Stock-Based Compensation

12 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Total stock-based compensation expense for the fiscal years ended June 30, 2020, June 30, 2019, and June 30, 2018 was $9.9 million, $11.9 million and $8.6 million, respectively. Measured but unrecognized stock-based compensation expense at June 30, 2020 was $11.9 million, all of which related to nonvested deferred shares which are expected to be recognized as expense over a weighted average period of 1.6 years. The Company recognized excess tax expense of $0.2 million and $0.5 million related to stock-based compensation vesting for the fiscal years ended June 30, 2020 and 2018, respectively. The Company recognized excess tax benefits of $0.3 million for the fiscal year ended June 30, 2019 related to stock-based compensation vesting.

Plan Information

In October 2018, the Company's stockholders approved the Matrix Service Company 2018 Stock and Incentive Compensation Plan (the "2018 Plan"), which provides stock-based and cash-based incentives for officers, directors and other key employees. Stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares and cash-based awards can be issued under this plan. Upon approval of the 2018 Plan, the 2016 Stock and Incentive Compensation Plan ("2016 Plan") was frozen with the exception of normal vesting and other activity associated with awards previously granted under the 2016 Plan. The 2016 Plan was preceded by the 2012 Stock Incentive Plan ("2012 Plan"), which was frozen upon approval of the 2016 Plan with the exception of normal vesting, forfeiture and other activity associated with awards previously granted under the 2012 Plan. Shares awarded under either the 2016 Plan or the 2012 Plan that are subsequently forfeited or net settled for tax withholding purposes are returned to the treasury share pool and become available for grant under the 2018 Plan. The 2012 Plan was preceded by the 2004 Stock Incentive Plan ("2004 Plan"), which was frozen upon approval of the 2012 Plan with the exception of normal vesting, forfeiture and other activity associated with awards previously granted under the 2004 Plan.

Awards totaling 1,600,000 shares have been authorized under the 2018 Plan. There were 1,473,424 shares available for grant under the 2018 Plan as of June 30, 2020.

Stock Options

Stock options are granted at the market value of the Company’s common stock on the grant date and expire after 10 years. The Company’s policy is to issue shares upon the exercise of stock options from its treasury shares, if available. The Company did not award any new stock options in fiscal years 2020, 2019, or 2018.

Stock option activity and related information for the fiscal year ended June 30, 2020 is as follows:


	Number of Options	Weighted-Average Remaining Contractual Life	Weighted-Average Exercise Price		Aggregate Intrinsic Value
		(Years)			(In thousands)
Outstanding at June 30, 2019	53,700	2.4	$	10.19	$	541
Granted	—		—		—
Exercised	—		—		—
Canceled	—		—		—
Outstanding at June 30, 2020	53,700	1.4	$	10.19	$	—
Vested at June 30, 2020	53,700	1.4	$	10.19	$	—
Exercisable at June 30, 2020	53,700	1.4	$	10.19	$	—

The total intrinsic value of stock options exercised was $0.1 million and $0.3 million during fiscal year 2019 and fiscal 2018, respectively. No stock options were exercised in fiscal 2020.

Nonvested Deferred Shares

The Company has issued nonvested deferred shares under the following types of arrangements:

•Time-based awards—Employee awards generally vest in four equal annual installments beginning one year after the grant date. Beginning in fiscal 2019, the award agreements contain a provision that accelerates the vesting for retirement eligible participants and participants that become retirement eligible during the vesting period and who elect to retire more than one year after the date of the award. The award is forfeited if retirement occurs before the first anniversary of the award. Settlement still occurs on the normal vesting schedules. Director awards vest one year after the grant date.

•Market-based awards—These awards are in the form of performance units which vest 3 years after the grant date only if the Company’s common stock achieves certain levels of total shareholder return when compared to the total shareholder return of a peer group of companies as selected by the Compensation Committee of the Board of Directors. The payout can range from zero to 200% of the original award depending on the Company's relative total shareholder return during the performance period. These awards are settled in stock. As of June 30, 2020, there are approximately 232,000, 170,000, and 200,000 performance units that are scheduled to vest in fiscal 2021, fiscal 2022, and fiscal 2023, respectively, assuming target performance.

All awards vest upon the death or disability of the participant or upon a change of control of the Company.

The grant date fair value of the time-based awards is determined by the market value of the Company's common stock on the grant date. The grant date fair value of stock options is determined based on the Black-Scholes option pricing model. The grant date fair value of the market-based awards is calculated using a Monte Carlo model. For the fiscal 2020 grant, the model estimated the fair value of the award based on approximately 100,000 simulations of the future prices of the Company's common stock compared to the future prices of the common stock of its peer companies based on historical volatilities. The model also took into account the expected dividends over the performance period of those peer companies which pay cash dividends.

Nonvested deferred share activity for the fiscal year ended June 30, 2020 is as follows:


	Shares	Weighted Average Grant Date Fair Value per Share
Nonvested shares at June 30, 2019	1,459,511	$	19.88
Shares granted	490,322	$	21.79

Shares vested and released	(542,279)	$	19.43
Shares canceled	(172,636)	$	19.51
Nonvested shares at June 30, 2020	1,234,918	$	20.89

There were 602,148 and 715,539 deferred shares granted in fiscal 2019 and 2018 with average grant date fair values of $25.10 and $13.64 per share, respectively. There were 314,711 and 253,241 deferred shares that vested and were released in fiscal 2019 and 2018 with weighted average fair values of $16.23 and $19.60 per share, respectively.