Quarterly report pursuant to Section 13 or 15(d)

Treasury Stock and Share Based Awards

v3.8.0.1
Treasury Stock and Share Based Awards
3 Months Ended
Mar. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Treasury Stock and Share Based Awards

9.

Treasury Stock and Share Based Awards

Treasury Stock — Treasury stock represents shares of common stock repurchased or withheld by the Company and not yet retired. The Company has applied the cost method in recording its treasury shares.  Below is a summary of the Company’s treasury stock activity for the three months ended March 31, 2018:

 

 

 

Number of

 

 

 

 

 

 

 

Treasury

 

 

 

 

 

 

 

Shares

 

 

Cost

 

Balance at January 1, 2018

 

 

4,525,870

 

 

$

76,354

 

Restricted stock withholdings (1)

 

 

70,010

 

 

 

2,695

 

Restricted stock forfeitures

 

 

11,303

 

 

 

 

Balance at March 31, 2018

 

 

4,607,183

 

 

$

79,049

 

 

(1)

The Company withheld restricted shares as a result of the election by certain employees to satisfy their tax liabilities upon vesting in restricted stock and restricted stock units.  The Company determined the number of shares to be withheld based upon market values ranging from $34.83 to $39.03 per share.

As of March 31, 2018, the Company had no plans to retire any shares of treasury stock.

Restricted Stock – During the three months ended March 31, 2018, the Company granted 260,019 shares of restricted stock to employees. The fair value of the restricted stock granted was determined based on the market value of the Company’s common stock on the date of grant, which was $39.03 per share. The Company assumed forfeiture rates ranging from 0% to 10% for the restricted stock awards. Certain of the restricted stock awards vest over two years and certain awards vest over four years. The recipients of restricted stock are entitled to receive non-forfeitable dividends and to vote their respective shares, however, the sale and transfer of the restricted shares is prohibited during the restriction period.

Below is a summary of restricted stock activity for the three months ended March 31, 2018:

 

 

 

Shares of

 

 

Weighted

Average

 

 

 

Restricted

 

 

Grant Date

 

 

 

Stock

 

 

Fair Value

 

Outstanding at January 1, 2018

 

 

650,581

 

 

$

35.81

 

Granted

 

 

260,019

 

 

$

39.03

 

Vested

 

 

(202,341

)

 

$

29.45

 

Forfeited

 

 

(11,303

)

 

$

37.96

 

Outstanding at March 31, 2018

 

 

696,956

 

 

$

38.82

 

Unvested restricted stock at March 31, 2018

 

 

696,956

 

 

$

38.82

 

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Compensation expense recognized during the period

 

$

2,375

 

 

$

2,127

 

Fair value of restricted shares that vested during the period

 

$

7,807

 

 

$

6,013

 

Income tax benefit recognized upon vesting of restricted stock     awards

 

$

1,399

 

 

$

1,972

 

 

As of March 31, 2018, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $20,005 and the weighted average period over which this remaining compensation expense will be recognized is approximately two years.

Restricted Stock Units – During the three months ended March 31, 2018, the Company granted restricted stock units representing 224,602 hypothetical shares of common stock to employees. The restricted stock units vest based on a combination of financial performance factors and continued service. The financial performance factors are based on an implied equity value concept that determines an internal rate of return (“IRR”) during the two fiscal year periods ending December 31, 2019 based on a formula utilizing a multiple of Adjusted EBITDA subject to certain adjustments as specified by the Compensation Committee prior to the grant date. The financial performance factors for the restricted stock units have a threshold, target and maximum level of payment opportunity and vest on a prorata basis according to the IRR achieved by the Company during the performance period. If the IRR for the two-year period is at least 7%, which is the threshold, one-third of the maximum restricted stock units vest. If the IRR for the two-year period is at least 9.5%, which is the target, two-thirds of the maximum restricted stock units vest. If the IRR for the two-year period is at least 13%, which is the maximum, 100% of the maximum restricted stock units vest. Grantees are eligible to receive a ratable portion of the common stock issuable if the IRR is within the targets previously noted. Further, as an example, if the Company achieves an IRR equal to 11%, the number of restricted stock units that shall vest will be greater than the target but less than the maximum number that would have vested had the Company achieved the highest IRR.  All restricted stock units granted during 2018 will vest subject to an additional two-year service requirement and will be paid in the form of common stock if the participant continues to provide services through February 2022, which is the fourth anniversary of the grant date. Restricted stock unit award participants are eligible to receive dividend equivalent payments from the grant date if, and at the time that, the restricted stock unit awards vest.

Below is a table summarizing the potential number of shares that could vest under restricted stock unit awards granted during the three months ended March 31, 2018 at each of the three target levels of financial performance (excluding forfeiture assumptions):

 

 

 

Number of

 

 

 

 

 

 

 

Shares

 

 

Value at

 

 

 

Vesting

 

 

Grant

 

at IRR of at least 7%

 

 

74,867

 

 

$

2,922

 

at IRR of at least 9.5%

 

 

149,735

 

 

$

5,844

 

at IRR of at least 13%

 

 

224,602

 

 

$

8,766

 

 

Due to the fact that the IRR for the two-year performance period could not be determined at the time of the 2018 grant, the Company estimated that the most likely outcome is the achievement of the target IRR level. The fair value of the restricted stock unit awards was determined based on the closing price of the Company’s common stock on the date of grant, which was $39.03 per share. The Company assumed a forfeiture rate of 5% for the restricted stock unit awards. If during the service period, additional information becomes available to lead the Company to believe a different IRR level will be achieved for the two-year performance period, the Company will reassess the number of units that are expected to vest for the grant and adjust its compensation expense accordingly on a prospective basis over the remaining service period.

 

 

 

March 31,

 

 

 

2018

 

 

2017

 

Number of restricted stock unit awards that vested during

   the period

 

 

125,063

 

 

 

97,115

 

Fair value of restricted stock unit awards that vested during

   the period

 

$

3,594

 

 

$

4,155

 

Accumulated dividends paid upon vesting of restricted stock

   unit awards

 

$

522

 

 

$

68

 

Compensation expense recognized during the period

 

$

1,051

 

 

$

1,114

 

Income tax benefit recognized upon vesting of restricted stock

   unit awards

 

$

723

 

 

$

1,745

 

 

During the three months ended March 31, 2018, the Company determined that the IRR reached for the restricted stock units granted in February 2016 was 7.2%, compared to a target IRR of 8.0%.  The Company recorded a reduction in compensation expense of $69 during the three months ended March 31, 2018 to reflect the revised number of shares expected to vest in February 2020 for the 2016 restricted stock unit grant.  

 

As of March 31, 2018, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $10,776. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of March 31, 2018, the Company had restricted stock units outstanding that represented a total of 596,726 hypothetical shares of common stock, net of actual cumulative forfeitures of 13,690 units, assuming an IRR of 7.2% was achieved for the 2016 grants and the maximum IRR level is achieved for all other grants outstanding.