Stock Compensation

12 Months Ended

Dec. 31, 2019

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

Prior to the IPO, our Amended and Restated Stock Incentive Plan, (the “Stock Incentive Plan”), allowed us to offer common options, B-1 common options and common RSUs for the benefit of our employees, affiliate employees and key non-employees. Under the Stock Incentive Plan, we could award up to an aggregate of 2,761,000 common shares and 4,732,200 B-1 common shares. The Stock Incentive Plan provided for accelerated vesting of awards upon the occurrence of certain events. Through December 31, 2016, we issued 5,156,976 options and 385,220 RSUs under the Stock Incentive Plan.

In connection with our IPO, the Board adopted, and our shareholders approved, the JELD-WEN Holding, Inc. 2017 Omnibus Equity Plan, (the “Omnibus Equity Plan”). Under the Omnibus Equity Plan, equity awards may be made in respect of 7,500,000 shares of our Common Stock and may be granted in the form of options, restricted stock, RSUs, stock appreciation rights, dividend equivalent rights, share awards and performance-based awards (including performance share units and performance-based restricted stock).

Share-based compensation expense included in SG&A expenses totaled $13.3 million, $15.1 million, and $19.8 million in 2019, 2018, and 2017, respectively. We recognized a windfall tax benefit of $12.7 million in 2017, which included a benefit of $14.1 million in the U.S., offset by disallowances in our foreign subsidiaries of $1.4 million. There were no material related tax benefits for the years 2019 or 2018. As of December 31, 2019, there was $24.2 million of total

unrecognized compensation expense related to non-vested share-based compensation arrangements. This cost is expected to be recognized over the remaining weighted-average vesting period of 2.0 years.

Stock Options – Generally, stock option awards vest ratably each year on the anniversary date over a 3 to 5-year period, have an exercise term of 10 years, and any vested options must be exercised within 90 days of the employee leaving the Company. The compensation cost of option awards is charged to expense based upon the graded-vesting method over the vesting periods applicable to the option awards. The graded-vesting method provides for vesting of portions of the overall awards at interim dates and results in greater expense in earlier years than the straight-line method.

When options are granted, we calculate the fair value of common and Class B-1 Common Stock options using multiple Black-Scholes option valuation models. Expected volatilities are based upon a selection of public guideline companies. The risk-free rate was based upon U.S. Treasury rates.

Key assumptions used in the valuation models were as follows for the years ended December 31:



	2019	2018	2017
Expected volatility	37.90% - 40.02%	34.81% - 39.68%	37.36% - 42.83%
Expected dividend yield rate	0.00%	0.00%	0.00%
Weighted average term (in years)	5.50 - 6.50	5.50 - 6.50	5.50 - 6.50
Weighted average grant date fair value	$8.32	$12.98	$11.51
Risk free rate	1.79% - 2.50%	2.04% - 2.96%	1.83% - 2.19%

The following table represents stock option activity:



	Shares	Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value (millions)		Weighted Average Remaining Contract Term in Years
Outstanding as of January 1, 2017	5,156,976	$	20.40
Issued upon conversion of class B-1 Common Stock	2,494,553	11.13
Granted	505,122	27.78
Exercised	(2,781,055)	11.67
Forfeited	(448,928)	15.01
Balance as of December 31, 2017	4,926,668	$	14.56
Granted	838,912	32.16
Exercised	(1,548,484)	13.79
Forfeited	(884,391)	18.8
Balance as of December 31, 2018	3,332,705	$	18.22
Granted	443,170	20.94
Exercised	(641,706)	10.56
Forfeited	(301,370)	26.07
Balance as of December 31, 2019	2,832,799	$	19.55	$	17.0	5.9

Exercisable as of December 31, 2019	1,755,821	$	16.47	$	14.6	4.6

RSUs – RSUs are subject to the continued service of the recipient through the vesting date, which is generally 12 to 60 months from issuance. Once vested, the recipient will receive one share of Common Stock for each restricted stock unit. Prior to the IPO, the grant-date fair value per share used for RSUs was determined using the aggregate value of our common equity, as determined by a third-party valuation firm, as of the most recent calendar quarter-end and applying a 10% discount based upon reflecting the differential economic rights and preferences of the Preferred or the ESOP common shares relative to the common shares, with that amount rounded down to the nearest whole percent. After the IPO, the grant-date fair value per share used for RSUs was determined using the closing price of our Common Stock on the NYSE on the date of the grant. We apply this grant-date fair value per share to the total number of shares that we anticipate will fully vest and amortize the fair value to compensation expense over the vesting period using the straight-line method. In February 2018, we granted 314,267 RSUs to our then Chairman of the Board and interim CEO which vested daily through

the first anniversary of the date of grant, subject to continuous employment. On June 30, 2018, 208,364 RSUs were forfeited at the end of his interim service.

The following table represents RSU activity:



	Shares	Weighted Average Grant-Date Fair Value Per Share
Outstanding as of January 1, 2017	385,220	$	22.00
Granted	365,972	28.89
Vested	(175,110)	18.40
Forfeited	(13,714)	26.02
Balance as of December 31, 2017	562,368	$	27.51
Granted	766,927	29.14
Vested	(124,560)	25.21
Forfeited	(530,867)	29.69
Balance as of December 31, 2018	673,868	$	28.07
Granted	952,801	20.07
Vested	(232,666)	30.08
Forfeited	(154,498)	23.38
Balance as of December 31, 2019	1,239,505	$	22.13

PSUs – In 2018 and 2019, we issued PSUs pursuant to the Omnibus Equity Plan. The PSUs are subject to continued employment of the recipient through the vesting date, which is on the third anniversary of the grant. Once vested, the recipient will receive one share of Common Stock for each vested PSU.

The number of PSUs that vest is determined by a payout factor consisting of equally weighted performance measures of Adjusted EBITDA and free cash flow and is adjusted based upon a market condition measured by our relative total shareholder return (“TSR”) as compared to the TSR of the Russell 3000 index. The fair value of the award is estimated using a Monte Carlo simulation approach in a risk-neutral framework to model future stock price movements based on historical volatility, risk free rates of return and correlation matrix.

The following table represents PSU activity for the awarded shares at target performance measures:



	Shares	Weighted Average Grant-Date Fair Value Per Share
Outstanding as of January 1, 2018	—	$	—
Granted	193,763	31.60
Forfeited	(19,093)	33.31
Balance as of December 31, 2018	174,670	$	31.41
Granted	401,935	22.21
Forfeited	(65,832)	25.24
Balance as of December 31, 2019	510,773	$	24.97