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Shared-Based Compensation | 9 Months Ended
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Sep. 30, 2021
Share-based Payment Arrangement [Abstract] |
Shared-Based Compensation | Share-Based Compensation Share-based compensation cost is recognized in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) except for $(0.2) million and $0.2 million, attributable to discontinued operations for the three and nine months ended September 30, 2020, respectively. The following table lists the components of share-based compensation expense by type of award.
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
Stock options |  | $ | 59 |  |  | $ | 132 |  |  | $ | 207 |  |  | $ | 453 |
Restricted stock |  | 521 |  |  | 963 |  |  | 1,660 |  |  | 2,791 |
Performance share units |  | 351 |  |  | 340 |  |  | 1,050 |  |  | 898 |
Change in estimate of share-based award vesting (1) |  | — |  |  | (577) |  |  | (337) |  |  | (577) |
Share-based compensation expense |  | $ | 931 |  |  | $ | 858 |  |  | $ | 2,580 |  |  | $ | 3,565 |
_______________________________ (1) Amounts reflect the decrease in share-based compensation expense based on the change in estimate of the probability of vesting of share-based awards. Stock Options The following table presents stock option activity for the nine months ended September 30, 2021.
|  | Number of Options (in thousands) |  | Weighted- Average Exercise Price (per share) |  | Weighted- Average Remaining Contractual Term |  | Aggregate Intrinsic Value |
Outstanding at January 1, 2021 |  | 871 |  |  | $ | 12.41 |  |  |  |  |  |
Exercised |  | (6) |  |  | 7.93 |  |  |  |  |  |
Forfeited or expired |  | (118) |  |  | 15.25 |  |  |  |  |  |
Outstanding at September 30, 2021 |  | 747 |  |  | $ | 11.99 |  |  | 3.6 years |  | $ | — |  | (1)
Exercisable at September 30, 2021 |  | 651 |  |  | $ | 12.45 |  |  | 3.0 years |  | $ | — |  | (1)
_______________________________ (1)The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant. The intrinsic value is the amount by which the closing market price of our stock at September 30, 2021, was greater than the exercise price of any individual option grant. Restricted Stock During the nine months ended September 30, 2021, we granted 459 thousand shares of restricted stock to non-executive directors, officers and certain other key employees. The shares of restricted stock granted during the nine months ended September 30, 2021, vest pro-rata generally over three years for employees and over one year for non-executive directors. We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant. The weighted average grant date fair value of restricted stock granted in the nine months ended September 30, 2021, was $6.84 per share. Total grant date fair value of restricted stock that vested in the nine months ended September 30, 2021, was $2.8 million. The following table presents the status of unvested restricted stock awards as of September 30, 2021, and changes during the nine months then ended.
|  | Nonvested Restricted Shares (in thousands) |  | Weighted Average Grant-Date Fair Value (per share)
Unvested at January 1, 2021 |  | 385 |  |  | $ | 9.42 |
Granted |  | 459 |  |  | 6.84 |
Vested |  | (303) |  |  | 9.34 |
Forfeited |  | (65) |  |  | 7.20 |
Unvested at September 30, 2021 |  | 476 |  |  | $ | 7.28 |
Performance Share Units Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value. PSUs granted in 2021 were made pursuant to the NN, Inc. 2019 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”). Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”). The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of the S&P SmallCap 600 Index during specified performance periods as defined in the 2019 Omnibus Agreement. The ROIC Awards vest, if at all, upon our achieving a specified average return on invested capital during the performance periods. Each performance period generally begins on January 1 of the year of grant and ends 3 years later on December 31. We recognize compensation expense over the performance period in which the performance and market conditions are measured. If the PSUs do not vest at the end of the performance periods, then the PSUs will expire automatically. Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the award recipient’s continued employment. The actual number of shares of common stock to be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the performance period; however, dividend equivalents will be paid based on dividends declared and the number of shares of common stock that are ultimately earned at the end of the performance periods. With respect to the TSR and ROIC Awards, a participant will earn 50% of the target number of PSUs for “Threshold Performance,” 100% of the target number of PSUs for “Target Performance,” and 150% of the target number of PSUs for “Maximum Performance.” For performance levels falling between the values shown below, the percentages will be determined by interpolation. The following table presents the goals with respect to TSR Awards and ROIC Awards granted or modified in 2021.
TSR Awards: |  | Threshold Performance (50% of Shares) |  | Target Performance (100% of Shares) |  | Maximum Performance (150% of Shares)
2021 grants |  | 35th Percentile |  | 50th Percentile |  | 75th Percentile
ROIC Awards: |  | Threshold Performance (50% of Shares) |  | Target Performance (100% of Shares) |  | Maximum Performance (150% of Shares)
2021 grants |  | 6.3% |  | 7.0% |  | 8.6%
2020 grants (1) |  | 6.7% |  | 7.9% |  | 8.7%
_______________________________ (1)The performance levels for 2020 grants were modified by the compensation committee of the board of directors in the first quarter of 2021 to adjust for the sale of the Life Sciences business and the ongoing effects of the COVID-19 pandemic. We estimate the grant date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation. The grant date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant. The following table presents the number of PSUs granted and the grant date fair value in the period presented.
|  | TSR Awards |  | ROIC Awards
Award Year |  | Shares (in thousands) |  | Grant Date Fair Value (per share) |  | Shares (in thousands) |  | Grant Date Fair Value (per share)
2021 |  | 142 |  | $8.58 |  | 172 |  | $7.20
We recognize expense for ROIC Awards based on the probable outcome of the associated performance condition. We generally recognize an expense for ROIC Awards based on the Target Performance threshold of 100% because, at the date of grant, the Target Performance is the probable level of performance achievement. The following table presents the status of unvested PSUs as of September 30, 2021, and changes during the nine months then ended.
|  | Nonvested TSR Awards |  | Nonvested ROIC Awards
|  | Shares (in thousands) |  | Weighted Average Grant-Date Fair Value (per share) |  | Shares (in thousands) |  | Weighted Average Grant-Date Fair Value (per share)
Nonvested at January 1, 2021 |  | 138 |  |  | $ | 10.58 |  |  | 160 |  |  | $ | 9.13 |
Granted |  | 142 |  |  | 8.58 |  |  | 172 |  |  | 7.20 |
Forfeited |  | (61) |  |  | 9.61 |  |  | (71) |  |  | 8.17 |
Nonvested at September 30, 2021 |  | 219 |  |  | $ | 9.55 |  |  | 261 |  |  | $ | 8.12 |
Change in Vesting Estimates During the nine months ended September 30, 2021, we recognized a decrease in share-based compensation expense in continuing operations of $0.3 million in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for restricted stock and PSU awards that were forfeited upon termination of employment and were in excess of our estimated forfeiture rate.

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