|12 Months Ended|
Dec. 31, 2018
|Disclosure of Compensation Related Costs, Share-based Payments [Abstract]|
The Company issues shares pursuant to the 2007 Stock Incentive Plan (the “2007 Plan”) which provides for the grant of stock incentive awards in the form of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance stock, performance units and other awards in stock to certain key employees, non-employee directors and service providers. The exercise price of stock options granted under the 2007 Plan is equal to the market value on the date of grant. As of December 31, 2018, 3,230,320 shares are authorized under the 2007 Plan, of which 527,988 were available for future grant.
In addition to awards granted under the 2007 Plan, the Company granted a non-qualified option to purchase 100,000 shares of its common stock to a newly hired senior management level employee on November 26, 2012, which remained outstanding as of December 31, 2018. The option was granted outside of any shareholder-approved plan as an inducement to accept employment with the Company. The option has an exercise price equal to the closing price of the Company’s common stock as reported by the Nasdaq Stock Market on the date of grant, vests in four equal installments on each of the first four anniversaries of the date of grant and has a term of seven years. In other respects, the option was structured to mirror the terms of options granted under the 2007 Plan and is subject to a stock option agreement between the Company and the employee.
The Company recognized the following amounts related to the Company’s share-based payment arrangements (in thousands):
As of December 31, 2018, total stock option compensation expense of $369,000 and $582,000 was not yet recognized related to non-vested option awards and related to non-vested shares and restricted share unit awards, respectively, and is expected to be recognized over a weighted average period of 3.1 years and 2.5 years, respectively.
The fair value of each option award is estimated at the date of grant using the Black-Scholes option pricing model. The assumptions used to determine the fair value of stock option awards granted were as follows:
The Company reviews these assumptions at the time of each new option award and adjusts them as necessary to ensure proper option valuation. The expected life represents the period that the stock option awards are expected to be outstanding. Effective April 2008, the Company’s Board of Directors approved a change in the contractual term of stock options granted to employees from ten to seven years. Given the reduction in the contractual term of its employee stock option awards and a lack of exercise history or other means to reasonably estimate future exercise behavior, the Company determined it was unable to rely on its historical exercise data as a basis for estimating the expected life of stock options granted to employees subsequent to this change. As such, the Company used the “simplified” method for determining the expected life of stock options granted to employees in 2018, 2017 and 2016, which bases the expected life calculation on the average of the vesting term and the contractual term of the awards. The risk-free interest rate is based on the yield of constant maturity U.S. treasury bonds with a remaining term equal to the expected life of the awards. The Company estimated the stock price volatility using weekly price observations over the most recent historical period equal to the expected life of the awards.
A summary of share option activity is presented in the table below (in thousands, except per share data):
Other information pertaining to options is as follows (in thousands, except per share data):
Restricted Stock and Restricted Stock Units
Restricted stock and restricted stock units are valued based on the market value of the Company’s shares on the date of grant, which was equal to the intrinsic value of the shares on that date. These awards vest and the restrictions lapse over varying periods from the date of grant. The Company recognizes compensation expense for the intrinsic value of the restricted awards ratably over the vesting period.
A summary of restricted stock and restricted stock units activity is presented in the table below (in thousands, except per share data):
Other information pertaining to restricted stock and restricted stock units is as follows (in thousands, except per share data):
Performance Stock Units
The Company granted performance stock units during 2018 ("2018 Performance Stock Units") and 2017 ("2017 Performance Stock Units"). In settlement of the performance stock units, the Company issues a number of shares equal to the number of performance stock units issued multiplied by the total percentage achievement of the performance goals for each award. The percentage achievement for the performance stock units may not exceed 100%.
In settlement of the 116,168 of vested 2017 Performance Stock Units, during 2018 the Company issued 25,726 shares, which is equal to the number of vested performance stock units vested multiplied by the weighted percentage achievement of the performance goals of approximately 22.1%.
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef