XML 36 R21.htm IDEA: XBRL DOCUMENT

Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company has share-based incentive awards outstanding to its eligible employees and non-employee directors under two equity incentive plans: (i) the 2009 Long-Term Incentive Plan (the "2009 Plan") and (ii) the 2016 Long-Term Incentive Plan (the "2016 Plan"). No further awards may be granted under the 2009 Plan, although one stock option award granted under the 2009 Plan remains outstanding in accordance with its terms. Awards granted under the 2016 Plan may be in the form of stock options, restricted stock units and other forms of share-based incentives, including performance restricted stock units, stock appreciation rights and deferred stock rights. At the annual shareholders meeting on May 19, 2020, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 2 million, for a total of 3.7 million shares that may be issued under the 2016 Plan, of which 1,176,888 shares were available for future grants as of December 31, 2021. As of December 31, 2021, there was an aggregate of approximately 5,000 stock options outstanding under the 2009 Plan.

Stock Options

For each of the years ended December 31, 2021, 2020 and 2019, the Company did not recognize any share-based compensation expense related to the stock option award, as the one outstanding stock option award was already fully vested. No unrecognized compensation costs remained related to the stock option awards. Cash proceeds from, and the intrinsic value of, stock options exercised during the years ended December 31, 2021, 2020 and 2019 were as follows (in thousands):


	For the year ended December 31,
	2021		2020		2019 1
Cash proceeds from options exercised	$	—	$	—	$	32
Aggregate intrinsic value of options exercised	$	—	$	—	$	4,530

____________________

1 During 2019, 2.1 million stock options were net exercised, wherein the option holders surrendered a portion of the underlying stock option awards to pay the exercise price and required minimum tax withholding.

The following table sets forth a summary of the stock option activity, weighted-average exercise prices and options outstanding as of December 31, 2021, 2020 and 2019 is as follows (in thousands, except per share amounts and years):


	For the years ended December 31,
	2021			2020			2019
	Common Stock Options	Weighted Average Exercise Price		Common Stock Options	Weighted Average Exercise Price		Common Stock Options	Weighted Average Exercise Price
Outstanding at beginning of year:	5	$	22.35	5	$	22.35	2,105	$	13.47
Granted	—	$	—	—	$	—	—	$	—
Exercised	—	$	—	—	$	—	(2,093)	$	13.45
Expired or forfeited	—	$	—	—	$	—	(7)	$	10.00
Outstanding at end of year:	5	$	22.35	5	$	22.35	5	$	22.35


			December 31, 2021
			Options Outstanding			Options Exercisable
Exercise Price	Total Options Outstanding		Weighted Average Remaining Life (Years)	Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
22.35	5		0.2	$	22.35	5		$	22.35


Aggregate Intrinsic Value	$	—				$	—

Restricted Stock Unit Awards

Restricted Stock Units generally vest ratably on each of the first four anniversary dates of issuance. The Company recognized approximately $3.5 million, $4.4 million and $4.0 million of share-based compensation for the years ended December 31, 2021, 2020 and 2019, respectively, related to restricted stock unit awards. As of December 31, 2021, there were approximately $5.8 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which are expected to be recognized over a remaining weighted average period of 2.5 years. Upon vesting, restricted stock units are generally net share-settled to cover the required minimum withholding tax and the remaining amount is converted into an equivalent number of shares of common stock.

A summary of the vesting activity of restricted stock unit awards, with the respective fair value of the awards, is as follows:


	For the year ended December 31,
	2021		2020		2019
Restricted stock awards vested	317		208		172
Fair value of awards vested	$	3,434	$	837	$	2,495

A summary of the fully-vested common stock the Company issued to its six non-employee directors, in connection with its non-employee director compensation plan, is as follows:


	For the year ended December 31,
	2021		2020		2019
Awards issued	51		68		30
Grant date fair value of awards issued	$	525	$	326	$	450

A summary of the Company's outstanding, non-vested restricted share units is as follows:


	For the year ended December 31,
	2021			2020			2019
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	1,076	$	7.41	559	$	16.92	443	$	20.55
Granted	528	$	10.07	782	$	3.79	339	$	14.04
Released	(317)	$	10.77	(208)	$	18.71	(172)	$	20.38
Forfeited	(79)	$	8.82	(57)	$	9.62	(51)	$	17.71
Outstanding at end of period:	1,208	$	7.96	1,076	$	7.41	559	$	16.92

Performance Restricted Stock Units

The Company maintains Performance Restricted Stock Units (PRSUs) that have been granted to select executives and senior officers whose ultimate payout is based on the Company’s performance over a one-year period based on specific metrics approved by the Compensation Committee of the Board of Directors of the Company.

For 2020, the Compensation Committee approved the following four metrics

1.Revenue.

2.Adjusted EBITDA defined as net income attributable to the Company plus: interest expense, provision for income taxes, depreciation and amortization, share-based compensation expense and certain acquisition related costs (including transaction due diligence costs and adjustments to the fair value of contingent consideration), foreign exchange (gain) loss and, if applicable, certain special items which are noted).

3.Free Cash Flow as a percentage of revenue.

4.Return on Average Book Equity defined as net income divided by average book value of shareholders equity.

The free cash flow and return on average book equity criteria are relative metrics, the performance of which are based upon how the Company performs relative to a peer group.

For 2021, the Compensation Committee made changes to the Company’s equity incentive compensation plan for its executive officers and approved the new target metrics for 2021. For 2021, the three metrics are:

1.Free Cash Flow net cash provided by operating activities less purchases of property, plant, equipment and intangible assets and is subject to adjustments approved by the Compensation Committee.

2.Adjusted EBITDA as defined in the 2020 metric section above.

3.Total Shareholder Return (TSR) measures the total return to shareholders of the Company during 2021 versus the total return to the shareholders of a predefined peer group of companies that provide inspection, testing, certification or similar industrial services. The return will be measured by the year over year percent change in share price. The share prices used to calculate the return are the average share price during the 20-trading day period ending on the initial measurement date (the last 20 trading days of 2020), compared to the average share price during the 20-trading day

period ending on the final measurement date (the last 20 trading days of 2021). Any cash dividends or distributions paid in 2021 will be added to calculate the return to shareholders during the year. TSR is considered a market condition for which the fair value of PRSUs with this condition is determined using a Monte Carlo valuation model. Key assumptions in the Monte Carlo valuation model included:

a.Expected Volatility. Expected volatility of the Company’s common stock at the date of grant was estimated based on a historical average volatility rate for the approximate 1-year performance period.

b.Dividend Yield. The dividend yield assumption was based on historical and anticipated dividend payouts (assumed at zero).

c.Risk-Free Interest Rate. The risk-free interest rate assumption was based on observed interest rates consistent with the approximate 1-year performance measurement period.

PRSUs are equity-classified and compensation costs are initially measured using the fair value of the underlying stock at the date of grant. Compensation costs related to the PRSUs are subsequently adjusted for changes in the expected outcomes of the performance conditions. Compensation cost related to the PRSUs with a market condition is not reversed if the market condition is not achieved, provided the employee requisite service has been rendered. PRSUs generally vest ratably on each of the first four anniversary dates upon completion of the performance period, for a total requisite service period of up to five years and have no dividend rights.

A summary of the Company's PRSU activity is presented as follows:


	For the year ended December 31,
	2021			2020			2019
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Outstanding at beginning of period:	333	$	8.84	260	$	16.77	277	$	17.80
Granted	189	$	12.59	292	$	3.68	190	$	13.63
Performance condition adjustments, net	(56)	$	9.27	(99)	$	3.82	(106)	$	13.77
Released	(78)	$	8.15	(120)	$	17.29	(101)	$	17.19
Forfeited	—	$	—	—	$	—	—	$	—
Outstanding at end of period:	388	$	10.07	333	$	8.84	260	$	16.77

For the year ended December 31, 2021, 189,000 PRSUs were granted. There was a 56,000 net unit reduction to these awards, which represents Company performance against target, during the year ended December 31, 2021.

For the year ended December 31, 2020, 292,000 PRSUs were granted. There was a 99,000 unit reduction to these awards, which represents Company performance against target, (including an increase of 1,000 units due to the Compensation Committee approving the final calculation of the award metrics for calendar year 2019), during the year ended December 31, 2020.

For the year ended December 31, 2019, 190,000 PRSUs were granted. There was a 103,000 unit reduction to these awards, which represents Company performance below target, during the year ended December 31, 2019. As of December 31, 2019, the aggregate liability related to 29,000 outstanding discretionary PRSUs was less than $0.1 million and is classified within Accrued expenses and other liabilities on the consolidated balance sheet.

Compensation expense related to all PRSUs described above was $1.4 million, $1.2 million, and $1.3 million for the years ended December 31, 2021, 2020 and 2019, respectively. At December 31, 2021, there was $2.0 million of total unrecognized compensation costs related to approximately 388,000 unvested performance restricted stock units. These costs are expected to be recognized over a weighted-average period of approximately 2.2 years.

For the years ended December 31, 2021, 2020 and 2019, the income tax benefit recognized on all share based compensation arrangements referenced above was approximately $1.4 million, $0.6 million, and $2.1 million, respectively.