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Shareholders' Equity
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Dec. 31, 2014
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| Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shareholders' Equity | Shareholders' Equity
(i) Authorized: Unlimited no par value voting common shares (ii) Issuance of common shares: On May 16, 2012, the Company completed a public offering of 12.0 million of its common shares at a price to the public of $45.30 per share. The net proceeds to the Company from the offering were approximately $519.1 million, after deducting the underwriting discounts and commissions and offering expenses. The Company used part of the net proceeds from the offering to pay a portion of the cash component of the Merger consideration and other related fees and expenses in connection with the Merger and the balance was used for general corporate purposes. On July 2, 2012, the Company issued 66.8 million common shares and 0.5 million warrants in connection with the Catalyst Merger. See Note 4 — Business Combinations for further information related to the Merger.
Effective on March 11, 2009, the Board of Directors of the Company adopted the Catamaran Corporation Long-Term Incentive Plan (“LTIP”), which was approved by the shareholders of the Company at the Annual and Special Meeting of Shareholders on May 13, 2009. The LTIP provides for the grant of stock option awards, stock appreciation rights, restricted stock awards, restricted stock unit ("RSU") awards, performance awards and other stock-based awards to eligible persons, including executive officers and directors of the Company. The purpose of the LTIP is to advance the interests of the Company by attracting and retaining high caliber employees and other key individuals who perform services for the Company, a subsidiary or an affiliate; align the interests of the Company’s shareholders and recipients of awards under the LTIP by increasing the proprietary interest of such recipients in the Company’s growth and success; and motivate award recipients to act in the best long-term interest of the Company and its shareholders. The LTIP replaced the previous stock option plan, and no further grants or awards will be issued under the previous stock option plan. The maximum common shares of the Company allowed to be issued under the LTIP was increased by 3.6 million on May 11, 2011, after the Company’s shareholders approved an amendment to the LTIP at the Annual and Special Meeting of Shareholders of the Company. In July 2012, the maximum common shares of the Company allowed to be issued under the LTIP was increased by 5.0 million. Any full-value awards (i.e., any awards other than stock options or stock appreciation rights) granted under the LTIP are counted against this share limit as 1.79 shares for every one share granted. There were 4,815,112 stock-based awards available for grant under the LTIP as of December 31, 2014. In connection with the closing of the Merger with Catalyst on July 2, 2012, the Company assumed two stock incentive plans (together the "Assumed Plans"), each as amended and adjusted for the purpose of granting awards to certain employees of the Company subsequent to the close of the Merger or to newly hired employees of the Company who were not employed with the Company as of the close of the Merger. The Assumed Plans provide for the grant of stock option awards, RSU awards, performance awards and other stock-based awards to eligible persons. The maximum common shares of the Company allowed to be issued under the Assumed Plans is 1,480,936. Any full-value awards (i.e., any awards other than stock options or SARs) granted under the Assumed Plans are counted against this share limit as 1.45 shares for every one share granted. There were 730,056 stock-based awards available for grant under the Assumed Plans as of December 31, 2014.
The following table summarizes activity related to stock options for the year ended December 31, 2014:
Options granted during 2014, were primarily subject to a graded vesting schedule of four years. Options granted expire seven years from the grant date. The following table summarizes certain information about the options outstanding at December 31, 2014:
The aggregate intrinsic value and remaining contractual term of exercisable stock options at December 31, 2014 was $14.0 million and 3.26 years, respectively. The aggregate intrinsic value and remaining contractual term of all vested options and options that are expected to vest are $21.0 million and 4.47 years, respectively. The total fair value of stock options which vested during the years ended December 31, 2014, 2013 and 2012 was approximately $4.6 million, $3.5 million, and $2.8 million, respectively. As of December 31, 2014, there were $8.2 million and $1.7 million of unrecognized compensation costs related to stock options for LTIP and Assumed Plans, respectively, which are expected to be recognized over a weighted-average period of 2.39 years and 3.01 years, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2014, 2013, and 2012 was $8.2 million, $14.9 million, and $50.3 million, respectively.
On May 16, 2007, shareholders of the Company approved the creation of the Employee Stock Purchase Plan (“ESPP”) which allows eligible employees to withhold annually up to a maximum of 15% of their base salary, or $25,000, subject to U.S. Internal Revenue Service limitations, for the purchase of the Company’s common shares. Common shares will be purchased on the last day of each offering period at a discount of 5% of the fair market value of the common shares on such date. The aggregate number of common shares that may be awarded under the ESPP may not exceed 400,000 common shares. Common shares available for purchase under the ESPP are drawn from reacquired common shares purchased on behalf of the Company in the open market. During 2014, 2013, and 2012, the Company delivered 40,156, 33,728, and 14,697 common shares, respectively, under the ESPP. The ESPP is not considered compensatory as the plan terms are no more favorable than to all other shareholders, and the purchase discount does not exceed the per-share costs that would be incurred through a public offering. Since the plan is not considered compensatory, no portion of the costs related to ESPP purchases is included in the Company’s stock-based compensation expense.
During 2014, the Company granted both time-based RSUs and performance based RSUs to its employees and non-employee directors under both the LTIP and the Assumed Plans. Time-based RSUs vest on a straight-line basis over a range of three to four years. During 2012 and 2013, the Company also granted time-based RSUs that cliff vest after a three to four year period. Performance-based RSUs cliff vest based upon reaching agreed upon three-year performance conditions. The number of outstanding performance-based RSUs as of December 31, 2014 stated below assumes the associated performance targets will be met at the maximum level. The table below summarizes the number of time-based and performance-based RSUs that were granted and outstanding under both plans for the year ended December 31, 2014:
The total fair value of RSUs that vested during 2014, 2013, and 2012 was $20.8 million, $27.3 million, and $18.0 million, respectively. The weighted average grant date fair value of awards granted during 2014, 2013, and 2012 was $44.72, $55.99, and $38.49, respectively. The following table summarizes the information about RSUs for the year ended December 31, 2014 under the Company's equity incentive plans:
On July 2, 2012, the Company issued 66.8 million common shares and 0.5 million warrants in connection with the Company's merger with Catalyst Health Solutions, Inc. As of December 31, 2013, 425,160 of the warrants issued were outstanding. In June 2014, all of the outstanding warrants were exercised carrying a weighted average exercise price of $8.12. As of December 31, 2014, there were no warrants outstanding.
For the years ended December 31, 2014, 2013, and 2012, the Company recorded stock-based compensation expense of $33.6 million, $25.6 million, and $17.7 million, respectively. At December 31, 2014, there was $34.6 million and $12.0 million unrecognized compensation cost related to RSUs under the LTIP and Assumed Plans, respectively, which is expected to be recognized over a weighted-average period of 2.02 and 2.49 years, respectively. The Company allocated stock-based compensation costs to the same statement of operations line item as the cash compensation to those employees. Accordingly, the allocation of the compensation costs is as follows for the years ended December 31, 2014, 2013, and 2012 (in thousands):
The total income tax benefit, using the Company’s statutory tax rates, recognized in the statements of operations for stock-based compensation arrangements for years ended December 31, 2014, 2013, and 2012 was $12.7 million, $9.5 million, and $6.5 million, respectively. The Black-Scholes-Merton option-pricing model was used to estimate the fair value of the options at grant date for the years ended December 31, 2014, 2013, and 2012, based on the following assumptions:
The volatility assumption is based on historical volatility at the date of grant for the period equal to the expected life of the option. The expected life assumption is based on historical exercise patterns. The options issued to employees typically have a longer expected life of 4.5 to 5 years due to the vesting schedules, whereas options issued to directors have a shorter expected life of 1 to 2.5 years due to the shorter vesting period of some director options. The Company does not expect to pay dividends and, therefore, no dividend yield assumption is used in calculating the fair value of stock options. |
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