Share-Based Compensation

6 Months Ended

Jun. 30, 2019

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

Share-Based Compensation

Note 10. Share-Based Compensation

The Company previously adopted the 2007 Management Incentive Plan (the “

2007 Plan

”) and the 2011 Stock Incentive Plan (the “

2011 Plan

”). On April 22, 2015, the stockholders of the Company approved the 2015 Long-Term Incentive Plan (the “

2015 Plan

”), and on April 27, 2017, the stockholders of the Company re-approved the 2015 Plan, as amended and restated. As of June 30, 2019, subject to adjustments as provided in the 2015 Plan, the maximum aggregate number of shares of the Company’s common stock that could be issued under the 2015 Plan could not exceed the sum of (i)

1.55

million shares plus (ii) any shares (A) remaining available for the grant of awards as of the 2015 Plan effective date (April 22, 2015) under the 2007 Plan or the 2011 Plan, and/or (B) subject to an award granted under the 2007 Plan or the 2011 Plan, which award is forfeited, cancelled, terminated, expires, or lapses without the issuance of shares or pursuant to which such shares are forfeited. As of the effectiveness of the 2015 Plan (April 22, 2015), there were

922

thousand shares available for grant under the 2015 Plan, inclusive of shares previously available for grant under the 2007 Plan and the 2011 Plan that were rolled over to the 2015 Plan. No further grants will be made under the 2007 Plan or the 2011 Plan. However, awards that are outstanding under the 2007 Plan and the 2011 Plan will continue in accordance with their respective terms. As of June 30, 2019, there were 0.9 million shares available for grant under the 2015 Plan.

For the three months ended June 30, 2019 and 2018, the Company recorded share-based compensation expense of $1.2 million and $1.3 million, respectively. The Company recorded $2.2 million and $2.5 million in share-based compensation for the six months ended June 30, 2019 and 2018, respectively. As of June 30, 2019, unrecognized share-based compensation expense to be recognized over future periods approximated $7.8 million. This amount will be recognized as expense over a weighted-average period of 1.9 years. Share-based compensation expenses are recognized on a straight-line basis over the requisite service period of the agreement. All share-based compensation is classified as equity awards.

The Company allows for the settlement of share-based awards on a net share basis. With net share settlement, the employee does not surrender any cash or shares upon the exercise of stock options or the vesting of stock awards or stock units. Rather, the Company withholds the number of shares with a value equivalent to the option exercise price (for stock options) and the statutory tax withholding (for all share-based awards). Net share settlements have the effect of reducing the number of shares that would have otherwise been issued as a result of exercise or vesting.

Long-term incentive program:

The Company issues non-qualified stock options, performance-contingent restricted stock units (“

RSUs

”), cash-settled performance units (“

CSPUs

”), and restricted stock awards (“

RSAs

”) to certain members of senior management under a long-term incentive program (“

LTIP

”). The CSPUs are cash incentive awards, and the associated expense is not based on the market price of the Company’s common stock. Recurring annual grants are made at the discretion of the Board. The annual grants are subject to cliff- and graded-vesting, generally concluding at the end of the third calendar year and subject to continued employment or as otherwise provided in the underlying award agreements. The actual value of the RSUs and CSPUs that may be earned can range from 0% to 150% of target based on the percentile ranking of the Company’s compound annual growth rate of net income and net income per share compared to a public company peer group over a three-year performance period.

The Company also has a key team member incentive program for certain other members of senior management. Recurring annual participation in the program is at the discretion of the Board and executive management. Each participant in the program is eligible to earn an RSA, subject to performance over a one-year period. Payout under the program can range from

% to

150

% of target based on the achievement of five Company performance metrics and individual performance goals (subject to continued employment and certain other terms and conditions of the program). If earned, the RSA is issued following the one-year performance period and vests ratably over a subsequent two-year period (subject to continued employment or as otherwise provided in the underlying award agreement).

Inducement and retention program:

From time to time, the Company issues stock awards and other long-term incentive awards in conjunction with employment offers to select new employees and retention grants to select existing employees. The Company issues these awards to attract and retain talent and to provide market competitive compensation. The grants have various vesting terms, including fully-vested awards at the grant date, cliff-vesting, and graded-vesting over periods of up to five years (subject to continued employment or as otherwise provided in the underlying award agreements).

Non-employee director compensation program:

The Company awards its non-employee directors a cash retainer and shares of restricted common stock. The RSAs are granted on the fifth business day following the Company’s annual meeting of stockholders and fully vest upon the earlier of the first anniversary of the grant date or the completion of the directors’ annual service to the Company. The Board revised the compensation program in April 2018 to modify the amount of the annual cash retainers for Board and committee members, eliminate committee meeting fees, and modify the value of the RSAs for committee members.

The following are the terms and amounts of the awards issued under the Company’s share-based incentive programs:

Non-qualified stock options:

The exercise price of all stock options is equal to the Company’s closing stock price on the date of grant. Stock options are subject to various vesting terms, including graded- and cliff-vesting over periods of up to five years. In addition, stock options vest and become exercisable in full or in part under certain circumstances, including following the occurrence of a change of control (as defined in the option award agreements). Participants who are awarded options must exercise their options within a maximum of ten years of the grant

date.

The fair value of option grants is estimated on the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions for option grants during the periods indicated below:

	Six Months Ended June 30,
	2019			2018
Expected volatility		41.14	%		41.63	%
Expected dividends		0.00	%		0.00	%
Expected term (in years)		6.0			6.0
Risk-free rate		2.55	%		2.66	%

Expected volatility is based on the Company’s historical stock price volatility. The expected term is calculated by using the simplified method (average of the vesting and original contractual terms) due to insufficient historical data to estimate the expected term. The risk-free rate is based on the zero coupon U.S. Treasury bond rate over the expected term of the awards.

The following table summarizes the stock option activity for the six months ended June 30, 2019:

In thousands, except per share amounts	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Options outstanding at January 1, 2019		981	$	18.69
Granted		100		27.89
Exercised		—		—
Forfeited		—		—
Expired		—		—
Options outstanding at June 30, 2019		1,081	$	19.55		6.4	$	7,936
Options exercisable at June 30, 2019		871	$	17.83		5.8	$	7,715

The following table provides additional NQSO information for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
In thousands, except per share amounts	2019		2018		2019		2018
Weighted-average grant date fair value per share	$	—	$	—	$	12.07	$	12.39
Intrinsic value of options exercised	$	—	$	574	$	—	$	1,604
Fair value of NQSOs that vested	$	—	$	—	$	—	$	199

Performance-contingent restricted stock units:

Compensation expense for RSUs is based on the Company’s closing stock price on the date of grant and the probability that certain financial goals will be achieved over the performance period. Compensation expense is estimated based on expected performance and is adjusted at each reporting period.

The following table summarizes RSU activity during the six months ended June 30, 2019:

In thousands, except per unit amounts	Units			Weighted-Average Grant Date Fair Value Per Unit
Non-vested units at January 1, 2019		182		$	21.89
Granted (target)		39			27.89
Achieved performance adjustment (1)		8			16.98
Vested		(54	)		16.98
Forfeited		—			—
Non-vested units at June 30, 2019		175		$	24.55

(1)

The 2016 LTIP RSUs were earned and vested at 116.5% of target, as described in greater detail in the Company’s definitive proxy statement filed with the SEC on March 27, 2019.

The following table provides additional RSU information for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
In thousands, except per unit amounts	2019		2018		2019		2018
Weighted-average grant date fair value per unit	$	—	$	—	$	27.89	$	28.25
Fair value of RSUs that vested	$	—	$	—	$	916	$	—

Restricted stock awards:

The fair value and compensation expense of RSAs are calculated using the Company’s closing stock price on the date of grant.

The following table summarizes RSA activity during the six months ended June 30, 2019:

In thousands, except per share amounts	Shares			Weighted-Average Grant Date Fair Value Per Share
Non-vested shares at January 1, 2019		71		$	26.95
Granted		138			26.92
Vested		(28	)		32.36
Forfeited		(2	)		27.22
Non-vested shares at June 30, 2019		179		$	26.06

The following table provides additional RSA information for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
In thousands, except per share amounts	2019		2018		2019		2018
Weighted-average grant date fair value per share	$	24.66	$	34.39	$	26.92	$	24.70
Fair value of RSAs that vested	$	810	$	651	$	918	$	711