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Stock-based Compensation | 12 Months Ended
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Sep. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Stock-based Compensation | Stock-Based Compensation During fiscal 2014, we adopted, and our stockholders approved, the 2014 Beazer Homes USA, Inc. Long-Term Incentive Plan (the 2014 Plan). Following adoption of the 2014 Plan, shares available for grant under our 2010 Equity Incentive Plan (the 2010 Plan) remain available for grant in accordance with the terms of that plan. However, there are no more shares available for future issuance under our Amended and Restated 1999 Stock Incentive Plan (the 1999 Plan). We issue new shares upon the exercise of stock options and the vesting of restricted stock awards. In cases of forfeitures and shares returned to us for taxes, those shares are returned to the share pool for future issuance. As of September 30, 2018, we had approximately 2.6 million shares of common stock for issuance under our various equity incentive plans, of which approximately 2.1 million shares are available for future grants. Our total stock-based compensation expense is included in G&A expenses in our consolidated statements of operations and recognized using the straight-line method over the vesting period. A summary of the expense related to stock-based compensation by award type is as follows for the periods presented:
| Fiscal Year Ended September 30,
(In thousands) | 2018 |  | 2017 |  | 2016
Stock options expense | $ | 225 |  |  | $ | 274 |  |  | $ | 534 |
Restricted stock awards expense | 10,033 |  |  | 7,885 |  |  | 7,425 |
Before tax stock-based compensation expense | 10,258 |  |  | 8,159 |  |  | 7,959 |
Tax benefit | (2,622 | ) |  | (2,917 | ) |  | (2,832 | )
After tax stock-based compensation expense | $ | 7,636 |  |  | $ | 5,242 |  |  | $ | 5,127 |
Stock Options We have issued stock options to officers and key employees under the 2014 Plan, the 2010 Plan, and the 1999 Plan. Stock options have an exercise price equal to the fair market value of the common stock on the grant date, vest three years after the date of grant, and may be exercised thereafter until their expiration, subject to forfeiture upon termination of employment as provided in the applicable plan. Under certain conditions of retirement, eligible participants may receive a partial vesting of stock options. Stock options generally expire on the seventh or eighth anniversary from the date such options were granted, depending on the terms of the award. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes Model). As of September 30, 2018, the intrinsic value of our stock options outstanding, vested and expected to vest, vested and exercisable were $0.1 million, $0.1 million, and $0.1 million, respectively. As of September 30, 2018 and September 30, 2017, there was $0.2 million and $0.3 million, respectively, of total unrecognized compensation cost related to unvested stock options. The cost remaining as of September 30, 2018 is expected to be recognized over a weighted-average period of 1.8 years. During fiscal 2016, the Compensation Committee of our Board of Directors approved the Employee Stock Option Program (EOP). This program is available to all full-time employees, other than our senior leadership team, and is designed to enable employees to share in potential price appreciation of the Company's stock. The EOP matches stock purchases made by eligible employees meeting certain conditions with an option to purchase an additional share of the Company's shares on a one-to-one basis. The exercise price of the options granted is equal to the closing price of the Company's stock on the day the underlying stock is purchased. The options will vest on the second anniversary of the date of grant but are forfeited if (1) the eligible employee no longer works for the Company or (2) the underlying shares are sold before the two-year vesting period is over. The total number of options available under the EOP is limited to 100,000, of which 3,950 options were granted through the end of fiscal 2018. During the year ended September 30, 2018, we issued 25,230 stock options, including those issued under the EOP, each for one share of the Company's stock. These stock options typically vest ratably over three years from the date of grant, or two years from the date of grant if issued under the EOP. We used the following valuation assumptions for stock options granted for the periods presented:
| Fiscal Year Ended September 30,
| 2018 |  | 2017 |  | 2016
Expected life of options | 5.0 years |  |  | 5.4 years |  |  | 4.9 years |
Expected volatility | 44.71 | % |  | 50.10 | % |  | 46.49 | %
Expected dividends | — |  |  | — |  |  | — |
Weighted-average risk-free interest rate | 2.10 | % |  | 1.85 | % |  | 1.36 | %
Weighted-average fair value | $ | 8.30 |  |  | $ | 5.83 |  |  | $ | 4.03 |
We relied upon a combination of the observed exercise behavior of our prior grants with similar characteristics, the vesting schedule of the current grants, and an index of peer companies with similar grant characteristics to determine the expected life of the options granted. We considered historic returns of our stock and the implied volatility of our publicly-traded options in determining expected volatility. We assumed no dividends would be paid since our Board of Directors has suspended payment of dividends indefinitely and payment of dividends is restricted under our Senior Note covenants. The risk-free interest rate is based on the term structure of interest rates at the time of the option grant. Activity related to stock options for the periods presented is as follows:
| 2018 |  | 2017 |  | 2016
| Shares |  | Weighted- Average Exercise Price |  | Shares |  | Weighted- Average Exercise Price |  | Shares |  | Weighted- Average Exercise Price
Outstanding at beginning of period | 593,753 |  |  | $ | 14.76 |  |  | 672,669 |  |  | $ | 16.49 |  |  | 643,907 |  |  | $ | 18.13 |
Granted | 25,230 |  |  | 19.99 |  |  | 29,410 |  |  | 12.50 |  |  | 125,449 |  |  | 9.19 |
Exercised | (8,411 | ) |  | 7.52 |  |  | (2,313 | ) |  | 10.80 |  |  | — |  |  | — |
Expired | (61,967 | ) |  | 23.19 |  |  | (84,976 | ) |  | 28.45 |  |  | (86,606 | ) |  | 19.70 |
Cancelled | — |  |  | — |  |  | (480 | ) |  | 23.65 |  |  | — |  |  | — |
Forfeited | (15,553 | ) |  | 10.46 |  |  | (20,557 | ) |  | 11.97 |  |  | (10,081 | ) |  | 10.98 |
Outstanding at end of period | 533,052 |  |  | $ | 14.26 |  |  | 593,753 |  |  | $ | 14.76 |  |  | 672,669 |  |  | $ | 16.49 |
Exercisable at end of period | 479,538 |  |  | $ | 14.03 |  |  | 476,606 |  |  | $ | 15.91 |  |  | 503,594 |  |  | $ | 17.76 |
Vested or expected to vest in the future | 533,052 |  |  | $ | 14.26 |  |  | 585,186 |  |  | $ | 14.83 |  |  | 672,669 |  |  | $ | 16.49 |
The following table summarizes information about stock options outstanding and exercisable as of September 30, 2018:
| Stock Options Outstanding |  | Stock Options Exercisable
Range of Exercise Price | Number Outstanding |  | Weighted-Average Contractual Remaining Life (Years) |  | Weighted-Average Exercise Price |  | Number Exercisable |  | Weighted-Average Contractual Remaining Life (Years) |  | Weighted-Average Exercise Price
$1 - $10 | 152,004 |  |  | 2.6 |  | $ | 9.77 |  |  | 152,004 |  |  | 2.6 |  | $ | 9.77 |
$11 - $15 | 207,451 |  |  | 3.2 |  | 13.33 |  |  | 177,617 |  |  | 2.7 |  | 13.37 |
$16 - $20 | 173,597 |  |  | 3.7 |  | 19.30 |  |  | 149,917 |  |  | 3.1 |  | 19.12 |
$1 - $20 | 533,052 |  |  | 3.2 |  | $ | 14.26 |  |  | 479,538 |  |  | 2.8 |  | $ | 14.03 |
Information pertaining to the intrinsic value of options exercised and the fair market value of options that vested is below:
| Fiscal Year Ended September 30,
(In thousands) | 2018 |  | 2017 |  | 2016
Intrinsic value of options exercised | $ | 76 |  |  | $ | 13 |  |  | $ | — |
Fair market value of options vested | $ | 296 |  |  | $ | 482 |  |  | $ | 681 |
Restricted Stock Awards The fair value of each restricted stock award with market conditions is estimated on the date of grant using the Monte Carlo valuation method. The fair value of restricted stock awards without market conditions is based on the market price of the Company's common stock on the date of grant. If applicable, the cash-settled component of any awards granted to employees is accounted for as a liability, which is adjusted to fair value each reporting period until vested. Compensation cost arising from restricted stock awards granted to employees is recognized as an expense using the straight-line method over the vesting period. As of September 30, 2018 and September 30, 2017, there was $8.8 million and $8.8 million, respectively, of total unrecognized compensation cost related to unvested restricted stock awards. The cost remaining as of September 30, 2018 is expected to be recognized over a weighted-average period of 1.8 years. We have issued restricted stock awards to officers and key employees under both the 2014 Plan and the 2010 Plan. During fiscal 2018, we issued time-based restricted stock awards and performance-based restricted stock awards with a payout subject to certain performance and market conditions. Each award type is discussed below. Performance-Based Restricted Stock Awards During the year ended September 30, 2018, we issued 165,085 shares of performance-based restricted stock (2018 Performance Shares) to our executive officers and certain other employees that also have market conditions. The 2018 Performance Shares are structured to be awarded based on the Company's performance under three pre-determined financial metrics at the end of the three-year performance period. After determining the number of shares earned based on the financial metrics, which can range from 0% to 175% of the targeted number of shares, the award will be subject to further upward or downward adjustment by as much as 20% based on the Company's relative total shareholder return (TSR) compared against the S&P Homebuilders Select Industry Index during the three-year performance period. The 2018 Performance Shares were valued using the Monte Carlo valuation model due to the existence of the TSR market condition and had an estimated fair value of $22.40 per share on the date of grant. A Monte Carlo valuation model requires the following inputs: (1) the expected dividend yield on the underlying stock; (2) the expected price volatility of the underlying stock; (3) the risk-free interest rate for the period corresponding with the expected term of the award; and (4) the fair value of the underlying stock. For the Company and each member of the peer group, the following inputs were used, as applicable, in the Monte Carlo valuation model to determine the fair value as of the grant date for performance-based restricted stock granted in each of the fiscal years ended. The methodology used to determine these assumptions is similar to the Black-Scholes Model; however, the expected term is determined by the model in the Monte Carlo simulation.
| Fiscal Year Ended September 30,
| 2018 |  | 2017 |  | 2016
Expected volatility | 21.1% - 61.2% |  |  | 32.6% - 66.0% |  |  | 29.9% - 151.2% |
Risk-free interest rate | 1.81 | % |  | 1.30 | % |  | 1.21 | %
Dividend yield | — |  |  | — |  |  | — |
Grant-date stock price | $ | 20.50 |  |  | $ | 12.51 |  |  | $ | 14.24 |
Each performance share represents a contingent right to receive one share of the Company's common stock if vesting is satisfied at the end of the three-year performance period. Any 2018 Performance Shares earned in excess of the target number of 165,085 may be settled in cash or additional shares at the discretion of the Compensation Committee. Any portion of these shares that do not vest at the end of the period will be forfeited. The performance criteria of the 2016 Performance Share grant was satisfied as of September 30, 2018. Based on the actual performance level achieved, 309,843 performance-based restricted stock awards from the 2016 Performance Share grant will cliff vest at the end of the three-year vesting period on November 23, 2018. Of the total $4.8 million compensation cost related to these awards, we have recognized $1.3 million, $2.3 million, and $1.0 million during the fiscal years ended September 30, 2018, 2017, and 2016, respectively. The remaining $0.2 million of unrecognized compensation cost will be recognized in the first quarter of fiscal 2019. Time-Based Restricted Stock Awards During the year ended September 30, 2018, we also issued 277,165 shares of time-based restricted stock (Restricted Shares) to our directors, executive officers, and certain other employees. Restricted Shares are valued based on the market price of the Company's common stock on the date of the grant. The Restricted Shares granted to our non-employee directors vest on the first anniversary of the grant, while the Restricted Shares granted to our executive officers and other employees generally vest ratably over three years from the date of grant. Activity relating to all restricted stock awards for the periods presented is as follows:
| Year Ended September 30, 2018
| Performance-Based |  | Time-Based |  | Total
| Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value
Beginning of period | 668,766 |  |  | $ | 15.72 |  |  | 872,181 |  |  | $ | 16.47 |  |  | 1,540,947 |  |  | $ | 16.15 |
Granted | 165,085 |  |  | 22.40 |  |  | 277,165 |  |  | 18.98 |  |  | 442,250 |  |  | 20.26 |
Vested | — |  |  | — |  |  | (690,922 | ) |  | 17.38 |  |  | (690,922 | ) |  | 17.38 |
Forfeited | (189,066 | ) |  | 18.98 |  |  | (26,641 | ) |  | 17.02 |  |  | (215,707 | ) |  | 18.74 |
End of period | 644,785 |  |  | $ | 16.47 |  |  | 431,783 |  |  | $ | 16.60 |  |  | 1,076,568 |  |  | $ | 16.53 |
| Year Ended September 30, 2017
| Performance-Based |  | Time-Based |  | Total
| Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value
Beginning of period | 448,693 |  |  | $ | 16.71 |  |  | 807,124 |  |  | $ | 17.52 |  |  | 1,255,817 |  |  | $ | 17.23 |
Granted | 263,696 |  |  | 13.60 |  |  | 271,855 |  |  | 12.50 |  |  | 535,551 |  |  | 13.04 |
Vested | — |  |  | — |  |  | (189,029 | ) |  | 15.52 |  |  | (189,029 | ) |  | 15.52 |
Forfeited | (43,623 | ) |  | 13.11 |  |  | (17,769 | ) |  | 14.08 |  |  | (61,392 | ) |  | 13.39 |
End of period | 668,766 |  |  | $ | 15.72 |  |  | 872,181 |  |  | $ | 16.47 |  |  | 1,540,947 |  |  | $ | 16.15 |
| Year Ended September 30, 2016
| Performance-Based |  | Time-Based |  | Total
| Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value
Beginning of period | 252,022 |  |  | $ | 16.34 |  |  | 704,261 |  |  | $ | 18.97 |  |  | 956,283 |  |  | $ | 18.27 |
Granted | 231,624 |  |  | 15.43 |  |  | 259,819 |  |  | 14.04 |  |  | 491,443 |  |  | 14.69 |
Vested | — |  |  | — |  |  | (127,993 | ) |  | 18.58 |  |  | (127,993 | ) |  | 18.58 |
Forfeited | (34,953 | ) |  | 5.51 |  |  | (28,963 | ) |  | 16.78 |  |  | (63,916 | ) |  | 10.62 |
End of period | 448,693 |  |  | $ | 16.71 |  |  | 807,124 |  |  | $ | 17.52 |  |  | 1,255,817 |  |  | $ | 17.23 |

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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 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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