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STOCK-BASED COMPENSATION | 12 Months Ended
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Oct. 31, 2019
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION | 9. STOCK–BASED COMPENSATION In March 2016, we adopted the Hurco Companies, Inc. 2016 Equity Incentive Plan (the “2016 Equity Plan”), which allows us to grant awards of stock options, stock appreciation rights, restricted stock, stock units and other stock–based awards. The 2016 Equity Plan replaced the Hurco Companies, Inc. 2008 Equity Incentive Plan (the “2008 Plan”) and is the only active plan under which equity awards may be made by us to our employees and non–employee directors. No further awards will be made under our 2008 Plan. The total number of shares of our common stock that may be issued pursuant to awards under the 2016 Equity Plan is 856,048, which includes 386,048 shares remaining available for future grants under the 2008 Plan as of March 10, 2016, the date our shareholders approved the 2016 Equity Plan. The Compensation Committee of our Board of Directors has the authority to determine the officers, directors and key employees who will be granted awards under the 2016 Equity Plan; designate the number of shares subject to each award; determine the terms and conditions upon which awards will be granted; and prescribe the form and terms of award agreements. We have granted restricted shares and performance units under the 2016 Equity Plan that are currently outstanding, and we have granted stock options under the 2008 Plan that are currently outstanding. No stock option may be exercised more than ten years after the date of grant or such shorter period as the Compensation Committee may determine at the date of grant. The market value of a share of our common stock, for purposes of the 2016 Equity Plan, is the closing sale price as reported by the Nasdaq Global Select Market on the date in question or, if not a trading day, on the last preceding trading date. A summary of the status of the options as of October 31, 2019, 2018 and 2017 and the related activity for the year is as follows:
|  | Shares Under |  | Weighted Average Grant
|  | Option |  | Date Fair Value
Balance October 31, 2016 |  | 107,889 |  | $ | 20.25
Granted |  | — |  |  | —
Cancelled |  | — |  |  | —
Expired |  | — |  |  | —
Exercised |  | (29,164) |  | $ | 18.31
Balance October 31, 2017 |  | 78,725 |  | $ | 20.97
Granted |  | — |  |  | —
Cancelled |  | — |  |  | —
Expired |  | — |  |  | —
Exercised |  | (41,680) |  | $ | 20.33
Balance October 31, 2018 |  | 37,045 |  | $ | 21.69
Granted |  | — |  |  | —
Cancelled |  | — |  |  | —
Expired |  | — |  |  | —
Exercised |  | — |  |  | —
Balance October 31, 2019 |  | 37,045 |  | $ | 21.69
The total intrinsic value of stock options exercised during the twelve months ended October 31, 2019, 2018 and 2017 was approximately $0, $847,000 and $771,000, respectively. As of October 31, 2019, the total intrinsic value of stock options that are outstanding and exercisable was $485,000. Stock options outstanding and exercisable on October 31, 2019, were as follows:
|  |  |  |  | Weighted Average |  | Weighted Average
Range of Exercise |  | Shares Under |  | Exercise Price Per |  | Remaining Contractual
Prices Per Share |  | Option |  | Share |  | Life in Years
| Outstanding and Exercisable |  |  |  |  |  |  |
| 18.13 |  | 3,738 |  |  | 18.13 |  | 0.5
| 21.45 |  | 21,748 |  |  | 21.45 |  | 2.1
| 23.30 |  | 11,559 |  |  | 23.30 |  | 3.1
$ | 18.13 – 23.30 |  | 37,045 |  | $ | 21.69 |  | 2.3
On March 14, 2019, the Compensation Committee granted a total of 11,824 shares of time–based restricted stock to our non–employee directors. The restricted shares vest in full one year from the date of grant provided the recipient remains on the board of directors through that date. The grant date fair value of the restricted shares was based on the closing sales price of our common stock on the grant date, which was $40.58 per share. On January 2, 2019, the Compensation Committee determined the degree to which the long–term incentive compensation arrangement approved for the fiscal 2016–2018 performance period was attained, and the resulting payout level relative to the target amount for each of the metrics that were established by the Compensation Committee in 2016. As a result, the Compensation Committee determined that a total of 32,559 performance shares were earned by our executive officers, which performance shares vested on January 2, 2019. The vesting date fair value of the performance shares was based on the closing sales price of our common stock on the vesting date, which was $36.08 per share. On January 2, 2019, the Compensation Committee also approved a long–term incentive compensation arrangement for our executive officers in the form of restricted shares and performance stock units (“PSUs”) under the 2016 Equity Plan, which will be payable in shares of our common stock if earned and vested. The awards were approximately 25% time–based vesting and approximately 75% performance–based vesting. The three–year performance period for the PSUs is fiscal 2019 through fiscal 2021. On that date, the Compensation Committee granted a total of 21,825 shares of time–based restricted stock to our executive officers. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $36.08 per share. On January 2, 2019, the Compensation Committee also granted a total target number of 30,943 PSUs to our executive officers designated as “PSU – TSR”. These PSUs were weighted as approximately 40% of the overall 2019 executive long–term incentive compensation arrangement and will vest and be paid based upon the total shareholder return of our common stock over the three–year period of fiscal 2019–2021, relative to the total shareholder return of the companies in a specified peer group over that period. Participants will have the ability to earn between 50% of the target number of the PSUs – TSR for achieving threshold performance and 200% of the target number of the PSUs – TSR for achieving maximum performance. The grant date fair value of the PSUs – TSR was $40.72 per PSU and was calculated using the Monte Carlo approach. On January 2, 2019, the Compensation Committee also granted a total target number of 30,557 PSUs to our executive officers designated as “PSU – ROIC”. These PSUs were weighted as approximately 35% of the overall 2019 executive long–term incentive compensation arrangement and will vest and be paid based upon the achievement of pre–established goals related to our average return on invested capital over the three–year period of fiscal 2019–2021. Participants will have the ability to earn between 50% of the target number of the PSUs – ROIC for achieving threshold performance and 200% of the target number of the PSUs – ROIC for achieving maximum performance. The grant date fair value of the PSUs – ROIC was based on the closing sales price of our common stock on the grant date, which was $36.08 per share. On November 14, 2018, the Compensation Committee granted a total of 7,200 shares of time–based restricted stock to our non–executive employees. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $40.01 per share. On March 15, 2018, the Compensation Committee granted a total of 9,114 shares of time–based restricted stock to our non–employee directors. The restricted shares vest in full one year from the date of grant provided the recipient remains on the board of directors through that date. The grant date fair value of the restricted shares was based on the closing sales price of our common stock on the grant date, which was $46.05 per share. On January 3, 2018, the Compensation Committee determined the degree to which the long–term incentive compensation arrangement approved for the fiscal 2015–2017 performance period was attained, and the resulting payout level relative to the target amount for each of the metrics that were established by the Compensation Committee in 2015. As a result, the Compensation Committee determined that a total of 23,299 performance shares were earned by our executive officers, which performance shares vested on January 3, 2018. The vesting date fair value of the performance shares was based on the closing sales price of our common stock on the vesting date, which was $42.20 per share. All related stock–based compensation cost for these vested performance shares was expensed accordingly during the three–year performance period ended October 31, 2017. On January 3, 2018, the Compensation Committee also approved a long–term incentive compensation arrangement for our executive officers in the form of restricted shares and PSUs under the 2016 Equity Plan, which will be payable in shares of our common stock if earned and vested. The awards were 25% time–based vesting and 75% performance–based vesting. The three–year performance period for the PSUs is fiscal 2018 through fiscal 2020. On that date, the Compensation Committee granted a total of 14,810 shares of time–based restricted stock to our executive officers. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $42.20 per share. On January 3, 2018, the Compensation Committee also granted a total target number of 21,891 PSUs to our executive officers designated as “PSU – TSR”. These PSUs were weighted as approximately 40% of the overall 2018 executive long–term incentive compensation arrangement and will vest and be paid based upon the total shareholder return of our common stock over the three–year period of fiscal 2018–2020, relative to the total shareholder return of the companies in a specified peer group over that period. Participants will have the ability to earn between 50% of the target number of the PSUs – TSR for achieving threshold performance and 200% of the target number of the PSUs – TSR for achieving maximum performance. The grant date fair value of the PSUs – TSR was $45.68 per PSU and was calculated using the Monte Carlo approach. On January 3, 2018, the Compensation Committee also granted a total target number of 20,734 PSUs to our executive officers designated as “PSU – ROIC”. These PSUs were weighted as approximately 35% of the overall 2018 executive long–term incentive compensation arrangement and will vest and be paid based upon the achievement of pre–established goals related to our average return on invested capital over the three–year period of fiscal 2018–2020. Participants will have the ability to earn between 50% of the target number of the PSUs – ROIC for achieving threshold performance and 200% of the target number of the PSUs – ROIC for achieving maximum performance. The grant date fair value of the PSUs – ROIC was based on the closing sales price of our common stock on the grant date, which was $42.20 per share. On November 15, 2017, the Compensation Committee granted a total of 2,364 shares of time–based restricted stock to our non–executive employees. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $42.30 per share. On March 9, 2017, the Compensation Committee granted a total of 14,920 shares of time–based restricted stock to our non–employee directors. The restricted shares vest in full one year from the date of grant provided the recipient remains on the board of directors through that date. The grant date fair value of the restricted shares was based on the closing sales price of our common stock on the grant date, which was $26.80 per share. On January 5, 2017, the Compensation Committee determined the degree to which the long-term incentive compensation arrangement approved for the fiscal 2014-2016 performance period was attained, and the resulting payout level relative to the target amount for each of the metrics that were established by the Compensation Committee in 2014. As a result, the Compensation Committee determined that a total of 30,683 performance shares were earned by our executive officers, which performance shares vested on January 5, 2017. The vesting date fair value of the performance shares was based on the closing sales price of our common stock on the vesting date, which was $33.90 per share. All related stock-based compensation cost for these vested performance shares was expensed accordingly during the three-year performance period ended October 31, 2016. On January 5, 2017, the Compensation Committee also approved a long–term incentive compensation arrangement for our executive officers in the form of restricted shares and PSUs under the 2016 Equity Plan, which will be payable in shares of our common stock if earned and vested. The awards were 25% time–based vesting and 75% performance–based vesting. The three–year performance period for the PSUs is fiscal 2017 through fiscal 2019. On that date, the Compensation Committee granted a total of 14,747 shares of time–based restricted stock to our executive officers. The restricted shares vest in thirds over three years from the date of grant provided the recipient remains employed through that date. The grant date fair value of the restricted shares was based upon the closing sales price of our common stock on the date of grant, which was $33.90 per share. On January 5, 2017, the Compensation Committee also granted a total target number of 18,496 PSUs to our executive officers designated as “PSU – TSR”. These PSUs were weighted as approximately 40% of the overall 2017 executive long–term incentive compensation arrangement and will vest and be paid based upon the total shareholder return of our common stock over the three–year period of fiscal 2017-2019, relative to the total shareholder return of the companies in a specified peer group over that period. Participants will have the ability to earn between 50% of the target number of the PSUs - TSR for achieving threshold performance and 200% of the target number of the PSUs - TSR for achieving maximum performance. The grant date fair value of the PSUs – TSR was $43.25 per PSU and was calculated using the Monte Carlo approach. On January 5, 2017, the Compensation Committee also granted a total target number of 20,647 PSUs to our executive officers designated as “PSU – ROIC”. These PSUs were weighted as approximately 35% of the overall 2017 executive long–term incentive compensation arrangement and will vest and be paid based upon the achievement of pre–established goals related to our average return on invested capital over the three–year period of fiscal 2017-2019. Participants will have the ability to earn between 50% of the target number of the PSUs - ROIC for achieving threshold performance and 200% of the target number of the PSUs – ROIC for achieving maximum performance. The grant date fair value of the PSUs – ROIC was based on the closing sales price of our common stock on the grant date, which was $33.90 per share. A reconciliation of our restricted stock, performance share and PSU activity and related information is as follows:
|  | Number |  | Weighted Average Grant
|  | of Shares |  | Date Fair Value
Unvested at October 31, 2018 |  | 168,348 |  | $ | 37.24
Shares or units granted |  | 102,349 |  |  | 38.28
Shares or units vested |  | (44,077) |  |  | 33.29
Shares or units cancelled |  | (12,462) |  |  | 29.82
Shares withheld |  | (13,676) |  |  | 29.67
Unvested at October 31, 2019 |  | 200,482 |  | $ | 39.62
During fiscal 2019, 2018, and 2017, we recorded approximately $2.7 million, $2.5 million, and $1.7 million, respectively, of stock–based compensation expense related to grants under the 2008 Plan and the 2016 Equity Plan. As of October 31, 2019, there was an estimated $3.2 million of total unrecognized stock–based compensation cost that we expect to recognize by the end of the first quarter of fiscal 2022.

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