Annual report pursuant to Section 13 and 15(d)

CAPITAL STOCK

v3.19.3.a.u2
CAPITAL STOCK
12 Months Ended
Dec. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
CAPITAL STOCK

16.

CAPITAL STOCK

Common Stock — Common stockholders are entitled to vote on all matters submitted to a vote of the Company’s stockholders. Subject to the rights of holders of any then outstanding shares of the Company’s preferred stock, the Company’s common stockholders are entitled to dividends declared by the board of directors. The shares of the Company’s common stock are not subject to any redemption provisions. The Company has no issued and outstanding shares of preferred stock.

The Company’s ability to pay dividends is effectively limited by its status as a holding company and the terms of its subsidiary’s indentures and senior secured credit facility, which also significantly restricts the ability of certain of the Company’s subsidiaries to pay dividends directly or indirectly to the Company. See Note 12 for discussion of restrictions contained within the debt agreements of the Company’s subsidiaries.

Treasury Stock — Treasury stock represents shares of common stock repurchased 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 years ended December 31, 2017, 2018 and 2019.

 

Number of

Treasury Shares

 

 

Cost

 

Balance at January 1, 2017

 

4,447,002

 

 

$

73,411

 

Restricted stock withholdings (1)

 

68,527

 

 

 

2,943

 

Restricted stock forfeitures (2)

 

10,341

 

 

 

 

Balance at December 31, 2017

 

4,525,870

 

 

$

76,354

 

Restricted stock withholdings (1)

 

75,801

 

 

 

2,905

 

Restricted stock forfeitures (2)

 

24,520

 

 

 

 

Balance at December 31, 2018

 

4,626,191

 

 

$

79,259

 

Restricted stock withholdings (1)

 

59,060

 

 

 

2,308

 

Restricted stock forfeitures (2)

 

26,608

 

 

 

 

Balance at December 31, 2019

 

4,711,859

 

 

$

81,567

 

 

(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 that ranged from $29.17 to $44.44 per share.  

(2)

The Company repurchased forfeited restricted shares at a cost of $0.001 per share in accordance with the 2017 Omnibus Plan.   

As of December 31, 2019, the Company had no plans to retire any shares of its treasury stock.

Restricted Stock — Below is a summary of restricted stock activity for the years ended December 31, 2017, 2018 and 2019:

 

 

 

Year Ended

 

 

Year Ended

 

 

Year Ended

 

 

 

December 31, 2017

 

 

December 31, 2018

 

 

December 31, 2019

 

 

 

Shares of

Restricted

Stock

 

 

Weighted

Average

Grant Date

Fair Value

 

 

Shares of

Restricted

Stock

 

 

Weighted

Average

Grant Date

Fair Value

 

 

Shares of

Restricted

Stock

 

 

Weighted

Average

Grant Date

Fair Value

 

Outstanding at January 1

 

 

606,618

 

 

$

33.51

 

 

 

650,581

 

 

$

35.81

 

 

 

704,353

 

 

$

38.68

 

Granted

 

 

246,534

 

 

$

41.70

 

 

 

328,734

 

 

$

38.72

 

 

 

315,899

 

 

$

37.34

 

Vested

 

 

(192,230

)

 

$

36.26

 

 

 

(250,442

)

 

$

31.27

 

 

 

(209,821

)

 

$

41.10

 

Forfeited

 

 

(10,341

)

 

$

33.48

 

 

 

(24,520

)

 

$

38.62

 

 

 

(26,608

)

 

$

37.69

 

Outstanding at December 31

 

 

650,581

 

 

$

35.81

 

 

 

704,353

 

 

$

38.68

 

 

 

783,823

 

 

$

37.53

 

 

During the year ended December 31, 2019, the Company granted 315,899 shares of restricted stock to directors and employees of the Company. 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 $34.01 to $41.61 per share. The Company assumed forfeiture rates ranging from 0% to 10% for the restricted stock awards.  Restricted stock granted to directors vests over a one-year period.  Restricted stock granted to employees vests over periods ranging from one year to four years based on continued service. The recipients of restricted stock are entitled to receive 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 award activity recorded for the periods indicated.

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2018

 

 

2019

 

Compensation expense recognized during the period

 

$

8,384

 

 

$

9,655

 

 

$

10,185

 

Fair value of restricted shares that vested during the period

 

$

8,172

 

 

$

9,501

 

 

$

8,024

 

Income tax deduction upon vesting of restricted stock awards

 

$

2,667

 

 

$

1,744

 

 

$

1,516

 

 

As of December 31, 2019, the remaining unrecognized compensation expense related to these restricted stock awards was approximately $15,524. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.

Restricted Stock Units — During the years ended December 31, 2017, 2018 and 2019, the Company granted restricted stock units representing 175,634, 228,194 and 306,651 hypothetical shares of common stock, respectively, 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”) for a two year measurement period, as defined in the award agreement, based on a formula utilizing a multiple of Adjusted EBITDA subject to certain specified adjustments (as defined in the restricted stock unit award agreement). 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. As an example, if the Company achieves an IRR equal to 9.0% for the 2017 grant, 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 payouts of restricted stock units that vest will be subject to an additional 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.

 

At the time of each of the restricted stock unit grants, the Company assumes the IRR level to be reached for the defined measurement period will be the target IRR level in determining the amount of compensation expense to record for such grants. If and when additional information becomes available to indicate that something other than the target IRR level will be achieved, the Company adjusts compensation expense on a prospective basis over the remaining service period. The Company assumed forfeiture rates ranging from 0% to 5% for the restricted stock unit awards granted during 2017, 2018 and 2019. Restricted stock unit award participants are eligible to receive dividend equivalent payments if and at the time the restricted stock unit awards vest.  

Below is a table summarizing the potential number of units that could vest under restricted stock unit awards granted during the years ended December 31, 2017, 2018 and 2019 at each of the three levels of financial performance (excluding forfeitures):

 

 

 

Granted During the Year Ended December 31,

 

 

 

2017

 

 

2018

 

 

2019

 

 

 

Number of

 

 

Value at

 

 

Number of

 

 

Value at

 

 

Number of

 

 

Value at

 

 

 

Units

 

 

Grant(1)

 

 

Units

 

 

Grant(1)

 

 

Units

 

 

Grant(1)

 

at threshold IRR

 

 

58,545

 

 

$

2,481

 

 

 

76,065

 

 

$

2,967

 

 

 

136,285

 

 

$

5,011

 

at target IRR

 

 

117,089

 

 

$

4,961

 

 

 

152,129

 

 

$

5,938

 

 

 

204,427

 

 

$

7,517

 

at maximum IRR

 

 

175,634

 

 

$

7,442

 

 

 

228,194

 

 

$

8,906

 

 

 

306,651

 

 

$

11,276

 

 

(1)

The grant date fair value for units issued during the year ended December 31, 2017 was $42.37. The grant date fair values for the units issued during the year ended December 31, 2018  ranged from $37.55 to $39.03.  The grant date fair value for units issued during the year ended December 31, 2019 was $36.77 per share.

Below is a summary of activity for restricted stock unit awards for the periods indicated:

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2018

 

 

2019

 

Number of restricted stock unit awards that vested during the period

 

 

97,115

 

 

 

127,084

 

 

 

90,895

 

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

 

$

4,155

 

 

$

4,846

 

 

$

3,658

 

Accumulated dividends paid upon vesting of restricted stock unit awards

 

$

558

 

 

$

526

 

 

$

386

 

Compensation expense recognized during the period

 

$

4,297

 

 

$

4,681

 

 

$

4,430

 

Income tax benefit recognized upon vesting of restricted stock unit awards

 

$

1,745

 

 

$

708

 

 

$

397

 

 

During the year ended December 31, 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 at the time of the modification.  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.  

The current financial performance factors and respective vesting rates for each of the 2017, 2018 and 2019 grants are as follows:

 

 

 

Year Ended December 31,

 

 

Percentage of Shares Vesting

 

 

 

2017

 

 

2018

 

 

2019

 

 

 

 

 

Threshold IRR

 

6.0%

 

 

6.0%

 

 

6.0%

 

 

33.3%

 

Target IRR

 

8.0%

 

 

8.0%

 

 

8.0%

 

 

66.6%

 

Maximum IRR

 

14.0%

 

 

14.0%

 

 

14.0%

 

 

100.0%

 

 

As of December 31, 2019, the Company had restricted stock units outstanding that represented a total 749,895 hypothetical shares of common stock, net of actual cumulative forfeitures of 6,195 units, assuming the maximum IRR is achieved for all of the outstanding restricted stock unit awards.

As of December 31, 2019, the remaining unrecognized compensation expense related to the outstanding restricted stock unit awards was $9,872, which reflects an IRR level of 7.2% that was achieved for the 2016 grant, an IRR level of 9.3% that was achieved for the 2017 grant and an IRR level of 8.0% that is estimated for the 2018 and 2019 grants. The weighted average period over which this remaining compensation expense will be recognized is approximately two years.