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11. Stock-based and Other Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Note 11 – Stock-based and Other Compensation

In December 2015, Lifeway stockholders 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 to qualifying employees. Under the Plan, the Board or its Audit and Corporate Governance Committee approves stock awards to executive officers and certain senior executives, generally in the form of restricted stock or performance shares. The number of performance shares that participants may earn depends on the extent to which the corresponding performance goals have been achieved. Stock awards generally vest over a three-year performance or service period. At September 30, 2019, 3.381 million shares remain available under the Omnibus Incentive Plan. While we plan to continue to issue awards pursuant to the Plan at least annually, we 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.

Stock Options

The following table summarizes stock option activity during the nine months ended September 30, 2019:

	Options		Weighted average exercise price		Weighted average remaining contractual life		Aggregate intrinsic value

Outstanding at December 31, 2018		41	$	10.42		7.22		–
Granted		–	$	–
Exercised		–	$	–
Forfeited		–	$	–
Outstanding at September 30, 2019		41	$	10.42		6.47	$	–
Exercisable at September 30, 2019		41	$	10.42		6.47	$	–

For the nine months ended September 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $1 and $9, respectively. For the nine months ended September 30, 2019 and 2018 tax-related benefits of $0 and $2 were also recognized. For the three months ended September 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $0 and $2, respectively. For the three months ended September 30, 2019 and 2018 tax-related benefits of $0 and were also recognized. As of September 30, 2019, there is no remaining unearned compensation expense related to non-vested stock options.

Restricted Stock Awards

A Restricted Stock Award (“RSA”) represents the right to receive one share of common stock in the future. RSAs have no exercise price. The grant date fair value of the awards is equal to our closing stock price on the grant date. The following table summarizes RSA activity during the nine months ended September 30, 2019.

	RSA’s

Outstanding at December 31, 2018		25
Granted		39
Shares issued upon vesting		(12	)
Forfeited		–
Outstanding at September 30, 2019		52
Weighted average grant date fair value per share outstanding	$	3.90

We expense RSA’s over the service period. For the nine months ended September 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $82 and $29, respectively. For the nine months ended September 30, 2019 and 2018 tax-related benefits of $22 and $8, respectively, were also recognized. For the three months ended September 30, 2019 and 2018 total pre-tax stock-based compensation expense recognized in the consolidated statements of operations was $30 and $25, respectively. For the three months ended September 30, 2019 and 2018 tax-related benefits of $8 and $7, respectively, were also recognized. As of September 30, 2019, the total remaining unearned compensation related to non-vested RSA’s was $134, which is expected to be amortized over the weighted-average remaining service period of 1.35 years.

Long-Term Incentive Plan Compensation

Lifeway established long-term incentive-based compensation programs for fiscal year 2017 (the “2017 Plan”), fiscal year 2018 (the “2018 Plan”), and for fiscal year 2019 (the “2019 Plan”) for certain senior executives and key employees (the “participants”). Under both the 2017 Plan and the 2018 Plan, long-term incentive compensation is based on Lifeway’s achievement of certain sales and adjusted EBITDA performance levels versus respective targets established by the Board for each fiscal year. Under the 2019 Plan, long-term equity incentive compensation is based on Lifeway’s achievement of four strategic milestones over a three-year period from Fiscal 2019 through Fiscal 2021.

2017 Plan

Under the 2017 Plan, collectively the participants had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,025 depending on Lifeway’s performance levels compared to the respective targets and the participants 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, 2019 and 2018, $234 and $551 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations, respectively. For the three months ended September 30, 2019 and 2018, $54 and $139 was expensed under the 2017 Plan as stock-based compensation expense in the consolidated statements of operations, respectively. As of September 30, 2019, the total remaining unearned compensation related to the 2017 Plan was $103, of which $54 and $49 is expected to be recognized in 2019 and 2020, respectively, subject to vesting.

2018 Plan

Under the 2018 Plan, collectively the participants had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,200 depending on Lifeway’s performance levels compared to the respective targets and the participants performance compared to their individual objectives. The equity portion of the incentive compensation was payable in restricted stock that vests one-third in each of the three years from the 2018 grant dates. For the nine months ended September 30, 2018, $303 was expensed under the 2018 Plan, of which $76 was recorded as cash bonus expense and $227 was recorded as stock-based compensation expense in the consolidated statements of operations. For the three months ended September 30, 2018, $157 was expensed under the 2018 Plan as stock-based compensation expense in the consolidated statements of operations. Due to the final fiscal 2018 financial results, there were no equity-based incentives awarded under the 2018 Plan.

2019 Plan

Under the 2019 Plan, collectively the participants have the opportunity to earn equity-based incentive compensation in amounts ranging from $0 to $1,776 depending on Lifeway’s performance levels compared to the respective targets. The equity-based incentive compensation is payable in restricted stock that vests 50% of unvested shares in year one, 50% of unvested shares in year two, and 100% of remaining unvested shares in year three from the 2019 grant date. For the nine months ended September 30, 2019, $103 was expensed under the 2019 Plan as stock-based compensation expense in the consolidated statements of operations. For the three months ended September 30, 2019, $35 was expensed under the 2019 Plan as stock-based compensation expense in the consolidated statements of operations.

2019 Retention Award

During Q1 2019, we awarded a special retention grant (the “2019 Retention Award”) of restricted stock to senior executives and key employees (the “participants”). The equity-based incentive compensation is payable in restricted stock that vests one-third in March 2019, one-third in March 2020 and one-third in March 2021. For the nine months ended September 30, 2019, $265 was expensed under the 2019 Retention Award as stock-based compensation expense in the consolidated statements of operations. For the three months ended September 30, 2019, $54 was expensed under the 2019 Retention Award as stock-based compensation expense in the consolidated statements of operations.

Retirement Benefits

Lifeway has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan, we match employee contributions under a prescribed formula. For the nine months ended September 30, 2019 and 2018 total contribution expense recognized in the consolidated statements of operations was $269 and $319, respectively. For the three months ended September 30, 2019 and 2018 total contribution expense recognized in the consolidated statements of operations was $88 and $90, respectively.