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Stockholders' Equity | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Stockholders' Equity | STOCKHOLDERS’ EQUITY Share Authorization We are authorized to issue 80,000,000 shares of common stock, $0.01 per share par value. We had 26,264,245 and 26,359,876 shares issued and 15,331,923 and 14,732,058 shares outstanding, net of 10,932,322 and 11,627,818 shares held in treasury at par, at December 31, 2021 and 2022, respectively. Stock Based Compensation Plans During the year ended December 31, 2022, we had two stock benefits plans in effect under which stock, restricted stock, stock options and performance awards have been granted or remain outstanding: the Second Amended and Restated 2006 Long-Term Incentive Plan (as amended, the “Amended and Restated 2006 Plan”) and the 2017 Omnibus Incentive Plan (as amended, the “2017 Plan”). The Amended and Restated 2006 Plan was terminated upon the approval of the 2017 Plan at the annual shareholders meeting on May 17, 2017. The 2017 Plan expires on May 17, 2027. All stock-based plans are administered by the Compensation Committee appointed by our Board of Directors (our “Board”). At December 31, 2022, we had 2,137,048 shares available to issue under our 2017 Plan. The termination of the Amended and Restated 2006 Plan does not affect the awards previously issued and outstanding. Restricted Stock Restricted stock activity is as follows (in thousands, except shares):
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
| Shares | Fair Value |  | Shares | Fair Value |  | Shares | Fair Value
Granted(1) | 10,200 |  | $ | 255 |  |  | 9,300 |  | $ | 324 |  |  | — |  | $ | — |
Returned for payroll taxes | 10,588 |  | $ | 250 |  |  | 10,399 |  | $ | 375 |  |  | 4,136 |  | $ | 205 |
Cancelled | — |  | $ | — |  |  | 966 |  | $ | 27 |  |  | 1,950 |  | $ | 63 |
(1) | Restricted stock granted during the year ended December 31, 2020 and 2021 will vest over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $25.00 and $34.79, respectively.
A summary of the number of unvested restricted stock awards and their weighted average grant date fair values during the year ended December 31, 2022 is presented in the table below (shares in thousands):
Restricted stock awards | Shares |  | Weighted Average Grant Date Fair Value
Unvested at January 1 | 22,643 |  |  | $ | 27.21 |
Vested | (13,111) |  |  | $ | 24.23 |
Cancelled | (1,950) |  |  | $ | 32.28 |
Unvested at December 31 | 7,582 |  |  | $ | 31.05 |
We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for restricted stock awards of $735,000, $390,000 and $171,000 for the years ended December 31, 2020, 2021 and 2022, respectively. At December 31, 2022, we had $235,000 of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of 0.8 years. Stock Options Stock option grants and cancellations are as follows (in thousands, except shares):
| Years Ended December 31, |
| 2020 |  | 2021 |  | 2022 |
| Shares | Fair Value |  | Shares | Fair Value |  | Shares | Fair Value |
Granted(1) | — |  | $ | — |  |  | 701,400 |  | $ | 7,115 |  |  | 58,500 |  | $ | 959 |  |
Granted(2) | — |  | $ | — |  |  | — |  | $ | — |  |  | 310,000 |  | $ | 5,388 |  |
Granted(3) | — |  | $ | — |  |  | 150,000 |  | $ | 1,684 |  |  | — |  | $ | — |  |
Granted(4) | 20,000 |  | $ | 92 |  |  | — |  | $ | — |  |  | 12,600 |  | $ | 143 |  |
Cancelled | 146,034 |  | $ | 846 |  |  | 74,688 |  | $ | 722 |  |  | 45,590 |  | $ | 512 |  |
(1) | Stock options granted during the year ended December 31, 2021 and 2022 had a weighted average price of $34.79 and $49.48, respectively. The fair value of these options was calculated using the Black-Scholes option pricing model. The options granted in 2021 and 2022 vest over a five-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period.
(2) | Stock options granted during the year ended December 31, 2022 had a weighted average price of $49.48. The fair value of these options was calculated using the Black-Scholes option pricing model and vest over a seven-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period.
(3) | We granted 150,000 options to a key employee at a weighted average price of $34.79. These options will vest when the price of our common stock closes at or above $53.39 (50,000 options) and $77.34 (100,000 options) for three consecutive days within the ten-year term and the employee has remained continuously employed by us through such date. The fair value of these options was $1.7 million.
(4) | Stock options granted during the year ended December 31, 2020 and 2022 had a weighted average price of $18.02 and $31.58, respectively. The fair value of these options was calculated using the Black-Scholes option pricing model and vest over a three-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period.
Additional stock option activity is as follows (in thousands, except shares):
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
| Shares | Cash |  | Shares | Cash |  | Shares | Cash
Exercised(1) | 40,365 |  | (1) |  |  | 423,294 |  | (1) |  |  | 32,196 |  | (1) |
Returned for option price(2) | 18,640 |  | $ | 19 |  |  | 211,088 |  | $ | 1,013 |  |  | 18,797 |  | $ | 60 |
Returned for payroll taxes(3) | 2,954 |  | $ | 89 |  |  | 43,534 |  | $ | 2,272 |  |  | 2,895 |  | $ | 123 |
(1) | Stock options exercised during the years ended December 31, 2020, 2021 and 2022 had a weighted average exercise price of $13.72, $21.99 and $25.49, respectively.
(2) | Represents shares withheld/cash received for the payment of the option price.
(3) | Represents shares withheld/cash paid for the payment of payroll taxes.
Stock options are granted with an exercise price equal to the closing price of our common stock on the date of grant. All of the options granted and outstanding under this plan have either a seven or ten-year term. We utilized the Black-Scholes option pricing model and Monte-Carlo simulation pricing model for estimating the fair value of our stock options. These models allow for the use of a range of assumptions related to volatility, risk-free interest rate, expected holding period and dividend yield. The expected volatility utilized in these valuation models is based on the historical volatility of our stock price. The dividend yield and expected holding period are based on historical experience and management's estimate of future events. The risk-free interest rate is derived from the U.S. Treasury yield curve based on the expected life of the option in effect at the time of grant. The fair value of the options granted using the Black-Scholes option pricing model was estimated on the date of grant with the following assumptions:
|  | Years Ended December 31,
|  | 2020 |  | 2021 |  | 2022 |  | 2022 |  | 2022
Grant date |  | June 25 |  | February 17 |  | February 23 |  | February 23 |  | September 27
Expected holding period (years) |  | 3.7 |  | 5.0 |  | 7.0 |  | 5.0 |  | 4.1
Awards granted |  | 20,000 |  | 701,400 |  | 310,000 |  | 58,500 |  | 12,600
Dividend yield |  | 1.67 | % |  | 1.15 | % |  | 0.91 | % |  | 0.91 | % |  | 1.43 | %
Expected volatility |  | 38.54 | % |  | 36.72 | % |  | 34.35 | % |  | 33.18 | % |  | 43.68 | %
Risk-free interest rate |  | 0.25 | % |  | 0.57 | % |  | 1.98 | % |  | 1.89 | % |  | 4.29 | %
Black-Scholes value |  | $4.61 |  | $10.14 |  | $17.38 |  | $16.39 |  | $11.35
The fair value of the options granted using the Monte-Carlo simulation pricing model was estimated on the date of grant with the following assumptions:
| Year ended December 31, 2022
Awards granted | 150,000
Dividend yield | 1.15 | %
Expected volatility | 34.08 | %
Risk-free interest rate | 1.29 | %
A summary of the number of stock options and their weighted average exercise prices during the year ended December 31, 2022 is presented in the table below (shares in thousands):
| Shares |  | Wtd. Avg. Ex. Price
Outstanding at January 1 | 1,265 |  |  | $ | 30.94 |
Granted | 381 |  |  | $ | 48.89 |
Exercised | (32) |  |  | $ | 25.49 |
Forfeited or expired | (46) |  |  | $ | 37.34 |
Outstanding at December 31 | 1,568 |  |  | $ | 35.23 |
Exercisable at December 31 | 592 |  |  | $ | 27.60 |
A summary of the number of stock options and their weighted average grant date fair values during the year ended December 31, 2022 is presented in the table below (shares in thousands):
| Shares |  | Wtd. Avg. Fair Value
Non-vested at January 1 | 839 |  | $ | 9.90 |
Granted | 381 |  | $ | 17.03 |
Vested or exercised | (201) |  |  | $ | 8.86 |
Forfeited | (43) |  |  | $ | 11.43 |
Non-vested at December 31 | 976 |  | $ | 12.83 |
A summary of the intrinsic value of stock options exercised and the fair value of stock options vested for the three years ended December 31, 2022 is presented in the table below (in thousands):
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
Intrinsic value of options exercised | $ | 517 |  |  | $ | 8,229 |  |  | $ | 580 |
Fair value of stock options vested | $ | 735 |  |  | $ | 1,413 |  |  | $ | 1,784 |
The following table further describes our outstanding stock options at December 31, 2022:
| Options Outstanding |  | Options Exercisable
Actual Ranges of Exercise Prices | Number Outstanding at 12/31/22 |  | Weighted-Average Remaining Contractual Life |  | Weighted-Average Exercise Price |  | Number Exercisable at 12/31/22 |  | Weighted-Average Remaining Contractual Life |  | Weighted-Average Exercise Price
$18.02 - $18.02 | 13,333 |  |  | 2.48 |  | $ | 18.02 |  |  | 6,667 |  |  | 2.48 |  | $ | 18.02 |
$20.06 - $26.54 | 435,535 |  |  | 4.19 |  | $ | 24.85 |  |  | 415,569 |  |  | 4.15 |  | $ | 24.82 |
$31.58 - $31.58 | 12,600 |  |  | 9.75 |  | $ | 31.58 |  |  | — |  |  | 0.00 |  | $ | — |
$34.79 - $49.88 | 1,107,000 |  |  | 8.47 |  | $ | 39.56 |  |  | 169,980 |  |  | 8.14 |  | $ | 34.79 |
$18.02 - $49.48 | 1,568,468 |  |  | 7.24 |  | $ | 35.23 |  |  | 592,216 |  |  | 5.27 |  | $ | 27.60 |
The aggregate intrinsic value of the outstanding and exercisable stock options was $1.3 million and $1.2 million, respectively, at December 31, 2022. We had $9.5 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted average period of 5.0 years at December 31, 2022. We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for stock options of $669,000, $2,355,000 and $2,284,000 for the years ended December 31, 2020, 2021 and 2022, respectively. Performance Awards Performance award activity is as follows (in thousands, except shares):
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
| Shares | Fair Value |  | Shares | Fair Value |  | Shares | Fair Value
Granted | 30,743 |  | $ | 733 |  |  | 55,302 |  | $ | 2,116 |  |  | 27,013 |  | $ | 1,262 |
Cancelled | 33,538 |  | $ | 631 |  |  | 55,896 |  | $ | 799 |  |  | 30,743 |  | $ | 295 |
In addition to the activity described in the table above, we issued 237,500 performance awards to certain employees, during the year ended December 31, 2020, payable in shares, with a fair value of $2.8 million. On May 19, 2020, we cancelled all performance award agreements previously awarded to all individuals during 2019, as well as the 237,500 performance awards previously granted in 2020. Concurrently with the cancellation of those performance awards, the Compensation Committee of the Board approved 368,921 new performance awards to be issued to certain employees. These new performance awards were treated as a modification of the cancelled awards and resulted in an additional $1.7 million of incremental compensation expense. These awards will vest (if at all) on December 31, 2024, provided that the Company’s common stock reaches the predetermined growth targets for a sustained period beginning on the grant date and ending on December 31, 2024. On June 1, 2021, we amended the performance award agreements granted on May 19, 2020 for three of our executives. The amendment increased the amount of performance awards payable in shares for the last three predetermined growth targets. It was treated as a modification of the original performance award agreement and resulted in $2.6 million of incremental compensation expense, expected to be recognized over the remaining term of 24 months. A summary of the number of performance awards and their weighted average grant date fair values during the year ended December 31, 2022 is presented in the table below (shares in thousands):
Performance Awards | Shares |  | Weighted Average Grant Date Fair Value
At January 1 | 435,766 |  |  | $ | 21.76 |
Granted | 27,013 |  |  | $ | 46.71 |
Cancelled | (30,743) |  |  | $ | 9.59 |
At December 31 | 432,036 |  |  | $ | 20.95 |
The fair value of the performance awards granted during the year ended December 31, 2022 was calculated on the date of grant using the Monte-Carlo simulation pricing model with the following assumptions:
Grant date |  | February 23, 2022 |  | April 1, 2022 |  |  |  |  |  |
Simulation period (years) |  | 2.85 |  | 2.75 |  |  |  |  |  |
Share price at grant date |  | $49.48 |  | $52.49 |  |  |  |  |  |
Expected volatility |  | 43.99 | % |  | 44.44 | % |  |  |  |  |  |
Risk-free interest rate |  | 1.75 | % |  | 2.55 | % |  |  |  |  |  |
The fair value of the performance awards granted during the year ended December 31, 2021 was calculated on the date of grant using the Monte-Carlo simulation pricing model with the following assumptions:
Grant date |  | April 16, 2021 |  | June 1, 2021 |  | August 12, 2021 |  | September 15, 2021 |  | November 29, 2021
Simulation period (years) |  | 3.71 |  | 3.58 |  | 3.39 |  | 3.29 |  | 3.09
Share price at grant date |  | $35.83 |  | $38.78 |  | $39.48 |  | $45.27 |  | $51.15
Expected volatility |  | 41.17 | % |  | 41.79 | % |  | 42.85 | % |  | 43.44 | % |  | 45.50 | %
Risk-free interest rate |  | 0.52 | % |  | 0.46 | % |  | 0.53 | % |  | 0.49 | % |  | 0.85 | %
At December 31, 2022, there was $5.6 million of unrecognized compensation cost related to performance awards expected to be recognized over a weighted average period of 24 months. If all of the predetermined growth targets are met as of December 31, 2024, a total of 995,873 shares of common stock would be awarded to participants under this program. We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for performance awards of $894,000, $1,573,000 and $2,524,000 during the years ended December 31, 2020, 2021 and 2022, respectively. Employee Stock Purchase Plan We provide all employees the opportunity to purchase common stock through payroll deductions in our ESPP. Purchases are made quarterly; the price being 85% of the lower of the price on the first day of the plan entry date (beginning of the fiscal year) or the actual date of purchase (end of quarter). ESPP activity is as follows (in thousands, except shares):
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
| Shares | Price |  | Shares | Price |  | Shares | Price
ESPP | 71,908 |  | $ | 16.71 |  |  | 61,904 |  | $ | 26.32 |  |  | 52,053 |  | $ | 32.38 |
We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for our ESPP of $434,000, $552,000 and $545,000 during the years ended December 31, 2020, 2021 and 2022, respectively. The fair values of the right to purchase shares under the ESPP are estimated at the date of purchase with the four quarterly purchase dates using the following assumptions:
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
Dividend yield | 1.5 | % |  | 0.01 | % |  | 0.01 | %
Expected volatility | 48.6 | % |  | 48.1 | % |  | 30.2 | %
Risk-free interest rate | 1.54%, 1.57%, 1.57%, 1.56% |  | 0.09%, 0.09%, 0.10%,0.10% |  | 0.08%, 0.22%, 0.31%, 0.40%
Expected life (years) | 0.25, 0.50, 0.75, 1.00 |  | 0.25, 0.50, 0.75, 1.00 |  | 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 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). Good To Great Incentive Program Common stock issued to certain employees under this incentive program is as follows (in thousands, except shares):
Years Ended December 31,
2020 |  | 2021 |  | 2022
Shares | Fair Value |  | Shares | Fair Value |  | Shares | Fair Value
17,991 |  | $ | 449 |  |  | — |  | $ | — |  |  | 27,448 |  | $ | 1,358 |
(1) | Common stock granted during the year ended December 31, 2020 and 2022 had a grant date stock price of $25.00 and $49.48, respectively.
Non-Employee Director and Board Advisor Compensation Our Director Compensation Policy provides that each independent director is entitled to a quarterly retainer of $35,000 payable in cash and/or unrestricted shares of our common stock at the end of each quarter. 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 unrestricted shares of our common stock. The Board Advisor is entitled to a quarterly retainer of $18,750 payable in cash and/or unrestricted shares of our common stock at the end of each quarter. 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. On May 17, 2022, Bryan D. Leibman resigned from the Board effective on that date. He served as the Company's Lead Independent Director. Effective with Mr. Leibman’s resignation, the Board appointed Donald D. Patteson, Jr. as Lead Independent Director. Non-Employee Director and Board Advisor common stock activity is as follows (in thousands, except shares):
| Years Ended December 31,
| 2020 |  | 2021 |  | 2022
| Shares | Fair Value |  | Shares | Fair Value |  | Shares | Fair Value
Board of Directors(1) | 30,883 |  | $ | 654 |  |  | 14,744 |  | $ | 622 |  |  | 11,155 |  | $ | 415 |
Advisor to the Board(1) | 967 |  | $ | 20 |  |  | 466 |  | $ | 20 |  |  | 555 |  | $ | 20 |
(1) | Common stock granted during the years ended December 31, 2020, 2021 and 2022 had a weighted average price of $21.16, $42.14 and $37.14, respectively.
We recorded compensation expense, which is included in General, administrative and other expenses, related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of $889,000, $858,000 and $718,000 during the years ended December 31, 2020, 2021 and 2022, respectively. Cash Dividends Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
2022 | Per Share |  | Dollar Value
March 1st | $ | 0.1125 |  |  | $ | 1,725 |
June 1st | $ | 0.1125 |  |  | $ | 1,730 |
September 1st | $ | 0.1125 |  |  | $ | 1,653 |
December 1st | $ | 0.1125 |  |  | $ | 1,655 |
2021 | Per Share |  | Dollar Value
March 1st | $ | 0.1000 |  |  | $ | 1,799 |
June 1st | $ | 0.1000 |  |  | $ | 1,808 |
September 1st | $ | 0.1000 |  |  | $ | 1,783 |
December 1st | $ | 0.1125 |  |  | $ | 1,873 |

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