(13) Share-based Compensation

The Company has historically awarded stock options and nonvested share-awards for employees and non-employee directors as a means of attracting and retaining quality personnel and to align employee performance with stockholder value. Stock option plans are approved by the Company’s stockholders and administered by the compensation committee of the board of directors (“Board”). The current plan allows for a variety of equity programs designed to provide flexibility in implementing equity and cash awards, including incentive stock options, nonqualified stock options, nonvested share-awards, restricted stock units, stock appreciation rights, performance stock, performance units and other share-based awards. Participants may be granted any one of the equity awards or any combination. The Company does not award stock options with an exercise price below the market price of the underlying securities on the date of award. As of March 31, 2015, 2.5 million shares remain available for future grants. Generally stock options have contractual terms of ten years.

For both the quarters ended March 31, 2015 and 2014, all share-based compensation is included in rental, selling and general expenses. As of March 31, 2015, total unrecognized compensation cost related to stock option awards was approximately $10.1 million and the related weighted-average period over which it is expected to be recognized is approximately 1.7 years. As of March 31, 2015, the unrecognized compensation cost related to nonvested share-awards was approximately $9.9 million, which is expected to be recognized over a weighted-average period of approximately 2.6 years.

 

Stock options. The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model which requires the input of assumptions. Management estimates the risk-free interest rate based on the U.S. Treasury security rate in effect at the time of the grant. The expected life of the options, volatility and dividend rates are estimated based on the Company’s historical data. The following are the key assumptions used for options granted during the three month periods ended March 31:

 

		2015		2014
Risk-free interest rate		1.3% - 1.5%			1.5	%
Expected life of the options (years)		5			5
Expected stock price volatility		35.6% - 35.7%			38.4	%
Expected dividend rate		1.8% - 2.0%			1.6	%

The following table summarizes stock option activity for the three months ended March 31, 2015 (share amounts in thousands):

 

		Number of Shares				Weighted Average Exercise Price
Options outstanding, beginning of period			2,649			$	32.33
Granted			363				42.80
Canceled/Expired			(16	)			45.72
Exercised			(1	)			25.43
Options outstanding, end of period			2,995				33.53

A summary of stock options outstanding as of March 31, 2015, is as follows:

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Terms				Aggregate Intrinsic Value
		(In thousands)								(In years)				(In thousands)
Outstanding			2,995			$	33.53				8.11			$	28,595
Vested and expected to vest			2,887				33.28				8.07				28,242
Exercisable			1,659				30.80				7.68				19,997

The aggregate intrinsic value of options exercised during the three months ended March 31, 2015, was approximately $23,000 and the weighted average fair value of stock options granted was $8.42.

Nonvested share-awards. The fair value of nonvested share-awards is estimated as the closing price of Mobile Mini’s common stock on the date of grant. A summary of nonvested share-awards activity is as follows (share amounts in thousands):

 

		Shares				Weighted Average Grant Date Fair Value
Nonvested at beginning of period			343			$	27.99
Awarded			81				37.22
Released			(29	)			34.78
Forfeited			(11	)			24.14
Nonvested at end of period			384				29.57

The total fair value of nonvested share-awards that vested during the three months ended March 31, 2015 was $1.0 million.