Quarterly report pursuant to Section 13 or 15(d)

Treasury Stock and Share Based Awards

v3.19.3
Treasury Stock and Share Based Awards
9 Months Ended
Sep. 30, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Treasury Stock and Share Based Awards

10.

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 nine months ended September 30, 2019:

 

 

 

Number of

 

 

 

 

 

 

 

Treasury

 

 

 

 

 

 

 

Shares

 

 

Cost

 

Balance at January 1, 2019

 

 

4,626,191

 

 

$

79,259

 

Restricted stock withholdings (1)

 

 

57,456

 

 

 

2,247

 

Restricted stock forfeitures

 

 

19,351

 

 

 

Balance at September 30, 2019

 

 

4,702,998

 

 

$

81,506

 

 

(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 $36.81 to $40.32 per share.

As of September 30, 2019, the Company had no plans to retire any shares of treasury stock.

Restricted Stock – During the nine months ended September 30, 2019, the Company granted 308,250 shares of restricted stock to its directors and employees. The fair value of the restricted stock granted was determined based on the market value of the Company’s common stock on the dates of grant, which ranged from $36.70 to $41.61 per share. The Company assumed forfeiture rates for the restricted stock awards that ranged from 0% to 10%.  The restricted stock awards vest over periods ranging from one to 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 nine months ended September 30, 2019:

 

 

 

Shares of

 

 

Weighted

Average

 

 

 

Restricted

 

 

Grant Date

 

 

 

Stock

 

 

Fair Value

 

Outstanding at January 1, 2019

 

 

704,353

 

 

$

38.68

 

Granted

 

 

308,250

 

 

$

37.42

 

Vested

 

 

(198,711

)

 

$

41.38

 

Forfeited

 

 

(19,351

)

 

$

37.41

 

Outstanding at September 30, 2019

 

 

794,541

 

 

$

37.55

 

Unvested restricted stock at September 30, 2019

 

 

794,541

 

 

$

37.55

 

 

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

Compensation expense recognized during the period

 

$

7,456

 

 

$

7,266

 

Fair value of restricted shares that vested during the period

 

$

7,630

 

 

$

7,815

 

Income tax benefit recognized upon vesting of restricted stock awards

 

$

1,473

 

 

$

1,751

 

 

As of September 30, 2019, the estimated remaining unrecognized compensation expense related to unvested restricted stock awards was $17,998 and the weighted average period over which this remaining compensation expense will be recognized is approximately two years.

Restricted Stock Units – During the nine months ended September 30, 2019, the Company granted restricted stock units representing 306,651 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, 2020 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 6%, which is the threshold, one-third of the maximum restricted stock units vest. If the IRR for the two-year period is at least 8%, which is the target, two-thirds of the maximum restricted stock units vest. If the IRR for the two-year period is at least 14%, 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 2019 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 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 nine months ended September 30, 2019 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 6%

 

 

136,285

 

 

$

5,011

 

at IRR of at least 8%

 

 

204,427

 

 

$

7,517

 

at IRR of at least 14%

 

 

306,651

 

 

$

11,276

 

 

Due to the fact that the IRR for the two-year performance period could not be determined at the time of the 2019 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 $36.77 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.

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Number of restricted stock unit awards that vested during the period

 

 

88,074

 

 

 

127,084

 

Fair value of restricted stock unit awards that vested during the period

 

$

3,550

 

 

$

4,846

 

Accumulated dividends paid upon vesting of restricted stock unit awards

 

$

375

 

 

$

526

 

Compensation expense recognized during the period

 

$

3,030

 

 

$

3,098

 

Income tax benefit recognized upon vesting of restricted stock unit awards

 

$

175

 

 

$

740

 

 

During the nine months ended September 30, 2019, the Company modified the performance target levels for the restricted stock unit awards granted during February 2017 and February 2018 for all participants other than certain executive officers.  The modification adjusted the threshold, target and maximum IRR levels from 7.0%, 9.5% and 13.0%, respectively, to 6.0%, 8.0% and

14.0%, respectively.  The Company accounted for the change in performance measures as modifications of each award, and recorded a reduction to compensation expense of $132 during the three months ended March 31, 2019.  Simultaneous with the modification of the restricted stock unit awards granted during February 2017, the Company determined that the final IRR reached for the respective measurement period was 9.3%, which resulted in a reduction in compensation expense of approximately $563.  

 

As of September 30, 2019, the estimated remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $11,128. The weighted average period over which this remaining compensation expense will be recognized is approximately two years. As of September 30, 2019, the Company had restricted stock units outstanding that represented a total of 554,529 hypothetical shares of common stock, net of forfeitures, assuming an IRR of 7.2% was achieved for the 2016 grants, an IRR of 9.3% was achieved for the 2017 grants, and the maximum IRR level is achieved for all other grants outstanding.