8. Shareholders' Equity

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Shareholders' Equity

Common Stock

Holders of common stock are entitled to such dividends as our Board of Directors, in its discretion, may declare out of funds available, subject to the terms of any outstanding shares of preferred stock and other restrictions. In the event of liquidation of the Company, holders of common stock are entitled to receive, pro rata, all of the assets of the Company available for distribution, after payment of any liquidation preference to the holders of outstanding shares of preferred stock. Holders of the shares of common stock have no conversion or preemptive or other subscription rights and there are no redemption or sinking fund provisions applicable to the common stock.

We are required to comply with various operating and financial covenants defined in the agreements governing the warehouse lines of credit, senior debt, residual interest financing and subordinated debt. The covenants for the senior debt, residual interest financing and subordinated debt restrict the payment of certain distributions, including dividends (See Note 7).

Stock Purchases

At five different times between 2000 and 2011, our Board of Directors has authorized the repurchase of up to $34.5 million of our securities. As of December 31, 2014, we had purchased $5.0 million principal amount of debt securities, and $28.4 million of our common stock, representing 9,800,720 shares. There is approximately $1.0 million remaining under such plans, which have no expiration date.

Options and Warrants

In 2006, the Company adopted and its shareholders approved the CPS 2006 Long-Term Equity Incentive Plan (the “2006 Plan”) pursuant to which our Board of Directors, or a duly-authorized committee thereof, may grant stock options, restricted stock, restricted stock units and stock appreciation rights to our employees or employees of our subsidiaries, to directors of the Company, and to individuals acting as consultants to the Company or its subsidiaries. In June 2008, May 2012 and again in April 2013, the shareholders of the Company approved an amendment to the 2006 Plan to increase the maximum number of shares that may be subject to awards under the 2006 Plan to 5,000,000, 7,200,000 and 12,200,000, respectively, in each case plus shares authorized under prior plans and not issued. Options that have been granted under the 2006 Plan and a previous plan approved in 1997 have been granted at an exercise price equal to (or greater than) the stock’s fair market value at the date of the grant, with terms generally of 7-10 years and vesting generally over 4-5 years.

The per share weighted-average fair value of stock options granted during the years ended December 31, 2014, 2013 and 2012 was $2.73, $4.79 and $1.15, respectively. That fair value was estimated using the Black-Scholes option pricing model using the weighted average assumptions noted in the following table. We use historical data to estimate the expected term of each option. The volatility estimate is based on the historical and implied volatility of our stock over the period that equals the expected life of the option. Volatility assumptions ranged from 52% to 55% for 2014, 50% to 85% for 2013 and 54% to 82% for 2012. The risk-free interest rate is based on the yield on a U.S. Treasury bond with a maturity comparable to the expected life of the option. The dividend yield is estimated to be zero based on our intention not to issue dividends for the foreseeable future.

	Year Ended December 31,
	2014			2013			2012
Expected life (years)		4.22			5.41			5.63
Risk-free interest rate		1.43	%		0.73	%		1.32	%
Volatility		55	%		80	%		79	%
Expected dividend yield		–			–			–

For the years ended December 31, 2014, 2013 and 2012, we recorded stock-based compensation costs in the amount of $3.8 million, $3.9 million and $1.1 million, respectively. As of December 31, 2014, the unrecognized stock-based compensation costs to be recognized over future periods was equal to $13.9 million. This amount will be recognized as expense over a weighted-average period of 3.0 years.

At December 31, 2014 and 2013, the options outstanding and exercisable had intrinsic values of $36.7 million and $61.6 million, respectively. The total intrinsic value of options exercised was $9.1 million and $8.1 million for the years ended December 31, 2014 and 2013, respectively. New shares were issued for all options exercised during the year ended December 2014 and cash of $2.5 million was received. A tax benefit of $1.0 million was recorded for the options exercised in 2014. At December 31, 2014, there were a total of 2.1 million additional shares available for grant under the 2006 Plan.

Stock option activity for the year ended December 31, 2014 for stock options under the 2006 and 1997 plans is as follows:

	Number of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Options outstanding at the beginning of period		10,128		$	3.30		N/A
Granted		2,030			6.59		N/A
Exercised		(1,227	)		2.02		N/A
Forfeited/Expired		(103	)		4.58		N/A
Options outstanding at the end of period		10,828		$	4.05		6.01 years
Options exercisable at the end of period		5,761		$	2.52		4.89 years

The per share weighted average exercise price of stock options granted whose exercise price was equal to the market price of the stock on the grant date during the years ended December 31, 2014, 2013 and 2012, was $6.59, $7.43 and $1.72, respectively. We did not issue any stock options with an exercise price above or below the market price of the stock on the grant date for the years ended December 31, 2014, 2013 and 2012.

On June 30, 2008, we entered into a series of agreements pursuant to which a lender purchased a $10 million five-year, fixed rate, senior secured note from us. In July 2008, in conjunction with the amendment of the residual interest financing as discussed above, the lender purchased an additional $15 million note with substantially the same terms as the $10 million note. Pursuant to the June 30, 2008 securities purchase agreement, we issued to the lender 1,225,000 shares of common stock. In addition, we issued the lender two warrants: (i) warrants that we refer to as the FMV Warrants, which were exercisable for 1,611,114 shares of our common stock, at an exercise price of $1.39818 per share, and (ii) warrants that we refer to as the N Warrants, which were exercisable for 285,781 shares of our common stock, at a nominal exercise price. Both the FMV Warrants and the N Warrants were exercised in November 2013.

In connection with the amendment to and partial repayment of our residual interest financing in July 2008, we issued warrants exercisable for 2,500,000 common shares for $4,071,429. The warrants represent the right to purchase 2,500,000 CPS common shares at a nominal exercise price, at any time prior to July 10, 2018. In March 2010 we repurchased warrants for 500,000 of these shares for $1.0 million. Warrants to purchase 2,000,000 shares remain outstanding as of December 31, 2014.

A warrant to purchase 1,162,270 shares of our common shares at an exercise price of $0.876 per share, which was issued in connection with our $50 million revolving credit facility established in September 2009, was exercised by the lender in April 2013.

Warrants to purchase 500,000 of our common shares at an exercise price of $1.41 per share were issued to certain note purchasers in our March 2010 $50 million term funding facility. Warrants to purchase 409,390 shares were exercised during 2014 and none remain outstanding as of December 31, 2014.