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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2020
Share Based Compensation [Abstract] |
Stock-Based Compensation |
11. | Stock-Based Compensation
The Company has various stock-based incentive compensation plans for its employees and members of its Board of Directors. Only shares of CRD-A can be issued under these plans. The fair value of an equity award is estimated on the grant date without regard to service or performance conditions. The fair value is recognized as compensation expense over the requisite service period for all awards that vest. When recognizing compensation expense, estimates are made for the number of awards that are expected to vest, and subsequent adjustments are made to reflect both changes in the number of shares expected to vest and actual vesting. Compensation expense recognized at the end of any year equals at least the portion of the grant-date value of an award that has vested at that date. The pretax compensation expense recognized for all stock-based compensation plans was $4,384,000, $4,109,000, and $6,196,000 for the years ended December 31, 2020, 2019, and 2018, respectively. During 2019, there was increased performance share forfeiture activity, which resulted in the decreased stock-based compensation for that year as compared to 2020 and 2018. In 2020, the increase was offset by less expense from restricted shares and stock options. The total income tax benefit recognized in the Consolidated Statements of Operations for stock-based compensation arrangements was approximately $947,000, $888,000, and $1,475,000 for the ended December 31, 2020, 2019, and 2018, respectively. Some of the Company's stock-based compensation awards are granted under plans which are designed not to be taxable as compensation to the recipient based on tax laws of the U.S. or other applicable country. Accordingly, the Company does not recognize tax benefits on all of its stock-based compensation expense. Adjustments to additional paid-in capital for differences between deductions taken on its income tax returns related to stock-based compensation plans and the related income tax benefits previously recognized for financial reporting purposes were not significant in any year. Stock Options The Company has granted nonqualified and incentive stock options to key employees and directors. All stock options are for shares of CRD-A. Option awards are granted with an exercise price equal to the fair market value of the Company's stock on the date of grant. The Company's stock option plans have been approved by shareholders, and the Company's Board of Directors is authorized to make specific grants of stock options under active plans. Employee stock options typically are subject to graded vesting over three years (33% each year) and have a typical life of ten years. Compensation cost for stock options is recognized on an accelerated basis over the requisite service period for the entire award. For the years ended December 31, 2020, 2019, and 2018, compensation expense of $617,000, $1,397,000, and $1,253,000, respectively, was recognized for employee stock option awards. A summary of option activity as of December 31, 2020, 2019, and 2018, and changes during each year, is presented below:
|  | Shares |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Term |  | Aggregate Intrinsic Value |
|  | (In thousands) |  |  |  |  |  |  |  |  | (In thousands) |
Outstanding at December 31, 2017 |  |  | 887 |  |  | $ | 8.53 |  |  | 8.4 years |  | $ | 527 |
Granted |  |  | 582 |  |  |  | 8.60 |  |  |  |  |  |  |
Exercised |  |  | (21 | ) |  |  | 4.88 |  |  |  |  |  |  |
Forfeited or expired |  |  | (154 | ) |  |  | 8.74 |  |  |  |  |  |  |
Outstanding at December 31, 2018 |  |  | 1,294 |  |  |  | 8.60 |  |  | 8.1 years |  |  | 667 |
Granted |  |  | 591 |  |  |  | 9.70 |  |  |  |  |  |  |
Exercised |  |  | (111 | ) |  |  | 5.91 |  |  |  |  |  |  |
Forfeited or expired |  |  | (80 | ) |  |  | 9.24 |  |  |  |  |  |  |
Outstanding at December 31, 2019 |  |  | 1,694 |  |  |  | 9.13 |  |  | 7.9 years |  |  | 3,969 |
Granted |  |  | 660 |  |  |  | 8.73 |  |  |  |  |  |  |
Exercised |  |  | — |  |  |  | — |  |  |  |  |  |  |
Forfeited or expired |  |  | (458 | ) |  |  | 9.05 |  |  |  |  |  |  |
Outstanding at December 31, 2020 |  |  | 1,896 |  |  | $ | 9.01 |  |  | 7.4 years |  | $ | 114 |
Vested and Exercisable at December 31, 2020 |  |  | 1,101 |  |  | $ | 9.06 |  |  | 6.6 years |  | $ | 26 |
The weighted average grant date fair value of stock options granted during the year ended December 31, 2020, 2019, and 2018 was $2.29, $2.57 and $2.78, respectively. No options were exercised in 2020. Options vested in 2019 and 2018 had an intrinsic value of $446,000, and $80,000, respectively. Options that vested in 2020 had no fair value. The fair value of options that vested in 2019 and 2018 was $1,000,000 and $36,000, respectively. At December 31, 2020, the unrecognized compensation cost related to unvested employee stock options was $636,000. Directors' stock options had no unrecognized compensation cost since directors' options vest upon grant, and the grant-date fair values were fully expensed on the grant date. The fair value of each option was estimated on the date of grant using the Black-Scholes-Merton option-pricing formula, with the following weighted average assumptions:
|  | 2020 |  |  | 2019 |
Expected dividend yield |  |  | 3.02 | % |  |  | 3.80 | %
Expected volatility |  |  | 35.48 | % |  |  | 36.73 | %
Risk-free interest rate |  |  | 1.38 | % |  |  | 2.56 | %
Expected term of options |  | 7 years |  |  | 7 years |
The expected dividend yield used for 2020 was based on the Company's historical dividend yield. The expected volatility of the price of CRD-A was based on historical realized volatility. The risk-free interest rate was based on the U.S. Treasury Daily Yield Curve Rate on the grant date, with a term equal to the expected term used in the pricing formula. The expected term of the option took into account both the contractual term of the option and the effects of expected exercise behavior. Performance-Based Stock Grants Performance share grants are from time to time made to certain key employees of the Company. Such grants entitle employees to earn shares of CRD-A upon the achievement of certain individual and/or corporate objectives. Grants of performance shares are made at the discretion of the Company's Board of Directors, or the Board's Compensation Committee, and are subject to graded or cliff vesting over three-year periods. Shares are not issued until the vesting requirements have been met. Dividends are not paid or accrued on unvested/unissued shares. The grant-date fair value of a performance share grant is based on the market value of CRD-A on the date of grant, reduced for the present value of any dividends expected to be paid on CRD-A prior to the vesting of the award. Compensation expense for each award is recognized ratably from the grant date to the vesting date for each tranche. On September 23, 2020, deeming the existing performance based cliff awards granted in 2019 and 2020 to be unattainable, the Compensation Committee cancelled the existing awards and approved a new plan based on Total Shareholder Return (“TSR”), a market condition. The 2019 replacement awards were targeted to achieve 50% of the original award it was replacing and set to vest on December 31, 2021. The 2020 replacement awards were targeted to achieve 100% of the original award it was replacing, with a vesting date of December 31, 2022. TSR is defined as dividends paid during the measurement period plus share price appreciation. Share price appreciation is measured by using the 20 day trading day volume weighted average price at the start of the measurement period as the baseline, compared against the highest consecutive 20 day trading day volume weighted average price for the period between January 1, 2021 and the vesting date for the 2019 replacement awards and between January 1, 2022 and the vesting date for the 2020 replacement awards. Depending on the TSR, the number of shares earned can be between 50% and 200% of the targeted shares granted. If the TSR is below 10% for the 2019 replacement awards, or 20% for the 2020 replacement awards, then no shares vest. The cancellation and reissuance of these awards was treated as a Type III modification, where no cumulative expense is recognized prior to the cancellation as it was deemed improbable to vest. Expense of the modified award will be recorded ratably over the service life, based on the valuation determined by utilizing a Monte Carlo simulation. At the time of modification, employees were given an option to elect a cash payout at the vesting date, also based on a component of TSR. This one-time election had to be determined within 30 days of the grant date. Any awards where the cash payout option was elected were recorded as liability awards, which are included on the Company's Consolidated Balance Sheets in "Accrued compensation and related costs." A summary of the status of the Company's nonvested performance shares as of December 31, 2020, 2019, and 2018, and changes during each year, is presented below:
|  | Shares |  |  | Weighted-Average Grant-Date Fair Value |
Nonvested at December 31, 2017 |  |  | 884,342 |  |  | $ | 7.05 |
Granted |  |  | 751,128 |  |  |  | 7.43 |
Vested |  |  | (445,311 | ) |  |  | 5.98 |
Forfeited or unearned |  |  | (201,322 | ) |  |  | 7.54 |
Nonvested at December 31, 2018 |  |  | 988,837 |  |  |  | 8.07 |
Granted |  |  | 626,776 |  |  |  | 8.87 |
Vested |  |  | (214,824 | ) |  |  | 8.49 |
Forfeited or unearned |  |  | (427,010 | ) |  |  | 8.34 |
Nonvested at December 31, 2019 |  |  | 973,779 |  |  |  | 8.38 |
Granted |  |  | 1,616,902 |  |  |  | 8.01 |
Vested |  |  | (224,681 | ) |  |  | 8.33 |
Forfeited or unearned |  |  | (1,466,729 | ) |  |  | 8.10 |
Nonvested at December 31, 2020 |  |  | 899,271 |  |  | $ | 8.19 |
The total fair value of the performance shares that vested in 2020, 2019, and 2018 was $1,871,000, $1,823,000, and $2,662,000, respectively. Compensation expense recognized for all performance shares totaled $2,382,000, $1,082,000, and $3,307,000 for the years ended December 31, 2020, 2019 and 2018, respectively. Compensation cost for these awards is net of estimated or actual award forfeitures. Certain performance awards vest ratably, from grant date to vesting date of their respective tranches, without cumulative earnings per share targets. As of December 31, 2020, there was an estimated $4,999,000 of unearned compensation cost for nonvested performance shares. This unearned compensation cost is expected to be fully recognized by the end of 2022. Restricted Shares The Company's Board of Directors may elect to issue restricted shares of CRD-A in lieu of, or in addition to, cash payments to certain key employees. Employees receiving these shares are subject to restrictions on their ability to transfer the shares. Such restrictions generally lapse ratably over vesting periods ranging from several months to five years. The grant-date fair value of a restricted share of CRD-A is based on the market value of the stock on the date of grant. Compensation cost is recognized on an accelerated basis over the requisite service period. A summary of the status of the Company's restricted shares of CRD-A as of December 31, 2020, 2019, and 2018 and changes during each year, is presented below:
|  | Shares |  |  | Weighted-Average Grant-Date Fair Value |
Nonvested at December 31, 2017 |  |  | 112,219 |  |  | $ | 7.89 |
Granted |  |  | 112,502 |  |  |  | 7.81 |
Vested |  |  | (131,260 | ) |  |  | 8.27 |
Forfeited or unearned |  |  | (21,352 | ) |  |  | 8.43 |
Nonvested at December 31, 2018 |  |  | 72,109 |  |  |  | 7.76 |
Granted |  |  | 149,496 |  |  |  | 9.38 |
Vested |  |  | (108,610 | ) |  |  | 9.04 |
Forfeited or unearned |  |  | (31,387 | ) |  |  | 9.55 |
Nonvested at December 31, 2019 |  |  | 81,608 |  |  |  | 8.35 |
Granted |  |  | 117,279 |  |  |  | 8.34 |
Vested |  |  | (119,327 | ) |  |  | 8.52 |
Forfeited or unearned |  |  | — |  |  |  | — |
Nonvested at December 31, 2020 |  |  | 79,560 |  |  | $ | 8.08 |
Compensation expense recognized for all restricted shares for the years ended December 31, 2020, 2019, and 2018 was $942,000, $1,205,000, and $1,176,000, respectively. As of December 31, 2020, there was $214,000 of total unearned compensation cost related to nonvested restricted shares which is expected to be recognized by December 31, 2022. Employee Stock Purchase Plans The Company has three employee stock purchase plans: the U.S. Plan, the U.K. Plan, and the International Plan. Eligible employees in Canada, Puerto Rico, and the U.S. Virgin Islands may also participate in the U.S. Plan. The International Plan is for eligible employees located in certain other countries who are not covered by the U.S. Plan or the U.K. Plan. All plans are compensatory. For all plans, the requisite service period is the period of time over which the employees contribute to the plans through payroll withholdings. For purposes of recognizing compensation expense, estimates are made for the total withholdings expected over the entire withholding period. The market price of a share of stock at the beginning of the withholding period is then used to estimate the total number of shares that will be purchased using the total estimated withholdings. Compensation cost is recognized ratably over the withholding period. Under the U.S. Plan, the Company is authorized to issue up to 1,200,000 shares of CRD-A to eligible employees. Participating employees can elect to have up to $25,000 of their eligible annual earnings withheld to purchase shares at the end of the one-year withholding period which starts each July 1 and ends the following June 30. The purchase price of the stock is 85% of the lesser of the closing price of a share of such stock on the first day or the last day of the withholding period. Participating employees may cease payroll withholdings during the withholding period and/or request a refund of all amounts withheld before any shares are purchased. During the years ended December 31, 2020, 2019 and 2018, a total of 114,408, 131,100, and 143,769 shares, respectively, of CRD-A were issued under the prior U.S. employee stock purchase plan to the Company's employees at average purchase prices of $6.71, $7.38, and $7.32 in 2020, 2019, and 2018, respectively. At December 31, 2020, an estimated 151,000 shares will be issued and purchased under the U.S. Plan in 2021. During the years ended December 31, 2020, 2019, and 2018, compensation expense of $343,000, $277,000, and $321,000, respectively, was recognized for the prior U.S. employee stock purchase plan. Under the U.K. Plan, the Company is authorized to issue up to 1,200,000 shares of CRD-A. Under the U.K. Plan, eligible employees can elect to have up to £250 withheld from payroll each month to purchase shares after the end of a three-year savings period. The purchase price of a share of stock is 85% of the market price of the stock at a date prior to the grant date as determined under the U.K. Plan. Participating employees may cease payroll withholdings and/or request a refund of all amounts withheld before any shares are purchased. At December 31, 2020, an estimated 108,000 shares will be eligible for purchase under the U.K. Plan at the end of the current withholding periods. This estimate is subject to change based on future fluctuations in the value of the British pound against the U.S. dollar, future changes in the market price of CRD-A, and future employee participation rates. The purchase price per share of CRD-A under the U.K. Plan ranges from $6.32 to $8.95. For the years ended December 31, 2020, 2019, and 2018, compensation expense of $163,000, $148,000, and $140,000, respectively, was recognized for the U.K. Plan. During 2020, 2019, and 2018, a total of 2,061 shares, 289,901 shares, and 63,033 shares, respectively, of CRD-A were issued under the U.K. Plan. Under the International Plan, up to 1,000,000 shares of CRD-A may be issued. Participating employees can elect to have up to $21,250 of their eligible annual earnings withheld to purchase up to 5,000 shares of CRD-A at the end of the one-year withholding period which starts each July 1 and ends the following June 30. The purchase price of the stock is 85% of the lesser of the closing price for a share of such stock on the first day or the last day of the withholding period. Participating employees may cease payroll withholdings during the withholding period and/or request a refund of all amounts withheld before any shares are purchased. During 2020, 2019, and 2018, 4,051, 4,264, and 8,740 shares, respectively, were issued under the International Plan. Compensation expense was immaterial for this plan in all three years.

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