Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

The Compensation Committee of the Company's Board of Directors is responsible for the administration of the Company's stock incentive plans, which include the 2017 Long Term Incentive Plan, or the "2017 LTIP", which was approved by shareholders in May 2017 and authorized the maximum aggregate number of shares of common stock to be issued at 2,400,000. In general, the Company's 2017 LTIP provides for grants of restricted stock and stock options to be issued with a per-share price equal to the fair market value of a share of common stock on the date of grant.  Option terms are specified at each grant date, but are generally 10 years from the date of issuance.  Options generally vest over a three to five year period.  

The Company applies a 3.2% and a 5.5% forfeiture rate, which gets compounded over the vesting terms of the individual award, to its restricted stock and option grants, respectively, based on historical analysis.

In the three months ended September 30, 2017 and 2016, compensation expense related to stock based awards outstanding was $592,000 and $540,000, respectively. In the nine months ended September 30, 2017 and 2016, compensation expense related to stock based awards outstanding was $1.8 million and $1.8 million, respectively.

In May 2017, the Company granted certain executives options to purchase 425,204 shares of common stock and used the Black Scholes option pricing model to estimate the fair value of these options using the following assumptions:

Grant-date fair value	$	2.44
Risk-free interest rate	1.46		%
Expected volatility	48.2		%
Expected term of options (in years)	3.0
Dividend yield	—		%

The risk-free interest rate is based on interest rates on U.S. Treasury zero-coupon issues that match the contractual terms of the stock option grants. The expected term represents the period in which the Company's equity awards are expected to be outstanding.

Also, in May 2017, certain officers and executives of the Company were awarded 345,913 shares of restricted common stock. The fair value on the date of the grant was $7.22 per share.

In May 2017, the Company awarded certain executives 69,945 shares of performance based stock options, with 100% of shares to be earned based on the achievement of an objective return on invested capital measured over a two-year performance period. The fair value on the date of the grant of $7.22 per share.

In the three months ended September 30, 2017, 13,710 options were exercised, generating proceeds to the Company of $68,000. In the three months ended September 30, 2016, no options were exercised, generating no proceeds to the Company. In the nine months ended September 30, 2017, 173,518 options were exercised, generating proceeds to the Company of approximately $1.0 million. In the nine months ended September 30, 2016, 3,924 options were exercised, generating proceeds to the Company of approximately $8,000.

At September 30, 2017, total unrecognized compensation expense related to unvested stock and options was approximately $4.1 million, which is expected to be recognized over a period of approximately two years.