Stock Based and Other Management Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock Based and Other Management Compensation

Stock-Based and Other Management Compensation

Our Omnibus Equity Incentive Plan permits the granting of options and other stock-based awards (including restricted stock units ("RSUs") and deferred share units ("DSUs")). As of December 31, 2021, the aggregate number of shares authorized under the plan since its initial adoption was 15.0 million. Shares issued upon vesting of awards or exercise of options are new share issuances. Upon the vesting or payment of stock awards, an employee may elect receipt of the full share amount and either pay the resulting taxes or have the Company withhold shares to cover the tax obligation. At December 31, 2021, 12.1 million common stock shares were available for future issuance.

Stock-based compensation expense was $16.6 million, $2.7 million and $2.1 million in 2021, 2020 and 2019, respectively. A majority of the expense, $14.6 million in 2021, $2.3 million in 2020 and $1.9 million in 2019 was recorded as selling and administrative expenses in the Consolidated Statement of Operations, with the remaining expenses incurred as cost of sales. Stock-based compensation expense for 2021 includes $14.7 million, recorded in the second quarter of 2021, due to the Change in Control accelerated vesting provisions of certain of our awards. For the purpose of these grants, a Change in Control occurred when Brookfield and any affiliates thereof ceased to own stock of the Company that constitutes at least thirty percent (30%) or thirty-five percent (35%), as applicable, of the total fair market value or total voting power of the stock of the Company. Out of the $14.7 million recorded with the Change in Control, $0.9 million accelerated at the 35% ownership level and the remaining $13.8 million accelerated at the 30% ownership level.

The Company derives a tax deduction measured by the excess of the market value over the grant price at the date stock-based compensation awards are exercised or vest. We recognized $1.8 million of tax benefits in 2021, compared to $0.5 million of tax benefits in both 2020 and 2019 relating to the issuance of common stock for the exercise/vesting of equity awards.

Stock Options. Non-qualified stock options may be granted to our employees and directors. Stock options vest over a five year period, with one-fifth of the award vesting on the anniversary date of the grant in each of the next five years and expire 10 years from the date of grant. Option exercises are satisfied through the issuance of common shares. Compensation expense for stock options is based on the estimated fair value of the option on the date of the grant. We calculate the estimated fair value of the option using the Black-Scholes option-pricing model. The weighted average assumptions used in our Black-Scholes option pricing model for options granted in 2021, 2020 and 2019 were as follows:


	2021		2020		2019
Dividend yield	0.32% - 0.35%		0.44% - 3.77%		2.39% - 3.05%
Expected volatility	62	%	50	%	50	%
Risk-free interest rate	1.1% - 1.21%		0.37% - 1.22%		1.79% - 2.63%
Expected term in years	6.5 years		6.5 years		6.5 years

Dividend Yield. Our dividend yield estimate is based on our expected dividends and the stock price on the grant date.

Expected Volatility. For 2021 and 2020, we estimated the volatility of our common stock at the date of grant based on the historical volatility of the Company’s stock. The volatility factor we use is based on our historical closing prices since our stock has been publicly traded. For 2019, we estimated the volatility of our common stock at the date of grant based on the historical volatility of comparable companies over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate. We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award.

Expected Term In Years. The expected life of awards granted represents the time period that the awards are expected to be outstanding. We determined the expected term of the grants using the “simplified” method as described by the SEC, since we do not have a history of stock option awards to provide a reliable basis for estimating such term.

The following table summarizes activity related to stock options during 2021:


	Number of Options	Weighted- Average Exercise Price Per Share		Aggregate Intrinsic Value (thousands)		Weighted Average Remaining Term (Years)
Outstanding at December 31, 2020	1,248,935	$	13.66
Granted	479,500	$	11.49
Exercised	(39,700)	$	10.67
Forfeited or expired	(72,015)	$	14.02
Outstanding at December 31, 2021	1,616,720	$	13.08	$	972,123	7.6 years
Vested and Expected to vest as of December 31, 2021	1,616,720	$	13.08	$	972,123	7.6 years
Exercisable at December 31, 2021	1,500,800	$	12.79	$	972,123	7.6 years

Outstanding options have exercise prices ranging from $7.28 per share to $20.00 per share.

A summary of the status and changes of stock options and the related average price per share follows:


	Number of Options	Weighted- Average Grant Date Fair Value
Outstanding unvested as of December 31, 2020	906,361	$	4.94
Granted	479,500	6.50
Vested	(1,227,592)	5.38
Forfeited	(42,349)	5.09
Outstanding unvested as of December 31, 2021	115,920	$	6.64

We recognized stock-based compensation expense of $5.9 million, $1.1 million and $1.2 million in 2021, 2020 and 2019, respectively, relating to stock options. As of December 31, 2021, there was $0.5 million of total unrecognized compensation cost related to unvested stock options, which is expected to be amortized over a weighted average period of 1.4 years. The total fair value of shares vested was $6.6 million in 2021 and $1.1 million in both 2020 and 2019. There were 39,700 options exercised during 2021. No options were exercised during 2020 or 2019. Cash received from option exercises during 2021 was $0.4 million.

RSUs. RSUs constitute an agreement to deliver shares of common stock to the participant at the end of a vesting period. Compensation expense for RSUs is based on the closing price of our common stock on the date of grant, less forfeitures or cancellations of awards throughout the vesting period. RSUs vest over a five year period, with one-fifth of the award vesting on the anniversary date of the grant in each of the next five years. A summary of the status and changes of shares subject to RSU awards for employees and the related average price per share follows:


	Number of Shares	Weighted- Average Grant Date Fair Value
Outstanding unvested as of December 31, 2020	502,770	$	10.28
Granted	515,960	11.49
Cancelled	(16,795)	10.78
Vested	(999,239)	10.88
Outstanding unvested as of December 31, 2021	2,696	$	13.96

During 2021, 2020 and 2019, we recognized stock-based compensation expense of $10.0 million, $1.0 million and $0.5 million, respectively, relating to RSU awards for employees. The total fair value of RSU awards vested during 2021 and 2020 was $10.8 million and $0.6 million, respectively. No RSUs vested in 2019. As of December 31, 2021, less than

$0.1 million of expense with respect to non-vested RSUs has yet to be recognized and will be amortized into expense over a weighted-average period of approximately 1.3 years.

DSUs. DSUs are granted to our independent directors in lieu of cash retainers and vest immediately upon grant. All whole DSUs will be settled in shares of our common stock after the Director's termination of service on the Board and any fractional shares will be settled in cash. During 2021, we granted 61,351 DSUs to our independent directors with a weighted-average grant date fair value of $11.48 per share. During 2021, 2020 and 2019, we recognized stock-based compensation expense of $0.7 million, $0.6 million and $0.4 million, respectively, relating to DSU awards. The total fair value of DSU awards vested during 2021, 2020 and 2019 was $1.0 million, $0.5 million and $0.4 million, respectively.

Annual Cash Incentive Plan

We have a global annual cash incentive program for the majority of our worldwide salaried and hourly employees, the Short-Term Incentive Program (the “STIP”). In 2021, the STIP is based primarily on the performance metric of adjusted EBITDA, a non-GAAP financial measure. See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report for additional information, as well as a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP. The balance of our accrued liability for the STIP was $10.9 million at December 31, 2021 and $8.9 million as of December 31, 2020.