STOCKHOLDERS’ EQUITY

Stock Options

As of June 30, 2016, there were 1,864,754 stock options outstanding and 694,899 stock options which remain unvested. We did not grant any stock options in the three months ended June 30, 2016. During the first quarter of 2016, we granted 235,500 options to certain officers and key employees at an option price of $20.06. These options will vest in one-fifth increments over a five-year period and have a ten-year term. The fair value of the total options granted during the first quarter of 2016 was approximately $1.3 million. We recorded pre-tax stock-based compensation expense for stock options totaling approximately $0.6 million for both the three months ended June 30, 2015 and 2016, respectively, and $1.2 million and $1.1 million for the six months ended June 30, 2015 and 2016, respectively.

Performance Awards

During the first quarter of 2016, we granted 73,700 performance awards to certain officers and key employees, payable in shares. We did not grant any performance awards in the three months ended June 30, 2016. These awards will vest (if at all) on December 31, 2020 provided that certain criteria surrounding Adjusted Consolidated EBITDA (Adjusted Consolidated Earnings Before Interest Tax Depreciation and Amortization) and Relative Shareholder Return performance is achieved and the individual has remained continuously employed by the Company through such date. The Adjusted Consolidated EBITDA performance represents 25% of the award and the Relative Shareholder Return performance represents 75% of the award. The fair value of these performance awards granted during the first quarter of 2016 was approximately $1.6 million. The pre-tax compensation expense associated with these awards for the three months ended June 30, 2016 was approximately $81,000 and $108,000 for the six months ended June 30, 2016.

Restricted Stock Grants

We did not issue any restricted stock during the three months ended June 30, 2016. During the first quarter of 2016, we issued a total of 16,900 restricted stock grants that vest over a three-year period with an aggregate grant date market value of approximately $0.3 million.

Related to the vesting of restricted stock awards, we recorded $0.4 million and $0.3 million of pre-tax compensation expense, which is included in general, administrative and other expenses for the three months ended June 30, 2015 and 2016, respectively, and approximately $0.8 million and $0.6 million for the six months ended June 30, 2015 and 2016, respectively.

As of June 30, 2016, we had approximately $2.5 million of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of approximately 1.8 years.

Employee Stock Purchase Plan

During the second quarter of 2016, employees purchased a total of 11,510 shares of common stock through the employee stock purchase plan (“ESPP”) at a weighted average price of $19.92 per share. We recorded pre-tax stock-based compensation expense for the ESPP totaling approximately $55,000 and $67,000 for the three months ended June 30, 2015 and 2016, respectively, and $129,000 and $144,000 for the six months ended June 30, 2015 and 2016, respectively.

The fair value of the option to purchase shares under the ESPP is estimated on the date of grant (January 1 of each year) associated with the four quarterly purchase dates using the following assumptions:



	2016
Dividend yield	0.4	%
Expected volatility	24.71	%
Risk-free interest rate	0.22%, 0.49%, 0.55%, 0.61%
Expected life (years)	0.25, 0.50, 0.75, 1.00

Expected volatilities are based on the historical volatility during the previous twelve months of the underlying common stock. The risk-free rate for the quarterly purchase periods is based on the U.S. Treasury yields in effect at the time of the purchase. The expected life of the ESPP grants represents the calendar quarters from the beginning of the year to the purchase date (end of each quarter).

Director Compensation Policy

On May 17, 2016, our Board of Directors (our “Board”) approved a new Director Compensation Policy, which provides for the following: (i) each independent director is entitled to an annual retainer of $75,000, payable in quarterly installments of $18,750 each at the end of the quarter; and (ii) the Lead Director and chairman of our Audit Committee are entitled to an additional annual retainer of $10,000, payable in quarterly installments of $2,500 each at the end of each quarter, and the chairman of our Corporate Governance and Compensation Committees are entitled to an additional annual retainer of $5,000, payable in quarterly installments of $1,250 each at the end of each quarter. Any new independent director will receive upon admission to the Board a grant of $25,000 (in addition to the independent director annual retainer prorated at the time the new director is admitted to the Board) which can be taken in cash or restricted shares of our common stock. The number of shares of such common stock will be determined by dividing the cash amount by the closing price of our common stock on the date of grant, which will be the date of admission to the Board. Such common stock, will vest (based on continued service on the Board) 50% immediately and 25% on the first and second anniversaries of admission. Prior to the approval of the new Director Compensation Policy, there was one meeting during the second quarter of 2016 for which the directors were paid under the previous policy.

We recorded approximately $0.3 million and $0.1 million of pre-tax compensation expense, which is included in general, administrative and other expenses, for the three months ended June 30, 2015 and 2016, respectively, and $0.4 million and $0.2 million for the six months ended June 30, 2015 and 2016, respectively, related to the director fees and annual retainers.

Share Repurchase Program

On February 25, 2016, our Board approved a share repurchase program authorizing us to purchase up to an aggregate of $25.0 million of our common stock in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The shares may be purchased from time to time in the open market or in privately negotiated transactions. Purchases will be at times and in amounts as management deems appropriate based on factors such as market conditions, legal requirements and other business considerations. During the six months ended June 30, 2016, we did not repurchase any shares of common stock.

Cash Dividends

During the three months ended June 30, 2016, our Board declared a quarterly dividend of $0.025 per share, totaling approximately $0.4 million, which was paid on June 1, 2016 to record holders of our common stock as of May 13, 2016. For the six months ended June 30, 2015 and 2016, we paid total dividends of approximately $0.9 million and $0.8 million, respectively. We have a dividend reinvestment program so that stockholders may elect to reinvest their dividends into additional shares of our common stock.

Accumulated other comprehensive income

Our components of accumulated other comprehensive income are as follows:



	Accumulated Other Comprehensive Income
Balance at December 31, 2015	$	—
Decrease in net unrealized gains associated with available-for-sale securities of the trusts	(19,765		)
Reclassification of net unrealized gain activity attributable to the Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus	19,765
Balance at June 30, 2016	$	—