Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Stock-Based Compensation

STOCK-BASED COMPENSATION

NOTE 18.           STOCK-BASED COMPENSATION

As of December 31, 2019, we had two active stock-based incentive compensation plan: the 2017 Omnibus Incentive Plan and the Employee Stock Purchase Plan (“ESPP”). All new equity compensation grants are issued under these two plans; however, outstanding awards previously issued under inactive plans will continue to vest and remain exercisable in accordance with the terms of the respective plans. Our stock plans are administered by the Board of Directors Compensation Committee. At December 31, 2019, there were 3.3 million shares reserved and 2.5 million shares available for future grant under our stock-based incentive plans.

On May 4, 2017, the stockholders approved the Company’s 2017 Omnibus Incentive Plan ("the 2017 Plan") and reserved 5.2 million shares under the plan. The 2017 Plan replaced the 2008 Omnibus Incentive Plan ("the 2008 Plan"), and all awards previously granted under the 2008 Plan continue to vest and/or are exercisable under the 2017 Plan in accordance with their original terms and conditions. The 2017 Plan and 2008 Plan provide for the grant of stock options, stock appreciation rights, restricted stock, stock units (including deferred stock units), unrestricted stock, and dividend equivalent rights. Additionally, awards issued may be issued as performance-based awards to align stock compensation awards to the attainment of annual or long-term performance goals. As of December 31, 2019, there were 2.3 million shares available for grant under the 2017 Plan.

The Company grants restricted stock units and performance stock units. The grant date fair values of restricted stock units and performance stock units are based on the closing market price of our common stock on the grant date. Our restricted stock units vest based on continued service. Our performance stock units vest based on achievement of certain performance goals and certification of performance achievement by the Compensation Committee of the Board of Directors. Stock-based compensation expense, net of forfeitures, is recognized on a straight-line basis over the requisite service period. For performance stock units, compensation expense is updated for the Company’s expected performance level against performance goals at the end of each reporting period, which involves judgment as to achievement of certain performance metrics.

Stock-based Compensation Expense

We recognize stock-based compensation expense based on the fair value of the awards issued and the functional area of the employee receiving the award. Stock-based compensation for the three years ended December 31 is as follows:

	Years Ended December 31,
	2019		2018		2017
Stock-based compensation expense	$	7,327	$	9,703	$	12,549

Our stock-based compensation expense is based on the value of the portion of share-based payment awards that are ultimately expected to vest, assuming estimated forfeitures at the time of grant. Estimated forfeiture rates for our stock-based compensation expense applicable to stock options and restricted stock units ("RSU’s") was approximately 10%, 10% and 17% for the years ended December 31, 2019, 2018 and 2017, respectively.

Restricted Stock Units

The fair value of our Restricted Stock Units ("RSUs") is determined based upon the closing fair market value of our common stock on the grant date. Changes in the unvested RSU’s during the years ended December 31, 2019, 2018 and 2017 were as follows:

	2019			2018			2017
		Weighted-			Weighted-			Weighted-
		Average			Average			Average
		Grant			Grant			Grant
	Shares	Value		Shares	Value		Shares	Value
RSUs outstanding at beginning of period	352	$	58.17	386	$	51.06	354	$	29.60
RSUs granted	380		52.24	245		64.48	252		63.63
RSUs vested	(155)		50.95	(207)		54.94	(211)		30.62
RSUs forfeited	(43)		51.82	(72)		50.79	(9)		33.91
RSUs outstanding at end of period	534	$	56.56	352	$	58.17	386	$	51.06

The total intrinsic value of RSUs converted to shares for the years ended December 31, 2019, 2018 and 2017 were $8.3 million, $13.6 million and $14.8 million, respectively. As of December 31, 2019, there was $5.9 million of total unrecognized compensation cost, net of expected forfeitures related to non-vested RSUs granted, which is expected to be recognized through fiscal November 2022, with a weighted-average remaining vesting period of 1.3 years.

Stock Options

Stock option awards are generally granted with an exercise price equal to the market price of our stock at the date of grant and with either a three or four-year vesting schedule or performance-based vesting as determined at the time of grant. Stock option awards generally have a term of 10 years.

The fair value of options granted during the year ended December 31, 2015 was estimated on the date of grant using the Black-Scholes-Merton option pricing model using the following assumptions: the risk-free interest rate was 1.1% - 1.4%, the expected term was 4.3 years and expected volatility was 43%. The risk-free interest rate was based on the five-year U.S. Treasury Bill at the time of the grant. We utilize our historical experience in determining the expected term of our stock options and volatility of our common stock. We have not historically issued dividends.

Changes in our outstanding stock options during the years ended December 31, 2019, 2018 and 2017 were as follows:

	2019			2018			2017
		Weighted-			Weighted-			Weighted-
		Average			Average			Average
		Exercise			Exercise			Exercise
	Shares	Price		Shares	Price		Shares	Price
Options outstanding at beginning of period	230	$	20.73	317	$	18.97	474	$	17.47
Options exercised	(42)		17.73	(83)		14.41	(152)		14.32
Options forfeited	—		—	—		—	(2)		26.32
Options expired	(3)		9.91	(4)		11.97	(3)		11.09
Options outstanding at end of period	185	$	21.56	230	$	20.73	317	$	18.97
Options vested during the year	—			2			9

The total intrinsic value of options exercised for the years ended December 31, 2019, 2018 and 2017 was $1.6 million, $4.1 million and $9.7 million, respectively. All options outstanding at December 31, 2019 are vested and have aggregate intrinsic value of $9.2 million and weighted-average remaining contractual life of 4.1 years.

The following table summarizes information about the stock options outstanding at December 31, 2019:

	Options Outstanding				Options Exercisable
		Weighted-Average	Weighted-			Weighted-
	Number	Remaining	Average		Number	Average
Range of Exercise Prices	Outstanding	Contractual Life	Exercise Price		Exercisable	Exercise Price
9.51 - 13.85	23	1.42 years	$	12.00	23	$	12.00
14.21 - 16.25	20	0.72 years		15.06	20		15.06
18.77 - 18.77	43	4.75 years		18.77	43		18.77
26.32 - 26.32	99	5.10 years		26.32	99		26.32
9.51 - 26.32	185	4.09 years	$	21.56	185	$	21.56

Employee Stock Purchase Plan

The ESPP, a stockholder-approved plan, provides for the issuance of rights to purchase up to 1,000,000 shares of common stock. In May 2010, stockholders approved an increase from 500,000 to 1,000,000 shares authorized for sale under our ESPP. Employees below the Vice President level are eligible to participate in the ESPP if employed by us for at least 20 hours per week during at least five months per calendar year. Participating employees may contribute up to the lesser of 15% of their eligible earnings or $5,000 during each plan period. Currently, the plan period is six months. The purchase price of common stock purchased under the ESPP is currently equal to the lower of: 1) 85% of the fair market value of our common stock on the commencement date of each plan period or 2) 85% of the fair market value of our common shares on each plan period purchase date. At December 31, 2019, 0.2 million shares remained available for future issuance under the ESPP.

Purchase rights granted under the ESPP are valued using the Black-Scholes-Merton model. As of December 31, 2019, there was $0.2 million of total unrecognized compensation cost related to the ESPP that is expected to be recognized over a remaining period of five months. Total compensation expense was $0.5 million for the year ended December 31, 2019 and $0.4 million for the year ended December 31, 2018, and $0.2 million for the year ended December 31, 2017.

The fair value of each purchase right granted under the ESPP was estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following assumptions:

	2019		2018		2017
Risk-free interest rates	1.62% - 2.31	%	2.10% - 2.56	%	1.07% - 1.45	%
Expected dividend yield rates	—	%	—	%	—	%
Expected term	0.5 years		0.5 years		0.5 years
Expected volatility	41.3	%	38.0	%	33.3	%

The risk-free interest rate is based on the six-month U.S. Treasury Bill at the time of the grant. We utilize our historical experience in determining the expected term of our stock options and volatility of our common stock. We have not historically issued dividends.