Share-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

(4) Share-Based Compensation

Share-Based Compensation Plans

In 2016, the Company adopted the 2016 Equity Incentive Plan (as amended from time to time, the “2016 Plan”). The Company also adopted the Inducement Plan (as amended from time to time, the “Inducement Plan,” and, together with the 2016 Plan, the “Plans”) on December 15, 2016. Under the Plans, the Company does not estimate the forfeiture rate during the initial calculation of compensation cost but rather has elected to account for forfeitures in compensation cost when they occur.

The Company computes a deferred tax benefit for restricted stock units (“RSUs”), performance-based stock units (“PSUs”) and stock options expected to generate future tax deductions by applying its effective tax rate to the expense recorded. For RSUs, the Company's actual tax deduction is based on the value of the units at the time of vesting.

The expense for awards issued to both employees and non-employees, which was recorded in “General and administrative, net” in the accompanying condensed consolidated statements of operations was $1.1 million and $1.8 million for the three months ended September 30, 2020 and 2019, respectively, and $3.5 million and $5.1 million for the nine months ended September 30, 2020 and 2019, respectively. Capitalized share-based compensation was less than $0.1 million and was $0.1 million for the three months ended September 30, 2020 and 2019, respectively, and $0.2 million and $0.4 million for the nine months ended September 30, 2020 and 2019, respectively.

We view stock option awards and RSUs with graded vesting as single awards with an expected life equal to the average expected life of component awards, and we amortize the awards on a straight-line basis over the life of the awards.

On April 2, 2019, our Board of Directors authorized a one-time grant of market-based awards (both RSUs and PSUs) in exchange for the cancellation of special equity awards (both RSUs and stock options) made to our named executive officers on August 9, 2018 (the “Equity Award Exchange”). As required under the terms of the 2016 Plan, this Equity Award Exchange was approved by the Company's shareholders on May 21, 2019. Pursuant to the Equity Award Exchange our executives were given the opportunity to exchange out-of-the-money or “underwater” stock options that were granted in August 2018 and certain RSUs also granted in August 2018 to receive a new equity award that consists of 50% time-based RSUs and 50% PSUs, granted under the 2016 Plan. The incremental compensation cost associated with the Equity Award Exchange was determined to be $1.2 million. This incremental cost was measured as the excess of the fair value of each new equity award, measured as of the date the new equity awards were granted, over the fair value of the stock options and RSUs surrendered in exchange for the new equity awards, measured immediately prior to the cancellation. This incremental compensation cost is being recognized ratably over the vesting period or performance period, as applicable, of the new equity awards.

Stock Option Awards

The compensation cost related to stock option awards is based on the grant date fair value and is typically expensed over the vesting period (generally one to five years). We use the Black-Scholes option pricing model to estimate the fair value of stock option awards.

At September 30, 2020, we had $0.7 million of unrecognized compensation cost related to stock option awards. The following table provides information regarding stock option award activity for the nine months ended September 30, 2020:


	Shares	Wtd. Avg. Exer. Price
Options outstanding, beginning of period	324,324	$	27.68



Options expired	(17,372)	$	26.96

Options outstanding, end of period	306,952	$	27.72
Options exercisable, end of period	209,426	$	28.39

Our outstanding stock option awards at September 30, 2020 had no measurable aggregate intrinsic value. At September 30, 2020, the weighted-average remaining contract life of stock option awards outstanding was 5.0 years and exercisable was 4.3 years. The total intrinsic value of stock option awards exercisable had no value for the nine months ended September 30, 2020.

Restricted Stock Units

The compensation cost related to these awards is based on the grant date fair value and is typically expensed over the requisite service period (generally one to five years).

As of September 30, 2020, we had $3.1 million unrecognized compensation expense related to our RSUs which is expected to be recognized over a weighted-average period of 1.3 years.

The following table provides information regarding RSU activity for the nine months ended September 30, 2020:


	RSUs	Wtd. Avg. Grant Price
RSUs outstanding, beginning of period	342,683	$	22.10
RSUs granted	397,285	$	2.83


RSUs forfeited	(1,794)	$	8.41
RSUs vested	(158,726)	$	21.38
RSUs outstanding, end of period	579,448	$	9.13

Performance-Based Stock Units

On February 20, 2018, the Company granted 30,700 PSUs for which the number of shares earned is based on the total shareholder return (“TSR”) of the Company's common stock relative to the TSR of its selected peers during the performance period from January 1, 2018 to December 31, 2020. The awards contain market conditions which allow a payout ranging between 0% and 200% of the target payout. The fair value as of the grant date was $41.66 per unit or 150.6% of the stock price. The compensation expense for these awards is based on the per unit grant date valuation using a Monte Carlo simulation multiplied by the target payout level. The payout level is calculated based on actual stock price performance achieved during the performance period. The awards have a cliff-vesting period of three years.

On May 21, 2019, the Company granted an additional 99,500 PSUs (as part of the Equity Award Exchange discussed above) for which the number of shares earned is based on the TSR of the Company's common stock relative to the TSR of its selected peers during the performance period from January 1, 2019 to December 31, 2021. The awards contain market conditions which allow a payout ranging between 0% and 200% of the target payout. The fair value as of the grant date was $18.86 per unit or 112.9% of the stock price. The awards have a cliff-vesting period of three years.

As of September 30, 2020, we had $1.3 million unrecognized compensation expense related to our PSUs based on the assumption of 100% target payout. The remaining weighted-average performance period is 1.2 years. No shares vested during the nine months ended September 30, 2020.