Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2023

Stock-Based Compensation Plans [Abstract]

14. Stock-Based Compensation Plans

Our stock-based compensation program is a broad-based program designed to attract and retain employees while also aligning employees’ interests with the interests of our shareholders. In addition, members of our Board of Directors participate in our stock-based compensation program in connection with their service on our board.

In May 2021, our Board of Directors and Shareholders approved an amendment and restatement to the 2016 Omnibus Incentive Plan (the “Plan”). Under the Plan, which terminates in May 2026, we are authorized to issue, among other things, shares of restricted and performance-based stock to eligible employees and restricted stock to directors of up to 2,050,000 shares; and shares of restricted and performance-based stock to nonemployee directors of up to 350,000 shares. Shares issued under the Plan that are cancelled, forfeited or expire by their terms are eligible to be granted again under the Plan. The 2016 Omnibus Incentive Plan is the only remaining plan available to provide stock-based incentive compensation to our employees, directors and other eligible persons. Awards previously granted under the 2006 Omnibus Incentive Plan remain outstanding, while shares not yet granted under the plan are not available for future issuance.

We account for our stock-based compensation plans in accordance with the provisions of FASB ASC 718, Stock Compensation, which requires that a company measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The service period is the period of time that the grantee must provide services to us before the stock-based compensation is fully vested. The grant-date fair value of the award is recognized as an expense on a straight-line basis over the requisite service periods in our consolidated statements of operations. Forfeitures are estimated at the time of grant based on historical trends in order to estimate the amount of share-based awards that will ultimately vest. We monitor actual forfeitures for any subsequent adjustment to forfeiture rates.

Restricted Stock and Performance Share Grants

We currently grant shares of restricted stock to eligible employees and our independent directors and performance-based stock to eligible employees. We grant eligible employees two types of restricted stock (standard restricted shares and long-term retention restricted shares). Standard restricted shares granted to employees become fully vested no earlier than three years after the date of grant. Long-term retention restricted shares granted to selected executives vest at a 25% rate on or within approximately two months of an executive reaching the ages of 60 and 63, and become fully vested on or within approximately two months of an executive reaching the age of 65. Restricted shares granted to directors become fully vested upon the first anniversary of the date of grant.

Performance-based shares issued to eligible employees are subject to a three-year measuring period and the achievement of performance targets and, depending upon the achievement of such performance targets, they may become vested no earlier than three years after the date of grant. Each period we evaluate the probability of achieving the applicable targets, and we adjust our accrual accordingly. Restricted shares (other than long-term retention restricted shares) and performance shares issued to certain key executives and directors are subject to a one or two year holding period upon the lapse of the vesting period. Forfeitures on stock grants are estimated at 5% for employees and 0% for executives and directors based upon our evaluation of historical and expected future turnover.

Prior to the time a restricted share becomes fully vested or a performance share is issued, the awardees cannot transfer, pledge, hypothecate or encumber such shares. Prior to the time a restricted share is fully vested, the awardees have all other rights of a stockholder, including the right to vote (but do not receive dividends during the vesting period). Prior to the time a performance share is issued, the awardees shall have no rights as a stockholder. All shares and rights are subject to forfeiture if certain employment conditions are not met.

Under the amended and restated 2016 Omnibus Incentive Plan, 2,050,000 shares are authorized to be issued. At December 31, 2023, under the plan, there were an aggregate of (a) 1,633,549 shares of restricted and performance-based stock grants issued, net of forfeitures, and (b) 416,451 shares of common stock available for future grants. For the year ended December 31, 2023, 230,875 restricted and performance-based shares were granted (165,125 restricted shares and 65,750 performance-based shares).

In determining the grant date fair value, the stock price on the date of grant, as quoted on the New York Stock Exchange, was reduced by the present value of dividends expected to be paid on the shares issued and outstanding during the requisite service period, discounted at a risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the restriction or vesting period at the grant date. In addition, a further discount for the lack of marketability reduced the fair value of grants issued to certain key executives and directors subject to the one or two year post vesting holding period. Assumptions used in calculating the discount for the lack of marketability include an estimate of stock volatility, risk-free interest rate, and a dividend yield.

As related to restricted and performance stock shares, we recorded compensation expense of $6.2 million ($4.8 million, net of tax), $7.6 million ($5.7 million, net of tax) and $9.1 million ($6.9 million, net of tax), for the years ended December 31, 2023, 2022 and 2021, respectively. The unamortized compensation expense related to our restricted and performance-based shares was $13.3 million and $14.9 million at December 31, 2023 and 2022, respectively and is expected to be recognized over a weighted average period of 4.1 years and 0.3 years for employees and directors, respectively, as of December 31, 2023 and over a weighted average period of 4.3 years and 0.3 years for employees and directors, respectively, as of December 31, 2022.

Our restricted and performance-based share activity was as follows for the years ended December 31, 2023 and 2022:

	Shares			Weighted Average Grant Date Fair Value per Share
Balance at December 31, 2021		807,019		$	34.92
Granted		246,325			28.44
Vested		(190,082	)		41.71
Performance Shares Target Adjustment		25,317			42.21
Forfeited		(7,750	)		40.73
Balance at December 31, 2022		880,829		$	31.79
Granted		230,875			27.00
Vested		(248,065	)		36.30
Performance Shares Target Adjustment		29,137			36.30
Forfeited		(11,800	)		35.36
Balance at December 31, 2023		880,976		$	29.48

The weighted-average grant date fair value of restricted and performance-based shares outstanding as of December 31, 2023, 2022 and 2021 was $26 million (or $29.48 per share), $28 million (or $31.79 per share), and $28.2 million (or $34.92 per share), respectively.