STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2015

Stockholders' Equity Note [Abstract]

Stock-based Compensation

STOCK-BASED COMPENSATION

At December 31, 2015, the Company 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 PBO, RSU, 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 PBO, 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 (however, the holder can elect to pay withholding taxes in cash).

The Company recorded total stock based compensation expense of $3.6 million, $7.1 million and $6 million during 2015, 2014 and 2013, respectively. Of the $3.6 million in stock based compensation expense recorded during 2015, $1.7 million related to RSU and stock options for UCP common stock granted to the officers of UCP, of which $734,000 was allocated to noncontrolling interest. Of the $7.1 million in stock based compensation expense recorded in 2014, $3.7 million related to RSU for UCP common stock granted to the officers of UCP, of which $1.9 million was allocated to noncontrolling interest. Of the $6 million in stock based compensation expense recorded in 2013, $2.2 million related to RSU for UCP common stock granted to the officers of UCP, of which $1.2 million was allocated to noncontrolling interest.

Performance-Based Options (PBO)

At various times, the Company has awarded PBO to various members of management. All of the PBO issued 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 PBO 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.

The estimated fair value of the Company’s PBO was determined using a Monte Carlo model, which incorporated the following assumptions:

	2015 10-Year Option			2014 10-Year Option			2014 4.58-Year Option
Grant date	8/12/2015			11/14/2014			11/14/2014
Expiration date	8/12/2025			11/14/2024			6/14/2019
Grant date stock price	$	13.06		$	19.51		$	19.51
Historical volatility	35.16		%	35.00		%	28.85		%
Risk-free rate (annualized)	2.19		%	2.38		%	1.5		%
Dividend yield (annualized)	—		%	—		%	—		%

The determination of the fair value of PBO using an option valuation model is affected by the Company’s stock price, as well as assumptions regarding a number of complex and subjective variables. The volatility is calculated through an analysis based on historical daily returns of PICO’s stock over a look-back period equal to the PBO contractual term. The risk-free interest rate assumption is based upon a risk-neutral framework using the 10-year and 4.58-year zero-coupon risk-free interest rates derived from the treasury constant maturities yield curve on the grant date, for the 10-year PBO award and the 4.58-year PBO award, respectively. The dividend yield assumption is based on the expectation of no future dividend payouts by the Company.

The weighted-average grant date fair value of the PBO granted during the years ended December 31, 2015 and December 31, 2014 was $5.87 and $6.51 per share, respectively. The total fair value of the 285,714 shares, 4.58-year options was $1.5 million, the total fair value of the 167,619 shares, 2014 10-year options was $1.5 million, and the total fair value of the 75,000 shares, 2015 10-year options was $440,000. The Company did not have any PBO activity during the year ended December 31, 2013.

A summary of PBO activity was as follows:

	Performance-Based Options		Weighted-Average Exercise Price Per Share
Outstanding at December 31, 2013
Granted	453,333		$	19.51
Forfeited
Outstanding at December 31, 2014	453,333		$	19.51
Granted	75,000		$	13.06
Forfeited	(75,000	)	$	13.06
Outstanding at December 31, 2015	453,333		$	19.51

Of the PBO outstanding, 285,714 are exercisable for up to 4 years, 7 months from the grant date and 167,619 are exercisable for up to 10 years from the grant date.

	Performance-Based Options		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Vested at December 31, 2013
Vested	12,593
Forfeited
Vested at December 31, 2014	12,593		$	19.51	6.5	—
Vested	155,278
Forfeited	(4,167	)
Vested at December 31, 2015	163,704		$	19.51	5.5	—

All previously recognized compensation expense related to forfeited PBO was reversed during the year and the remaining unamortized expense was canceled. There were no PBO forfeitures during the years ended December 31, 2014 and 2013.

As of December 31, 2015 and December 31, 2014, there were no PBO exercisable as the market condition had not been met. The unrecognized compensation cost related to unvested PBO at December 31, 2015 and 2014 was $1.8 million and $2.9 million, respectively.

Restricted Stock Units (RSU)

RSU awards 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. RSU are valued at the Company’s closing stock price on the date of grant and compensation expense is recognized ratably over the vesting period for each grant.

A summary of RSU activity was as follows:

	RSU Shares		Weighted-Average Grant Date Fair Value Per Share
Outstanding and unvested at December 31, 2012	467,716		$	30.43
Granted	15,435		$	22.67
Vested	(13,716	)	$	21.87
Forfeited
Outstanding and unvested at December 31, 2013	469,435		$	30.43
Granted	142,131		$	19.81
Vested	(469,435	)	$	30.43
Forfeited
Outstanding and unvested at December 31, 2014	142,131		$	19.81
Granted	23,300		$	15.68
Vested	(45,753	)	$	20.43
Forfeited	(11,020	)	$	15.72
Outstanding and unvested at December 31, 2015	108,658		$	19.07

The unrecognized compensation cost related to unvested RSU for the years ended December 31, 2015 and 2014 was $1.8 million and $2.5 million, respectively.

In August of 2015, the Company issued 5,000 RSU to a member of management that vest over a three year period and in June of 2015, the Company issued 3,050 RSU to each of the six non-employee directors of the Company for a total of 18,300 awards that vest one year from the date of grant.

When an award vests, the recipient receives a new share of PICO common stock for each RSU, less that number of shares of common stock equal in value to applicable withholding taxes. During 2015, 13,212 RSU held by directors and 32,539 RSU held by various officers and members of management vested, which resulted in the delivery of 33,758 newly issued shares of PICO common stock, net of applicable withholding taxes.

During the year ended December 31, 2015, 11,020 RSU were forfeited. All previously recognized expense was reversed during the year and the remaining unamortized expense was canceled. There were no RSU forfeited during the years ended December 31, 2014 and 2013.

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 recognized, during the three years ended December 31, 2015. In addition, there were no SAR granted or exercised during the three years ended December 31, 2015.

A summary of SAR activity is as follows:

	SAR Shares		Weighted Average Exercise Price		Weighted Average Contractual Term Remaining (Years)
Outstanding and exercisable at December 31, 2012	1,812,079		$	36.16	3.5
Expired	(195,454	)	$	33.76
Outstanding and exercisable at December 31, 2013	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
Expired	(1,110,155	)	$	33.76
Outstanding and exercisable at December 31, 2015	486,470		$	42.71	1.5

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