11. Stock-based and Other Compensation

9 Months Ended

Sep. 30, 2017

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

Stock-based and Other Compensation

Stock Options

In December 2015, Lifeway shareholders approved the 2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units. At September 30, 2017, 3.448 million shares remain available under the Omnibus Incentive Plan. The Company has not established a pace for the frequency of awards under the Omnibus Incentive Plan, and may choose to suspend the issuance of new awards in the future and may grant additional awards at any time including issuing special grants of restricted stock, restricted stock units, and stock options to attract and retain new and existing executives.

The following table summarizes stock option activity during the nine months ended September 30, 2017:

	Options		Weighted average exercise price		Weighted average remaining contractual life		Aggregate intrinsic value
Outstanding at December 31, 2016		45	$	10.45
Granted		–	$	–
Exercised		–	$	–
Forfeited		–	$	–
Outstanding at September 30, 2017		45	$	10.45		8.50	$	(70	)
Exercisable at September 30, 2017		29	$	10.42		8.50	$	(44	)

For the nine months ended September 30, 2017 and 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income and comprehensive income was $35 and $100, respectively. For the nine months ended September 30, 2017 and 2016 tax-related benefits of $14 and $37 were also recognized. For the three months ended September 30, 2017 and 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income and comprehensive income was $6 and $58, respectively. For the three months ended September 30, 2017 and 2016 tax-related benefits of $3 and $22 were also recognized. As of September 30, 2017, the total remaining unearned compensation related to non-vested stock options was $25, which is expected to be amortized over the weighted-average remaining service period of 1.22 years.

We measure the fair value of stock options using the Black-Scholes option pricing model. The expected term of options granted was based on the weighted average time of vesting and the end of the contractual term. We utilized this simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

Restricted Stock Units

Pursuant to the 2015 Omnibus Incentive Plan, Lifeway granted 2 Restricted Stock Units (“RSUs”) to certain key employees in December 2016. An RSU represents the right to receive one share of common stock in the future. RSUs have no exercise price.

The following table summarizes RSU activity during the nine months ended September 30, 2017:

	RSU’s
Outstanding at December 31, 2016		2
Granted		–
Shares issued upon vesting		–
Forfeited		–
Outstanding at September 30, 2017		2
Weighted average grant date fair value per share	$	10.54

We expense RSU’s over the service period. For the nine months ended September 30, 2017 and 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income and comprehensive income was $14 and $0, respectively. For the nine months ended September 30, 2017 and 2016 tax-related benefits of $6 and $0 were also recognized. For the three months ended September 30, 2017 and 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income and comprehensive income was $5 and $0, respectively. For the three months ended September 30, 2017 and 2016 tax-related benefits of $2 and $0 were also recognized. As of September 30, 2017, the total remaining unearned compensation related to non-vested RSU’s was $6, which is expected to be amortized over the weighted-average remaining service period of 0.71 years.

Incentive Compensation

In March 2016 Lifeway established an incentive-based compensation program (the “2016 Plan”) for certain senior executives and key employees (the “participants”). The incentive compensation was based on the achievement of certain sales and EBITDA performance levels versus respective targets in 2016. Under the 2016 Plan, the senior executives had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $4,000 for fiscal 2016 depending on the performance levels compared to the respective targets. For the nine months and three months ended September 30, 2016, bonuses of $1,280 and $240 were expensed under the 2016 Plan, respectively.

In January 2017, Lifeway established an incentive-based compensation program (the “2017 Plan”) for certain senior executives and key employees (the “participants”). The number of participants under the 2017 Plan was expanded from the 2016 Plan. Under the 2017 Plan, incentive compensation is based on (a) the achievement of certain sales and EBITDA performance levels versus respective targets in 2017, and (b) for certain senior executives, the achievement of individual performance objectives. Under the 2017 Plan, collectively the participants may earn cash and equity based incentive compensation in amounts ranging from $0 to $11,025 depending on the Company’s performance levels compared to the respective targets and the senior executive’s performance compared to their individual objectives. The equity portion of the incentive compensation is payable in restricted stock that vests one-third in each of the three years from the 2017 grant dates. For the nine months ended September 30, 2017, $2,106 was accrued under the 2017 Plan, of which $1,254 was recorded as cash bonus expense and $852 was recorded as stock-based compensation expense in the consolidated statements of income and comprehensive income. For the three months ended September 30, 2017, $121 was accrued under the 2017 Plan, of which $6 was recorded as cash bonus expense and $115 was recorded as stock-based compensation expense in the consolidated statements of income and comprehensive income.

Retirement Benefits

The Company has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan the Company matches employee contributions under a prescribed formula. For the nine months ended September 30, 2017 and 2016 total contribution expense recognized in the consolidated statements of income and comprehensive income was $296 and $255, respectively. For the three months ended September 30, 2017 and 2016 total contribution expense recognized in the consolidated statements of income and comprehensive income was $59 and $82, respectively.