Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

13. STOCK-BASED COMPENSATION

The company has an equity incentive plan that reserves 4,110,000 shares of common stock for issuance to its directors and employees. The plan provides for shares, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock, performance share awards, and restricted and deferred stock unit awards, to be granted to eligible employees, non-employee directors and consultants. The company measures stock-based compensation at fair value on the grant date, with no adjustments for estimated forfeitures. The company records noncash compensation expense related to equity awards in its consolidated financial statements over the requisite period on a straight-line basis. Substantially all of the existing stock-based compensation has been equity awards.

Grants under the equity incentive plans may include stock options, stock awards, performance share awards or deferred stock units:

Restricted Stock Awards – Restricted stock awards may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Stock awards granted to date vested immediately and over a period of time, and included sale restrictions. Compensation expense is recognized on the grant date if fully vested or over the requisite vesting period.

Deferred Stock Units – Deferred stock units may be granted to directors and employees that vest immediately or over a period of time as determined by the compensation committee. Deferred stock units granted to date vest over a period of time with underlying shares of common stock that are issuable after the vesting date. Compensation expense is recognized on the grant date if fully vested, or over the requisite vesting period.

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Performance Share Awards – Performance share awards may be granted to directors and employees that cliff-vest after a period of time as determined by the compensation committee. Performance share awards granted to date cliff-vest after a period of time, and included sale restrictions. Compensation expense is recognized over the requisite vesting period.

Stock Options – Stock options may be granted that can be exercised immediately in installments or at a fixed future date. Certain options are exercisable regardless of employment status while others expire following termination. Options issued to date may be exercised immediately or at future vesting dates, and expire five to eight years after the grant date. Compensation expense for stock options that vest over time is recognized on a straight-line basis over the requisite service period.

Restricted Stock Awards and Deferred Stock Units

The non-vested restricted stock award and deferred stock unit activity for the year ended December 31, 2019, are as follows:


	Non-Vested ‎Shares and ‎Deferred ‎Stock Units	Weighted- ‎Average Grant- ‎Date Fair Value		Weighted-Average ‎Remaining ‎Vesting Term ‎(in years)
Nonvested at December 31, 2018	882,288	$	19.12
Granted	497,118		15.40
Forfeited	(138,110)		17.55
Vested	(489,981)		18.31
Nonvested at December 31, 2019	751,315	$	17.48	1.6

Performance Share Awards

On February 19, 2019 and March 19, 2018, the board of directors granted performance shares to be awarded in the form of common stock to certain participants of the plan. Performance shares vest based on the company’s average return on net assets (RONA) and the company’s total shareholder return (TSR), as further described herein. The performance shares vest on the third anniversary of the grant, if the RONA and TSR criteria are achieved and the participant is then employed by the company. Fifty percent of the performance shares vest based upon the company’s ability to achieve a predetermined RONA during the three year performance period. The remaining fifty percent of the performance shares vest based upon the company’s total TSR during the three year performance period relative to that of the company’s performance peer group.

The performance shares were granted at a target of 100%, but each performance share will reduce or increase depending on results for the performance period for the company's RONA, and the company’s TSR relative to that of the performance peer group. If the company’s RONA and TSR achieve the maximum goals, the maximum amount of shares available to be issued pursuant to the 2018 and 2019 awards are 428,104 performance shares or 150% of the 285,403 performance shares which remain outstanding. The actual number of performance shares that will ultimately vest is based on the actual percentile ranking of the company’s RONA, and the company’s TSR compared to the peer performance at the end of the performance period.

The company used the Monte Carlo valuation model to estimate the fair value of the performance shares on the date of the grant. The weighted average assumptions used by the company in applying the Monte Carlo valuation model for performance share grants are illustrated in the following table:


	FY 2019 Performance Awards			FY 2018 Performance Awards
Risk-free interest rate		2.45	%		2.44	%
Dividend yield		3.13	%		2.64	%
Expected volatility		41.69	%		45.11	%
Monte Carlo valuation		99.62	%		97.39	%
Closing stock price on the date of grant	$	15.34		$	18.15

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The non-vested performance share award activity for the year ended December 31, 2019, are as follows:


	Performance ‎Shares	Weighted- ‎Average Grant- ‎Date Fair Value		Weighted-Average ‎Remaining ‎Vesting Term ‎(in years)
Nonvested at December 31, 2018	134,022	$	17.92
Granted	216,703		15.43
Forfeited	(65,322)		16.38
Nonvested at December 31, 2019	285,403	$	16.38	1.9

Green Plains Partners

Green Plains Partners has adopted the LTIP, an incentive plan intended to promote the interests of the partnership, its general partner and affiliates by providing incentive compensation based on units to employees, consultants and directors to encourage superior performance. The incentive plan reserves 2,500,000 common units for issuance in the form of options, restricted units, phantom units, distributable equivalent rights, substitute awards, unit appreciation rights, unit awards, profits interest units or other unit-based awards. The partnership measures unit-based compensation related to equity awards in its consolidated financial statements over the requisite service period on a straight-line basis.

The non-vested unit-based awards activity for the year ended December 31, 2019, are as follows:


	Non-Vested ‎Shares and ‎Deferred ‎Stock Units	Weighted- ‎ Average ‎ Grant-Date ‎Fair Value		Weighted-Average ‎Remaining ‎Vesting Term ‎(in years)
Non-Vested at December 31, 2018	18,582	$	16.96
Granted	22,856		14.00
Vested	(18,582)		16.96
Nonvested at December 31, 2019	22,856	$	14.00	0.5

Stock Options

The fair value of the stock options is estimated on the date of the grant using the Black-Scholes option-pricing model, a pricing model acceptable under GAAP. The expected life of the options is the period of time the options are expected to be outstanding. The company did not grant any stock option awards during the years ended December 31, 2019, 2018 and 2017.

The activity related to the exercisable stock options for the year ended December 31, 2019, is as follows:


	Shares	Weighted- ‎Average ‎Exercise Price		Weighted-Average ‎Remaining ‎Contractual Term ‎(in years)	Aggregate ‎Intrinsic Value ‎(in thousands)
Outstanding at December 31, 2018	128,750	$	12.72	1.0	$	89
Exercised	(118,750)		12.36	-		340
Outstanding at December 31, 2019	10,000	$	16.95	0.2	$	-
Exercisable at December 31, 2019 ⁽¹⁾	10,000	$	16.95	0.2	$	-

(1)The weighted average exercise price for options exercisable at December 31, 2019 was above the company’s stock price at December 31, 2019.

Option awards allow employees to exercise options through cash payment for the shares of common stock or simultaneous broker-assisted transactions in which the employee authorizes the exercise and immediate sale of the option in the open market. The company uses newly issued shares of common stock to satisfy its stock-based payment obligations.

Stock-Based and Unit-Based Compensation Expense

Compensation costs for stock-based and unit-based payment plans during the years ended December 31, 2019, 2018 and 2017, were approximately $9.7 million, $11.4 million and $12.2 million, respectively. The decrease in stock compensation for the year ended December 31, 2019 was largely due to current year forfeitures, offset by additional expense recorded due to the accelerated vesting of stock awards during the year. At December 31, 2019, there were $9.8 million of unrecognized

compensation costs from stock-based and unit-based compensation related to non-vested awards. This compensation is expected to be recognized over a weighted-average period of approximately 1.7 years. The potential tax benefit related to stock-based payment is approximately 24.3% of these expenses.