CAPITAL TRANSACTIONS |
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| Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| CAPITAL TRANSACTIONS |
CAPITAL TRANSACTIONS
Dividends
The declaration of dividends is subject to the discretion of our Board of Directors and will depend upon various factors, including our earnings, financial condition, restrictions imposed by any indebtedness that may be outstanding, cash requirements, future prospects and other factors deemed relevant by our Board of Directors.
On March 7, 2017, we announced a cash dividend of $0.10 per common share in the aggregate of $1.8 million, which was paid on April 3, 2017, to shareholders of record as of March 22, 2017.
On May 10, 2017, we announced that our Board of Directors elected to suspend the payment of quarterly dividends. Our Board of Directors will periodically evaluate our dividend policy in the future.
No dividends were declared for the year ended December 31, 2018.
Share-Based Compensation
During the year ended December 31, 2012, our shareholders adopted and approved the 2012 Incentive Plan. The 2012 Incentive Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. The Compensation Committee of the Board of Directors has authority and discretion to determine the type of award as well as the amount, terms and conditions of each award under the 2012 Incentive Plan, subject to the limitations of the 2012 Incentive Plan. A total of 1,500,000 shares of common stock were originally authorized for the granting of awards under the 2012 Stock Incentive Plan. In January 2015, our shareholders approved an amendment to the 2012 Incentive Plan, to increase the number of shares of Common Stock reserved for issuance by 1,500,000 shares. The number of shares available for awards, as well as the terms of outstanding awards, are subject to adjustment as provided in the 2012 Incentive Plan for stock splits, stock dividends, recapitalizations and other similar events.
We also maintain the 2009 Incentive Plan, which was approved by shareholders in 2009. The 2009 Incentive Plan also provided for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, performance awards, stock awards and other stock-based awards. Under the 2012 Incentive Plan, any shares subject to award, or awards forfeited or reacquired by the Company issued under the 2009 Incentive Plan are available for award up to a maximum of 400,000 shares.
Stock Options
Our outstanding stock options include time-based stock options, which vest over differing periods ranging from the date of issuance up to 48 months from the option grant date; performance-based stock options, which have already vested upon achieving operating income margins of six, eight and ten percent as reported in four of five consecutive quarters over the term of the options.
Stock option activity for 2018, 2017, and 2016 consisted of the following (share amounts in thousands, except for per share information):
During the year ended December 31, 2018, we granted options to purchase 50,000 shares of common stock under the 2012 Stock Incentive Plan to two members of our Board of Directors, which are composed of both time-based stock options and net sales performance-based stock options. These options were issued with a weighted-average exercise price of $8.43 per share and a weighted-average grant date fair value of $3.0 to $3.5 per share. All of the options issued have an option termination date of ten years from the option grant date.
During the year ended December 31, 2017, we granted options to purchase 25,000 shares of common stock under the 2012 Stock Incentive Plan to one member of our Board of Directors, which are composed of both time-based stock options and net sales performance-based stock options. These options were issued with a weighted-average exercise price of $13.50 per share and a weighted-average grant date fair value of $4.94 per share. All of the options issued have an option termination date of ten years from the option grant date.
During the year ended December 31, 2016, we did not grant any stock options to purchase shares of common stock under the 2012 Stock Incentive Plan to our executive officers and other employees.
For the years ended December 31, 2018, 2017, and 2016, we issued 99,000, 17,000, and 35,000 shares of common stock upon the exercise of stock options at an average exercise price of $6.10, $12.06, and $4.74 per share, respectively. The aggregate intrinsic values of options exercised during the years ended December 31, 2018, 2017, and 2016 was $0.2 million, $17,000, and $0.2 million, respectively. For the years ended December 31, 2018, 2017, and 2016, we recognized $0.1 million, $17,000, and $0.1 million of tax benefits from the exercise of stock options during the period, respectively.
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31, 2018 and 2017:
Share-based compensation expense from time-based stock options for the years ended December 31, 2018, 2017, and 2016 was $0.2 million, $0.2 million and $0.8 million, respectively. As of December 31, 2018, 2017, and 2016, the unrecognized share-based compensation cost related to grants described above was $0, $13,000, and $0.3 million, respectively. As of December 31, 2018, there are no unvested options.
The following table summarizes information about options outstanding and exercisable at December 31, 2018 (share amounts in thousands, except per share information):
At December 31, 2018, the aggregate intrinsic value of outstanding options to purchase 1,114,000 shares of common stock and the exercisable options to purchase 1,114,000 shares of common stock was $0.2 million and $0.2 million, respectively. At December 31, 2017, the aggregate intrinsic value of outstanding options to purchase 1,390,000 shares of common stock, the exercisable options to purchase 1,293,000 shares of common stock, and options to purchase 92,000 shares of common stock expected to vest was $0.9 million, $0.9 million, and $0, respectively.
Restricted Stock Units
Our outstanding RSUs include time-based RSUs, which vest over differing periods ranging from 12 months up to 48 months from the RSU grant date, as well as performance-based RSUs, which upon achieving cumulative annual net sales growth targets over a rolling one-year period and performance-based RSUs, which vest upon achieving earnings-per-share targets over a rolling one-year period, as well as attaining certain EBITDA and stock price levels. RSUs given to the Board of Directors contain a restriction period in which the shares are not issued until two years after vesting. At December 31, 2018 and 2017, there were 80,000 and 96,000 vested RSUs given to the Board of Directors that had a restriction period.
Restricted stock unit activity for the period ended December 31, 2018, 2017, and 2016 is as follows: (share amounts in thousands, except per share information):
During the year ended December 31, 2018, we granted 692,000 restricted stock units (RSUs) of common stock under the 2012 Incentive Plan to our board, executive officers and other employees, which are composed of both time-based RSUs and net sales and earnings per share performance-based RSUs. The time-based RSUs were granted with a weighted-average grant date fair value $10.05 per share and vest in 12 monthly installments over a one year period from the grant date or in annual installments over three year period from the grant date. The net sales and EBITDA performance-based RSUs were granted with a weighted-average grant date fair value of $11.20 per share and vest upon achieving net sales and EBITDA targets over a three year period from the grant date. The share-price performance-based RSUs were granted with a weighted-average grant date fair value of $4.73 per share and vest upon achieving share-price targets over a three year period from the grant date.
During the period ended December 31, 2017, we granted 274,000 RSUs of common stock under the 2012 Incentive Plan to our board, executive officers and other employees. The time-based RSUs were granted with a weighted average grant date fair value of $12.26 per share and vest 12 monthly installments over a one year period from the grant date, or in annual installments over a three year period from the grant date. The net sales performance-based RSUs were granted with a weighted-average grant date fair value of $13.35 per share and vest upon achieving net sales targets over a three year period from the grant date.
During the period ended December 31, 2016, we granted 281,000 RSUs of common stock under the 2012 Incentive Plan to our board, executive officers and other employees. The time-based RSUs were granted with a weighted average grant date fair value of $10.06 per share and vest in 12 monthly installments over a one year year period from the grant date, or in annual installments over a three year period from the grant date. The net sales performance-based RSUs were granted with a weighted-average grant date fair value of $8.16 per share and vest upon achieving net sales targets over a three year period from the grant date.
Except for share-price performance-based RSUs, RSUs are valued at the market value on the date of grant, which is the grant date share price discounted for expected dividend payments during the vesting period. For RSUs with post-vesting restrictions, a Finnerty Model was utilized to calculate a valuation discount from the market value of common shares reflecting the restriction embedded in the RSUs preventing the sale of the underlying shares over a certain period of time. Using assumptions previously determined for the application of the option pricing model at the valuation date, the Finnerty Model discount for lack of marketability is approximately 11.9 percent for a common share.
Share-price performance-based RSUs were estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. Our assumptions include a performance period of three years, expected volatility of 50 percent, and a range of risk free rates between 2.1 percent and 2.9 percent.
Share-based compensation expense from RSUs for the period ended December 31, 2018, 2017, and 2016, was approximately $1.9 million, $2.0 million, and $2.4 million, respectively. As of December 31, 2018, and 2017, the unrecognized share-based compensation expense related to the grants described above was $1.8 million and $1.3 million, respectively. As of December 31, 2018, the remaining compensation expense is expected to be recognized over the weighted average period of approximately 0.9 years.
Share-based compensation expense related to performance-based RSUs for the years ended December 31, 2018, 2017, and 2016, was approximately $82,000, $0, and $0, respectively. Should we attain all of the metrics related to the performance-based RSU grant, we would recognize up to $4.8 million of potential share-based compensation expense.
The number of shares issued upon vesting or exercise for restricted stock units granted, pursuant to our share-based compensation plans, is net of shares withheld to cover the minimum statutory withholding requirements that we pay on behalf of our employees, which was 60,000 and 43,000 shares for the years ended December 31, 2018 and 2017, respectively. Although shares withheld are not issued, they are treated as common share repurchases for accounting purposes, as they reduce the number of shares that would have been issued upon vesting. These shares do not count against the authorized capacity under the repurchase program described above.
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