Quarterly report pursuant to Section 13 or 15(d)

Stock Based Compensation

v3.8.0.1
Stock Based Compensation
9 Months Ended
Sep. 30, 2017
Stock Based Compensation  
Stock Based Compensation

11.Employee Stock Plans

 

In March 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-09, Stock-based Compensation: Improvements to Employee Share-based Payment Accounting, which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, forfeitures, statutory tax withholding requirements, and statement of cash flow classification. The amended guidance became effective for the Company commencing in the first quarter of 2017.    The Company has implemented ASU 2016-09 as follows:

 

o

ASU 2016-09 eliminates the requirement to estimate and apply a forfeiture rate to reduce stock compensation expense during the vesting period, and instead, provides an alternative option to account for forfeitures as they occur, which is the option the Company has adopted. ASU 2016-09 requires that this change be adopted using the modified retrospective approach. The adoption of this section had no material impact on the financial statements.

 

o

ASU 2016-09 addresses the presentation of excess tax benefits and employee taxes paid on the statement of cash flows. The standard requires presentation of excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. The Company adopted this change prospectively during the first quarter of 2017. ASU 2016-09 also requires the presentation of amounts withheld for applicable income taxes on employee share-based awards as a financing activity on the statement of cash flows, which the Company also adopted in the first quarter of 2017.  

 

o

ASU No 2016-09 also eliminates additional paid in capital ("APIC") pools and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. This requirement was adopted prospectively by the Company. The impact of this section of the standard was a benefit of $616 to income tax expense for the nine month period ending September 30, 2017. In addition, the ASU requires that the excess tax benefit be removed from the overall calculation of diluted shares. The impact on diluted earnings per share of this adoption was not material.

 

 

2010 Stock Incentive Plan

 

In May 2010, the Company’s Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (the “2010 Plan”).  The Company’s Board of Directors approved an amendment and restatement of the 2010 Plan on March 5, 2014, contingent on stockholder approval of the performance goals under the 2010 Plan, and the amendment and restatement became effective upon stockholder approval of the performance goals at the 2014 annual meeting of stockholders held on April 30, 2014.  The 2010 Plan provides for the issuance of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock awards and restricted stock units (“RSUs”), any of which may be performance-based, and for incentive bonuses, which may be paid in cash or stock or a combination of both, to eligible employees, officers, non-employee directors and other service providers to the Company and its subsidiaries.  A maximum of 2,130,000 shares of common stock may be issued pursuant to all awards under the 2010 Plan.

 

 

Performance Share Unit Awards

 

The Company granted performance share units as performance based awards under the 2010 Plan in the first quarter of 2017 that are subject to performance conditions.  Upon meeting the prescribed performance conditions, in the first quarter of the year subsequent to grant, employees will be issued RSUs, a portion of which will be subject to vesting over the two years following the end of the performance period.  In accordance with ASC 718, such awards are being expensed over the vesting period from the date of grant through the requisite service period, based upon the most probable outcome.  The fair value per share of the awards is the closing stock price on the date of grant, which was $33.60. The Company recognized $451 and $380 of compensation expense related to the awards in the three months ended September 30, 2017 and September 30, 2016, respectively.   The Company recognized $1,121 and $886 of compensation expense related to the awards in the nine months ended September 30, 2017 and September 30, 2016, respectively.   The unrecognized compensation expense calculated under the fair value method for shares that were, as of September 30, 2017, expected to be earned through the requisite service period was approximately $819 and is expected to be recognized through 2020.

 

Restricted Stock Unit Awards

 

RSUs are granted to both non-employee directors and management.  RSUs do not carry voting rights.  While all non-employee director RSUs participate in dividend equivalents, there are two classes of management RSUs, one for executives that participate in dividend equivalents, and a second for non-executives that do not participate in dividend equivalents.  Each RSU represents the right to receive one share of the Company’s common stock and is subject to time based vesting restrictions. Participants are not required to pay any consideration to the Company at either the time of grant of a RSU or upon vesting.

 

RSUs issued to management include a retirement provision under which members of management who either (1) are age 65 or older or (2) have at least ten years of service and are at least age 55 will continue to vest in unvested RSUs upon retirement.  As the retirement provision does not qualify as a substantive service condition, the Company incurred $619 and $528 in additional expense in the first quarter of 2017 and 2016, respectively, for employees who meet the thresholds of the retirement provision.  In 2013, the Company’s nominating and governance committee approved a retirement provision for the RSUs issued to non-employee directors that accelerates the vesting of such RSUs upon retirement.  Such awards are fully expensed immediately upon grant in accordance with ASC 718, as the retirement provision eliminates substantive service conditions associated with the awards.

 

A summary of RSU activity for the nine months ended September 30, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

Weighted

 

Average

 

 

 

 

Average

 

Remaining

 

 

 

 

Grant Date

 

Contractual

 

 

Shares

 

Fair value

 

Term

 

 

 

 

 

 

 

 

 

Unvested at December 31, 2016

 

47,790

 

$

20.31

 

0.96

years

Granted

 

127,750

 

$

24.15

 

0.34

years

Vested

 

(127,531)

 

$

22.94

 

 

 

Cancelled and forfeited

 

 -

 

$

 -

 

 

 

 

 

 

 

 

 

 

 

 

Unvested at September 30, 2017

 

48,009

 

$

23.56

 

1.00

years

 

 

 

 

 

 

 

 

 

Expected to vest in the future at September 30, 2017

 

48,009

 

$

23.56

 

1.00

years

 

The Company recognized $191 and $142 of compensation expense related to the RSU awards in the three months ended September 30, 2017 and September 30, 2016, respectively. The Company recognized $1,628 and $1,372 of compensation expense related to the RSU awards in the nine months ended September 30, 2017 and September 30, 2016, respectively. The unrecognized compensation expense, calculated under the fair value method for shares that were, as of September 30, 2017, expected to be earned through the requisite service period was approximately $536 and is expected to be recognized through 2020.

 

Vested director RSUs are ‘‘settled’’ by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following a termination of service of the participant that constitutes a separation from service, and in all events no later than the end of the calendar year in which such termination of service occurs or, if later, two and one-half months after such termination of service.  Vested management RSUs are “settled” by the delivery to the participant or a designated brokerage firm of one share of common stock per vested RSU as soon as reasonably practicable following vesting.