Stock-Based Compensation

3 Months Ended

Mar. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

At March 31, 2015, PICO had one stock-based payment arrangement outstanding, the PICO Holdings, Inc. 2014 Equity Incentive Plan (the “2014 Plan”). UCP also issues stock-based compensation under its own long term incentive plan that provides for equity-based awards, which upon vesting results in newly issued shares of UCP Class A common stock.

The 2014 Plan provides for the issuance of up to 3.3 million shares of common stock in the form of performance-based price-contingent stock options (“Performance-Based Options”), restricted stock units (“RSU”), free standing stock-settled stock appreciation rights (“SAR”), non-statutory stock options, restricted stock awards (“RSA”), performance shares, performance units, deferred compensation awards, and other stock-based awards to employees, directors and consultants of the Company (or any present or future parent or subsidiary corporation or other affiliated entity of the Company). The 2014 Plan allows for broker assisted cashless exercises and net-settlement of income taxes and employee withholding taxes. Upon exercise of a Performance-Based Option, RSU, and SAR, the employee will receive newly issued shares of PICO common stock with a fair value equal to the in-the-money value of the award, less applicable federal, state and local withholding and income taxes.

The Company recorded total stock based compensation expense of $1.1 million and $2 million during the three months ended March 31, 2015 and 2014, respectively. Of the $1.1 million in stock based compensation expense recorded during the three months ended March 31, 2015, $631,000 related to RSU and stock options for UCP common stock granted to the officers of UCP, of which, $270,000 was allocated to noncontrolling interest. Of the $2 million in stock based compensation expense recorded during the three months ended March 31, 2014, $1 million related to RSU for UCP common stock granted to the officers of UCP, of which $587,000 was allocated to noncontrolling interest.

Performance-Based Options:

Performance-based options contain a market condition based on the achievement of a stock price target during the contractual term and vest monthly over a three year period. The vested portion of the options may be exercised only if the 30-trading-day average closing sales price of the Company’s common stock equals or exceeds 125% of the grant date stock price. The stock price contingency may be met any time before the options expire and it only needs to be met once for the performance-based option to remain exercisable for the remainder of the term. Compensation expense is amortized on a straight-line basis over the requisite service period for the entire award, which is the vesting period of the award.

A summary of Performance-Based Options activity is as follows:

	Performance-Based Option Awards		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In Years)
Outstanding and unvested at January 1, 2014
Awards granted	453,333		$	19.51	6.6
Awards vested	(12,593	)	$	19.51	6.5
Outstanding and unvested at December 31, 2014	440,740		$	19.51	6.5
Awards vested	(37,778	)	$	19.51	6.3
Outstanding and unvested at March 31, 2015	402,962		$	19.51	6.3

As of March 31, 2015 and December 31, 2014, there were no Performance-Based Options exercisable as the market condition had not been met. The unrecognized compensation cost related to unvested Performance-Based Options was $2.6 million and $2.9 million at March 31, 2015 and December 31, 2014, respectively.

Restricted Stock Units (RSU)

RSU entitle the recipient, who must be continuously employed by the Company until the vesting date, unless the employment contracts stipulate otherwise, the right to receive one share of the Company’s common stock. RSU do not vote and are not entitled to receive dividends. Compensation expense for RSU is recognized ratably over the vesting period for each grant.

A summary of activity of PICO Holdings, Inc. common stock RSU is as follows:

	RSU Shares		Weighted-Average Grant Date Fair Value Per Share
Outstanding and unvested at January 1, 2014	469,435		$	30.43
Granted	142,131		$	19.81
Vested	(469,435	)	$	30.43
Outstanding and unvested at December 31, 2014	142,131		$	19.81
Outstanding and unvested at March 31, 2015	142,131		$	19.81

There were no RSU forfeited, vested, or granted during the three months ended March 31, 2015. There were no RSU forfeited during the year ended December 31, 2014. The unrecognized compensation cost related to unvested RSU was $2.3 million and $2.5 million at March 31, 2015 and December 31, 2014, respectively.

Stock-Settled Stock Appreciation Right (SAR)

Upon exercise, a SAR entitles the recipient to receive a newly issued share of the Company’s common stock equal to the in-the-money value of the award, less applicable federal, state and local withholding and income taxes. SAR do not vote and are not entitled to receive dividends. Compensation expense for SAR was recognized ratably over the vesting period for each grant.

There were no unvested SAR and therefore no compensation expense was recognized during the three months ended March 31, 2015 or 2014. In addition, there were no SAR granted, exercised, or forfeited during the three months ended March 31, 2015.

A summary of SAR activity is as follows:

	SAR Shares		Weighted Average Exercise Price		Weighted Average Contractual Term (In Years)
Outstanding and exercisable at January, 2014	1,616,625		$	36.45	2.5
Expired	(20,000	)	$	33.76
Outstanding and exercisable at December 31, 2014	1,596,625		$	36.49	1.5
Outstanding and exercisable at March 31, 2015	1,596,625		$	36.49	1.2

At March 31, 2015, none of the outstanding SAR were in-the-money.

For the three months ended March 31, 2015 and 2014, the Company’s common stock equivalents were excluded from the diluted per share calculation because their effect on earnings per share was anti-dilutive.