14. Stock Compensation

Overview

The Company has stock option and stock incentive plans for employees and non-employee Directors that provide for grants of restricted stock awards (“RSAs”), performance stock awards (“PSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”), and options to purchase shares of Company common stock at exercise prices generally equal to the fair value of such stock at the dates of grant. The Company also maintains a shareholder-approved Employee Stock Purchase Plan (the “ESPP”) for the benefit of its employees. The ESPP allows eligible employees to purchase common stock on a regular basis at the lower of 85% of the market price at the beginning or end of each offering period.

Equity Grants

During the nine months ended September 30, 2016 the Compensation Committee of the Company’s Board of Directors (the “Committee”) authorized awards from approved stock incentive plans of RSUs to certain employees and RSAs and PSUs to certain Company officers, which, assuming that performance under the PSUs were to be achieved at target levels, together totaled 478,000 shares and had an aggregate grant date market value of $5.3 million. The PSUs granted in 2016 represent the right to receive from 60% to 150% of the target number of shares of common stock. The performance component of PSU awards granted in 2016 was based on attaining specified levels of adjusted EBITDA, adjusted inventory levels, and trade accounts receivable days sales outstanding, each as defined in the PSU grant documents, for the 2016 calendar year. The Company currently believes that achievement of the performance component is probable, and it reevaluates this likelihood on a quarterly basis.

During the nine months ended September 30, 2015 the Committee authorized awards from approved stock incentive plans of RSUs to certain employees and RSAs and PSUs to certain Company officers, which, including PSUs at target levels, together totaled 405,000 shares of common stock and had an aggregate grant date market value of $4.3 million. The PSUs granted in 2015 represented the right to receive from 60% to 150% of the target number of shares of common stock. The performance component of PSU awards granted in 2015 was based on attaining specified levels of adjusted EBITDA, as defined in the PSU grant documents, for the 2015 calendar year. The PSUs granted in 2015 earned 127% of the target number of shares.

The Committee authorized, from approved stock incentive plans, grants of stock options to purchase a total of 387,000 and 328,000 shares to certain Company officers during the nine months ended September 30, 2016 and 2015, respectively. The exercise prices of the options were equal to the closing stock prices on their respective grant dates.

Employees purchased common stock totaling 52,000 and 90,000 shares in the three and nine months ended September 30, 2016, respectively, and 42,000 and 78,000 shares in the three and nine months ended September 30, 2015, respectively, through the ESPP.

Stock Compensation Expense

The following weighted‑average assumptions were used to determine the fair value of options:


	Three Months Ended				Nine Months Ended
	September 30, 2016				September 30, 2016
	Stock Options		ESPP Options		Stock Options		ESPP Options
Expected life of options		4.8 Years		0.5 Years		4.8 Years		0.5 Years
Expected stock price volatility		0.40		0.30		0.40		0.30
Dividends		--%		--%		--%		--%
Risk-free interest rate		1.19%		0.49%		1.20%		0.49%


	Three Months Ended				Nine Months Ended
	September 30, 2015				September 30, 2015
	Stock Options		ESPP Options		Stock Options		ESPP Options
Expected life of options		4.8 Years		0.5 Years		4.5 Years		0.5 Years
Expected stock price volatility		0.45		0.30		0.44		0.34
Dividends		1.24%		1.06%		1.12%		1.06%
Risk-free interest rate		1.49%		0.11%		1.41%		0.12%

The following table summarizes total stock compensation expenses prior to the capitalization of amounts into deferred preservation and inventory costs (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
RSA, PSA, RSU, and PSU expense	$	1,397	$	343	$	3,616	$	2,833
Stock option and ESPP option expense		421		289		1,203		1,084
Total stock compensation expense	$	1,818	$	632	$	4,819	$	3,917

Included in the total stock compensation expense, as applicable in each period, were expenses related to RSAs, PSAs, RSUs, PSUs, and stock options issued in each respective year, as well as those issued in prior periods that continue to vest during the period, and compensation related to the ESPP. These amounts were recorded as stock compensation expense and were subject to the Company’s normal allocation of expenses to inventory costs and deferred preservation costs. The Company capitalized $70,000 and $202,000 in the three and nine months ended September 30, 2016, respectively, and $79,000 and $190,000 in the three and nine months ended September 30, 2015, respectively, of the stock compensation expense into its inventory costs and deferred preservation costs.

As of September 30, 2016 the Company had total unrecognized compensation costs of $6.0 million related to RSAs, PSAs, RSUs, and PSUs and $2.2 million related to unvested stock options, before considering the effect of expected forfeitures. As of September 30, 2016 this expense is expected to be recognized over a weighted-average period of 2.1 years for RSUs, 1.8 years for stock options, 1.5 years for RSAs, 1.0 years for PSUs, and 0.9 years for PSAs.