Quarterly report pursuant to Section 13 or 15(d)

EQUITY AND EARNINGS PER SHARE

v3.10.0.1
EQUITY AND EARNINGS PER SHARE
 6 Months Ended
Jun. 30, 2018
Stockholders' Equity Note [Abstract]  
EQUITY AND EARNINGS PER SHARE
EQUITY AND EARNINGS PER SHARE
 
A. Equity

The following is a summary of the changes in the Company’s outstanding options for the six months ended June 30, 2018:
 
Number of Options
 
Weighted Average Strike Price
 
Weighted Average Life Remaining (in years)
Balance at December 31, 2017
5,010,576

 
$
2.55

 
 
Balance at June 30, 2018
5,010,576

 
$
2.55

 
5.09
 
 
 
 
 
 
Exercisable at June 30, 2018
2,705,586

 
$
2.64

 
5.14


As of June 30, 2018, the Company’s outstanding options were summarized as follows:
 
 
Issued in 2011 and thereafter
Held by the former Manager
 
2,705,253

Issued to the former Manager and subsequently transferred to certain of the Manager’s employees (A)
 
2,304,990

Issued to the independent directors
 
333

Total
 
5,010,576

Weighted average strike price
 
$
2.55


(A)
The Company and the former Manager agreed that options held by certain employees formerly employed by the Manager will not terminate or be forfeited as a result of the Termination and Cooperation Agreement, and the vesting of such options will relate to the relevant holder’s employment with the Company and its affiliates following January 1, 2018. In both February 2017 and April 2018, the former Manager issued 1,152,495 options to certain employees formerly employed by the Manager as part of their compensation.

The valuation of the employee options has been determined using the Black-Scholes option valuation model. The Black-Scholes option valuation model uses assumptions of expected volatility, expected dividend yield of the Company’s stock, expected term of the awards and the risk-free interest rate. The fair value of the options was determined using the following assumptions:
Option Valuation Date
 
January 1, 2018

 
April 10, 2018

Expected Volatility
 
39.73
%
 
35.66
%
Expected Dividend Yield
 
0.00
%
 
0.00
%
Expected Remaining Term
 
3.0 - 6.6 years

 
2.7 - 6.3 years

Risk-Free Rate
 
2.16 - 2.29%

 
2.68 - 2.82%

Fair Value at Valuation Date
 
$
4,272

 
$
3,558



The options granted to the Company's employees fully vest and are exercisable one year prior to the option expiration date, beginning March 2020 through January 2024. Stock-based compensation expense is recognized on a straight-line basis through the vesting date of the options. Stock-based compensation expense related to the employee options was $0.5 million and $0.8 million during the three and six months ended June 30, 2018, respectively, and was recorded in general and administrative expense on the Consolidated Statements of Operations. The unrecognized stock-based compensation expense related to the unvested options was $7.0 million as of June 30, 2018 and will be expensed over a weighted average of 4.2 years.

On March 6, 2018, the Company declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively, for the period beginning February 1, 2018 and ending April 30, 2018. Dividends totaling $1.4 million were paid on April 30, 2018.

On May 2, 2018, the Company declared dividends of $0.609375, $0.503125 and $0.523438 per share on the 9.750% Series B, 8.050% Series C and 8.375% Series D preferred stock, respectively, for the period beginning May 1, 2018 and ending July 31, 2018. Dividends totaling $1.4 million were paid on July 31, 2018.

B. Earnings Per Share

The Company is required to present both basic and diluted earnings per share (“EPS”). The following table shows the amounts used in computing basic and diluted EPS:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Numerator for basic and diluted earnings per share:
 
 
 
 
 
 
 
Loss from continuing operations after preferred dividends and noncontrolling interests
$
(6,198
)
 
$
(6,101
)
 
$
(23,890
)
 
$
(20,450
)
Loss Applicable to Common Stockholders
$
(6,198
)
 
$
(6,101
)
 
$
(23,890
)
 
$
(20,450
)
 
 
 
 
 
 
 
 
Denominator:
 
 
 
 
 
 
 
Denominator for basic earnings per share - weighted average shares
66,977,104

 
66,874,155

 
66,977,104

 
66,858,155

Effect of dilutive securities
 
 
 
 
 
 
 
Options
—

 
—

 
—

 
—

Denominator for diluted earnings per share - adjusted weighted average shares
66,977,104

 
66,874,155

 
66,977,104

 
66,858,155

 
 
 
 
 
 
 
 
Basic earnings per share:
 
 
 
 
 
 
 
Loss from continuing operations per share of common stock, after preferred dividends and noncontrolling interests
$
(0.09
)
 
$
(0.09
)
 
$
(0.36
)
 
$
(0.31
)
 
 
 
 
 
 
 
 
Loss Applicable to Common Stock, per share
$
(0.09
)
 
$
(0.09
)
 
$
(0.36
)
 
$
(0.31
)
 
 
 
 
 
 
 
 
Diluted earnings per share:
 
 
 
 
 
 
 
Loss from continuing operations per share of common stock, after preferred dividends and noncontrolling interests
$
(0.09
)
 
$
(0.09
)
 
$
(0.36
)
 
$
(0.31
)
 
 
 
 
 
 
 
 
Loss Applicable to Common Stock, per share
$
(0.09
)
 
$
(0.09
)
 
$
(0.36
)
 
$
(0.31
)

Basic EPS is calculated by dividing (loss) income applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted EPS is calculated by dividing (loss) income applicable to common stockholders by the weighted average number of shares of common stock outstanding plus the additional dilutive effect of common stock equivalents during each period. The Company’s common stock equivalents are its outstanding stock options. During both the three and six months ended June 30, 2018, the Company had zero antidilutive options. During the three and six months ended June 30, 2017, the Company had 85,238 and 118,054 antidilutive options, respectively. During the three and six months ended June 30, 2018 based on the treasury stock method, the Company had 2,893,372 and 2,702,628 potentially dilutive common stock equivalents, respectively, which were excluded due to the Company's loss position. During the three and six months ended June 30, 2017 based on the treasury stock method, the Company had 1,556,785 and 1,748,034 potentially dilutive common stock equivalents, respectively, which were excluded due to the Company's loss position. Income (loss) applicable to common stockholders is equal to net income (loss) less preferred dividends and net income (loss) attributable to noncontrolling interest.