Annual report pursuant to Section 13 and 15(d)

Stock Based Compensation

v2.4.0.6
Stock Based Compensation
 12 Months Ended
Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK BASED COMPENSATION
NOTE 8 — STOCK BASED COMPENSATION
We have a stock compensation plan, the Meritage Stock Option Plan (the “Plan”), that was adopted in 2006, which superceded a prior stock compensation plan and which has been amended from time to time. The Plan was approved by our stockholders and is administered by our Board of Directors. The provisions of the Plan allow for the grant of stock appreciation rights, restricted stock awards, performance share awards and performance-based awards in addition to non-qualified and incentive stock options. The Plan authorizes awards to officers, key employees, non-employee directors and consultants for up to 8,950,000 shares of common stock, of which 1,426,505 shares remain available for grant at December 31, 2012. We believe that such awards provide a means of performance-based compensation to attract and retain qualified employees and better align the interests of our employees with those of our stockholders. Non-vested stock awards and stock options granted in previous years are usually granted with either a three-year or five-year ratable vesting period, with a three-year cliff vesting for performance-based awards.
We did not grant any stock options in 2010, 2011 or 2012. A summary of remaining stock option activity from stock options granted prior to 2010 is provided below.

Summary of Stock Option Activity:
 
 
 
Year Ended December 31, 2012
 
 
Options
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life
 
Aggregate
Intrinsic
Value
 
 
 
 
 
 
 
 
(In thousands)
Options outstanding at beginning of year
 
897,767

 
$
23.56

 
 
 
 
Granted
 
—

 
N/A

 
 
 
 
Exercised
 
(282,082
)
 
$
15.12

 
 
 
 
Cancelled
 
(6,100
)
 
$
25.73

 
 
 
 
Outstanding at end of year
 
609,585

 
$
27.44

 
1.87
 
$
7,376

Vested and expected to vest at end of year
 
608,405

 
$
27.47

 
1.87
 
$
7,350

Exercisable at end of year
 
471,760

 
$
30.93

 
1.63
 
$
4,363

Price range of options exercised
 
$ 8.06 - $34.30

 
 
 
 
 
 
Price range of options outstanding
 
$8.06 - $44.44

 
 
 
 
 
 
Total shares reserved for existing or future grants at end of year
 
1,997,382

 
 
 
 
 
 
 
 
 
Years Ended December 31,
 
 
2011
 
2010
 
 
Options
 
Weighted
Average
Exercise
Price
 
Options
 
Weighted
Average
Exercise
Price
Options outstanding at beginning of year:
 
1,332,767

 
$
23.80

 
1,620,167

 
$
23.19

Granted
 
—

 
N/A

 
—

 
N/A

Exercised
 
(171,800
)
 
$
15.21

 
(133,400
)
 
$
15.46

Cancelled
 
(263,200
)
 
$
30.24

 
(154,000
)
 
$
24.58

Outstanding at end of year
 
897,767

 
$
23.56

 
1,332,767

 
$
23.80

Exercisable at end of year
 
550,359

 
$
26.29

 
740,376

 
$
26.79

Price range of options exercised
 
$ 8.06 - $21.10

 
 
 
$ 8.06 - $21.10

 
 
Price range of options outstanding
 
$ 8.06 - $44.44

 
 
 
$ 8.06 - $44.44

 
 

Stock options Outstanding at December 31, 2012:
 
 
 
Stock Options Outstanding
 
Stock Options Exercisable
Range of Exercise Prices
 
Number
Outstanding
 
Weighted
Average
Contractual
Life
 
Weighted
Average
Exercise Price
 
Number
Exercisable
 
Weighted
Average
Exercise Price
$8.06 - $15.98
 
209,768

 
2.38
 
$
14.81

 
109,261

 
$
15.80

$17.98 - $19.80
 
2,350

 
3.12
 
$
18.87

 
—

 
$
—

$19.90 - $19.90
 
139,840

 
2.38
 
$
19.90

 
111,872

 
$
19.90

$21.10 - $40.55
 
15,800

 
2.63
 
$
27.77

 
8,800

 
$
32.33

$42.82 - $44.44
 
241,827

 
1.08
 
$
42.83

 
241,827

 
$
42.83

 
 
609,585

 
 
 
 
 
471,760

 
 

The total intrinsic value of option exercises for the years ended December 31, 2012, 2011 and 2010 was $5.4 million, $1.4 million and $0.8 million, 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 stock option.

Summary of Nonvested (Restricted) Shares Activity:

In addition to the stock options discussed previously, we grant time-based and performance-based restricted shares. Performance-based restricted shares are only granted to our senior executive management group. All performance shares only vest upon the attainment of certain financial and operational criteria as established and approved by our Board of Directors.

 
 
 

Nonvested
Restricted Share
Activity
(time-based)
 

Weighted
Average
Grant Date
Fair Value
 

Nonvested
Restricted
Share Activity
(performance-
Based)
 

Weighted
Average
Grant Date
Fair Value
Outstanding at 1/1/10
 
305,279

 
$
19.11

 
202,500

 
$
14.27

Granted
 
315,000

 
$
21.30

 
67,500

 
$
22.18

Vested (Earned/Released)
 
(118,278
)
 
$
24.75

 
(67,500
)
 
$
14.27

Forfeited (1)
 
(36,750
)
 
$
20.99

 
—

 
N/A

Outstanding as of 12/31/10
 
465,251

 
$
19.01

 
202,500

 
$
16.91

Granted
 
357,000

 
$
25.57

 
56,250

 
$
25.65

Vested (Earned/Released)
 
(141,335
)
 
$
17.76

 
(33,750
)
 
$
14.27

Forfeited (1)
 
(31,400
)
 
$
23.23

 
(33,750
)
 
$
14.27

Outstanding at 12/31/11
 
649,516

 
$
22.68

 
191,250

 
$
20.41

Granted
 
386,500

 
$
27.21

 
56,250

 
$
20.72

Vested (Earned/Released)
 
(166,566
)
 
$
18.92

 
(33,750
)
 
$
14.27

Forfeited (1)
 
(43,800
)
 
$
25.10

 
(33,750
)
 
$
14.27

Outstanding at 12/31/12
 
825,650

 
$
25.43

 
180,000

 
$
22.81

 
(1)
Forfeitures on time-based nonvested shares are a result of terminations of employment, while forfeitures on performance-based nonvested shares are a result of failing to attain certain goals as outlined in our executive management group's compensation agreements.
    

Compensation cost related to time-based restricted stock awards is measured as of the closing price on the date
of grant and is expensed on a straight-line basis over the vesting period of the award. Compensation cost related to
performance-based restricted stock awards is also measured as of the closing price on the date of grant but is expensed in
accordance with ASC 718-10-25-20, Compensation – Stock Compensation, which requires an assessment of probability of
attainment of the performance target. As our performance targets are annual in nature, once we determine that the performance
target outcome is probable, the year-to-date expense is recorded and the remaining expense is recorded on a straight-line basis
through the end of the award’s vesting period. Below is a summary of compensation expense and stock award activity (in thousands):
 
 
 
 
 
 
 
 
 
 
Years Ended December 31,
 
 
2012
 
2011
 
2010
Stock-based compensation expense
 
$
8,319

 
$
7,410

 
$
5,358

Cash received by Company from exercises
 
$
4,267

 
$
2,613

 
$
2,062





The following table includes additional information regarding our Plan (dollars in thousands):

 
 
 
 
 
 
 
As of
 
 
December 31, 2012
 
December 31, 2011
Unrecognized stock-based compensation cost
 
$
13,072

 
$
9,058

Weighted average years remaining vesting period
 
2.17

 
2.05

Total equity awards outstanding (1)
 
1,615

 
1,739


(1)     Includes vested and unvested options outstanding and unvested restricted stock awards.