EQUITY-BASED COMPENSATION

Equity-based payments to employees and directors, including grants of stock options, restricted stock units, and restricted stock, are recognized in the statements of operations based on the grant-date fair value of the award. The Company uses the straight-line method of attributing the value of stock-based compensation expense over the vesting periods. Stock compensation expense recognized during the period is based on the value of the portion of equity-based awards that is ultimately expected to vest during the period. Vesting requirements vary for directors, executives, and key employees with a vesting period that typically equals four years with graded vesting.

The Gibraltar Industries, Inc. 2005 Equity Incentive Plan (the Plan) is an incentive compensation plan that allows the Company to grant equity-based incentive compensation awards to eligible participants to provide them an additional incentive to promote the business of the Company, to increase their proprietary interest in the success of the Company, and to encourage them to remain in the Company’s employ. Awards under the plan may be in the form of options, restricted shares, restricted units, performance shares, performance stock units, and rights. The Plan provides for the issuance of up to 3,000,000 shares of common stock. Of the total number of shares of common stock issuable under the Plan, the aggregate number of shares which may be issued in connection with grants of incentive stock options and rights cannot exceed 900,000 shares. Vesting terms and award life are governed by the award document.

Options, Restricted Stock Units, Restricted Stock Awards

The following table provides the number of restricted stock units (that will convert to shares upon vesting) and shares of restricted stock that were issued during the years ended December 31 along with the weighted-average grant-date fair value of each award:



	2014			2013			2012
Awards	Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value
Restricted stock units	218,857	$	16.96	150,570	$	14.60	151,452	$	13.58
Restricted shares	21,721	$	16.76	13,188	$	16.83	11,130	$	11.86

At December 31, 2014, 376,000 shares were available for issuance under the Plan as incentive stock options or other stock awards.

The Company recognized the following compensation expense in connection with awards that vested under the 2005 Equity Incentive Plan and previously terminated plans along with the related tax benefits recognized during the years ended December 31 (in thousands):



	2014		2013		2012
Expense recognized under terminated plans	$	—	$	—	$	18
Expense recognized under the Plan	3,150		2,564		3,130
Total stock compensation expense	$	3,150	$	2,564	$	3,148
Tax benefits recognized related to stock compensation expense	$	1,229	$	1,000	$	1,228

The fair value of the restricted shares and restricted stock units issued during the three years ended December 31, 2014 was based on the grant-date market price. The fair value of stock options granted was estimated on the date of grant using the Black-Scholes option pricing model. No options were granted in 2014, 2013, and 2012. Expected stock volatility was based on volatility of the Company’s stock price using a historical period commensurate with the expected life of the options.

The following table summarizes the ranges of outstanding and exercisable options at December 31, 2014:



Range of Exercise Prices	Options Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
$8.90 – $8.90	59,175	5.70	$	8.90	59,175	$	8.90
$9.74 – $9.74	157,264	6.70	$	9.74	113,514	$	9.74
$11.89 – $18.78	148,781	3.54	$	15.98	148,781	$	15.98
$20.52 – $23.78	204,099	2.35	$	22.56	204,099	$	22.56
	569,319				525,569

The weighted average remaining life of options exercisable at December 31, 2014 is 4.00 years. The intrinsic value of options exercisable at December 31, 2014 was $1,393,000.

The following table summarizes information about stock option transactions:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Balance at January 1, 2012	770,499		$	14.74
Exercised	(27,500	)	9.70
Forfeited	(31,375	)	13.76
Balance at December 31, 2012	711,624		$	14.97
Exercised	(59,750	)	11.00
Forfeited	(29,750	)	12.38
Balance at December 31, 2013	622,124		$	15.48
Exercised	(52,805	)	11.18
Balance at December 31, 2014	569,319		$	15.88	4.00	$	1,393,000

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the $16.26 per share market price of the Company’s common stock as of December 31, 2014, which would have been received by the option holders had all option holders with an exercise price below the per share market price on December 31, 2014, exercised their options as of that date.

The following table sets forth the aggregate intrinsic value of options exercised and aggregate fair value of restricted stock units and restricted shares that vested during the years ended December 31 (in thousands):



	2014		2013		2012
Aggregate intrinsic value of options exercised	$	326	$	398	$	115
Aggregate fair value of vested restricted stock units	$	2,416	$	1,900	$	2,760
Aggregate fair value of vested restricted shares	$	364	$	222	$	193

The following table summarizes information about non-vested restricted stock units (that will convert to shares upon vesting) and restricted shares:



	Restricted Stock Units		Weighted Average Grant Date Fair Value		Restricted Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2013	576,724		$	14.77	5,053		$	14.37
Granted	218,857		16.96		21,721		16.76
Vested	(136,110	)	16.13		(16,515	)	16.57
Forfeited	(11,979	)	13.21		—		—
Balance at December 31, 2014	647,492		15.26		10,259		15.89

As of December 31, 2014, there was $4,300,000 of total unrecognized compensation cost related to non-vested options, restricted shares, and restricted stock units. That cost is expected to be recognized over a weighted average period of 3.3 years.

Performance Stock Units

In January 2012, the Company awarded 295,000 performance stock units with grant date fair value of $4,152,000. As of December 31, 2012, 280,000 of the originally awarded performance stock units remained outstanding after forfeitures. The final number of performance stock units earned was based on the Company’s total stockholder returns relative to the S&P Small Cap 600 Index for the calendar year of 2012. During the performance period, the participants earned 58.3% of target, aggregating 163,200 performance stock units compared to the target of 280,000 awards.

In January 2013, the Company awarded 304,000 performance stock units with grant date fair value of $4,123,000. As of December 31, 2013, 237,000 of the originally awarded performance stock units remained outstanding after forfeitures. The final number of performance stock units earned was determined based on the Company’s actual return on invested capital (ROIC) for 2013 relative to the improved ROIC targeted for the performance period ending December 31, 2013. During the performance period, the participants earned 50.0% of target, aggregating 114,000 performance stock units compared to the target of 237,000 awards.

In January 2014 and June 2014, the Company awarded 212,000 and 19,000, respectively, of performance stock units with a grant date fair value of $3,914,000 and $319,000, respectively. As of December 31, 2014, 224,000 of the originally awarded performance stock units remain outstanding after forfeitures. The final number of performance stock units earned will be determined based on the Company's actual return on invested capital (ROIC) for 2014. Based on the actual 2014 ROIC, no shares were earned during the performance period.

The cost of the 2012, 2013, and 2014 performance stock awards are recognized over the requisite vesting period, which ranges between one year and three years, depending on the date a participant turns 60 and completes 5 years of service. After the vesting period, any performance stock units earned will convert to cash based on the trailing 90-day closing price of the Company’s common stock as of December 31, 2014, 2015, and 2016 and be payable to participants in January 2015, 2016, and 2017, respectively.

The following table summarizes the compensation expense recognized from the change in fair value and vesting of performance stock units awarded for the years ended December 31 (in thousands):



	2014		2013		2012
Performance stock unit compensation expense	$	31	$	2,214	$	1,639

Management Stock Purchase Plan

The Management Stock Purchase Plan (MSPP) is an integral component of the Plan and provides participants the ability to defer a portion of their salary, their annual bonus under the Management Incentive Compensation Plan, and Directors’ fees. The deferral is converted to restricted stock units and credited to an account together with a company-match in restricted stock units equal to a percentage of the deferral amount. The account is converted to cash at the trailing 200-day average closing price of the Company’s stock and payable to the participants upon a termination of their service to the Company. The matching portion vests only if the participant has reached their sixtieth (60th) birthday. If a participant terminates prior to age sixty (60), the match is forfeited. Upon termination, the account is converted to a cash account that accrues interest at 2% over the then current ten-year U.S. Treasury note rate. The account is then paid out in either one lump sum, or in five or ten equal annual cash installments at the participant’s election.

The fair value of restricted stock units held in the MSPP equals the trailing 200-day average closing price of the Company’s common stock as of the last day of the period. During the years ended December 31, 2014, 2013, and 2012, respectively, 119,105, 132,037, and 253,587 restricted stock units that will convert to cash upon vesting were credited to participant accounts. At December 31, 2014 and 2013, the value of the restricted stock units in the MSPP was $15.68 and $15.97 per unit, respectively. At December 31, 2014 and 2013, 647,371 and 614,888 restricted stock units were credited to participant accounts including 62,455 and 47,268, respectively, of unvested restricted stock units.

The MSPP is a share-based liability settled in cash. The following table sets forth the cash paid to settle these liability awards and expense recognized for the years ended December 31 (in thousands):



	2014		2013		2012
Share-based liabilities paid	$	2,120	$	531	$	542
MSPP expense	$	329	$	3,857	$	1,180