Stock-Based Compensation Plan

3 Months Ended

Mar. 31, 2017

Stock-Based Compensation Plan [Abstract]

Stock-Based Compensation Plan

(10)  Stock–Based Compensation Plan

Stock Options

The Company grants stock options from time to time to certain employees and independent directors pursuant to its 2007 Equity Incentive Plan, as amended, (Plan). Under the Plan, a maximum of 2,671,980 share awards may be granted.

Stock options granted to employees have a vesting period of four years from grant date, with 25% vesting after one year, and 1/48th vesting each month thereafter until fully vested. Stock options granted to independent directors vest in one year. All of the stock options have a contractual term of ten years.

The following table summarizes the Company’s stock option activities for the three months ended March 31, 2017 and 2016:

		Three Months Ended March 31,
	2017				2016
			Weighted				Weighted
			Average				Average
	Number of		Exercise		Number of		Exercise
	Shares		Price		Shares		Price
Options outstanding at January 1		1,428,255	$	16.31		1,189,255	$	18.08
Options granted		190,500	$	15.89		-	$	-
Options exercised		(60,875)	$	8.44		-	$	-
Options outstanding at March 31		1,557,880	$	16.57		1,189,255	$	18.08
Options exercisable		1,009,555	$	18.21		917,729	$	16.92
Weighted average remaining term		4.5 years				4.7 years

The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2017 was$0.4  million. The aggregate intrinsic value of all options outstanding as of March 31, 2017  was $4.0 million based on the closing price of the Company’s common stock of $15.74 per share on March 31, 2017, the last trading day of the quarter.

The Company recorded stock-based compensation expense of $0.3 million and $0.4 million for the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, the remaining unamortized stock-based compensation cost relating to stock options granted to the Company’s employees and independent directors was approximately $3.3 million, which is to be recognized over the remaining weighted average vesting period of approximately 3.0 years.

CAI INTERNATIONAL, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The fair value of stock options granted to the Company’s employees and independent directors in 2017 was estimated using the Black-Scholes-Merton pricing model using the following weighted average assumptions. No stock options were granted in the three months ended March 31, 2016:

	Three Months Ended
	March 31,
	2017		2016
Stock price	$	15.89	$	-
Exercise price	$	15.89	$	-
Expected term (years)		6.25		-
Expected volatility (%)		56.40		-
Risk-free interest rate (%)		2.14		-
Dividend yield (%)		-		-

The expected option term is calculated using the simplified method in accordance with SEC guidance. The expected volatility was derived from the average volatility of the Company’s stock over a period approximating the expected term of the options. The risk-free rate is based on the daily U.S. Treasury yield curve with a term approximating the expected term of the options. No forfeiture rate was estimated on all options granted during the three months ended March 31, 2017, as the Company accounts for forfeitures as they occur (see Note 2).

Restricted Stock

The Company grants restricted stock from time to time to certain employees pursuant to the Plan. The restricted stock is valued based on the closing price of the Company’s stock on the date of grant and has a vesting period of four years. The following table summarizes the activity of restricted stock under the Plan:

	Number of	Weighted
	Shares of	Average
	Restricted	Grant Date
	Stock	Fair Value
Restricted stock outstanding, December 31, 2016	65,802	$	14.75
Restricted stock granted	85,850	$	15.89
Restricted stock vested	(1,045)	$	24.36
Restricted stock outstanding, March 31, 2017	150,607	$	15.33

The Company recognized $0.1  million of stock-based compensation expense relating to restricted stock for both the three months ended March 31, 2017 and 2016. As of March 31, 2017, unamortized stock-based compensation expense relating to restricted stock was $1.1 million, which will be recognized over the remaining average vesting period of 3.0 years.

Stock-based compensation expense is recorded as a component of administrative expenses in the Company’s consolidated statements of income with a corresponding credit to additional paid-in capital in the Company’s consolidated balance sheets.