Incentive Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Incentive Plans

9. Incentive Plans

On August 4, 2017, the Board of Directors approved the Houston Wire & Cable Company 2017 Stock Plan (the “2017 Plan”). The 2017 Plan was approved by the stockholders at the 2018 Annual Meeting on May 8, 2018. The 2017 Plan provides for discretionary grants of stock options, stock awards, stock units and stock appreciation rights (SARs) to employees and directors up to a total of 1,000,000 shares. Shares issuable under the 2017 Plan may be authorized but unissued shares or treasury shares. If any award granted under the 2017 Plan expires, terminates or is forfeited or cancelled for any reason, the shares subject to the award will again be available for issuance. Any shares subject to an award that are delivered to the Company or withheld by the Company on behalf of a participant as payment for the award (including the exercise price of a stock option or SAR) or as payment for any withholding taxes due in connection with the award, or that are purchased by the Company with proceeds received from a stock option exercise, will not again be available for issuance. The 2017 Plan’s purpose is to attract and retain outstanding individuals as employees and directors of the Company and its subsidiaries and to provide them with additional incentive to expand and improve the Company’s profits by giving them the opportunity to acquire or increase their proprietary interest in the Company. 

The 2017 Plan succeeded the Company’s 2006 Stock Plan (the “2006 Plan”), which expired on May 1, 2017. The types of equity awards previously authorized under the 2006 Plan did not significantly differ from those permitted under the 2017 Plan. 

Stock Option Awards

The Company may grant options to purchase its common stock to employees and directors of the Company under the 2006 Plan and 2017 Plan at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and may be forfeited in the event the employee or director terminates his or her employment or relationship with the Company. Options granted to employees generally vest over three to five years, and options granted to directors generally vest one year after the date of grant. Shares issued to satisfy the exercise of options may be newly issued shares or treasury shares. Each plan contains anti-dilutive provisions that permit an adjustment of the number of shares of the Company’s common stock represented by each option for any change in capitalization. Compensation cost for options granted is charged to expense on a straight line basis over the term of the option. 

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The expected life of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. There were no options granted in 2019, 2018 or 2017. 

All granted stock options have vested, with the last grant having an expiration date of December 20, 2021. The following summarizes stock option activity and related information: 

	Options (in 000’s)						Weighted Average Exercise Price				Aggregate Intrinsic Value				Weighted Average Remaining Contractual Life (in years)
	2019			2018			2019		2018		2019		2018		2019		2018
Outstanding-Beginning of year		154			223			13.40		13.10	$	—	$	—		2.52		2.84
Granted		—			—			—		—
Exercised		—			—			—		—
Forfeited		(22	)		(30	)		13.04		11.17
Expired		(10	)		(39	)		10.32		13.42
Outstanding-End of year		122			154			13.72		13.40	$	—	$	—		1.75		2.52
Exercisable-End of year		122			154			13.72		13.40	$	—	$	—		1.75		2.52

There was no excess tax benefit for the years ended December 31, 2019, 2018 and 2017. 

There were no options exercised in the years ended December 31, 2019, 2018 and 2017. There is no intrinsic value of options outstanding and exercisable as of December 31, 2019 as the closing stock price at the end of 2019 creates a negative intrinsic value.

The total grant-date fair value of options vested during 2019 was $0, as all the options vested as of December 31, 2018. The total grant-date fair value of options vested during the year ended December 31, 2017 was $0.2 million.

Restricted Stock Awards, Restricted Stock Units and Cash Awards 

As a result of the approval of the 2017 Plan by the stockholders at the 2018 Annual Meeting, all cash/liability awards granted prior to stockholder approval of the 2017 Plan were reclassified to restricted stock units (equity) effective May 8, 2018. The total liability reclassified to additional paid-in-capital was $0.4 million. This modification resulted in an increase in total fair value of $0.1 million, recognized over the terms of the grants, which range from 1 to 5 years. 

On December 3, 2019, the Board of Directors granted to the Company’s President and CEO 78,125 voting shares of restricted stock and to the CFO, 19,531 voting shares of restricted stock under the 2017 Plan. The shares vest in one-third increments on the first, second and third anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares or units vest. 

Also, on December 3, 2019, the Board of Directors granted 250,000 shares of restricted stock to the Company’s President and CEO and 125,000 shares of restricted stock to the CFO. Each grant vests if there is a Change in Control of the Company (as defined in the 2017 Plan) on or before December 2, 2024, as long as the recipient remained in continuous employment with the Company or a Subsidiary until the Change in Control or if the recipient was terminated by the Company without cause within one year before the Change in Control. Any dividends declared will be accrued and paid to the grantee if and when the related shares vest.

The Board of Directors also granted 39,719 voting shares of restricted stock under the 2017 Plan to members of management in December 2019. The shares vest in one-third increments on the third, fourth and fifth anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares or units vest.

Following the Annual Meeting of Stockholders on May 7, 2019, the Company granted restricted stock units with a grant date value of $60,000 to each nonemployee director who was elected, for an aggregate of 58,920 restricted stock units. Each award of restricted stock units vests at the date of the 2020 Annual Meeting of Stockholders. Each non-employee director is entitled to receive a number of shares of the Company’s common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason. 

On March 12, 2019, the Board of Directors granted 52,910 performance stock units to the Company’s President and CEO and 13,228 performance stock units to the CFO. Each grant of performance stock units vests on December 31, 2021, based on and subject to the Company’s achievement of cumulative EBITDA and stock price performance goals over a three-year period, as long as the grantee is then employed by the Company, and upon vesting will be settled in shares of our common stock. Any dividends declared will be accrued and paid to the grantee if and when the related shares vest. 

On December 4, 2018, the Board of Directors granted to the Company’s President and CEO 48,387 voting shares of restricted stock and to the CFO, 12,097 voting shares of restricted stock under the 2017 Plan. The shares vest in one-third increments on the first, second and third anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares or units vest. 

The Board of Directors also granted 44,357 voting shares of restricted stock under the 2017 Plan to members of management on December 4, 2018. The shares vest in one-third increments on the third, fourth and fifth anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares or units vest. 

On November 6, 2018 and June 1, 2018, the Company awarded restricted stock units with a grant date value of $30,000 and $55,000 for a total of 4,950 and 6,667 restricted stock units, respectively, to its newly appointed non-employee directors. These awards of restricted stock units vest at the date of the 2019 Annual Meeting of Stockholders. Each grant entitles the non-employee director to receive a number of shares of the Company’s common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason. 

On May 8, 2018, the Company approved the award of restricted stock units with a grant date value of $60,000 to each non-employee director who was re-elected, for an aggregate of 31,372 restricted stock units. Each award of restricted stock units vests at the date of the 2019 Annual Meeting of Stockholders. Each non-employee director is entitled to receive a number of shares of the Company’s common stock equal to the number of vested restricted stock units, together with dividend equivalents from the date of grant, at such time as the director’s service on the board terminates for any reason. 

Also on May 8, 2018, the Company granted 28,144 voting shares of restricted stock to new members of the management team. Of the 28,144 shares granted, 26,144 shares vest in one third increments on the first, second and third anniversaries of the date of grant and the remaining 2,000 shares vest in one third increments on the third, fourth and fifth anniversaries of the date of grant, in each case as long as the recipient is then employed by the Company. Any dividends declared will be accrued and paid if and when the related shares vest. 

Restricted common shares and restricted stock units are measured at fair value on the date of grant based on the quoted price of the common stock. Such value is recognized as compensation expense over the corresponding vesting period which ranges from one to five years, based on the number of awards that vest. 

The following summarizes restricted stock activity for the years ended December 31, 2019 and 2018: 

	Shares
	2019					2018
	Shares (in 000’s)			Weighted Average Market Value at Grant Date		Shares (in 000’s)			Weighted Average Market Value at Grant Date
Non-vested -Beginning of year		259		$	6.78		238		$	7.33
Granted		511			3.84		133			6.51
Vested		(107	)		7.24		(99	)		7.61
Cancelled/Forfeited		(9	)		6.34		(13	)		7.63
Expired		—			—		—			—
Cash awards converted to equity		—			—		—			—
Non-vested -End of year		654		$	5.18		259			6.78

	Units
	2019					2018
	Shares (in 000’s)			Weighted Average Market Value at Grant Date		Shares (in 000’s)			Weighted Average Market Value at Grant Date
Non-vested -Beginning of year		215		$	7.59		40		$	7.50
Granted		125			5.88		43			7.47
Vested		(60	)		7.59		(60	)		7.65
Cancelled/Forfeited		(3	)		7.65		(5	)		7.65
Expired		—			—		—			—
Cash awards converted to equity		—			—		197			7.65
Non-vested -End of year		277			6.83		215			7.59

Total stock-based compensation cost was $1.5 million for the year ended December 31, 2019, $1.3 million for the year ended December 31, 2018, and $1.2 million for the year ended December 31, 2017, of which $1.0 million was for equity awards and $0.2 million was for liability awards. Total income tax benefit recognized for equity awards stock-based compensation arrangements was $0.2 million for each of the years ended December 31, 2019, 2018 and 2017. 

As of December 31, 2019, there was $1.8 million of total unrecognized compensation cost related to non-vested, stock-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 26 months. There are 5,148 shares available for future grants under the 2017 Plan at December 31, 2019.