Stock Benefit Plans

12 Months Ended

Dec. 31, 2019

Stock Benefit Plans

Stock Benefit Plans

10. Stock Benefit Plans

Pursuant to the Long-Term Incentive Plan, Holdings may grant stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, deferred stock units, performance and cash-settled awards and dividend equivalents to select employees, officers, directors and consultants of Holdings and its affiliates. In May 2017, our stockholders approved amendments to the Long-Term Incentive Plan that increased the number of shares available for issuance under the Long-Term Incentive Plan by 4,000,000 shares.

During the years ended December 31, 2019, 2018, and 2017 we recognized stock-based compensation expense related to the Long-Term Incentive Plan, excluding amounts related to our 2017 Performance Award (as defined below), of $13.0 million, $15.5 million and $16.9 million, respectively.

As of December 31, 2019, options to purchase approximately 6,408,000 shares of common stock of Holdings and approximately 62,000 shares of restricted stock or restricted stock units were outstanding under the Long-Term Incentive Plan and approximately 3,518,000 shares were available for future grant.

Stock Options

Options granted under the Long-Term Incentive Plan are designated as either incentive stock options or non-qualified stock options. Options are generally granted with an exercise price equal to the fair market value of the common stock of Holdings on the date of grant. While certain stock options are subject to acceleration in connection with a change in control, options are generally cumulatively exercisable in four equal annual installments commencing one year after the date of grant with a ten-year term. Generally, the unvested portion of stock option awards is forfeited upon termination of employment. Stock option compensation is recognized over the vesting period using the graded vesting terms of the respective grant.

The estimated fair value of our options granted was calculated using the Black-Scholes option pricing valuation model. This model takes into account several factors and assumptions. The risk-free interest rate is based on the yield on United States Treasury zero-coupon issues with a remaining term equal to the expected term assumption at the time of grant. We have sufficient historical data to develop an expected term assumption and we calculated the expected term using a mid-point scenario with a one-year grant date filter to exclude grants for which vesting could not have yet occurred. Expected volatility is based three-fourths on the term-matching historical volatility of our stock and one-fourth on the weighted-average implied volatility based on forward-looking pricing data on exchange-traded options for our stock. The expected dividend yield is based on our current quarterly dividend and a three-month average stock price. The fair value of stock options on the date of grant is expensed on a straight line basis over the requisite service period of the graded vesting term as if the award was, in substance, multiple awards.

The following weighted-average assumptions were utilized in the Black-Scholes model to value the stock options granted during the years ended December 31, 2019, 2018 and 2017:

	December 31, 2019				December 31, 2018				December 31, 2017
	CEO		Employees		CEO		Employees		CEO		Employees
Risk-free interest rate	1.59	%	1.42	%	2.52	%	2.67	%	1.64	%	1.56	%
Expected life (in years)	3.67		3.67		3.85		3.68		3.85		3.85
Expected volatility	28.62	%	26.96	%	23.20	%	22.51	%	21.89	%	22.70	%
Expected dividend yield	6.47	%	6.12	%	4.67	%	4.54	%	4.22	%	4.42	%

The following table summarizes stock option activity for the year ended December 31, 2019:

		Weighted Avg.		Weighted Avg.
		Exercise Price		Remaining	Aggregate
		Per Share		Contractual	Intrinsic Value
(Amounts in thousands, expect per share and term data)	Shares	($)		Term	($)
Balance at December 31, 2018	5,380	$	50.60
Granted	1,971	$	56.15
Exercised	(441)	$	39.70
Canceled or exchanged	(50)	$	51.83
Forfeited	(452)	$	59.41
Expired	—	$	—
Balance at December 31, 2019	6,408	$	52.42	6.91	$	15,776
Vested and expected to vest at December 31, 2019	6,122	$	52.08	6.81	$	15,776
Options exercisable at December 31, 2019	3,066	$	46.59	4.64	$	15,776

The following table presents the weighted average grant date fair value per share of the options granted, the total intrinsic value of options exercised, the total fair value of options that have vested, and the total cash received from the exercise of stock options during the years ended December 31, 2019, 2018 and 2017:

	Year Ended December 31,
(Amounts in thousands, expect per share data)	2019		2018		2017
Weighted average grant date fair value per share of options granted	$	6.38	$	8.01	$	6.26
Total intrinsic value of options exercised	$	7,130	$	31,822	$	52,955
Total fair value of vested options	$	10,253	$	8,446	$	8,436
Total cash received from the exercise of stock options	$	17,495	$	41,658	$	60,583

As of December 31, 2019, there was $14.9 million of unrecognized compensation expense related to option awards. The weighted-average period over which that cost is expected to be recognized is 3.30 years.

Stock, Restricted Stock and Restricted Stock Units

Stock, restricted stock and restricted stock units granted under the Long-Term Incentive Plan may be subject to transfer and other restrictions as determined by the compensation committee of Holdings’ Board of Directors. Generally, the unvested portion of restricted stock and restricted stock unit awards is forfeited upon termination of employment. The fair value of stock, restricted stock and restricted stock unit awards on the date of grant is expensed on a straight line basis over the requisite service period of the graded vesting term as if the award was, in substance, multiple awards.

During the year ended December 31, 2014, a performance award was established based on our goal to achieve Modified EBITDA of $600 million by 2017 (the "2017 Performance Award"). "Modified EBITDA” is defined as the Company’s consolidated income from continuing operations: excluding the cumulative effect of changes in accounting principles; discontinued operations gains or losses; income tax expense or benefit; restructure costs or recoveries; reorganization items (net); other income or expense; gain or loss on early extinguishment of debt; equity in income or loss of investees; interest expense (net); gain or loss on disposal of assets; gain or loss on the sale of investees; amortization; depreciation; stock-based compensation; and fresh start accounting valuation adjustments. We did not reach late achievement of the 2017 Performance Award goal in 2018 and thus all previously recognized stock-based compensation associated with this award was reversed.

During the year ended December 31, 2016, an additional performance award was established based on our aspirational goal to achieve Modified EBITDA of $750 million by 2020 (the "2020 Performance Award"). The aggregate payout under the performance award to key employees if the target is achieved in 2020 would be 1,025,000 shares plus associated Dividend Equivalent Rights (“DERs”) but could be more or less depending on the level of achievement and the timing thereof. As of December 31, 2019, 857,000 shares have been granted. There has been no stock-based compensation expense recorded for this performance award because it is not deemed probable that we will achieve the specified performance targets as of December 31, 2019. Based on the closing market price of Holdings’ common stock on the last trading day of the quarter ended December 31, 2019, the total unrecognized compensation expense related to this award at target achievement in 2020 is $46.2 million that will be expensed over the service period if it becomes probable of achieving the performance condition. The required growth rate, combined with the uncertainty of the timing of our international agreements revenue over the next few years has led us to revisit our medium-term outlook and conclude that on time or late achievement of the 2020 Performance Award is not reasonably attainable. We will continue to evaluate the probability of achieving the performance condition going forward and record the appropriate expense if necessary.

The following table summarizes stock, restricted stock and restricted stock unit activity for the year ended December 31, 2019:

			Weighted
			Average Grant
			Date Fair Value
			Per Share
(Amounts in thousands, except per share amounts)	Shares		($)
Non-vested balance at December 31, 2018	16	$	63.69
Granted	62	$	48.29
Vested	(16)	$	63.69
Forfeited	—	$	—
Canceled	—	$	—
Non-vested balance at December 31, 2019	62	$	48.29

The following table presents the weighted average grant date fair value per share of stock awards granted, the total grant date fair value of stock awards granted, and the total fair value of stock awards that have vested during the years ended December 31, 2019, 2018 and 2017:

	Year Ended December 31,
(Amounts in thousands, expect per share data)	2019		2018		2017
Weighted average grant date fair value per share of stock awards granted	$	48.29	$	63.80	$	61.74
Total grant date fair value of stock awards granted	$	3,007	$	4,185	$	750
Total fair value of vested stock awards	$	1,027	$	3,888	$	560

There was $2.2 million of total unrecognized stock-based compensation expense related to stock, restricted stock and restricted stock units as of December 31, 2019 that is expected to be recognized over a weighted-average period of 0.80 years.

Deferred Share Units

Non-employee directors can elect to receive the value of their annual cash retainer as a deferred share unit award ("DSU") under the Long-Term Incentive Plan whereby the non-employee director is granted DSUs in an amount equal to such director’s annual cash retainer divided by the closing price of Holdings’ common stock on the date of the annual stockholders meeting. Each DSU represents Holdings’ obligation to issue one share of common stock. The shares are delivered approximately thirty days following the cessation of the non-employee director’s service as a director of Holdings’.

DSUs generally vest consistent with the manner in which non-employee directors’ cash retainers are paid. The fair value of the DSUs on the date of grant is expensed on a straight line basis over the requisite service period.

During each of the years ended December 31, 2019, 2018 and 2017, approximately 4,000 DSUs, 3,000 DSUs and 3,000 DSUs were granted, respectively, at a weighted-average grant date fair value of $50.12, $57.04 and $56.32 per DSU, respectively. The total grant date fair value of DSUs granted was $0.2 million for the years ended December 31, 2019, 2018 and 2017.

As of December 31, 2019, there was no unrecognized compensation expense related to the outstanding DSUs.

Dividend Equivalent Rights

On February 8, 2012, Holdings’ Board of Directors granted DERs to holders of unvested stock options, at which time, approximately 10.0 million unvested stock options were outstanding. The DERs accrue dividends as of the record date of each of Holdings’ dividends that will be distributed to stock option holders upon the vesting of their stock option award. Holdings will distribute the accumulated accrued dividends pursuant to the DERs in either cash or shares of common stock. Generally, holders of stock options for fewer than 1,000 shares of stock will receive their accumulated accrued dividends in cash and holders of stock options for 1,000 shares of stock or greater will receive their accumulated accrued dividends in shares of common stock. In addition, Holdings’ Board of Directors granted similar DERs payable in shares of common stock if and when any shares are granted under the 2020 Performance Award.

Holdings’ Board of Directors granted approximately 2.0 million, 1.5 million and 1.9 million additional options to the majority of our full-time employees as well as DERs in connection with such options during the years ended December 31, 2019, 2018 and 2017, respectively. Exclusive of stock-based compensation recognized for the DER grants associated with the 2017 Performance Award discussed above, we recorded stock-based compensation for DER grants of $5.0 million, $5.9 million and $4.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Employee Stock Purchase Plan

The Six Flags Entertainment Corporation Employee Stock Purchase Plan (the "ESPP") allows eligible employees to purchase Holdings’ common stock at 90% of the lower of the market value of the common stock at the beginning or end of each successive six-month offering period. Amounts accumulated through participants’ payroll deductions ("purchase rights") are used to purchase shares of common stock at the end of each purchase period. No more than 2,000,000 shares of common stock of Holdings may be issued pursuant to the ESPP. Holdings’ common stock may be issued from authorized and unissued shares, treasury shares or shares purchased on the open market. As of December 31, 2019, we had 1,652,000 shares available for purchase pursuant to the ESPP.

In accordance with FASB ASC Topic 718, Stock Based Compensation, stock-based compensation related to purchase rights is recognized based on the intrinsic value of each respective six-month ESPP offering period. As of December 31, 2019 and 2018, no purchase rights were outstanding under the ESPP.

Stock-based compensation consisted of the following amounts for the years ended December 31, 2019, 2018 and 2017. We present separately the reversal of previously recorded stock-based compensation related to the 2017 Performance Award from our Long-Term Incentive Plan and Employee Stock Purchase Plan.

	Year Ended December 31,
(Amounts in thousands)	2019		2018		2017
Long-Term Incentive Plan
Options and other	$	13,037	$	15,543	$	16,910
Performance awards		—		(62,512)		(39,935)
Employee Stock Purchase Plan		237		285		328
Total Stock-Based Compensation	$	13,274	$	(46,684)	$	(22,697)