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Equity-Based Compensation | 9 Months Ended
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Sep. 27, 2015
Equity-Based Compensation |
Equity-Based Compensation | NOTE 13 - Equity-Based Compensation At September 27, 2015, CTS had five equity-based compensation plans: the 2001 Stock Option Plan (“2001 Plan”), the Nonemployee Directors’ Stock Retirement Plan (“Directors’ Plan”), the 2004 Omnibus Long-Term Incentive Plan (“2004 Plan”), the 2009 Omnibus Equity and Performance Incentive Plan (“2009 Plan”), and the 2014 Performance & Incentive Plan (“2014 Plan”). Future grants can only be made under the 2014 Plan. The 2009 Plan, and previously the 2001 Plan and 2004 Plan, provides for grants of incentive stock options or nonqualified stock options to officers, key employees, and nonemployee members of CTS’ Board of Directors. In addition, the 2014 Plan, the 2009 Plan and the 2004 Plan allow for grants of stock appreciation rights, restricted stock, RSUs, performance shares, performance units, and other stock awards. The following table summarizes the compensation expense included in Selling, general and administrative expenses in the Consolidated Statements of Earnings related to equity-based compensation plans:
|  | Three Months Ended |  | Nine Months Ended |
($ in thousands) |  | September 27, 2015 |  | September 28, 2014 |  | September 27, 2015 |  | September 28, 2014 |
Service-Based RSUs |  | $ | 295 |  | $ | 397 |  | $ | 1,244 |  | $ | 1,080 |
Performance-Based RSUs |  |  | (62) |  |  | 146 |  |  | 709 |  |  | 419 |
Market-Based RSUs |  |  | 60 |  |  | 117 |  |  | 702 |  |  | 340 |
Total |  | $ | 293 |  | $ | 660 |  | $ | 2,655 |  | $ | 1,839 |
Income tax benefit |  | $ | 110 |  | $ | 252 |  | $ | 998 |  | $ | 703 |
The following table summarizes the unrecognized compensation expense related to non-vested RSUs by type and the weighted-average period in which the expense is to be recognized:
|  | Unrecognized |  |  |  |
|  | compensation |  | Weighted- |
|  | expense at |  | average |
($ in thousands) |  | September 27, 2015 |  | period |
Service-Based RSUs |  | $ | 1,548 |  | 1.2 | years |
Performance-Based RSUs |  |  | 1,118 |  | 1.2 | years |
Market-Based RSUs |  |  | 614 |  | 1.0 | years |
Total |  | $ | 3,280 |  |  |  |
CTS recognizes expense on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards. The following table summarizes the status of these plans as of September 27, 2015:
|  | 2014 Plan |  | 2009 Plan |  | 2004 Plan |  | 2001 Plan |
Awards originally available |  | 1,500,000 |  | 3,400,000 |  | 6,500,000 |  | 2,000,000 |
Stock options outstanding |  | — |  | — |  | — |  | — |
RSUs outstanding |  | 78,947 |  | 240,091 |  | 131,857 |  | — |
Options exercisable |  | — |  | — |  | — |  | — |
Awards available for grant |  | 1,349,075 |  | 1,627,069 |  | 106,423 |  | — |
Stock Options Stock options are exercisable in cumulative annual installments over a maximum 10-year period, commencing at least one year from the date of grant. Stock options are generally granted with an exercise price equal to the market price of CTS’ stock on the date of grant. The stock options generally vest over four years and have a 10-year contractual life. The awards generally contain provisions to either accelerate vesting or allow vesting to continue on schedule upon retirement if certain service and age requirements are met. The awards also provide for accelerated vesting if there is a change in control event. CTS estimated the fair value of the stock option on the grant date using the Black-Scholes option-pricing model and assumptions for expected price volatility, option term, risk-free interest rate, and dividend yield. Expected price volatilities were based on historical volatilities of CTS’ common stock. The expected option term is derived from historical data on exercise behavior. The dividend yield was based on historical dividend payments. The risk-free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. A summary of the status of stock options as of September 27, 2015, and changes during the period then ended, is presented below:
|  | Nine Months Ended |
|  | September 27, 2015 |
|  |  |  | Weighted |
|  |  |  | Average |
|  |  |  | Exercise |
|  | Options |  | Price |
Outstanding at beginning of year |  | 5,200 |  | $ | 12.35 |
Exercised |  | (5,200) |  | $ | 12.35 |
Outstanding at end of period |  | — |  | $ | — |
Exercisable at end of period |  | — |  | $ | — |
Performance-Based Stock Options During the second quarter of 2015, the Compensation Committee of the Board of Directors of the Company (the “Committee”) granted a total of 430,000 performance-based stock option awards (“Performance-Based Option Awards”) for certain CTS employees under the 2014 Plan. The Performance-Based Option Awards, which have a grant date of May 26, 2015 and a grant date fair value of $18.37, are subject to the terms of the 2014 Plan. The Performance-Based Option Awards generally have a term of five years and generally will become exercisable (provided the optionee remains employed by CTS or an affiliate) upon CTS’ attainment of at least $600,000,000 in revenues during any of CTS’ four-fiscal-quarter trailing periods (as determined by the Committee) during the term. CTS has not recognized any expense on these Performance-Based Option Awards for the nine months ended September 27, 2015 since the revenue target is not likely to be attained, based upon the CTS’ earnings history and forecast, at this time. Service-Based Restricted Stock Units Service-based RSUs entitle the holder to receive one share of common stock for each unit when the unit vests. RSUs are issued to officers, key employees and non-employee directors as compensation. Generally, the RSUs vest over a three-year period. RSUs granted to non-employee directors vest one month after granted. Upon vesting, the non-employee directors elect to either receive the stock associated with the RSU immediately, or defer receipt of the stock until their retirement from the Board of Directors. The fair value of the RSUs is equivalent to the trading value of CTS’ common stock on the grant date. A summary of the status of RSUs is presented below:
|  | Nine Months Ended |
|  | September 27, 2015 |
|  |  |  | Weighted |
|  |  |  | Average |
|  |  |  | Grant Date |
|  | Units |  | Fair Value |
Outstanding at January 1, 2015 |  | 517,965 |  | $ | 12.06 |
Granted |  | 125,525 |  |  | 17.10 |
Converted |  | (165,801) |  |  | 12.41 |
Forfeited |  | (26,794) |  |  | 17.20 |
Outstanding at September 27, 2015 |  | 450,895 |  | $ | 13.03 |
Performance-Based Restricted Stock Units CTS grants performance-based restricted stock unit awards for certain executives. Vesting may occur in the range from zero percent to 200% of the target amount. Vesting is subject to certification of the fiscal results of the year prior to the target year by CTS’ independent auditors. Vesting is dependent upon CTS’ achievement of either sales growth targets or cash flow targets as noted in the table below. Performance-Based RSUs include the following components:
|  | Target |  | Vesting |  | Vesting |  | Units |
Grant Date |  | Units |  | Year |  | Dependency |  | Awarded |
February 11, 2013 |  | 47,164 |  | 2016 |  | Sales growth |  | — |
February 11, 2013 |  | 40,425 |  | 2016 |  | Cash flow |  | — |
February 14, 2014 |  | 15,071 |  | 2017 |  | Sales growth |  | — |
February 14, 2014 |  | 12,918 |  | 2017 |  | Cash flow |  | — |
February 13, 2015 |  | 24,150 |  | 2018 |  | Sales growth |  | — |
February 13, 2015 |  | 20,700 |  | 2018 |  | Cash flow |  | — |
Market-Based Restricted Stock Units CTS grants market-based restricted stock unit awards for certain executives and key employees. Vesting may occur in the range from zero percent to 200% of the target amount. Vesting is subject to certification of the fiscal results of the year prior to the target year by CTS’ independent auditors. The vesting rate will be determined using a matrix based on a percentile ranking of CTS total stockholder return with peer group total shareholder return over a three-year period. Vesting is tied exclusively to CTS total stockholder return relative to peer group companies’ total stockholder return rates. Market-Based RSUs include the following components:
|  |  |  |  |  | Number of |  |  |
|  | Target |  | Vesting |  | Peer Group |  | Units |
Grant Date |  | Units |  | Year |  | Companies |  | Awarded |
February 11, 2013 |  | 40,425 |  | 2016 |  | 20 |  | — |
February 11, 2013 |  | 48,750 |  | 2016 |  | 20 |  | — |
February 14, 2014 |  | 15,071 |  | 2017 |  | 15 |  | — |
February 13, 2015 |  | 24,150 |  | 2018 |  | 23 |  | — |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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