Shareholders' Equity Transactions

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Shareholders' Equity Transactions

Shareholders’ Equity Transactions

The Company’s Common Shares have a $.25 stated value. The Common Shares and the Class B Common Shares generally have identical rights, terms and conditions and vote together as a single class on most issues, except that the Class B Common Shares have ten votes per share, carry a 10% lower cash dividend rate and, in general, can only be transferred to family members. Holders of Class B Common Shares are entitled to convert their shares into Common Shares at any time on a share-for-share basis.

On May 16, 2013 shareholders approved the Invacare Corporation 2013 Equity Compensation Plan (the “2013 Plan”), which was adopted on March 27, 2013 by the Company's Board of Directors (the “Board”). The Board adopted the 2013 Plan because the ten-year term of the Company's prior equity plan, the Invacare Corporation Amended and Restated 2003 Performance Plan (the “2003 Plan”), expired on May 21, 2013. No new awards will be granted under the 2003 Plan following its expiration, but awards granted prior to its expiration will remain in effect under their original terms.

The 2013 Plan uses a fungible share-counting method, under which each common share underlying an award of stock options or SARs will count against the number of total shares available under the 2013 Plan as one share; and each common share underlying any award other than a stock option or a stock appreciation rights (“SAR”) will count against the number of total shares available under the 2013 Plan as two shares. Any common shares that are added back to the 2013 Plan as the result of the cancellation or forfeiture of an award granted under the 2013 Plan will be added back in the same manner such shares were originally counted against the total number of shares available under the 2013 Plan. Each common share that is added back to the 2013 Plan due to a cancellation or forfeiture of an award granted under the 2003 Plan will be added back as one common share.

The Compensation and Management Development Committee of the Board (the “Committee”), in its discretion, may grant an award under the 2013 Plan to any director or employee of the Company or an affiliate. The 2013 Plan initially allows the Committee to grant up to 4,460,337 Common Shares in connection with the following types of awards with respect to shares of the Company's common shares: incentive stock options, nonqualified stock options, SARs, restricted stock, restricted stock units, unrestricted stock, and performance shares. The Committee also may grant performance units that are payable in cash. The Committee has the authority to determine which participants will receive awards, the amount of the awards and the other terms and conditions of the awards. 

During 2013, 2012 and 2011, the Committee granted 756,700, 761,892 and 608,896 non-qualified stock options, respectively, each having a term of ten years and generally granted at the fair market value of the Company’s Common Shares on the date of grant under the 2003 Plan. There were no stock appreciation rights outstanding at December 31, 2013, 2012 or 2011.

Restricted stock awards for 114,700, 118,200, and 101,329 shares were granted in years 2013, 2012 and 2011, respectively, without cost to the recipients. The 2013 weighted average fair value of the 2013 restricted stock awards was $14.49. The restricted stock awards vest ratably over the four years after the award date. There were 97,695 restricted stock awards with a weighted average fair value of $20.34 that vested in 2013 and 12,925 restricted stock awards were forfeited in 2013.

At December 31, 2013 and 2012, there were 264,878 and 260,548 shares, respectively, for restricted stock awards that were unvested. Unearned restricted stock compensation of $3,705,000 in 2013, $4,323,000 in 2012 and $5,227,000 in 2011, determined as the market value of the shares at the date of grant, is being amortized on a straight-line basis over the vesting period. Compensation expense of $2,031,000, $2,241,000 and $2,199,000 was recognized in 2013, 2012 and 2011, respectively, related to restricted stock awards granted since 2004.

The 2013 Plan, 2003 Plan and the 1994 Performance Plans (the "Plans") have provisions that allow employees to exchange mature shares to pay the exercise price and surrender shares from the options or restricted awards to cover the minimum tax withholding obligation. Under these provisions, the Company acquired approximately 23,000 treasury shares for $532,000 in 2013, 35,000 shares for $459,000 in 2012 and 31,000 shares for $676,000 in 2011.

The following table summarizes information about stock option activity for the three years ended 2013, 2012 and 2011:

	2013			Weighted Average Exercise Price		2012			Weighted Average Exercise Price		2011			Weighted Average Exercise Price
Options outstanding at January 1	4,664,634			$	26.21	4,455,365			$	28.99	4,484,195			$	29.60
Granted	756,700			14.47		761,892			13.44		608,896			24.57
Exercised	(30,166		)	16.94		(9,417		)	10.70		(178,744		)	23.15
Canceled	(857,386		)	28.63		(543,206		)	31.52		(458,982		)	31.42
Options outstanding at December 31	4,533,782			$	23.86	4,664,634			$	26.21	4,455,365			$	28.99
Options exercise price range at December 31	13.35 to					13.37 to					10.70 to
	$	47.80				$	47.80				$	47.80
Options exercisable at December 31	2,985,175					3,074,275					2,960,317
Options available for grant at December 31*	4,460,337					1,248,033					1,914,574

 ________________________

 * Options available for grant as of December 31, 2013 reduced by net restricted stock award activity of 793,351.

The following table summarizes information about stock options outstanding at December 31, 2013:

	Options Outstanding				Options Exercisable
Exercise Prices	Number Outstanding At 12/31/13	Weighted Average Remaining Contractual Life Years	Weighted Average Exercise Price		Number Exercisable At 12/31/13	Weighted Average Exercise Price
$ 13.35 – $15.00	1,332,962	8.9	$	13.96	152,186	$	13.40
$ 15.01 – $25.00	1,580,572	5.4	22.53		1,333,490	22.22
$ 25.01 – $35.00	919,833	5.6	25.73		799,084	25.76
$ 35.01 – $47.80	700,415	1.1	43.25		700,415	43.25
Total	4,533,782	5.8	$	23.86	2,985,175	$	27.65

The Plans provide that shares granted come from the Company’s authorized but un-issued Common Shares or treasury shares. In addition, the Company’s stock-based compensation plans allow participants to exchange mature shares for the exercise price and surrender shares for minimum withholding taxes, which results in the Company acquiring treasury shares. Pursuant to the Plans, the Committee has established that the majority of the 2013 grants may not be exercised within one year from the date granted and options must be exercised within ten years from the date granted. Accordingly, for the stock options issued in 2013, 2012 and 2011, 25% of such options vested in the year following issuance. The stock options awarded during such years provided a four-year vesting period whereby options vest equally in each year. The 2013, 2012 and 2011 expense has been adjusted for estimated forfeitures of awards that will not vest because service or employment requirements have not been met.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	2013		2012		2011
Expected dividend yield	0.4	%	0.4	%	0.2	%
Expected stock price volatility	38.2	%	41.0	%	37.3	%
Risk-free interest rate	0.82	%	0.94	%	1.11	%
Expected life in years	6.1		6.0		5.9
Forfeiture percentage	9.2	%	7.6	%	6.9	%

Expected stock price volatility is calculated at each date of grant based on historical stock prices for a period of time commensurate with the expected life of the option. The weighted-average fair value of options granted during 2013, 2012 and 2011 was $5.33, $5.14 and $8.88, respectively. The weighted-average remaining contractual life of options outstanding at December 31, 2013, 2012 and 2011 was 5.8, 5.8 and 5.7 years, respectively. The weighted-average contractual life of options exercisable at December 31, 2013 was 4.4 years. The total intrinsic value of stock awards exercised in 2013, 2012 and 2011 was $158,000, $41,000 and $1,429,000, respectively. As of December 31, 2013, the intrinsic value of all options outstanding and of all options exercisable was $14,144,000 and $3,252,000, respectively.

The exercise of stock awards in 2013, 2012 and 2011 resulted in cash received by the Company totaling $512,000, $0 and $4,139,000 for each period, respectively with no tax benefits for any period. The total fair value of awards vested during 2013, 2012 and 2011 was $3,778,000, $4,398,000 and $4,362,000, respectively.

As of December 31, 2013, there was $11,975,000 of total unrecognized compensation cost from stock-based compensation arrangements granted under the Plans, which is related to non-vested options and shares, which includes $3,705,000 related to restricted stock awards. The Company expects the compensation expense to be recognized over a weighted-average period of approximately two years. Prior to the adoption of ASC 718, Compensation—Stock Compensation, the Company presented all tax benefit deductions resulting from the exercise of stock options as a component of operating cash flows in the Consolidated Statement of Cash Flows. In accordance with ASC 718, any tax benefits resulting from tax deductions in excess of the compensation expense recognized for those options is classified as a component of financing cash flows.

Effective July 8, 2005, the Company adopted a new Rights Agreement to replace the Company’s previous shareholder rights plan, which expired on July 7, 2005. In order to implement the new Rights Agreement, the Board of Directors declared a dividend of one Right for each outstanding share of the Company’s Common Shares and Class B Common Shares to shareholders of record at the close of business on July 19, 2005. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a Series A Participating Serial Preferred Share, without par value, at a Purchase Price of $180.00 in cash, subject to adjustment. The Rights will not become exercisable until after a person (an “Acquiring ”) has acquired, or obtained the right to acquire, or commences a tender offer to acquire, shares representing 30% or more of the Company’s outstanding voting power, subject to deferral by the Board of Directors. After the Rights become exercisable, under certain circumstances, the Rights may be exercisable to purchase Common Shares of the Company, or common shares of an acquiring Company, at a price equal to the exercise price of the Right divided by 50% of the then current market price per Common Share or acquiring Company common share, as the case may be. The Rights will expire on July 18, 2015 unless previously redeemed or exchanged by the Company. The Company may redeem and terminate the Rights in whole, but not in part, at a price of $0.001 per Right at any time prior to 10 days following a public announcement that an Acquiring Party has acquired beneficial ownership of shares representing 30% or more of the Company’s outstanding voting power, and in certain other circumstances described in the Rights Agreement.