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Share-Based Compensation | 3 Months Ended
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Mar. 31, 2020
Share Based Compensation [Abstract] |
Share-Based Compensation | Note 13 – Share-Based Compensation As of March 31, 2020, the Company has outstanding awards under the CBL & Associates Properties, Inc. 2012 Stock Incentive Plan ("the 2012 Plan"), which was approved by the Company's shareholders in May 2012. The 2012 Plan permits the Company to issue stock options and common stock to selected officers, employees and non-employee directors of the Company up to a total of 10,400,000 shares. As the primary operating subsidiary of the Company, the Operating Partnership participates in and bears the compensation expense associated with the Company's share-based compensation plan. Restricted Stock Awards The Company may make restricted stock awards to independent directors, officers and its employees under the 2012 Plan. These awards are generally granted based on the performance of the Company and its employees. None of these awards have performance requirements other than a service condition of continued employment, unless otherwise provided. Compensation expense is recognized on a straight-line basis over the requisite service period. Share-based compensation expense related to the restricted stock awards was $1,144 and $1,713 for the three months ended March 31, 2020 and 2019, respectively. Share-based compensation cost capitalized as part of real estate assets was $7 and $14 for the three months ended March 31, 2020 and 2019, respectively. A summary of the status of the Company’s nonvested restricted stock awards as of March 31, 2020, and changes during the three months ended March 31, 2020, is presented below:
|  | Shares |  |  | Weighted- Average Grant-Date Fair Value |
Nonvested at January 1, 2020 |  |  | 971,846 |  |  | $ | 5.16 |
Granted |  |  | 1,628,397 |  |  | $ | 0.86 |
Vested |  |  | ( 1,051,783 | ) |  | $ | 2.86 |
Forfeited |  |  | ( 4,852 | ) |  | $ | 5.81 |
Nonvested at March 31, 2020 |  |  | 1,543,608 |  |  | $ | 2.19 |
As of March 31, 2020, there was $3,165 of total unrecognized compensation cost related to nonvested stock awards granted under the plans, which is expected to be recognized over a weighted-average period of 2.6 years. Long-Term Incentive Program In 2015, the Company adopted a long-term incentive program ("LTIP") for its named executive officers, which consists of performance stock unit ("PSU") awards and annual restricted stock awards, that may be issued under the 2012 Plan. The number of shares related to the PSU awards that each named executive officer may receive upon the conclusion of a three-year performance period is determined based on the Company's achievement of specified levels of long-term total stockholder return ("TSR") performance relative to the National Association of Real Estate Investment Trusts ("NAREIT") Retail Index, provided that at least a "Threshold" level must be attained for any shares to be earned. Beginning with the 2018 PSUs, two-thirds of the quantitative portion of the award over the performance period is based on the achievement of TSR relative to the NAREIT Retail Index while the remaining one -third is based on the achievement of absolute TSR metrics for the Company. Beginning with the 2018 PSU grant, to maintain compliance with a 200,000 share annual equity grant limit (the “Section 162(m) Grant Limit”) that was included in the 2012 Plan to satisfy the “qualified performance-based compensation” exception to the deduction limits for certain executive compensation under Section 162(m) of the Code, to the extent that a grant of PSUs could result in the issuance of a number of shares of common stock at the conclusion of the performance period that, when coupled with the number of shares of time-vesting restricted stock granted in the same year the PSUs were granted, would exceed such limit, any such excess will be converted to a cash bonus award with a value equivalent to the number of shares of common stock constituting such excess times the average of the high and low trading prices reported for CBL's common stock on the date such shares would otherwise have been issuable. In conjunction with the February 2020 approval of the 2020 LTIP grants for the named executive officers, the 2012 Stock Incentive Plan was amended to remove the Section 162(m) Grant Limit, which no longer served its original purpose because the “qualified performance-based compensation” exception to the Section 162(m) deduction limits was repealed by the 2017 tax reform legislation. However, NYSE rules also include an annual equity grant limit which effectively limits the number of shares that can be subject to stock awards to any individual named executive officer, without additional shareholder approval, to one percent ( 1%) of the total number of outstanding shares of the Company’s Common Stock (the “NYSE Annual Grant Limit”). To maintain NYSE compliance following elimination of the Section 162(m) Grant Limit, the Company’s Compensation Committee revised PSU awards under the LTIP, beginning in 2020, to provide that if a grant of PSUs could result in the issuance of a number of shares to a named executive officer at the conclusion of the 3-year performance period that would exceed the NYSE Annual Grant Limit, when coupled with the number of shares subject to other stock awards (e.g., the time-vesting restricted stock component of the LTIP) issued in the same year that such PSUs were issued, any such excess will instead be converted to a cash bonus award, while remaining subject to vesting conditions as described below. Any such portion of the value of the 2018 PSUs, the 2019 PSUs or the 2020 PSUs earned payable as a cash bonus will be subject to the same vesting provisions as the issuance of common stock pursuant to the PSUs. In addition, to the extent any cash is to be paid, the cash will be paid first relative to the vesting schedule, ahead of the issuance of shares of common stock with respect to the balance of PSUs earned. Annual Restricted Stock Awards Under the LTIP, annual restricted stock awards consist of shares of time-vested restricted stock awarded based on a qualitative evaluation of the performance of the Company and the named executive officer during the fiscal year. Annual restricted stock awards under the LTIP, which are included in the totals reflected in the preceding table, vest 20% on the date of grant with the remainder vesting in four equal annual installments. Performance Stock Units A summary of the status of the Company’s PSU activity as of March 31, 2020, and changes during the three months ended March 31, 2020, is presented below:
|  | PSUs |  |  | Weighted-Average Grant Date Fair Value |
Outstanding at January 1, 2020 |  |  | 1,766,580 |  |  | $ | 2.96 |
2020 PSUs granted (1) |  |  | 3,408,083 |  |  | $ | 0.84 |
Outstanding at March 31, 2020 (2) |  |  | 5,174,663 |  |  | $ | 1.56 |
(1) | Includes 211,375 shares classified as a liability due to the potential cash component described above.
( 2 ) | None of the PSUs outstanding at March 31, 2020 were vested.
Shares earned pursuant to the PSU awards vest 60% at the conclusion of the performance period while the remaining 40% of the PSU award vests 20% on each of the first two anniversaries thereafter. Compensation cost is recognized on a tranche-by-tranche basis using the accelerated attribution method. The resulting expense, for awards classified as equity, is recorded regardless of whether any PSU awards are earned as long as the required service period is met. The fair value of the potential cash component related to the 2020 PSUs is measured at each reporting period, using the same methodology as was used at the initial grant date, and classified as a liability on the condensed consolidated balance sheet as of March 31, 2020 with an adjustment to compensation expense. If the performance criterion is not satisfied at the end of the performance period for the 2020 PSUs, previously recognized compensation expense related to the liability-classified awards would be reversed as there would be no value at the settlement date. Share-based compensation expense related to the PSUs was $478 and $426 for the three months ended March 31, 2020 and 2019, respectively. Unrecognized compensation costs related to the PSUs was $4,678 as of March 31, 2020, which is expected to be recognized over a weighted-average period of 4.1 years. The following table summarizes the assumptions used in the Monte Carlo simulation pricing model related to the PSUs:
|  | 2020 PSUs |  |  | 2019 PSUs |  |  | 2018 PSUs |
Grant date |  | February 10, 2020 |  |  | February 11, 2019 |  |  | February 12, 2018 |
Fair value per share on valuation date (1) |  | $ | 0.84 |  |  | $ | 4.74 |  |  | $ | 4.76 |
Risk-free interest rate (2) |  |  | 1.39 | % |  |  | 2.54 | % |  |  | 2.36 | %
Expected share price volatility (3) |  |  | 57.98 | % |  |  | 60.99 | % |  |  | 42.02 | %
( 1) | The value of the PSU awards is estimated on the date of grant using a Monte Carlo simulation model. The valuation consists of computing the fair value using CBL's simulated stock price as well as TSR over a three-year performance period. The award is modeled as a contingent claim in that the expected return on the underlying shares is risk-free and the rate of discounting the payoff of the award is also risk-free. The weighted-average fair value per share related to the 2020 PSUs classified as equity consists of 2,131,245 shares at a fair value of $0.88 (which relate to relative TSR) and 1,065,463 shares at fair value of $0.75 per share (which relate to absolute TSR). The weighted-average fair value per share related to the 2019 PSUs classified as equity consists of 357,800 shares at a fair value of $2.45 per share (which relate to relative TSR) and 178,875 shares at a fair value of $2.29 per share (which relate to absolute TSR).
(2) | The risk-free interest rate was based on the yield curve on zero-coupon U.S. Treasury securities in effect as of the valuation date, which is the respective grant date listed above.
( 3) | The computation of expected volatility was based on a blend of the historical volatility of CBL's shares of common stock based on annualized daily total continuous returns over a five-year period for the 2020 PSUs and a three-year period for the 2019 and 2018 PSUs and implied volatility data based on the trailing month average of daily implied volatilities implied by stock call option contracts that were both closest to the terms shown and closest to the money.

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