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10. Stock-based and Other Compensation

6 Months Ended

Jun. 30, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based and Other Compensation

Note 10 – Stock-based and Other Compensation

Stock Options

In December 2015, Lifeway shareholders approved the 2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units. At June 30, 2018, 3.469 million shares remain available under the Omnibus Incentive Plan. We have not established a pace for the frequency of awards under the Omnibus Incentive Plan, and may choose to suspend the issuance of new awards in the future and may grant additional awards at any time including issuing special grants of restricted stock, restricted stock units, and stock options to attract and retain new and existing executives.

The following table summarizes stock option activity during the six months ended June 30, 2018:

		Options				Weighted average exercise price				Weighted average remaining contractual life				Aggregate intrinsic value

Outstanding at December 31, 2017			45			$	10.45
Granted			–			$	–
Exercised			–			$	–
Forfeited			(3)			$	11.10
Outstanding at June 30, 2018			42			$	10.40				7.70			$	–
Exercisable at June 30, 2018			33			$	10.50				7.70			$	–

For the six months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $7 and $29, respectively. For the six months ended June 30, 2018 and 2017 tax-related benefits of $2 and $11 were also recognized. For the three months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $3 and $14, respectively. For the three months ended June 30, 2018 and 2017 tax-related benefits of $0 and $5 were also recognized. As of June 30, 2018, the total remaining unearned compensation related to non-vested stock options was $6, which is expected to be amortized over the weighted-average remaining service period of 0.82 years.

Restricted Stock Units

Lifeway granted 20 Restricted Stock Units (“RSUs”) to certain independent directors in June 2018. An RSU represents the right to receive one share of common stock in the future. RSUs have no exercise price.

The following table summarizes RSU activity during the six months ended June 30, 2018:

		RSU’s

Outstanding at December 31, 2017			–
Granted			20
Shares issued upon vesting			–
Forfeited			–
Outstanding at June 30, 2018			20
Weighted average grant date fair value per share		$	6.18

We expense RSU’s over the service period. For the six months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $4 and $9, respectively. For the six months ended June 30, 2018 and 2017 tax-related benefits of $1 and $4 were also recognized. For the three months ended June 30, 2018 and 2017 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $3 and $4, respectively. For the three months ended June 30, 2018 and 2017 tax-related benefits of $1 and $2 were also recognized. As of June 30, 2018, the total remaining unearned compensation related to non-vested RSU’s was $118, which is expected to be amortized over the weighted-average remaining service period of 2.90 years.

Incentive Compensation

In January 2017, Lifeway established an incentive-based compensation program for fiscal year 2017 (the “2017 Plan”) for certain senior executives and key employees (the “participants”). We established a similar plan for participants for fiscal year 2018 (the “2018” Plan). Under both the 2017 Plan and the 2018 Plan, incentive compensation is based on (a) Lifeway’s achievement of certain sales and adjusted EBITDA performance levels versus respective targets established by the Board for each fiscal year, and (b) for certain senior executives other than our CEO and COO, the achievement of individual performance objectives.

Under the 2017 Plan, collectively the participants had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,025 depending on Lifeway’s performance levels compared to the respective targets and the senior executive’s performance compared to their individual objectives. The equity portion of the incentive compensation is payable in restricted stock that vests one-third in each of the three years from the 2017 grant dates. For the six months ended June 30, 2018, $412 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations. For the six months ended June 30, 2017, $1,985 was expensed under the 2017 Plan, of which $1,248 was recorded as cash bonus expense and $737 was recorded as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2018, $126 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2017, $1,167 was expensed under the 2017 Plan, of which $859 was recorded as cash bonus expense and $308 was recorded as stock-based compensation expense in the consolidated statements of operations. As of June 30, 2018, the total remaining unearned compensation related to the 2017 Plan was $633, of which $278 is expected to be recognized through the balance of fiscal year 2018 subject to vesting; and $303 and $52 is expected to be recognized in 2019 and 2020, respectively, subject to vesting.

Under the 2018 Plan, collectively the participants have the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,200 depending on Lifeway’s performance levels compared to the respective targets and the senior executive’s performance compared to their individual objectives. The equity portion of the incentive compensation is payable in restricted stock that vests one-third in each of the three years from the 2018 grant dates. For the six months ended June 30, 2018, $146 was expensed under the 2018 Plan, of which $76 was recorded as cash bonus expense and $70 was recorded as stock-based compensation expense in the consolidated statements of operations. For the three months ended June 30, 2018, $(25) was expensed under the 2018 Plan as stock-based compensation expense in the consolidated statements of operations.

Retirement Benefits

Lifeway has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan, we match employee contributions under a prescribed formula. For the six months ended June 30, 2018 and 2017 total contribution expense recognized in the consolidated statements of operations was $229 and $237, respectively. For the three months ended June 30, 2018 and 2017 total contribution expense recognized in the consolidated statements of operations was $97 and $134, respectively, due to timing of bonus payments.