STOCKHOLDERS’ EQUITY

Restricted Stock

During the first quarter of 2017, we issued a total of 22,250 restricted stock grants that vest over a three-year period with an aggregate grant date market value of approximately $0.6 million.

During the three months ended March 31, 2016 and 2017, we recorded $0.3 million and $0.2 million, respectively, of pre-tax compensation expense related to the vesting of restricted stock awards, which is included in general, administrative and other expenses.

As of March 31, 2017, we had approximately $1.3 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 1.9 years.

Stock Options

As of March 31, 2017, there were 1,977,406 stock options outstanding and 703,489 stock options which remain unvested. During the first quarter of 2017, we granted 445,450 options to certain officers and key employees at a weighted average exercise price of $26.54. 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 2017 was approximately $3.2 million. We recorded pre-tax stock-based compensation expense for stock options totaling approximately $0.6 million and $0.5 million for the three months ended March 31, 2016 and 2017, respectively.

The fair value of the option grants were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:



	March 21, 2017
Dividend yield	0.75	%
Expected volatility	29.30	%
Risk-free interest rate	1.96	%
Expected life (years)	5.0
Black-Scholes value	$7.13

Performance Awards

During the first quarter of 2017, we granted 101,040 performance awards to certain officers and key employees, payable in shares. These awards will vest (if at all) on December 31, 2021 provided that certain criteria surrounding Adjusted Consolidated EBITDA (Adjusted Earnings Before Interest Tax Depreciation and Amortization) and Adjusted Consolidated EBITDA Margin performance is achieved and the individual has remained continuously employed by Carriage through such date. The Adjusted Consolidated EBITDA performance represents 50% of the award and the Adjusted Consolidated EBITDA Margin performance represents 50% of the award. The fair value of these performance awards granted during the first quarter of 2017 was approximately $2.7 million. We recorded pre-tax compensation expense for performance awards totaling $27,000 and $55,000 for the three months ended March 31, 2016 and 2017, respectively.

Employee Stock Purchase Plan

During the first quarter of 2017, employees purchased a total of 13,639 shares of common stock through the ESPP at a weighted average price of $23.05 per share. We recorded pre-tax stock-based compensation expense for the ESPP totaling approximately $77,000 and $96,000 for the three months ended March 31, 2016 and 2017, 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:



	2017
Dividend yield	0.77	%
Expected volatility	18.82	%
Risk-free interest rate	0.53%, 0.65%, 0.77%, 0.89%
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

We recorded approximately $124,000 and $90,000 of pre-tax compensation expense, which is included in general, administrative and other expenses, for the three months ended March 31, 2016 and 2017, respectively, related to director compensation.

Share Repurchase

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”). During the three months ended March 31, 2017, we did not repurchase any shares of common stock pursuant to this share repurchase program.

Cash Dividends

On January 26, 2017 our Board declared a dividend of $0.050 per share, totaling approximately $0.8 million, which was paid on March 1, 2017 to record holders of our common stock as of February 13, 2017. During the first quarter of 2016, we paid a quarterly dividend of $0.025 per share, totaling approximately $0.4 million.

Accumulated other comprehensive income

Our components of accumulated other comprehensive income are as follows:



	Accumulated Other Comprehensive Income
Balance at December 31, 2016	$	—
Increase in net unrealized gains associated with available-for-sale securities of the trusts	482
Reclassification of net unrealized gain activity attributable to the Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus	(482		)
Balance at March 31, 2017	$	—