Share-Based Compensation

3 Months Ended

Mar. 31, 2013

Share-based Compensation [Abstract]

Share-Based Compensation

Share-Based Compensation

As of March 31, 2013, we have one share-based compensation plan. The Amended and Restated 1999 Stock Option and Incentive Plan (the “1999 Stock Plan”), which was adopted by our Board of Directors and approved by our shareholders, permits the granting of the following types of awards to our officers, other employees and non-employee directors: incentive stock options; non-qualified stock options; deferred stock awards; restricted stock awards; unrestricted stock awards; performance share awards; cash-based awards; stock appreciation rights and dividend equivalent rights. The 1999 Stock Plan provides for the issuance of up to 3,000,000 shares of common stock (subject to adjustment for stock splits and similar events). New options granted under the 1999 Stock Plan could have varying vesting provisions and exercise periods. Options granted vest in periods ranging from one year to five years and expire ten years after the grant date. Restricted stock units granted generally vest from three years to six years. Vested restricted stock units will be settled in shares of our common stock. As of March 31, 2013, there were 97,024 stock options and 312,293 restricted stock units outstanding. In addition, there were 384,009 shares available for grant under the 1999 Stock Plan as of March 31, 2013. As of March 31, 2013, there were no outstanding restricted stock units that contain rights to nonforfeitable dividend equivalents and are considered participating securities that are included in our computation of basic and fully diluted earnings per share. There is no difference in the earnings per share amounts between the two class method and the treasury stock method, which is why we continue to use the treasury stock method.

For all of our stock option grants, the fair value of each grant was estimated at the date of grant using the Black-Scholes option pricing model. Black-Scholes utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and employee exercise behavior. Expected volatilities utilized in the model are based on the historic volatility of the Company’s stock price. The risk free interest rate is derived from the U.S. Treasury Yield curve in effect at the time of the grant. In the first three months of 2013, we granted 0 stock options.

We account for Restricted Stock Unit (“RSU”) Awards by expensing the weighted average fair value to selling, general and administrative expenses ratably over vesting periods generally ranging from three years to six years. During the three months ended March 31, 2013 and April 1, 2012, we granted 109,468 and 121,725 RSU Awards with approximate fair values of $42.12 and $33.58 per RSU Award, respectively.

The CIRCOR Management Stock Purchase Plan, which is a component of the 1999 Stock Plan, provides that eligible employees may elect to receive restricted stock units in lieu of all or a portion of their pre-tax annual incentive bonus and, in some cases, make after-tax contributions in exchange for restricted stock units (“RSU MSPs”). In addition, non-employee directors may elect to receive restricted stock units in lieu of all or a portion of their annual directors’ fees. Each RSU MSP represents a right to receive one share of our common stock after a three year vesting period. RSU MSPs are granted at a discount of 33% from the fair market value of the shares of our common stock on the date of grant. This discount is amortized as compensation expense, to selling, general and administrative expenses, over a four year period. A total of 28,463 and 34,534 RSUs with per unit discount amounts representing fair values of $13.90 and $10.81 were granted under the CIRCOR Management Stock Purchase Plan during the three months ended March 31, 2013 and April 1, 2012, respectively.

Compensation expense related to our share-based plans for the three month periods ended March 31, 2013, and April 1, 2012 was $1.2 million and $1.4 million, respectively, and was recorded as selling, general and administrative expense. As of March 31, 2013, there was $8.7 million of total unrecognized compensation costs related to our outstanding share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.4 years.

The weighted average contractual term for stock options outstanding and options exercisable as of March 31, 2013 was 7.3 years and 5.7 years, respectively. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2013 was $0.7 million and the aggregate intrinsic value of stock options outstanding and options exercisable as of March 31, 2013 was $1.0 million and $0.5 million, respectively.

The aggregate intrinsic value of RSU Awards settled during the three months ended March 31, 2013 was $2.5 million and the aggregate intrinsic value of RSU Awards outstanding and RSU Awards vested and deferred as of March 31, 2013 was $9.7 million and $0.0 million, respectively.

The aggregate intrinsic value of RSU MSPs settled during the three months ended March 31, 2013 was $0.4 million and the aggregate intrinsic value of RSU MSPs outstanding and RSU MSPs vested and deferred as of March 31, 2013 was $1.4 million and $0.0 million respectively.