Stockholders’ Equity

Equity Based Awards

At the Company’s 2018 Annual Meeting of Stockholders held on June 7, 2018, the stockholders of the Company approved the Company’s 2018 Long Term Incentive Plan (the “2018 Incentive Plan”) to replace the Company's 2010 Long Term Incentive Plan (the "Prior Plan"). The 2018 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”). The total number of shares of the Company's common stock originally reserved and available for issuance pursuant to awards granted under the 2018 Incentive Plan was 2,000,000, plus an additional number of shares (not to exceed 300,000) underlying stock awards granted under the Company's Prior Plan that terminated, expired, or forfeited. As of June 7, 2018, there were 2,210,544 shares of our common stock reserved for future awards, under the 2018 Incentive Plan. A total of 2,194,074 shares are available for issuance as of December 31, 2018. A variety of discretionary awards for employees, officers, directors and consultants are authorized under the 2018 Incentive Plan, including incentive or non-qualified statutory stock options and restricted stock, restricted stock units and performance-based awards. All awards must be evidenced by a written award certificate which will include the provisions specified by the Compensation Committee. The Compensation Committee determines the exercise price for stock options, which cannot be less than the fair market value of the Company's common stock as of the date of grant.

Almost Family had Stock and Incentive Compensation Plans that provided for stock awards of the Company's common stock to employees, non-employee directors, or independent contractors. Almost Family issued restricted shares and/or option awards to employees and non-employee directors. Under the change of control provisions of the Almost Family plans, all outstanding restricted stock, performance restricted stock, and options became non-forfeitable in conjunction with the Merger.

Each unvested restricted share award issued by Almost Family that was outstanding immediately prior to the Merger converted into a restricted stock award to acquire shares of the Company on the same terms and conditions rounded up or down to the nearest whole share, determined by multiplying the number of shares of Almost Family's common stock subject to such restricted stock award by the exchange ratio. Each stock option to purchase shares of Almost Family that was outstanding immediately prior to the Merger converted into an option to purchase shares of the Company on the same terms and conditions, (A) the number of shares of LHC's common stock, rounded down to the nearest whole share, determined by multiplying (I) the total number of shares of Almost Family's common stock by (II) the exchange ratio, and (B) at a per-share exercise price, rounded up to the nearest whole cent, equal to the quotient determined by dividing (I) the exercise price per share of Almost Family's common stock by (II) the exchange ratio.

Share Based Compensation

Nonvested Stock

The Company issues stock-based compensation to employees in the form of nonvested stock, which is an award of common stock subject to certain restrictions. The awards, which the Company calls nonvested shares, generally vest over a five year period, conditioned on continued employment for the full incentive period. Compensation expense for the nonvested stock is recognized for the awards that are expected to vest. The expense is based on the fair value of the awards on the date of grant recognized on a straight-line basis over the requisite service period, which generally relates to the vesting period.

During 2018, 2017 and 2016, respectively, 213,105, 139,310 and 220,800 nonvested shares were granted to employees pursuant to the 2010 Incentive Plan. In addition, 16,470 nonvested shares were granted to employees pursuant to the 2018 Incentive Plan.

The Company also issues nonvested stock to its independent directors of the Company’s Board of Directors. During 2018, 2017 and 2016, respectively, 13,600, 11,700 and 15,300 nonvested shares of stock were granted to the independent directors under the 2005 Director Compensation Plan. The shares issued under the 2005 Director Compensation Plan were drawn from the 1,500,000 shares reserved for issuance under the 2010 Incentive Plan. The shares fully vest one year from the date of the grant. During the twelve months ended December 31, 2018, four new directors were granted 14,000 nonvested shares of common stock under the Second Amended and Restated 2005 Non-Employee Directors Compensation Plan. The shares vest 33% at the grant date, then 33% each year on the anniversary date until the third year.

The fair value of nonvested shares is determined based on the closing trading price of the Company’s shares on the grant date. The weighted average grant date fair values of nonvested shares granted during the years ended December 31, 2018, 2017 and 2016 were $64.11, $48.52 and $37.99, respectively.

The following table represents the share grants stock activity for the year ended December 31, 2018:



	Restricted stock				Options
	Number of Shares		Weighted average grant date fair value		Number of Shares		Weighted average grant date fair value
Share grants outstanding at December 31, 2017	529,465		$	37.34	—		$	—
Granted	257,175		64.11		—		—
Acquired	—		—		270,710		36.48
Vested or exercised	(212,355	)	37.77		(108,903	)	34.11
Share grants outstanding at December 31, 2018	574,285		$	49.68	161,807		$	38.08

As of December 31, 2018, there was $19.4 million of total unrecognized compensation cost related to nonvested shares granted. That cost is expected to be recognized over the weighted average period of 3.10 years. The total fair value of shares vested in the year ended December 31, 2018 was $8.0 million and the total fair value of shares vested in the years December 31, 2017 and 2016 was $5.6 million and $4.5 million, respectively. The Company records compensation expense related to nonvested share awards at the grant date for shares that are awarded fully vested and over the vesting term on a straight line basis for shares that vest over time. Compensation expense is reduced for estimated forfeitures. The Company estimates forfeitures at the time of grant and revises the estimate in subsequent periods if actual forfeitures differ. The Company has recorded $9.4 million, $6.0 million and $4.9 million in compensation expense related to non-vested stock grants in the years ended December 31, 2018, 2017 and 2016, respectively. Options acquired in connection with the Merger are fully vested and non-forfeitable.

Aggregate intrinsic value for options represents the estimated value of the Company's common stock at the end of the period in excess of the weighted average exercise price multiplied by the number of options exercisable. The aggregate intrinsic value of options outstanding at December 31, 2018 was $9.0 million. The total intrinsic value of options exercised during the year ended December 31, 2018 was $6.8 million. The following table summarizes information about stock options outstanding and exercisable at December 31, 2018:



Range of Exercise Price	Shares	Wtd. Avg. Remaining Contractual Life	Wtd. Avg. Exercise Price
$0.00 - 30.00	47,579	4.47	$	24.93
$30.01 - 40.00	71,684	6.23	$	39.43
Over $40.00	42,544	7.73	$	50.51



161,807	6.46	$	38.08

Employee Stock Purchase Plan

In 2006, the Company adopted the Employee Stock Purchase Plan allowing eligible employees to purchase the Company’s common stock at 95% of the market price on the last day of each calendar quarter. There were 250,000 shares reserved for the plan.

On June 20, 2013, the Amended and Restated Employee Stock Purchase Plan was approved by the Company’s stockholders. As a result of the amendment, the Employee Stock Purchase Plan was modified as follows:


•	An additional 250,000 shares of common stock were authorized for issuance over the term of the Employee Stock Purchase Plan.


•	The term of the Employee Stock Purchase Plan was extended from January 1, 2016 to January 1, 2023.

The following table represents the shares issued during 2018, 2017 and 2016 under the Employee Stock Purchase Plan:



	Number of Shares	Weighted Average Per Share Price
Shares available as of December 31, 2015	213,760
Shares issued in 2016	24,149	$	37.79
Shares issued in 2017	18,542	$	55.40
Shares issued in 2018	18,725	$	71.12
Shares available as of December 31, 2018	152,344

Treasury Stock

In conjunction with the vesting of the nonvested shares of stock or exercise of options, recipients incur personal income tax obligations. The Company allows the recipients to turn in shares of common stock to satisfy those personal tax obligations. The Company redeemed 68,217, 61,825 and 52,119 shares of common stock related to these tax obligations during the years ended December 31, 2018, 2017 and 2016, respectively. In addition, the Company redeemed 68,070 shares of common stock valued at $2.5 million, related to the exercise of Almost Family options. Such shares are held as treasury stock and are available for reissuance by the Company. Additionally, shares were submitted by employees in lieu of paying the stock option exercise price that would have otherwise been due on exercise. Such shares are held in treasury stock and are available for reissuance by the Company.