Stock-Based Compensation
Our stock-based compensation expense for 2013, 2012 and 2011 was $30,340, $27,218 and $30,811, respectively, and the related income tax benefits were $9,161, $8,075 and $8,760, respectively.
We have elected to use the Black-Scholes option-pricing model to determine the fair value of stock options. The Black-Scholes model incorporates various assumptions including volatility, expected life, and interest rates. The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected life of our stock options. The expected life of an award is based on historical experience and the terms and conditions of the stock-based awards granted to employees. The fair value of options granted in 2013, 2012 and 2011 was estimated assuming no dividends and using the following weighted average assumptions:
|
| | | | | |
| Fiscal Year Ended |
| 2013 | | 2012 | | 2011 |
Expected life of stock options | 3.1 years | | 5.0 years | | 5.0 years |
Risk-free interest rate | 0.57% | | 0.89% | | 2.11% |
Expected stock volatility | 25.9% | | 34.6% | | 32.7% |
Fair value of options granted | $3.62 | | $5.79 | | $6.35 |
Equity Incentive Plan
We currently have a single stock incentive plan, the Ingram Micro Inc. 2011 Incentive Plan, for the granting of equity-based incentive awards including incentive stock options, non-qualified stock options, restricted stock, restricted stock units and stock appreciation rights, among others, to key employees and members of our Board of Directors. During the second quarter of 2013, our stockholders approved an amendment of the Ingram Micro Inc. 2011 Incentive Plan (the “2011 Amended Plan”), which increased the number of shares that we may issue by 12,000. The authorized pool of shares available for grant is a fungible pool. The authorized share limit is reduced by one share for every share subject to a stock option or stock appreciation right granted and 2.37 shares for every share granted after June 8, 2011 (2.29 shares after June 7, 2013) under any award other than an option or stock appreciation right for awards.
We grant time- and/or performance-vested restricted stock and/or restricted stock units, in addition to stock options, to key employees and members of our Board of Directors. Options granted generally vest over a period of up to three years and have expiration dates not longer than 10 years. In 2013, a majority of the options granted had a contractual term of four years. A portion of the restricted stock and restricted stock units vest over a time period of one to three years. The remainder of the restricted stock and restricted stock units vests upon achievement of certain performance measures over a time period of one to three years. In 2013, 2012 and 2011, the performance measures for restricted stock and restricted stock units for grants to management were based on earnings growth, return on invested capital total shareholder return and profit before tax. As of December 28, 2013, approximately 13,805 shares were available for grant under the 2011 Amended Plan, taking into account granted options, time-vested restricted stock units/awards and performance-vested restricted stock units assuming maximum achievement.
During 2013, 2012 and 2011 previously granted restricted stock units of 2,101, 2,132 and 1,144, respectively, were converted to Class A Common Stock. Approximately 684, 683 and 326 shares, respectively, were withheld to satisfy the employees’ minimum statutory obligation for the applicable taxes and cash was remitted to the appropriate taxing authorities. Total payments for the employees’ tax obligations to the taxing authorities were approximately $13,045, $13,011 and $6,294 in 2013, 2012 and 2011, respectively. The withheld shares had the effect of share repurchases by us as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting. Of the restricted stock and/or units that were converted to Class A Common Stock, there were 1,535, 1,495 and 133 in 2013, 2012 and 2011, respectively, based on performance-based grants previously approved by the Human Resources Committee of the Board of Directors. In 2011, the Human Resources Committee of the Board of Directors determined that the performance measures for certain performance-based grants were not met, resulting in the cancellation of approximately 772 restricted stock units.
Stock Award Activity
Stock option activity under the 2011 Amended Plan was as follows for the three years ended December 28, 2013:
|
| | | | | | | | | | | | |
| No. of Shares | | Weighted- Average Price | | Weighted-Average Remaining Contractual Term (in Years) | | Aggregate Intrinsic Value |
Outstanding at January 1, 2011 | 10,415 |
| | $ | 16.41 |
| | 3.7 | | |
Granted | 40 |
| | 19.62 |
| | | | |
Exercised | (2,397 | ) | | 15.44 |
| | | | |
Forfeited/cancelled/expired | (42 | ) | | 16.25 |
| | | | |
Outstanding at December 31, 2011 | 8,016 |
| | 16.72 |
| | 2.8 | | |
Granted | 51 |
| | 18.31 |
| | | | |
Exercised | (2,116 | ) | | 14.80 |
| | | | |
Forfeited/cancelled/expired | (306 | ) | | 18.37 |
| | | | |
Outstanding at December 29, 2012 | 5,645 |
| | 17.36 |
| | 2.7 | | |
Granted | 1,452 |
| | 25.70 |
| | | | |
Exercised | (2,619 | ) | | 16.56 |
| | | | |
Forfeited/cancelled/expired | (291 | ) | | 20.14 |
| | | | |
Outstanding at December 28, 2013 | 4,187 |
| | 20.56 |
| | 3.1 | | $ | 15,469 |
|
Vested and expected to vest at December 28, 2013 | 4,022 |
| | 20.34 |
| | 3.1 | | $ | 15,469 |
|
Exercisable at December 28, 2013 | 2,783 |
| | 17.83 |
| | 2.7 | | $ | 15,444 |
|
The aggregate intrinsic value in the table above represents the difference between our closing stock price on December 28, 2013 and the option exercise price, multiplied by the number of in-the-money options on December 28, 2013. This amount changes based on the fair market value of our common stock. Total intrinsic value of stock options exercised in 2013, 2012 and 2011 was $11,655, $8,273 and $9,999, respectively. Total fair value of stock options expensed was $458, $298 and $251 for 2013, 2012 and 2011, respectively. As of December 28, 2013, the unrecognized stock-based compensation costs related to stock options was $4,803. We expect this cost to be recognized over a remaining weighted-average period of approximately 2.9 years.
Cash received from stock option exercises in 2013, 2012 and 2011 was $43,384, $31,335 and $39,465, respectively, and the actual benefit realized for the tax deduction from stock option exercises of the share-based payment awards totaled $3,785, $2,975 and $3,248 in 2013, 2012 and 2011, respectively.
The following table summarizes information about stock options outstanding and exercisable at December 28, 2013:
|
| | | | | | | | | | | | | | | |
| Options Outstanding | | Options Exercisable |
Range of Exercise Prices | Number Outstanding at December 28, 2013 | | Weighted- Average Remaining Life | | Weighted- Average Exercise Price | | Number Exercisable at December 28, 2013 | | Weighted- Average Exercise Price |
$10.62 – $17.80 | 1,296 |
| | 2.8 | | $ | 15.96 |
| | 1,292 |
| | $ | 15.96 |
|
$17.92 – $20.70 | 1,474 |
| | 2.6 | | 19.43 |
| | 1,474 |
| | 19.43 |
|
$20.80 – $21.60 | 17 |
| | 3.2 | | 21.50 |
| | 17 |
| | 21.50 |
|
$26.00 – $26.00 | 1,400 |
| | 3.9 | | 26.00 |
| | — |
| | — |
|
| 4,187 |
| | 3.1 | | 20.56 |
| | 2,783 |
| | 17.83 |
|
Activity related to restricted stock and restricted stock units was as follows for the three years ended December 28, 2013:
|
| | | | | | |
| Number of Shares | | Weighted- Average Grant Date Fair Value |
Non-vested at January 1, 2011 | 5,110 |
| | $ | 10.84 |
|
Granted | 1,961 |
| | 19.37 |
|
Vested | (1,145 | ) | | 9.92 |
|
Forfeited | (1,006 | ) | | 18.02 |
|
Non-vested at December 31, 2011 | 4,920 |
| | 12.98 |
|
Granted | 2,866 |
| | 17.21 |
|
Vested | (2,132 | ) | | 12.79 |
|
Forfeited | (147 | ) | | 17.66 |
|
Non-vested at December 29, 2012 | 5,507 |
| | 15.13 |
|
Granted | 4,071 |
| | 19.26 |
|
Vested | (2,101 | ) | | 18.34 |
|
Forfeited | (447 | ) | | 17.74 |
|
Non-vested at December 28, 2013 | 7,030 |
| | 16.39 |
|
As of December 28, 2013, the unrecognized stock-based compensation cost related to non-vested restricted stock and restricted stock units was $57,513. We expect this cost to be recognized over a remaining weighted-average period of approximately 1.5 years.
