NOTE K—ACCOUNTING FOR STOCK-BASED COMPENSATION

Stock Incentive Plans

On June 5, 2015, the Company’s stockholders approved an amendment (the “Amendment”) to the ICF International, Inc. 2010 Omnibus Incentive Plan (as amended, the “Omnibus Plan”). The Amendment, among other items, increased the new shares available for issuance under the Omnibus Plan by 1,540,000 shares from 3,550,000 to 5,090,000 (for an aggregate 5,966,186 shares, which includes shares that remained available under the 2006 Long-Term Equity Incentive Plan when the Omnibus Plan was initially adopted). The Omnibus Plan provides for the granting of options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards to all officers, key employees, and non-employee directors of the Company. Under the terms of the Omnibus Plan, shares awarded that are not stock options or stock appreciation rights, are counted as 1.93 shares deducted for every one share delivered under those awards. Shares awarded that are stock options or stock appreciation rights are counted as a single share deducted from the Omnibus Plan for every one share delivered under those awards. As of December 31, 2015, the Company had approximately 2.7 million shares available to grant under the Amended Plan. CSRSUs have no impact on the shares available for grant under the Omnibus Plan, and have no impact on the calculated shares used in earnings per share calculations.

Starting in the third quarter of 2013, the Company started granting awards of unregistered shares to its non-employee directors on a quarterly basis under its Annual Equity Election program to replace the previous restricted stock awards program. The awards are issued from the Company’s treasury stock and have no impact on the shares available for grant under the Omnibus Plan.

Total compensation expense relating to stock-based compensation was approximately $14.7 million, $13.4 million, and $11.9 million for the years ended December 31, 2015, 2014, and 2013, respectively. As of December 31, 2015, the total unrecognized compensation expense related to non-vested stock awards totaled approximately $17.1 million. These amounts are expected to be recognized over a weighted-average period of 2.1 years. The unrecognized expense related to CSRSUs totaled approximately $11.7 million at December 31, 2015. These costs are expected to be recognized over a weighted-average period of 2.6 years.

The assumptions of employment termination forfeiture rates used in the determination of fair value of stock awards during calendar year 2015 were based on the Company’s historical average from October 2006 through the 12 months preceding the reporting period. The expected annualized forfeiture rates used varied from 4.92% to 8.87%, and the Company does not expect these termination rates to vary significantly in the future.

Stock Options

Option awards are granted with an exercise price equal to the market value of the Company’s common stock on the date of grant. All options outstanding as of December 31, 2015 have a 10-year contractual term. Options generally have a vesting term of three or four years. The Company recorded approximately $1.5 million, $1.9 million, and $1.6 million of compensation expense related to stock options for the years ended December 31, 2015, 2014, and 2013, respectively. There were no options awards granted during 2015. The fair value assumptions using the Black-Scholes-Merton pricing model for awards granted in 2014 were 5.1 years for the expected life, 33.0% for historical volatility, and 1.5% for the risk-free rate of return. The fair value assumptions using the Black-Scholes-Merton pricing model for awards granted in 2013 were 5.4 years for the expected life, 36.8% for historical volatility, and 0.9% for the risk-free rate of return. At December 31, 2015, unrecognized expense related to stock options totaled approximately $0.9 million, and these costs are expected to be recognized over a weighted average period of 1.2 years.

The following table summarizes the changes in outstanding stock options:

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2013		638,800		$	22.21
Exercised		(159,309	)	$	19.48
Granted		218,707		$	27.03
Forfeited/Expired		(3,646	)	$	24.84
Outstanding at December 31, 2013		694,552		$	24.34
Exercised		(85,063	)	$	21.53
Granted		166,861		$	40.68
Forfeited/Expired		(9,426	)	$	25.53
Outstanding at December 31, 2014		766,924		$	28.20
Exercised		(43,919	)	$	21.23
Granted		—		$	—
Forfeited/Expired		—		$	—
Outstanding at December 31, 2015		723,005		$	28.62	$	5,872

Vested plus expected to vest at December 31, 2015		664,824		$	28.35	$	5,530
Exercisable at December 31, 2015		540,287		$	26.35	$	5,263

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $35.56 as of December 31, 2015. The total intrinsic value of options exercised was $0.8 million, $1.5 million, and $2.3 million for the years ended December 31, 2015, 2014 and 2013, respectively. The weighted average grant date fair value of options granted was $13.00, and $9.37 per share for the years ended December 31, 2014 and 2013, respectively. The fair value of shares vested was $2.0 million, $1.8 million, and $1.6 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, the weighted-average remaining contractual term for options vested and expected to vest was 6.4 years, and for exercisable options was 6.0 years.

Information regarding stock options outstanding as of the dates indicated is summarized below:

			OPTIONS OUTSTANDING						OPTIONS EXERCISABLE
Range of Exercise Prices			Number Outstanding As of 12/31/1 5		Weighted Average Remaining Contractual Term		Weighted Average Exercise Price		Number Exercisable As of 12/31/1 5		Weighted Average Exercise Price
$ 9.05	–	$25.00		210,293		4.55	$	22.61		210,293	$	22.61
$25.01	–	$28.00		345,851		6.79	$	26.46		274,368	$	26.31
$28.01	–	$41.00		166,861		8.21	$	40.68		55,626	$	40.68
$ 9.05	to	$41.00		723,005		6.47	$	28.62		540,287	$	26.35

Restricted Stock Awards

Restricted stock awards generally have a vesting term of one year. Compensation expense related to restricted stock awards computed under the fair value method for the year ended December 31, 2013, was approximately $0.2 million. The Company did not grant restricted stock awards in 2015, 2014 and 2013. There was no unrecognized expense related to restricted stock awards as of December 31, 2015, 2014 and 2013. The fair value of shares vested was $0.7 million for the year ended December 31, 2013.

A summary of the Company’s restricted stock awards is presented below.

	Number of Shares			Weighted- Average Grant Date Fair Value
Non-vested restricted stock awards at January 1, 2013		36,139		$	22.41
Granted		—		$	—
Vested		(30,825	)	$	22.38
Forfeited		(5,314	)	$	22.58
Non-vested restricted stock awards at December 31, 2013		—		$	—

Restricted Stock Units

RSUs generally have a vesting term of three or four years. Upon vesting, the employee is issued one share of stock for each RSU he or she holds. Compensation expense related to RSUs computed under the fair value method for the years ended December 31, 2015, 2014, and 2013, was approximately $

7.2 million, $7.8 million, and $8.7 million, respectively. At December 31, 2015, unrecognized expense related to RSUs totaled approximately $

14.4 million. These costs are expected to be recognized over a weighted-average period of

2.3 years. The fair value of shares vested was $

6.3 million, $8.2 million, and $7.0 million for the years ended December 31, 2015, 2014 and 2013, respectively.

A summary of the Company’s RSUs is presented below.

	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)
Non-vested RSUs at January 1, 2013		848,591		$	24.32
Granted		229,574		$	27.02
Vested		(288,258	)	$	24.28
Cancelled		(33,719	)	$	24.86
Non-vested RSUs at December 31, 2013		756,188		$	25.13
Granted		265,811		$	39.48
Vested		(333,321	)	$	24.73
Cancelled		(44,791	)	$	27.33
Non-vested RSUs at December 31, 2014		643,887		$	31.10
Granted		250,159		$	39.04
Vested		(233,899	)	$	26.85
Cancelled		(104,243	)	$	36.76
Non-vested RSUs at December 31, 2015		555,904		$	35.40	$	19,768
RSUs expected to vest in the future		512,897		$	35.40	$	18,239

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $35.56 per share as of December 31, 2015.

Cash-Settled Restricted Stock Units

CSRSUs generally have a vesting term of four years. Compensation expense related to CSRSUs computed under the fair value method for the years ended December 31, 2015, 2014 and 2013 was $4.4 million, $3.2 million, and $1.2 million, respectively. The unrecognized expense related to CSRSUs totaled approximately $11.7 million at December 31, 2015. These costs are expected to be recognized over a weighted-average period of 2.6 years. CSRSUs have no impact on the shares available for grant under the Omnibus Plan.

A summary of the Company’s CSRSUs is presented below.

	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)
Non-vested CSRSUs at January 1, 2013		—		$	—
Granted		203,115		$	27.84
Cancelled		(2,816	)	$	27.03
Non-vested CSRSUs at December 31, 2013		200,299		$	28.23
Granted		416,432		$	39.12
Vested		(47,742	)	$	27.55
Cancelled		(31,870	)	$	32.12
Non-vested CSRSUs at December 31, 2014		537,119		$	36.36
Granted		121,015		$	39.35
Vested		(78,033	)	$	33.29
Cancelled		(133,438	)	$	38.14
Non-vested CSRSUs at December 31, 2015		446,663		$	37.18	$	15,883
CSRSUs expected to vest in the future		414,431		$	37.16	$	14,737

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $35.56 per share as of December 31, 2015. The fair value of CSRSUs vested and settled in cash for the years ended December 31, 2015 and 2014 was $2.9 million and $1.7 million, respectively.

Non-Employee Director Awards

Com

pensation expense related to non-employee director awards computed under the fair value method for the years ended December 31, 2015, 2014 and 2013 was $0.6 million, $0.5 million, and $0.2 million, respectively. Non-employee director awards do not include vesting conditions; thus, there was no unrecognized expense related to these awards as of December 31, 2015, 2014 and 2013. Non-employee director awards are comprised of unregistered shares and have no impact on the shares available for grant under the Omnibus Plan. A summary of the Company’s non-employee director awards granted by fiscal year is presented below.

For the Year ended December 31,	Number of Shares Granted		Weighted- Average Grant Date Fair Value
2013		5,133	$	35.06
2014		15,872	$	36.08
2015		18,109	$	35.62

Performance Shares

In the first quarter of 2015, the Company’s Board of Directors approved a performance-based share program (the “Program”) that provides for the issuance of PSAs to its senior management. Under the Program, the number of PSAs that the participant will receive depends on the Company’s achievement of two performance goals during two performance periods. The performance goals under the Program are based on a performance condition (i) the Company’s compounded annual growth rate in earnings per share (“EPS”) during a performance period from January 1, 2015 through December 31, 2016, and a market condition (ii) the Company’s cumulative total shareholder return (“rTSR”) relative to its peer group during a performance period from January 1, 2015 through December 31, 2017. The PSAs will only be eligible to vest following the expiration of the three-year performance period ending on December 31, 2017. Actual shares vested will be subject to both continued employment by the Company (barring certain exceptions allowing for partial performance periods) and actual financial measures achieved. The actual number of shares of common stock that will be issued to each participant at the end of the applicable performance period will be determined by multiplying the award by the product of two percentages, one based on the Company’s EPS performance and a second one based on the Company’s rTSR performance, subject to a minimum and maximum performance level.

The fair value of the awards is estimated on the grant date using a Monte Carlo simulation model due to the market condition for the rTSR component. The fair value assumptions using the Monte Carlo simulation model for awards in 2015 were 0.0% for the dividend yield, 29.3% for historical volatility, and 1.0% for the risk-free rate of return.

During the year ended December 31, 2015, the Company granted approximately 0.1 million PSAs with a grant-date fair value of $44.21 per share. Compensation expense recognized related to PSAs for the year ended December 31, 2015 was $0.7 million. Based on the Company’s current estimate of shares expected to vest, unrecognized compensation expense related to PSAs of $1.9 million as of December 31, 2015 is expected to be recognized over a weighted-average period of approximately 2.0 years.