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Share-Based Compensation | 3 Months Ended
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Mar. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation The Company has granted share-based incentive awards 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 awards have been granted under the 2009 Plan since the 2016 Plan was approved by shareholders in 2016, and the remaining stock option award granted under the 2009 Plan expired during the three months ended March 31, 2022. 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 23, 2022, the Company’s shareholders approved an amendment to increase the total number of shares that may be issued under the 2016 Plan by 1.2 million, for a total of 4.9 million shares that are authorized for issuance under the 2016 Plan, of which approximately 1,100,000 shares were available for future grants as of March 31, 2023. Stock Options During the three months ended March 31, 2022, all remaining outstanding stock options expired. For each of the three months ended March 31, 2023 and 2022, the Company did not recognize any share-based compensation expense related to the stock option award. Restricted Stock Unit Awards For the three months ended March 31, 2023 and March 31, 2022, the Company recognized share-based compensation expense related to restricted stock unit awards of $0.9 million and $0.9 million, respectively. As of March 31, 2023, there was $10.0 million of unrecognized compensation costs, net of estimated forfeitures, related to restricted stock unit awards, which is expected to be recognized over a remaining weighted-average period of 3.1 years. Upon vesting, restricted stock units are generally net share-settled to cover the required 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:
| Three months ended March 31,
| 2023 |  | 2022
Restricted stock awards vested | 338 |  |  | 226 |
Fair value of awards vested | $ | 1,946 |  |  | $ | 1,502 |
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:
| Three months ended March 31,
| 2023 |  | 2022
Awards issued | 48 |  |  | 34 |
Grant date fair value of awards issued | $ | 275 |  |  | $ | 225 |
A summary of the Company's outstanding, non-vested restricted share units is as follows:
| Three months ended March 31,
| 2023 |  | 2022
| Units |  | Weighted Average Grant-Date Fair Value |  | Units |  | Weighted Average Grant-Date Fair Value
Outstanding at beginning of period: | 1,415 |  |  | $ | 6.66 |  |  | 1,208 |  |  | $ | 7.96 |
Granted | 542 |  |  | $ | 8.50 |  |  | 675 |  |  | $ | 7.65 |
Released | (338) |  |  | $ | 5.76 |  |  | (226) |  |  | $ | 13.73 |
Forfeited | (22) |  |  | $ | 7.82 |  |  | (7) |  |  | $ | 10.50 |
Outstanding at end of period: | 1,597 |  |  | $ | 7.44 |  |  | 1,650 |  |  | $ | 7.16 |
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 2022, the Compensation Committee utilized the same structure for the Company’s equity incentive compensation plan for its executive officers as 2021, and approved the new target awards for 2022. The three metrics were: 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 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.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 2021), compared to the average share price during the 20-trading day period ending on the final measurement date (the last 20 trading days of 2022). Any cash dividends or distributions paid in 2022 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. For 2023, the Compensation Committee made changes to the Company's equity incentive compensation plan for its executive officers including modifying the metrics utilized, and approved the new target awards for 2023. 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 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.Revenue 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 as follows:
| Three months ended March 31,
| 2023 |  | 2022
| Units |  | Weighted Average Grant-Date Fair Value |  | Units |  | Weighted Average Grant-Date Fair Value
Outstanding at beginning of period: | 280 |  |  | $ | 9.96 |  |  | 388 |  |  | $ | 10.07 |
Granted | 282 |  |  | $ | 8.50 |  |  | 341 |  |  | $ | 6.55 |
Performance condition adjustments | (32) |  |  | $ | 6.55 |  |  | (56) |  |  | $ | 10.47 |
Released | (64) |  |  | $ | 5.58 |  |  | (17) |  |  | $ | 6.85 |
Forfeited | (84) |  |  | $ | 6.95 |  |  | — |  |  | $ | — |
Outstanding at end of period: | 382 |  |  | $ | 9.12 |  |  | 656 |  |  | $ | 12.18 |
During the three months ended March 31, 2023 and March 31, 2022, the Compensation Committee approved the final calculation of the award metrics for calendar year 2022 and 2021, respectively. As a result, the calendar year 2023 PRSUs decreased by approximately 32,000 units as a result of the final calculation of award metrics. For the three months ended March 31, 2023 and March 31, 2022, the Company recognized aggregate share-based compensation expense related to the awards described above of approximately $0.7 million and $0.3 million, respectively. At March 31, 2023, there was $2.8 million of total unrecognized compensation costs related to approximately 382,000 non-vested PRSUs, which is expected to be recognized over a remaining weighted-average period of 2.0 years.

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