Quarterly report pursuant to Section 13 or 15(d)

Equity and Share-Based Compensation

v3.10.0.1
Equity and Share-Based Compensation
9 Months Ended
Sep. 30, 2018
Equity and Share-Based Compensation  
Equity and Share-Based Compensation

10. Equity and Share‑Based Compensation

Common Shares

Share Activity

The following table summarizes changes in the number of shares  of common stock and treasury stock during the nine months ended September 30, 2018:

 

 

 

 

 

 

    

Common

    

Treasury

 

 

Stock

 

Stock(1)

Share count as of December 31, 2017

 

25,272,969

 

(99,623)

Common stock issued

 

113,135

 

Acquisition of treasury stock

 

 

(29,524)

Share count as of September 30, 2018

 

25,386,104

 

(129,147)


(1)

Treasury stock represents the net settlement on vesting of restricted stock necessary to satisfy the minimum statutory tax withholding requirements.

 

Share-Based Compensation

2016 Long Term Incentive Plan

On October 21, 2016, the Company established the 2016 LTIP and filed a Form S-8 with the SEC, registering 3,513,950  shares for issuance under the terms of the 2016 LTIP to employees, directors and certain other persons (the “Award Shares”). The types of awards that may be granted under the 2016 LTIP include stock options, restricted stock units, restricted stock, performance awards and other forms of awards granted or denominated in shares of common stock of the reorganized Company, as well as certain cash-based awards (the ”Awards”). The terms of each award are as determined by the Compensation Committee of the Board of Directors. Awards that expire, or are canceled, forfeited, exchanged, settled in cash or otherwise terminated, will again be available for future issuance under the 2016 LTIP. At September 30, 2018, 2,066,380 Award Shares remain available for issuance under the terms of the 2016 LTIP.

Restricted Stock Units

At September 30, 2018, the Company had 476,776 non-vested restricted stock units outstanding to employees and non-employee directors pursuant to the 2016 LTIP, excluding restricted stock units issued to non-employee directors containing a market condition, which are discussed below. During the nine months ended September 30, 2018, 271,968 non-vested restricted stock units were issued to employees and non-employee directors. Restricted stock units granted to employees in 2018 under the 2016 LTIP vest ratably over a period of three years: one-third will vest on December 31, 2018, an additional one-third will vest on December 31, 2019, and the final one-third will vest on December 31, 2020. Restricted stock units granted to non-employee directors during 2018 vest on the first to occur of (i) December 31, 2018, (ii) the date the non-employee director ceases to be a director of the Board (other than for cause), (iii) the director’s death, (iv) the director’s disability or (v) a change in control of the Company.

The fair value of restricted stock units granted to employees and non-employee directors during 2018 was based on grant date fair value of the Company’s common stock. Compensation expense is recognized ratably over the requisite service period.

The following table summarizes the Company’s non-vested restricted stock unit award activity for the nine months ended September 30, 2018:

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

Grant Date

 

    

Restricted Stock

    

Fair Value

Non-vested shares outstanding at December 31, 2017

 

324,984

 

$

18.84

Granted

 

271,968

 

$

14.24

Vested(1)

 

(105,009)

 

$

19.63

Forfeited

 

(15,167)

 

$

15.76

Non-vested shares outstanding at September 30, 2018

 

476,776

 

$

16.14


(1)

Vested restricted stock units include 102,092 shares in which vesting was accelerated as a result of a reduction in workforce that occurred during the nine months ended September 30, 2018.

 

Unrecognized expense as of September 30, 2018, for all outstanding restricted stock units under the 2016 LTIP Plan was $2.9 million and will be recognized over a weighted-average period of 0.9 years. On October 21, 2018, 67,414 restricted stock units vested before consideration of minimum statutory tax withholding requirements.

Stock Options

At September 30, 2018, the Company had 137,516 non-vested options outstanding pursuant to the 2016 LTIP. Stock option awards currently outstanding under 2016 LTIP vest ratably over a period of three years: one-sixth will vest on the six-month anniversary of the grant date, an additional one-sixth will vest on the twelve-month anniversary of the grant date, an additional one-third will vest on the twenty-four month anniversary of the grant date and the final one-third will vest on the thirty-six month anniversary of the grant date. Stock option awards expire 10 years from the grant date. There were no issuances of stock options during the nine months ended September 30, 2018.

The following table summarizes the Company’s 2016 LTIP non-vested stock option activity for the nine months ended September 30, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

 

 Average 

 

 

 

 

 

 

 

 

 

Remaining 

 

 

 

 

Range of

 

 Weighted-Average

 

Contractual 

 

    

Options

    

 Exercise Prices

    

Exercise Price

    

Term (Years)

Stock options outstanding at December 31, 2017

 

245,845

 

 

 

 

$

19.66

 

8.2

Granted

 

 

$

 —

 

$

 

Vested(1)

 

(102,759)

 

$

19.08-19.66

 

$

19.66

 

8.7

Forfeited

 

(5,570)

 

$

19.66

 

$

19.66

 

0.1

Stock options outstanding at September 30, 2018

 

137,516

 

 

 

 

$

19.66

 

8.2

Vested and exercisable at end of period(1)(2)

 

71,532

 

$

19.08-20.97

 

$

19.67

 

8.2


(1)

Vested stock options include 102,092 options in which vesting was accelerated as a result of a reduction in workforce that occurred during the nine months ended September 30, 2018. Per the 2016 LTIP Plan, these vested options had to be exercised within 180 days of employees termination or they would expire and be returned to the Plan for future reissuance. All options expired on July 31, 2018 thereby reducing the total options vested and exercisable at September 30, 2018.

 

(2)

Vested and exercisable options at September 30, 2018, had no aggregate intrinsic value.

 

Unrecognized expense as of September 30, 2018, for all outstanding stock options under the 2016 LTIP Plan was $0.3 million and will be recognized over a weighted-average period of 0.6 years. On October 21, 2018, 67,414 stock options vested before consideration of minimum statutory tax withholding requirements.

Non-Employee Director Restricted Stock Units Containing a Market Condition

On November 23, 2016, the Company issued 76,296 restricted stock units to non-employee directors that contain a market vesting condition. These restricted stock units will vest (i) on the first business day following the date on which the trailing 60-day average share price (including any dividends paid) of the Company's common stock is equal to or greater than $30.00 or (ii) upon a change in control (as defined in the 2016 LTIP) of the Company. Additionally, all unvested restricted stock units containing a market vesting condition will be immediately forfeited upon the first to occur of (i) the fifth anniversary of the grant date or (ii) any participant's termination as a director for any reason (except for a termination as part of a change in control of the Company).

These restricted stock awards are accounted for as liability awards under FASB Accounting Standards Codification 718 — Stock Compensation (“ASC 718”) as the awards allow for the withholding of taxes at the discretion of the non-employee director.

At September 30, 2018, the Company recorded a $0.1 million liability included within accrued liabilities on the unaudited interim condensed consolidated balance sheets related to the restricted stock units containing a market condition. The fair value of the restricted stock units containing a market condition was $1.36 per unit at September 30, 2018.

As of September 30, 2018, there was no unrecognized stock-based compensation expense related to market condition awards.

Chief Executive Officer ("CEO") Restricted Stock Units Containing a Market Condition

On November 1, 2017, the Company issued 135,778 restricted stock units to its CEO that contain a market vesting condition. These restricted stock units will vest, if at all, based on the Company's total stockholder return for the performance period of October 25, 2017 through October 31, 2020. Market conditions under this grant are (i) with respect to 50% of the RSUs granted, the Company's cumulative total shareholder return ("TSR") which is defined as the change in the value of the stock over the performance period  with the beginning and ending stock price based on a 20-day average stock price and (ii) with respect to the remaining 50% of the RSUs granted, the percentile rank of the Company's TSR compared to the TSR of the peer group over the performance period ("Relative TSR").

To the extent that actual TSR or Relative TSR for the performance period is between specified vesting levels, the portion of the RSUs that shall become vested based on actual and Relative TSR performance shall be determined on a pro-rata basis using straight-line interpolation; provided that the maximum portion of the RSUs that may become vested based on actual cumulative TSR or Relative TSR for the performance period shall not exceed 120% of the awards granted.

The RSUs issued to the CEO containing a market condition have a service period of three years. The share-based compensation costs related to the CEO restricted stock units containing a market condition recognized as general and administrative expense by the Company was $0.1 million and $0.3 million for the three and nine months ended September 30, 2018. As of September 30, 2018, unrecognized stock-based compensation related to CEO RSUs containing a market condition was $1.0 million and will be recognized over a weighted-average period of 2.1 years.

Performance Stock Units Issued to Certain Members of Executive Management Containing a Market Condition

On March 1, 2018, the Company issued 96,305 restricted stock units to certain members of executive management that contain a market vesting condition. These restricted stock units will vest, if at all, based on the Company's total stockholder return for the performance period of January 1, 2018 through December 31, 2020.

To the extent that the Relative TSR for the performance period is between specified vesting levels, the portion of the restricted stock units that become vested based on the Relative TSR performance shall be determined on a pro-rata basis using straight-line interpolation; provided that the maximum portion of the restricted stock units that may become vested based on the Relative TSR for the performance period shall not exceed 150% of the awards granted. In addition, if the Relative TSR for the Company is negative over the performance period, vesting of these performance stock units is limited to no more than 100%.

If a member of executive management terminates employment prior to vesting, the outstanding award is forfeited. Executive management restricted stock units with a market condition are subject to accelerated vesting in the event the executive’s employment is terminated prior to vesting by the Company without “Cause” or by the participant with “Good Reason” (each, as defined in the 2016 LTIP) or due to the executive’s death or disability. Upon a "Change in Control" (as defined in the 2016 LTIP), the compensation committee of the board of directors could (i) accelerate all or a portion of the award, (ii) cancel all of the award and pay cash, stock or combination equal to the change in control price, (iii) provide for the assumption or substitution or continuation by the successor company, (iv) certify to the extent to which the vesting conditions had been achieved prior to the conclusion of the performance period or (v) adjust restricted stock units to reflect the change in control.

These restricted stock awards are accounted for as equity awards under ASC 718 as the awards are settled in shares of the Company with no additional settlement options permitted. At the grant date, the Company estimated the fair value of this equity award. The compensation expense of this award each period is recognized by dividing the fair value of the total award by the requisite service period and recording the pro-rata share for the period for which service has already been provided. As there are inherent uncertainties related to these factors and the Company’s judgment in applying them to the fair value determinations, there is risk that the recorded compensation may not accurately reflect the amount ultimately earned by the executives.

The restricted stock units issued to executive management containing a market condition have a service period of three years. The share-based compensation costs related to executive management’s restricted stock units containing a market condition recognized as general and administrative expense by the Company was $0.1 million and $0.3 million for the three and nine months ended September 30, 2018. As of September 30, 2018, unrecognized stock-based compensation related to executive management’s restricted stock units containing a market condition was $1.0 million and will be recognized over a weighted-average period of 2.3 years.