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Share-based Compensation

12 Months Ended

Dec. 31, 2020

(6) Share-based Compensation

Provisions governing the Company’s share-based compensation awards are included in the A.M. Castle & Co. 2017 Management Incentive Plan (the “MIP”), which became effective on August 31, 2017. The Board of Directors (the “Board”) or a committee thereof (either, in such capacity, the “Administrator”) administers the MIP. The Administrator has broad authority under the MIP, among other things, to: (i) select participants; (ii) determine the terms and conditions, not inconsistent with the MIP, of any award granted under the MIP; (iii) determine the number of shares of the Company’s common stock to be covered by each award granted under the MIP; and (iv) determine the fair market value of awards granted under the MIP.

Persons eligible to receive awards under the MIP include officers, directors and employees of the Company and its subsidiaries. The types of awards that may be granted under the MIP include, stock options, stock appreciation rights, restricted stock, restricted stock units, restricted Convertible Notes, performance units, performance shares and other forms of cash or share-based awards.

The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the MIP (including shares initially convertible as a result of conversion of Convertible Notes issued pursuant to the MIP) is 395, which number may be increased with the approval of the Company’s shareholders. If any outstanding award granted under the MIP expires or is terminated or canceled without

having been exercised or settled in full, or if shares of the Company’s common stock acquired pursuant to an award subject to forfeiture are forfeited, the shares of the Company’s common stock allocable to the terminated portion of such award or such forfeited shares will revert to the MIP and will be available for grant under the MIP as determined by the Administrator, subject to certain restrictions.

As is customary in management incentive plans of this nature, in the event of any change in the outstanding shares of the Company’s common stock by reason of a stock split, stock dividend or other non-recurring dividends or distributions, recapitalization, merger, consolidation, spin-off, combination, repurchase or exchange of stock, reorganization, liquidation, dissolution or other similar corporate transaction, an equitable adjustment will be made in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the MIP. Such adjustment may include an adjustment to the maximum number and kind of shares of stock or other securities or other equity interests as to which awards may be granted under the MIP, the number and kind of shares of stock or other securities or other equity interests subject to outstanding awards and the exercise price thereof, if applicable.

Restricted Shares

The Board has issued restricted shares of the Company's common stock ("Restricted Shares") and restricted 5.00%/7.00% Convertible Notes (the "Restricted 5.00%/7.00% Convertible Notes") to certain officers of the Company, as well as Restricted Shares to certain members of the Board. On March 27, 2020, in conjunction with the Exchange Offer, the Company issued restricted 3.00%/5.00% Convertible Notes (the "Restricted 3.00%/5.00% Convertible Notes") and Restricted Shares in exchange for all of the outstanding Restricted 5.00%/7.00% Convertible Notes, including any accrued and unpaid interest on the Restricted 5.00%/7.00% Convertible Notes as of the date in which the Exchange Offer was completed (the "Restricted Note Exchange"). Pursuant to the Restricted Note Exchange, $1,613 in aggregate principal amount of the Restricted 5.00%/7.00% Convertible Notes were tendered and accepted and in exchange, the Company issued $793 in aggregate principal amount of Restricted 3.00%/5.00% Convertible Notes and 586 shares of Restricted Shares. As of December 31, 2020, the aggregate principal amount of Restricted 3.00%/5.00% Convertible Notes outstanding was $137 and were convertible into an additional 30 shares of the Company’s common stock.

The Restricted Shares granted to certain officers of the Company on September 1, 2017 cliff vested on August 31, 2020. As they relate to the first tranche of Restricted 5.00%/7.00% Convertible Notes, the Restricted 3.00%/5.00% Convertible Notes and Restricted Shares issued as a result of the Restricted Note Exchange also cliff vested on August 31, 2020. As they relate to the second tranche of Restricted 5.00%/7.00% Convertible Notes, which were made available as lapsed incentive awards and awarded to certain officers of the Company on March 25, 2020, the Restricted 3.00%/5.00% Convertible Notes, and Restricted Shares issued as a result of the Restricted Note Exchange cliff vest on August 31, 2024.

The following table summarizes the activity relating to the Company’s Restricted Shares for the year ended December 31, 2020:


		Weighted-Average
	Number of	Grant Date
	Shares	Fair Value
Outstanding at January 1, 2020	143	$	31.30
Granted	59		3.80
Vested	(190)		31.40
Outstanding at December 31, 2020	12		5.60
Expected to vest after December 31, 2020	12		5.60

Performance Share Units

The Board has granted performance share unit awards (“PSUs”) under the MIP to non-executive senior level managers and other select personnel. The PSUs contain a performance-based condition tied to the enterprise value of the Company. Each PSU that vests entitles the participant to receive, at the discretion of the Board, either one share of the Company’s common stock or cash equal to the fair market value of one share of the Company’s common stock. Vesting occurs upon achievement of a defined enterprise value of the Company, with 50% vesting upon achievement of the defined enterprise value between the performance period September 30, 2020 and September 30, 2022, and the remaining 50% vesting upon the achievement of the defined enterprise value as a result of a specified transaction, as defined in the PSU agreement, on or before September 30, 2022.

As of December 31, 2020, there were 75 PSUs outstanding.

Share-Based Compensation Expense

As of December 31, 2020, the unrecognized share-based compensation expense related to unvested Restricted Shares was $39 and the remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of approximately 1.6 years. As discussed in Note 1 - Basis of Presentation and Significant Accounting Policies, the Company has elected to account for forfeitures as they occur.

As of December 31, 2020, the unrecognized compensation expense related to the Restricted 3.00%/5.00% Convertible Notes was $94 and is expected to be recognized over a weighted-average period of approximately 1.7 years. The Company is recognizing this expense on a straight-line basis over the three-year vesting period using the fair value of the Restricted 3.00%/5.00% Convertible Notes at the issue date.

Compensation expense recognized related to the PSUs is based on management’s expectation of future performance compared to the pre-established performance goals. If the performance goals are not expected to be met, no compensation expense is recognized and any previously recognized compensation expense is reversed. As of December 31, 2020, no compensation expense was recognized for these awards to date as the threshold for expense recognition for the performance-based condition had not been met.

Total share-based compensation expense was $816 for the year ended December 31, 2020 and $2,862 for the year ended December 31, 2019.