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Share-based Payments

6 Months Ended

Jun. 30, 2023

Share-based Payments

Share-based Payments

21. Share-based Payments

Share-based payments consist of the following compensation costs:


		Three months ended						Six months ended
		June 30,						June 30,
		2023			2022			2023			2022
Selling, general and administrative:
Stock option compensation expense		$	1.6		$	3.0		$	4.3		$	5.6
Equity-classified share units			9.4			8.8			12.9			11.7
Liability-classified share units			0.5			1.1			0.5			0.3
Employee share purchase plan - employer contributions			0.8			0.7			1.3			1.4
			12.3			13.6			19.0			19.0
Acquisition-related and integration costs:
Acceleration of share-based payments expense			0.9			—			5.9			—
Share-based continuing employment costs			0.9			2.1			1.9			4.2
			1.8			2.1			7.8			4.2
		$	14.1		$	15.7		$	26.8		$	23.2

Conversion of IAA Share Based Awards

In connection with the acquisition of IAA, IAA’s stock options, RSU’s and performance restrictive stock unit (“PRSU”) awards were cancelled and exchanged into 187,727 Company stock options and 366,379 Company RSU awards. At the closing of the acquisition of IAA, the converted share-based awards had an estimated aggregate fair value of $24.9 million, of which $4.8 million was attributable to post-combination services and will be recognized as share-based payment expense over the remaining service periods. The Company awards are subject to the same terms and conditions as applicable to the corresponding IAA equity awards held prior to the acquisition of IAA, including vesting terms, with the exception of any Company RSU awards that replace IAA’s PRSU awards, where vesting will no longer be subject to the achievement of performance goals and will be solely based on providing continued services to the Company through the end of the applicable service period.

IAA restricted stock awards and IAA phantom stock awards which were granted to non-employee directors of IAA, vested at closing of the acquisition of IAA and therefore do not have a future service requirement. Accordingly, the entire post-combination portion of such awards of $0.3 million has been recognized as share-based payment expense concurrent with the closing of the acquisition of IAA.

In addition, certain former executives of IAA were terminated in connection with the acquisition of IAA and their outstanding awards were fully accelerated as of the closing date. Accordingly, $4.3 million has been recognized as share-based payment expense concurrent with the closing of the acquisition of IAA.

.

Stock Option Plans

On May 8, 2023, the Company’s shareholders approved the 2023 Share Incentive Plan (“2023 Plan”) under which 9,355,000 common shares of the Company were reserved for issuance. The 2023 Plan allows the Company to grant to employees, officers, non-employee directors and other key persons various types of equity-based awards, including stock options, performance-based restricted share units and time-based restricted share units. All share-based awards going-forward, including those granted during the second quarter of 2023, will be governed by the 2023 Plan. Equity awards granted under previous plans remain outstanding until expiration or settlement.

21. Share-based Payments (continued)

Stock Option Plans (continued)

Stock option activity for the six months ended June 30, 2023 is presented below:


	Stock options											Premium-priced stock options
						WA											WA
	Common		WA			remaining			Aggregate			Common		WA			remaining			Aggregate
	shares under		exercise			contractual			intrinsic			shares under		exercise			contractual			intrinsic
	option		price			life (in years)			value			option		price			life (in years)			value
Outstanding, December 31, 2022	2,730,295		$	46.88			7.3		$	31.2		1,118,432		$	91.26			4.7		$	—
Granted	—			—			—			—		—			—			—			—
Assumed in IAA acquisition (Note 5)	187,727			50.96			—			—		—			—			—			—
Exercised	(101,074)			38.59			—			1.7		—			—			—			—
Forfeited	(61,935)			45.96			—			—		(54,423)			91.12			—			—
Expired	(6,614)			61.55			—			—		—			—			—			—
Outstanding, June 30, 2023	2,748,399		$	47.44			6.4		$	35.6		1,064,009		$	91.27			4.1		$	—
Exercisable, June 30, 2023	2,070,214		$	44.03			5.8		$	33.6		43,242		$	91.21			1.7		$	—

Stock Options

The Company uses the Black Scholes option pricing model to fair value stock options. There were no stock options granted during the six-month period ended June 30, 2023 other than the stock options assumed as part of the IAA acquisition. Significant assumptions used to estimate the fair value of stock options granted during the six months ended June 30, 2022 are presented in the following table on a weighted average basis:


Six months ended June 30,		2022
Risk free interest rate		2.2	%
Expected dividend yield		1.74	%
Expected lives of the stock options		4	years
Expected volatility		31.7	%

At June 30, 2023, the unrecognized stock-based compensation cost related to the non-vested stock options was $3.7 million, which is expected to be recognized over a weighted average period of 1.6 years.

The fair value of the assumed stock options is estimated on the IAA acquisition date using the Black-Scholes option pricing model. The weighted average fair value of the assumed options was $15.52. The significant assumptions used to estimate the fair value of these assumed stock options are presented in the following table on a weighted average basis:


Six months ended June 30,		2023
Risk free interest rate		3.9	%
Expected dividend yield		2.05	%
Expected lives of the stock options		2	years
Expected volatility		33.3	%

21. Share-based Payments (continued)

Stock Option Plans (continued)

Premium-priced Stock Options

The Company has granted premium-priced stock options to the senior executives with exercise prices above the fair market value of the Company’s common shares on grant dates. The premium-priced stock options vest and become exercisable upon the third anniversary of their grant date. The premium-priced stock options granted in June 2022 expire in August 2027 to coincide with the expiry of the August 2021 grant. The fair values of the premium-priced stock options were calculated on the grant date using a Monte Carlo simulation model. The weighted average estimated grant date fair value of premium-priced options during the six-month period ended June 30, 2022 was $8.00 per option.

The significant assumptions used to estimate the fair value are presented in the following table:


Six months ended June 30,		2022
Risk free interest rate		3.0	%
Expected dividend yield		1.63	%
Expected lives of the stock options		4	years
Expected volatility		30.2	%

There were no premium-priced stock options granted during the six-month period ended June 30, 2023.

At June 30, 2023, the unrecognized stock-based compensation cost related to the premium-priced stock options was $3.7 million, which is expected to be recognized over a weighted average period of 1.4 years.

Share Unit Plans

Share unit activity for the six months ended June 30, 2023 is presented below:


		Equity-classified awards															Liability-classified awards
		PSUs					PSUs with Market Conditions					RSUs					DSUs
				WA grant					WA grant					WA grant						WA grant
				date fair					date fair					date fair						date fair
		Number		value			Number		value			Number		value				Number		value
Outstanding, December 31, 2022		662,634		$	51.71		102,879		$	66.08		68,024		$	58.32			108,365		$	39.35
Granted		12,027			57.04		—			—		333,778			52.11			12,300			52.55
Assumed in IAA acquisition (Note 5)		—			—		—			—		366,379			52.79			—			—
Vested and settled		(283,086)			42.23		—			—		(233,828)			52.85			—			—
Forfeited		(15,323)			58.60		(2,691)			65.45		(5,416)			60.07			—			—
Outstanding at June 30, 2023		376,252		$	58.73		100,188		$	66.10		528,937		$	52.97			120,665		$	40.70

The total market value of liability-classified share units vested and released during the first six months of 2023 was nil (2022: nil).

Senior Executive and Employee PSU Plans

The Company has granted PSUs under a senior executive PSU plan and an employee PSU plan (the “PSU Plans”). Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, and/or performance vesting conditions being met. The PSU Plans allow the Company to choose whether to settle the awards in cash or in shares. The Company intends to settle by issuance of shares. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase of shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) issue a number of shares equal to the number of units that vest.

Fair values of equity-classified PSUs are estimated on the grant date using the market close price of the Company's common shares listed on the NYSE, as these are not subject to market vesting conditions.

At June 30, 2023, the unrecognized share unit expense related to equity-classified PSU’s was $10.3 million, which is expected to be recognized over a weighted average period of 1.4 years.

21. Share-based Payments (continued)

Share Unit Plans (continued)

PSUs with Market Conditions

The Company has granted PSUs to senior executives with a market condition where vesting is conditional upon the total stockholder return performance of the Company’s stock relative to the performance of a peer group over a three year performance period from the date of grant. The PSUs granted in June 2022 have approximately a 2 year performance period to coincide with the remaining performance period of the August 2021 grant. The fair value per PSU granted during the three-month period ended June 30, 2022 of $69.92 was calculated on the grant date using the Monte Carlo simulation model which takes into consideration a required post-vesting holding period of one year with a discount value of $5.34 per PSU. The discount was calculated using the Chaffe Protective Put Method and an effective tax rate of 35%.

The significant assumptions used to estimate the fair value are presented in the following table:


Six months ended June 30,		2022
Risk free interest rate		2.7	%
Expected dividend yield		1.63	%
Expected lives of the PSUs		2	years
Expected volatility		33.4	%
Average expected volatility of comparable companies		34.4	%

There were no PSUs with market conditions granted in the six-month period ended June 30, 2023.

At June 30, 2023, the unrecognized share unit expense related to equity-classified PSUs with market conditions was $2.5 million, which is expected to be recognized over a weighted average period of 1.1 years.

RSUs

During the three months ended June 30, 2023, the Company granted 332,441 restricted share units under the 2023 Plan that are equity-settled and not subject to market vesting conditions.

Fair values of RSUs are estimated on grant date using the market close price of the Company's common shares listed on the NYSE.

At June 30, 2023, the unrecognized share unit expense related to equity-classified RSUs was $20.5 million, which is expected to be recognized over a weighted average period of 1.7 years.

DSUs

The Company has deferred share unit plans (DSU plans) that are cash-settled and not subject to market vesting conditions.

Fair values of deferred share units (“DSUs”) are estimated on grant date and at each reporting date using the market close price of the Company’s common shares listed on the NYSE. DSUs are granted under the DSU plan to members of the Board of Directors. There is no unrecognized share unit expense related to liability-classified DSUs as they vest immediately and are expensed upon grant.

At June 30, 2023, the Company had a total share unit liability of $7.6 million (at December 31, 2022: $6.3 million) in respect of share units under the DSU plans.

Employee Share Purchase Plan

In February 2023, the Board approved the suspension of the Company’s 1999 Employee Share Purchase Plan.

Effective June 15, 2023, the Company implemented a new employee stock purchase plan (“2023 ESPP”) which allows employees to purchase shares of the Company’s stock at 85% of the lower of the fair market value on the first day of the applicable offering period or on the last business day of the applicable purchase period within the offering period. These purchases are generally offered twice throughout each fiscal year. At the end of the six month purchase period, employee contributions are used to purchase common shares and purchased shares are transferred to the employees. On May 9, 2023, the Company registered 3,000,000 shares of common stock for future issuance under the ESPP. During the six months ended June 30, 2023, there were no shares issued under the 2023 ESPP. The offering period is beginning July 1, 2023, and therefore, the implementation of the 2023 ESPP did not have an impact on these consolidated financial statements.