Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company has stock plans under which directors, officers, key employees and consultants of the Company may be granted restricted stock awards, stock options, performance share awards and other equity-based instruments as a means of promoting the Company’s long-term growth and profitability. The plans are intended to encourage participants to contribute to, and participate in the success of the Company.

On December 16, 2014, the Company's Board of Directors approved the 2015 Incentive Award Plan, or 2015 Plan, which was subsequently approved by the Company's stockholders on June 16, 2015. On March 10, 2021, the Company's Board of Directors approved an amendment of the Company's 2015 Incentive Award Plan to increase the number of authorized shares of common stock available for issuance by 3.2 million shares. The amendment was subsequently approved by the Company's stockholders on May 20, 2021. As of December 31, 2021 and December 31, 2020, 4,174,216 and 1,618,417 shares of the Company’s common stock, respectively, remained available for future issuance under the 2015 Plan, as amended.

Stock-based compensation cost amounted to $12.5 million, $11.6 million and $8.2 million for 2021, 2020 and 2019, respectively. During 2021, 2020 and 2019 there was a $1.2 million, $3.6 million and $1.9 million tax benefit recognized in income related to stock-based compensation.

Restricted Stock and Restricted Stock Units

Restricted stock and restricted stock unit awards are valued at the fair value of the shares on the date of grant. Generally, granted shares and units vest over a two to four year graded vesting period. Each restricted stock unit represents the right to receive one share of common stock upon vesting of such restricted stock unit. Vesting of restricted stock units is based on time-based service conditions. In order to vest, the participant must still be employed by the Company, with certain contractual exclusions, at each vesting event. Generally, within 30 days after vesting, the shares underlying the award will be issued to the participant. In the event a successor corporation in a change in control situation fails to assume or substitute for the restricted stock units, the restricted stock units will automatically vest in full as of immediately prior to the consummation of such change in control. In the event of death or permanent disability of a participant, the restricted stock units will automatically vest in full. Compensation expense is recognized on a straight-line basis over the requisite service period.

A summary of the status of the Company’s restricted stock shares (restricted stock awards and restricted stock unit awards) as of December 31, 2021 and changes during the year ended December 31, 2021 is presented below:


	Number of Shares	Weighted-Average Grant Date Fair Value ($)
Outstanding at December 31, 2020	400,476	41.74
Granted	399,179	25.17
Vested	(171,391)	41.96
Forfeited	(46,564)	32.10
Outstanding at December 31, 2021	581,700	31.07

There were 399,179 and 222,401 restricted stock shares granted during the years ended December 31, 2021 and December 31, 2020, respectively. As of December 31, 2021 and December 31, 2020, there was $9.9 million and $10.4 million, respectively, of total unrecognized compensation cost related to nonvested restricted stock to be recognized over 1.6 years and 2.0 years, respectively.

The weighted-average fair value of restricted stock granted during the years ended December 31, 2021, 2020 and 2019 was $25.17, $35.48 and $53.41, respectively. The total fair value of restricted stock shares vested during the years ended December 31, 2021, 2020 and 2019 was $4.6 million, $5.5 million and $5.4 million, respectively.

Performance Share Awards

The Company grants certain senior-level executives performance stock units that vest based on either market and time-based service conditions or performance and time-based service conditions as part of a long-term incentive plan, which are referred to herein as performance share awards. The number of shares of common stock underlying each award is determined at the end of a three-year performance period. In order to vest, the senior level executive must still be employed by the Company, with certain contractual exclusions, at the end of the performance period. Depending on the type of performance stock unit, at the end of the performance period, the percentage of the stock units that will vest will be determined by ranking the Company’s total shareholder return compared to the total shareholder return of the peer companies identified in the plan or by ranking the Company's adjusted operating margin percentage compared to the adjusted operating margin percentage of the peer company's identified in the plan. Based on the level of performance, between 0% and 200% of the award may vest. Within 60 days after vesting, the shares underlying the award will be issued to the participant. In the event of a change in control of the Company or the death or permanent disability of a participant, the payout of any award is limited to a pro-rated portion of such award based upon a performance assessment prior to the change-in-control date or date of death or permanent disability.

The grant date fair value of the performance share awards based on total shareholder return (market condition) is determined through the use of a Monte Carlo simulation model. The market condition requirements are reflected in the grant date fair value of the award, and the compensation expense, net of forfeitures, for the award is recognized assuming that the requisite service is rendered regardless of whether the market conditions are achieved. Compensation expense is recognized on a straight-line basis over the requisite service period. The Monte Carlo simulation model used for valuation of these awards utilizes multiple input variables that determine the probability of satisfying the market condition requirements applicable to each award. The inputs utilized for the performance share awards based on total shareholder return are as follows:


	Weighted-Average at Grant Date for Twelve Months Ended December 31, 2020
Expected volatility factor	0.40
Risk free interest rate	1.58	%
Expected term (in years)	2.96
Expected dividend yield	—	%

During the twelve months ended December 31, 2021, the Company did not grant any performance share awards based on total shareholder return. For grants awarded in 2020 and 2019, the volatility was based upon a weighted average historical volatility for the Company. The Company chose to use historical volatility to value these awards because historical prices were used to develop the correlation coefficients between the Company and each of the peer companies within the peer group in order to model stock price movements. The volatilities used were calculated as the remaining term of the performance period at the date of grant. The risk-free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the remaining performance period. The Company does not intend to pay dividends on its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of zero in its model.

The following table summarizes the Company’s market condition performance share awards for the year ended December 31, 2021:



	Number of Awards	Weighted-Average Fair Value at Grant Date ($)
Outstanding at December 31, 2020	84,911	60.88
Granted	—	—
Vested	(44,835)	70.77
Forfeited	(7,229)	60.62
Outstanding at December 31, 2021	32,847	47.43

The grant date fair value of the performance share awards based on operating margin (performance condition) is based on grant date stock price, in accordance with the valuation of performance conditions applicable to this award type. The probability of payout for these awards is evaluated at each report date and adjustments are made to stock-based compensation expense based on the number of shares deemed probable of issuance upon vesting.

The following table summarizes the Company’s performance condition performance share awards for the year ended December 31, 2021:


	Number of Awards	Weighted-Average Fair Value at Grant Date ($)
Outstanding at December 31, 2020	96,098	45.14
Granted	77,722	25.16
Vested	(22,203)	60.11
Forfeited	(17,638)	34.39
Outstanding at December 31, 2021	133,979	32.49

As of December 31, 2021 and 2020, there was $1.6 million and $4.8 million, respectively, of total unrecognized compensation cost related to performance share awards expected to be recognized over 1.57 years and 1.66 years, respectively.

Market Share Unit Awards

The Company grants certain senior-level executives market share units that vest based on market performance and time-based service conditions as part of a long-term incentive plan, which are referred to herein as market share unit awards (MSUs). The MSUs are market performance-based awards that vest based on the Company’s total shareholder return performance over a three-year period. At the end of the first and second years of the performance period, performance is measured and up to 100% of target shares can be banked to vest at the end of the full performance period. At the end of the third and final year of the performance period, performance is measured and up to the lower of 300% of the target shares or 5-times the target award value can be earned. In order to vest, the senior level executive must still be employed by the Company, with certain contractual exclusions, at the end of the performance period. Based on the level of performance, between 0% and 300% of the award may vest. Within 60 days after vesting, the shares underlying the award will be issued to the participant. In the event of a change in control of the Company or the death or permanent disability of a participant, the payout of any award is calculated based on the price per share payable in connection with such change in control.

The grant date fair value of MSUs is determined through the use of Monte Carlo simulation model and are expensed over the requisite service period rendered. The market performance condition requirements are reflected in the grant date fair value of the award, and the compensation expense, net of forfeitures, for the award is recognized assuming that the requisite service is rendered regardless of whether the market performance conditions are achieved. Compensation expense is recognized on a straight-line basis over the requisite service period. The Monte Carlo simulation model used for valuation of these awards utilizes multiple input variables that determine the probability of satisfying the market performance condition requirements applicable. The inputs utilized for the MSUs awarded in 2021 are as follows:


	Weighted-Average at Grant Date for Twelve Months Ended December 31, 2021
Blended volatility factor	0.73
Risk free interest rate	0.22	%
Expected term (in years)	2.96
Expected dividend yield	—	%

For grants awarded in 2021, the volatility utilized is blended and weighted based on both the historical and implied volatilities of the Company. The Company chose to use a blended volatility rate to value these awards as it combines aspects of both historical and implied volatility as a forward-looking measure, which provides a more realistic estimate of the potential future outcome. The volatilities used were calculated as the remaining term of the performance period at the date of grant. The valuation was done under a risk neutral framework using the term matched zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve on the grant date. The Company does not intend to pay dividends on its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of zero in its model.

The following table summarizes the Company’s MSU awards for the year ended December 31, 2021:


	Number of Awards	Weighted-Average Fair Value at Grant Date ($)
Outstanding at December 31, 2020	—	—
Granted	116,801	28.84
Vested	—	—
Forfeited	(9,389)	28.84
Outstanding at December 31, 2021	107,412	28.84

As of December 31, 2021, there was $2.1 million of total unrecognized compensation cost related to MSU awards expected to be recognized over 2.00 years.

Treasury Stock

During the year ended December 31, 2021, 2020 and 2019, the Company repurchased 54 thousand, 44 thousand and 91 thousand shares, respectively, for $1.5 million, $1.7 million and $5.4 million, respectively. Repurchases made during the twelve months ended December 31, 2021 include repurchases made from employees who received restricted stock awards or performance share awards. Repurchases made during the twelve months ended December 31, 2020 and 2019 include repurchases made from employees who received restricted stock awards. During the year ended December 31, 2021, 2020 and 2019, the Company did not retire any treasury shares.