Quarterly report pursuant to Section 13 or 15(d)

STOCK INCENTIVE PLAN

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STOCK INCENTIVE PLAN
9 Months Ended
Sep. 30, 2015
STOCK INCENTIVE PLAN [Abstract]  
STOCK INCENTIVE PLAN

NOTE 7. STOCK INCENTIVE PLAN

 

The company has one stock incentive plan. The Amended and Restated 1999 Stock Incentive Plan (the “Plan”) allows the company to grant stock options and restricted stock to employees, directors, officers and advisors of the company. A maximum of 5,000,000 shares are authorized under the Plan. Options generally vest over a four-year period and have a maximum term of five years from the vesting date. The Plan provides that vesting may be accelerated upon the occurrence of certain corporate transactions of the company. The Plan provides that the Board of Directors, or a committee appointed by the Board, has discretion, subject to certain limits, to modify the terms of outstanding options. We recognize non-cash stock-based compensation expense related to the estimated fair value of stock options granted in accordance with FASB Codification Topic 718, Compensation—Stock Compensation.

 

The following table reflects the components of stock-based compensation expense recognized in the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2015:


 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

    2014       2015   2014   2015
  (Dollars in thousands)
Stock option compensation expense included in corporate expenses   $  223     $ 97   $ 843     $ 413
Restricted stock awards compensation expense included in corporate expenses      —        14       —       29
Stock option compensation expense included in broadcast operating expenses      64        30       253       107
Stock option compensation expense included in digital media operating expenses                40       20       134       75
Stock option compensation expense included in publishing operating expenses     17       9       46       33
Total stock-based compensation expense, pre-tax   $ 344     $ 170     $ 1,276     $ 657
Tax provision for stock-based compensation expense      (137 )      (68 )     (510 )     (263 )
Total stock-based compensation expense, net of tax   $ 207     $ 102     $ 766     $ 394

 

Stock option and restricted stock grants

 

The Plan allows the company to grant stock options and shares of restricted stock to employees, directors, officers and advisors of the company. For grants of stock options, the option exercise price is set at the closing price of the company's common stock on the date of grant, and the related number of shares underlying the stock option is fixed at that point in time. The Plan also provides for grants of restricted stock. Eligible employees may receive stock options annually with the number of shares and type of instrument generally determined by the employee's salary grade and performance level. In addition, certain management and professional level employees typically receive a stock option grant upon commencement of employment. The Plan does not allow key employees and directors (restricted persons) to exercise options during pre-defined blackout periods. Employees may participate in plans established pursuant to Rule 10b5-1 under the Exchange Act that allow them to exercise options according to pre-established criteria.

 

We use the Black-Scholes valuation model to estimate the grant date fair value of stock options and of restricted stock. The expected volatility reflects the consideration of the historical volatility of our stock as determined by the closing price over a six to ten year term that is generally commensurate with the expected term of the award. Expected dividends reflect the quarterly distributions authorized and declared on our Class A and Class B common stock as of the grant date. The expected term of the awards are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rates for periods within the expected term of the award are based on the U.S. Treasury yield curve in effect during the period the options were granted. We use historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model.

The weighted-average assumptions used to estimate the fair value of the stock options and restricted stock awards using the Black-Scholes valuation model were as follows for the three and nine months ended September 30, 2014 and 2015:

 

Three Months Ended September 30,   Nine Months Ended September 30,  
2014
  2015 2014     2015   
Expected volatility    n/a
    n/a 74.98 %     52.37 %
Expected dividends    n/a
    n/a 2.70 %     4.28 %
Expected term (in years)              n/a
    n/a     7.8       3.0  
Risk-free interest rate    n/a
    n/a     2.27 %     0.85 %

 

Stock option information with respect to the company's stock-based equity plans during the nine months ended September 30, 2015 is as follows:

 

Options Shares     Weighted Average
Exercise Price
    Weighted Average
Grant Date Fair Value
    Weighted Average
Remaining Contractual
Term
 

Aggregate
Intrinsic Value 

(in thousands)

 
   
 
Outstanding at January 1, 2015 1,816,204     $ 4.88     $ 3.39    
  $ 5,718  
Granted 10,000       6.08       1.98              
Exercised     (143,208 )     2.19       1.35              
Forfeited or expired     (54,462 )     12.15       8.05              
Outstanding at September 30, 2015     1,628,534     $ 4.88     $ 3.40     4.5 years   $ 2,769  
Exercisable at September 30, 2015     987,484     $ 4.93     $ 3.55     3.5 years   $ 1,648  
Expected to Vest     608,679     $ 4.81     $ 3.16     5.9 years   $ 1,065  

 

The aggregate intrinsic value represents the difference between the company's closing stock price on September 30, 2015 of $6.12 and the option exercise price of the shares for stock options that were in the money, multiplied by the number of shares underlying such options. The total fair value of options vested during the nine months ended September 30, 2014 and 2015 was $1.8 million and $1.5 million, respectively.


Non-employee directors of the company have been awarded restricted stock awards that vest one year from the date of issuance. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until the sooner of the fifth anniversary from the grant date or the day after the non-employee director is no longer a member of the company's board. The restricted stock awards were independent of option grants and were granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the date of grant.

 

The fair values of shares of restricted stock awards are determined based on the closing price of the company common stock on the grant dates. Information regarding the company's restricted stock awards during the nine months ended September 30, 2015 is as follows:

 

Restricted Stock Awards Shares     Weighted Average
Grant Date Fair Value
   

Weighted Average
Remaining 
Contractual
Term

   

Aggregate
Intrinsic Value

(in thousands)

 
 
Outstanding at January 1, 2015   —     $ —         $ —  
Granted   10,000       5.83     1.0 years     61  
Vested     —       —              
Forfeited     —       —              
Unvested outstanding at September 30, 2015      10,000     $ 5.83     0.5 years   $ 61  

 

As of September 30, 2015, there was $0.4 million of total unrecognized compensation cost related to non-vested awards of stock. This cost is expected to be recognized over a weighted average period of 1.10 years.