,470

RSUs outstanding at December 31, 2013		680,017			96,273			776,290

Weighted-average per share grant date fair value	$	14.15		$	12.46		$	13.95

(1)

On August 26, 2013 we effected a 1-for-2 reverse stock split of our issued common stock. The number and weighted average grant date fair value of stock units outstanding as of January 1, 2013 and any stock unit activity during 2013 prior to the date of the reverse stock split have been adjusted retroactively to reflect the reverse stock split.

(2)

Pursuant to the terms of our stock unit plans, employees have the option of forfeiting stock units to cover their minimum statutory tax withholding when shares are issued. Effective May 15, 2013, any stock units surrendered or cancelled in satisfaction of participants’ tax withholding obligations will no longer become available for future grants under the plans.

(3)	The number and exercise prices of certain stock units outstanding at the time of the WhiteWave spin-off were proportionately adjusted to maintain the aggregate intrinsic value of the stock units before and after the WhiteWave spin-off.

Stock Unit Grants and Stock Unit Expense

The following table summarizes information about our RSU grants and RSU expense during the years ended December 31, 2013, 2012 and 2011 (in thousands, except per share amounts):


	Year Ended December 31
	2013		2012		2011
Weighted-average grant date fair value of RSUs granted	$	15.45	$	12.01	$	10.13
Tax benefit related to RSU expense		1,493		3,904		4,173

Summary of Restricted Stock Activity

The following table summarizes restricted stock activity during the year ended December 31, 2013:


	Shares			Weighted- Average Grant Date Fair Value
Unvested at January 1, 2013		13,158		$	30.74
Restricted shares granted		30,540			21.22
Restricted shares vested		(19,499	)		22.47
Restricted shares forfeited		—			—

Unvested at December 31, 2013		24,199			22.76

Summary of Phantom Share Activity

The following table summarizes the phantom share activity during the year ended December 31, 2013 (1):


	Shares			Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2013		440,948		$	23.14
Granted		301,799			32.11
Converted/paid		(206,635	)		21.99
Forfeited		(105,548	)		19.42
Adjustment to phantom shares outstanding at the time of WhiteWave spin-off (2)		680,495			17.68

Outstanding at December 31, 2013		1,111,059			17.72

(1)

On August 26, 2013 we effected a 1-for-2 reverse stock split of our issued common stock. The number and weighted average grant date fair value of phantom shares outstanding as of January 1, 2013 and any phantom share activity during 2013 prior to the date of the reverse stock split have been adjusted retroactively to reflect the reverse stock split.

(2)	The number and exercise prices of certain phantom shares outstanding at the time of the WhiteWave spin-off were proportionately adjusted to maintain the aggregate intrinsic value of the phantom shares before and after the WhiteWave spin-off.

Summary of Share-Based Compensation Expense Recognized

The following table summarizes the share-based compensation expense related to Dean Foods equity-based awards recognized during the years ended December 31, 2013, 2012 and 2011 (in thousands):


	Year Ended December 31
	2013			2012(1)		2011
Stock Options	$	6,520	⁽²⁾	$	7,061	$	9,720
Stock Units		5,114	⁽²⁾		11,688		14,998
Cash Performance Units		—	⁽³⁾		331		1,475
Phantom Shares		7,654			8,383		2,429

Total		19,288			27,463		28,622

(1)

During the second quarter of 2012, we recorded additional compensation expense of $12.1 million related to employees whose equity-based long-term incentive awards are subject to certain accelerated vesting provisions, based on age and years of service, as a result of amendments to our incentive award agreements that were approved during 2010. The portion of the additional expense pertaining to prior periods was immaterial.

(2)	The share-based compensation expense recorded during the year ended December 31, 2013 includes additional compensation expense of $5.7 million for stock options and $1.0 million for stock units related to the equity conversion described more fully above.

(3)	As described above, the performance metric for the CPU awards granted in 2013 is Bank EBITDA and accordingly the expense related to such awards during the year ended December 31, 2013, which was not material, has been excluded from the table above.