Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Note 16 - Stock-Based Compensation

The Company’s incentive compensation plans, titled “The 2005 Long Term Incentive Plan” (as restated to incorporate all amendments, the “2005 Plan”) and “The FreightCar America, Inc. 2018 Long Term Incentive Plan (the “2018 Plan” and, collectively, the “Incentive Plans”), were approved by the Company’s board of directors and ratified by the stockholders. The Incentive Plans provide for the grant to eligible persons of stock options, share appreciation rights (“SAR”), restricted shares, restricted share units (“RSU”), performance shares, performance units, dividend equivalents and other share-based awards, referred to collectively as the awards. Time-vested stock option awards generally vest based on one to three years of service and have 10 year contractual terms. Share awards generally vest over one to three years. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the Incentive Plans). The Company accounts for forfeitures of stock-based awards as incurred. The 2005 Plan will terminate as to future awards on May 17, 2023 and the 2018 Plan will terminate as to future awards on May 10, 2028. Under the 2005 Plan, 2,459,616 shares of common stock have been reserved for issuance (from either authorized but unissued shares or treasury shares), of which 309,104 were available for issuance at December 31, 2020. Under the 2018 Plan, 2,800,000 shares of common stock have been reserved for issuance (from either authorized but unissued shares or treasury shares), of which 1,364,424 were available for issuance at December 31, 2020.

Stock Options

The Company recognizes stock-based compensation expense for time-vested stock option awards based on the fair value of the award on the grant date using the Black-Scholes option valuation model. Expected life in years for time-vested stock option awards was determined using the simplified method. The Company believes that it is appropriate to use the simplified method in determining the expected life for time-vested stock options because the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for time-vested stock options. Expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate was based on the U.S. Treasury bond rate for the expected life of the option. The expected dividend yield was based on the latest annualized dividend rate and the current market price of the underlying common stock on the date of the grant. The Company recognizes stock-based compensation for restricted stock awards over the vesting period based on the fair market value of the stock on the date of the award, calculated as the average of the high and low trading prices for the Company’s common stock on the award date.

Grant date fair values of time-vested stock option awards were estimated using the Black-Scholes option valuation model with the following assumptions:


				Expected	Risk Free	Grant Date
			Expected	Dividend	Interest	Fair Value
Grant Year	Grant Date	Expected Life	Volatility	Yield	Rate	Per Award

2019	4/23/2019	6 years	44.87%	0.00%	2.40%	$3.50
2019	1/14/2019	6 years	44.87%	0.00%	2.57%	$3.43
2018	1/12/2018	6 years	44.25%	0.00%	2.42%	$7.57

A summary of the Company’s time-vested stock options activity and related information at December 31, 2020 and 2019, and changes during the years then ended, is presented below:



			December 31,
	2020			2019
			Weighted-			Weighted-
			Average			Average
			Exercise			Exercise
	Options		Price	Options		Price
	Outstanding		(per share)	Outstanding		(per share)
Outstanding at the beginning of the year	313,317	$	12.70	208,426	$	21.47
Granted	-		-	255,009		7.43
Exercised	-		-	-		-
Forfeited or expired	(101,956)		14.81	(150,118)		15.93
Outstanding at the end of the year	211,361	$	11.68	313,317	$	12.70

Exercisable at the end of the year	103,458	$	14.93	82,964	$	23.01

A summary of the Company’s time vested stock options outstanding as of December 31, 2020 is presented below:



		Weighted-
		Average		Weighted-
		Remaining		Average
		Contractual		Exercise		Aggregate
	Options	Term		Price		Intrinsic
	Outstanding	(in years)		(per share)		Value
Options outstanding	211,361	7.0	$	11.68	$	-
Vested or expected to vest	211,361	7.0	$	11.68	$	-
Options exercisable	103,458	6.1	$	14.93	$	-

There were no time-vested stock options exercised during 2020 or 2019. As of December 31, 2020, there was $186 of total unrecognized compensation expense related to time-vested stock options, which will be recognized over the average remaining requisite service period of 13 months.

Stock Appreciation Rights

During 2020, the Company granted cash settled stock appreciation rights to certain employees. Each stock appreciation right represents the right to receive a payment measured by the increase in the fair market value of one share of the Company’s stock from the date of grant of the stock appreciation right to the date of exercise of the stock appreciation right. The cash settled stock appreciation rights vest ratably over three years and have a contractual life of 10 years. Cash settled stock appreciation rights are classified as Other long-term liabilities. The Company measures the fair value of cash settled stock appreciation rights using the Black-Scholes option valuation model and remeasures the fair value of the award each reporting period until the award is settled. Compensation cost for cash settled stock appreciation rights is trued up each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered. Once vested the Company immediately recognizes compensation cost for any changes in fair value of cash settled stock appreciation rights until settlement.

The fair value of cash settled stock appreciation rights as of December 31, 2020 was estimated using the Black-Scholes option valuation model with the following assumptions:


				Expected	Risk Free
			Expected	Dividend	Interest	Fair Value
Grant Year	Grant Date	Expected Life	Volatility	Yield	Rate	Per Award

2020	1/24/2020	5.1 years	66.33%	0.00%	0.37%	$1.52
2020	3/9/2020	5.2 years	66.06%	0.00%	0.38%	$1.61
2020	9/14/2020	5.7 years	64.76%	0.00%	0.44%	$1.45
2020	11/30/2020	5.9 years	64.06%	0.00%	0.46%	$1.34

A summary of the Company’s cash settled stock appreciation rights activity and related information at December 31, 2020 and changes during the year is presented below:



	December 31,
	2020
			Weighted-
			Average
			Exercise
	SAR		Price
	Outstanding		(per share)
Outstanding at the beginning of the year	-	$	-
Granted	1,164,464		1.68
Exercised	-		-
Forfeited or expired	(310,497)		1.64
Outstanding at the end of the year	853,967	$	1.69

Exercisable at the end of the year	-	$	-

A summary of the Company’s cash settled stock appreciation rights outstanding as of December 31, 2020 is presented below:



		Weighted-
		Average		Weighted-
		Remaining		Average
		Contractual		Exercise		Aggregate
	SAR	Term		Price		Intrinsic
	Outstanding	(in years)		(per share)		Value
SARS outstanding	853,967	9.1	$	1.69	$	619,728
Vested or expected to vest	853,937	9.1	$	1.69	$	619,725
SARS exercisable	-	-	$	-	$	-

Restricted Shares

A summary of the Company’s nonvested restricted shares as of December 31, 2020 and 2019, and changes during the years then ended is presented below:



			December 31,
	2020			2019

			Weighted-			Weighted-
			Average			Average
			Grant Date			Grant Date
			Fair Value			Fair Value
	Shares		(per share)	Shares		(per share)
Nonvested at the beginning of the year	327,345	$	8.49	133,462	$	16.12
Granted	872,494		1.43	293,309		6.75
Vested	(73,111)		8.18	(40,696)		16.89
Forfeited	(277,005)		3.63	(58,730)		11.27
Nonvested at the end of the year	849,723	$	2.86	327,345	$	8.49
Expected to vest	849,723	$	2.86	327,345	$	8.49

The fair value of stock awards vested during the years ended December 31, 2020 and 2019, was $138 and $293, respectively, based on the value at vesting date. As of December 31, 2020, there was $988 of unrecognized compensation expense related to nonvested restricted stock awards, which will be recognized over the average remaining requisite service period of 18 months.

Stock-based compensation expense of $1,034 and $1,225 is included within selling, general and administrative expense for the years ended December 31, 2020 and 2019, respectively.