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Note 3 - Share-based Compensation Plans
 12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
NOTE
3—Share
-based Compensation Plans
 
Overview
 
The Company had
one
effective share-based compensation plan as of 
December 31, 2019
and
December 31, 2018
, which is
the
2016
Long Term Incentive Plan, discussed further below. We measure the cost of share-based compensation based on the fair value of the award as of the grant date, net of estimated forfeitures. Awards granted are valued at fair value and recognized on a straight-line basis over the service periods (or the vesting periods) of each award. We estimate forfeiture rates for all unvested awards based on our historical experience.
 
2016
Long Term Incentive Plan
 
Our
2016
Long Term Incentive Plan (the “LTIP”), formerly referred to as the Management Incentive Plan, provides for awards of restricted stock, options, performance awards, phantom shares and stock appreciation rights to directors, officers, employees, and consultants. The LTIP is intended to promote the interests of the Company by providing a means by which employees, consultants and directors
may
acquire or increase their equity interest in the Company and
may
develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its stockholders. The LTIP is also intended to enhance the ability of the Company and its Subsidiary to attract and retain the services of individuals who are essential for the growth and profitability of the Company. The LTIP provides that the Compensation Committee shall have the authority to determine the participants to whom stock options, restricted stock, performance awards, phantom shares and stock appreciation rights
may
be granted.
 
In
2019,
the Company granted approximately (i)
205,000
restricted stock units (“RSUs”) to employees which will generally vest over
three
years from the date of grant, subject to continued employment, (ii)
205,000
performance share units (“PSUs”), which will generally cliff vest after a
three
-year performance period from the date of grant, subject to continued employment and the level of achievement with respect to applicable performance metrics and (iii)
81,000
 RSU's to non-employee directors which will generally cliff vest in
12
months following the date of grant, subject to continued service. In
2018,
there were
no
material issuances of RSUs granted to employees and the only issuances to employees under the LTIP were
201,969
shares of common stock issued in settlement for performance bonuses earned in
2017.
In
December 2018,
45,160
RSUs were granted to non-employee directors which vested in
12
months following the date of grant. As of
December 31, 2019,
the Company had
no
further shares available for future issuance under the LTIP, assuming that the PSUs awarded in
2017
and
2019
will vest at the maximum payouts of
250%
and
200%,
respectively.
 
Performance Share Unit Awards
 
In
December 2019,
the Company granted approximately
205,000
PSUs. The PSU awards have a service period of
3
years and contain predetermined market conditions established by the Compensation Committee, and, if the market and service conditions are met, will cliff vest after a
three
-year performance period from the date of grant. The actual number of sha
res to be earned and that will cliff vest is subject to a market condition, which is based on company stock price performance. The range of shares of common stock which
may
be earned by an award recipient ranges from 
zero
 to 
200%
 of the initial PSUs granted. The grant date fair value of the PSUs was determined using a Monte Carlo simulation model. The assumptions used in the Monte Carlo simulation model are described below:
 
 
•
Volatility factor
- The volatility factor represents the extent to which the market price of a share of the Company's common stock is expected to fluctuate between the grant date and the end of the performance period.
 
 
•
Dividend yield
- The dividend yield on the Company's common stock was assumed to be
zero
since the Company does
not
anticipate paying dividends within the vesting term of the PSU’s.
 
 
•
Risk-free interest rate
- The risk-free interest rate is based upon the yield of US Treasuries with a
three
year term.
 
 
•
Expected term
- The expected term represents the period of time that the PSUs will be outstanding, which is the grant date to the end of the performance period, or
three
years.
 
The grant date fair value of each PSU as determined by the Monte Carlo simulation model was 
$10.43,
which was based on the following assumptions:
 
   
2019
Number of simulations
    
250,000
 
Grant price
   $
10.43
 
Volatility factor
    
49.3
%
Dividend yield
    
—
 
Risk-free interest rate
    
2
%
Expected term (in years)
  
P3Y
 
 
The fair value of the PSUs granted in
2019
of 
$2.1
 million is amortized on a straight-line basis and recognized as share-based compensation expense, net of amounts capitalized, over the requisite service period of 
3
years. All compensation cost related to the PSUs will be recognized if the requisite service period is fulfilled, even if the market condition is
not
achieved. As of 
December 
31,
2019,
unrecognized compensation costs related to the unvested PSUs granted in
2019
was 
$2.1
million and will be recognized as share-based compensation expense, net of amounts capitalized, over a weighted-average period of
2.95
years.
 
Share-based Compensation
 
The following tables summarizes the pre-tax components of our share-based compensation program under the LTIP, recognized as a component of general and administrative expenses in the Consolidated Statements of Operations (in thousands), for the years ended
December 31, 2019
and
2018
:
 
   
Year Ended December 31,
2016 Long Term Incentive Plan
  
2019
  
2018
RSU expense - employees
   $
4,521
 
   $
4,702
 
PSU expense
    
1,952
 
    
1,893
 
RSU expense - directors
    
664
 
    
595
 
Total share-based compensation
   $
7,137
 
   $
7,190
 
Capitalized and lease operating expense share-based compensation    
(835
)
    
(747
)
Net share-based compensation - general and administrative expense   $
6,302
 
   $
6,443
 
 
RSUs and PSUs awarded under the LTIP generally have a vesting period between
one
to
three
years. During the vesting period, ownership of RSUs and PSUs subject to the vesting period cannot be transferred and the shares are subject to forfeiture if the employment or service relationship, as applicable, ends before the end of the vesting period. Certain RSUs and PSUs provide for accelerated vesting in certain limited circumstances. RSUs and PSUs are
not
considered to be currently issued and outstanding until the restrictions lapse and/or they vest.
 
RSU and PSU activity and changes under the LTIP for the years ended
December 31, 2019
and 
2018
 are as follows:
 
2016 Long Term Incentive Plan
  
Number of Units
  
Weighted Average Grant-Date Fair Value
  
Total Value (thousands)
   
RSU
  
PSU
  
Total
  
RSU
  
PSU
  
Total
  
RSU
  
PSU
  
Total
                                                                         
Unvested at December 31, 2017
    
1,171,353
 
    
402,679
 
    
1,574,032
 
   $
9.91
 
   $
15.29
 
   $
11.29
 
   $
11,647
 
   $
6,157
 
   $
17,804
 
Granted (1)
    
249,751
 
    
-
 
    
249,751
 
    
11.54
 
    
-
 
    
11.54
 
    
2,882
 
    
-
 
    
2,882
 
Vested (1)
    
(742,607
)
    
-
 
    
(742,607
)
    
10.20
 
    
-
 
    
10.20
 
    
(9,681
)
    
-
 
    
(9,681
)
Forfeited
    
(17,360
)
    
(3,291
)
    
(20,651
)
    
11.25
 
    
15.29
 
    
11.90
 
    
(195
)
    
(50
)
    
(245
)
Unvested at December 31, 2018
    
661,137
 
    
399,388
 
    
1,060,525
 
    
10.16
 
    
15.29
 
    
12.09
 
    
4,653
 
    
6,107
 
    
10,760
 
Granted
    
294,871
 
    
204,755
 
    
499,626
 
    
9.96
 
    
10.43
 
    
10.16
 
    
2,938
 
    
2,136
 
    
5,074
 
Vested
    
(530,446
)
    
-
 
    
(530,446
)
    
10.18
 
    
-
 
    
10.18
 
    
(5,138
)
    
-
 
    
(5,138
)
Forfeited
    
(9,032
)
    
-
 
    
(9,032
)
    
13.84
 
    
-
 
    
13.84
 
    
(125
)
    
-
 
    
(125
)
Unvested at December 31, 2019
    
416,530
 
    
604,143
 
    
1,020,673
 
   $
9.92
 
   $
13.64
 
   $
12.12
 
   $
2,328
 
   $
8,243
 
   $
10,571
 
 
(
1
) Includes 
201,969
shares of common stock issued in settlement for
2017
performance bonuses, which were paid in
2018.
 
As of
December 31, 2019
and
2018
, total unrecognized compensation cost and weighted average years to recognition related to RSUs and PSUs under the LTIP are as follows:
 
2016 Long Term Incentive Plan
  
Unrecognized compensation costs
  
Weighted Average years to recognition
   
(thousands)
  
(years)
   
RSU
  
PSU
  
Total
  
RSU
  
PSU
  
Total
December 31, 2019
   $
3,969
 
   $
4,283
 
   $
8,252
 
    
1.95
 
    
1.93
 
    
1.94
 
December 31, 2018
   $
6,340
 
   $
4,100
 
   $
10,440
 
    
1.35
 
    
1.96
 
    
1.59