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Stock Based Compensation

3 Months Ended

Mar. 31, 2020

Note 13 – Stock Based Compensation

The Company’s 2019 Incentive Plan (the ‘‘Plan’’), approved by the Company’s stockholders in June 2019, permits the Company to grant, among other things, stock options, restricted stock, RSUs, performance share awards and dividend equivalent rights and any one or more of the foregoing to its employees, officers, directors and consultants. A maximum of 750,000 shares of the Company’s common stock is authorized for issuance pursuant to this Plan. As of March 31, 2020, an aggregate of 224,576 shares subject to awards in the form of restricted stock (149,550 shares) and RSUs (75,026 shares) are outstanding under the Plan.

Under the Company’s 2016 and 2012 equity incentive plans (collectively, the “Prior Plans”), as of March 31, 2020, an aggregate of 702,125 shares of restricted stock (552,125 shares) and RSUs (150,000 shares) are outstanding and have not yet vested. No additional awards may be granted under the Prior Plans.

For accounting purposes, the restricted stock is not included in the shares shown as outstanding on the balance sheet until they vest; however, dividends are paid on the unvested shares. The restricted stock grants are charged to General and administrative expense over the respective vesting periods based on the market value of the common stock on the grant date. Unless earlier forfeited because the participant’s relationship with the Company terminated, unvested restricted stock awards vest on the fifth anniversary of the grant date, and under certain circumstances may vest earlier.

Note 13 – Stock Based Compensation (Continued)

In 2019, 2018 and 2017, the Company granted RSUs exchangeable for up to 77,776, 76,250 and 76,250 shares, respectively, of common stock upon satisfaction, through June 30, 2022, June 30, 2021 and June 30, 2020, respectively, of specified conditions. Specifically, up to 50% of these RSUs vest upon achievement of metrics related to average annual total stockholder return (the “TSR Awards”), which metrics meet the definition of a market condition, and up to 50% vest upon achievement of metrics related to average annual return on capital (the “ROC Awards”), which metrics meet the definition of a performance condition. The holders of the RSUs are not entitled to dividends or to vote the underlying shares until such RSUs vest and shares are issued. Accordingly, the shares underlying these RSUs are not included in the shares shown as outstanding on the balance sheet. For the TSR awards, a third party appraiser prepared a Monte Carlo simulation pricing model to determine the fair value, which is recognized ratably over the service period. For the ROC Awards, the fair value is based on the market value on the date of grant and the performance assumptions are re-evaluated quarterly. The Company does not recognize expense on ROC Awards which it does not expect to vest. During 2019, RSUs exchangeable in 2021 and 2022 for an aggregate of 5,250 shares were forfeited.

As of March 31, 2020, based on performance and market assumptions, the fair value of the RSUs granted in 2019, 2018 and 2017 is $729,000, $690,000 and $807,000, respectively. Recognition of such deferred compensation expense will be charged to General and administrative expense over the respective three year performance cycle. None of these RSUs were forfeited or vested during the three months ended March 31, 2020.

Note 13 – Stock Based Compensation (Continued)

The following is a summary of the activity of the equity incentive plans:


	Three Months Ended
	March 31,
	2020		2019
Restricted stock grants:
Number of shares		149,550		150,050
Average per share grant price	$	28.10	$	25.70
Deferred compensation to be recognized over vesting period	$	4,202,000	$	3,856,000

Number of non-vested shares:
Non-vested beginning of period		674,250		651,250
Grants		149,550		150,050
Vested during period		(122,125)		(112,150)
Forfeitures		—		—
Non-vested end of period		701,675		689,150

RSU grants:
Number of underlying shares		—		—
Average per share grant price		—		—
Deferred compensation to be recognized over vesting period		—		—

Number of non-vested shares:
Non-vested beginning of period		225,026		152,500
Grants		—		—
Vested during period		—		—
Forfeitures		—		—
Non-vested end of period		225,026		152,500


Restricted stock and RSU grants:
Weighted average per share value of non-vested shares (based on grant price)	$	25.52	$	24.60
Value of stock vested during the period (based on grant price)	$	3,004,000	$	2,304,000
Weighted average per share value of shares forfeited during the period (based on grant price)	$	—	$	—

The total charge to operations:
Outstanding restricted stock grants	$	875,000	$	843,000
Outstanding RSUs		101,000		111,000
Total charge to operations	$	976,000	$	954,000

As of March 31, 2020, total compensation costs of $10,468,000 and $907,000 related to non-vested restricted stock awards and RSUs, respectively, have not yet been recognized. These compensation costs will be charged to General and administrative expense over the remaining respective vesting periods. The weighted average remaining vesting period is 2.9 years for the restricted stock and 1.2 years for the RSUs.