Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

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STOCK-BASED COMPENSATION
6 Months Ended
Jun. 30, 2020
STOCK-BASED COMPENSATION.  
STOCK-BASED COMPENSATION

NOTE 12—STOCK-BASED COMPENSATION PLANS

During the first half of 2020, the Company granted 365,855 service-based restricted stock awards under the 2015 Equity Incentive Plan, as amended and restated on June 10, 2019 (the “2015 Plan”) at a grant date fair value of  $1.23 per share to its five non-employee directors, which vest in full on March 13, 2021. The fair value of these service-based restricted stock awards represents the closing price of the Company’s common stock on the date of grant.

During the first half of 2019, the Company granted 149,639 service-based restricted stock awards out of treasury stock of which 130,612 shares were granted under our annual director compensation program at a grant date fair value of $2.45 per share and 19,027 shares were granted to a new director at a grant date fair value of $2.35. These awards vest in four equal annual installments, one of which occurred on January 22, 2020 and the three remaining on January 22 of each of 2021, 2022 and 2023. This resulted in 37,410 service-based shares being vested to non-employee directors.

Historically, the non-employee directors also received an annual grant of service-based restricted shares in January with a value of $80,000 that vested in four equal annual installments. However, the annual grants for 2016, 2017 and 2018 were delayed until the Company filed its Annual Report on Form 10-K for the year ended December 31, 2017. After this Form 10-K was filed, the Board of Directors approved grants of restricted shares, out of treasury stock, with award values of $80,000 for 2016, $80,000 for 2017 and $60,000 for 2018 for non-employee directors who continued to serve after the 2018 Annual Meeting of Stockholders (in each case pro-rated for partial years of service).  The restricted shares for 2016, 2017 and 2018 vest in four equal annual installments in January of each year, determined as if the grant had occurred in the ordinary course in January of the respective year of service, resulting in a portion of each of the total awards vesting on the grant date.  The fair value of these service-based restricted stock awards represents the closing price of the Company’s common stock on the date of grant. This resulted in 59,057 service-based shares being vested to non-employee directors on January 22, 2020.

During the first half of 2020, the Company granted awards under the 2020 long-term incentive program, with a total target award opportunity equal to $2.9 million, which was converted to 580,312 service-based restricted stock units and 1,178,213 performance-based restricted stock units under the 2015 Plan using a conversion price of $1.67 per share. These equity awards had a grant date fair value of $1.22 per share, which was the closing price on March 31, 2020, and have the potential to be settled in shares or cash at the election of the Compensation Committee of the Board of Directors. The service-based restricted stock units will vest in equal annual installments over a period of three years; the performance-based restricted stock units are earned based on the extent to which the Company achieves annual performance objectives during the three-year period commencing January 1, 2020, with threshold performance resulting in awards earned at 50% of the target award opportunity and maximum performance resulting in awards earned at 200% of the target, and, to the extent earned, shall vest on March 31, 2023.

During the first half of 2019, the Company granted 358,613 service-based restricted stock units under the 2019 long-term incentive program and the 2015 Plan at a grant date fair value of $2.35 per share. The fair value of service-based restricted stock units represents the closing price of the Company’s common stock on the grant date. These service-based restricted stock units vest ratably over a three-year period, one of which occurred on March 31, 2020 and the two remaining on March 31, 2021 and 2022. This resulted in 120,574 service-based shares being vested on March 31, 2020 to key employees.

During the first half of 2019, the Company also granted performance-based restricted stock units under the 2019 long-term incentive program and the 2015 Plan with an aggregate cash value of approximately $1.7 million, which could be paid in cash or shares at the election of the Company. These performance-based restricted stock units vest ratably over a three-year period beginning on March 31, 2020. Performance objectives are established by the Compensation Committee of the Board of Directors (the “Compensation Committee”) on an annual basis. For the 2019 and 2020 performance periods, the performance objective was based on the Company’s backlog performance targets. Performance objectives for the final year will be established by the Compensation Committee in 2021. Award payouts range from a threshold of 50% to a maximum of 200% for each respective annual performance period. The fair value of the performance-based restricted stock units with an established 2019 and 2020 performance objective represents the closing price of the Company’s common stock on the date of grant. The fair value of the performance-based restricted stock units for the 2021 performance period will be measured in the year that the respective performance objective is established and approved by the Compensation Committee. On March 31, 2020, the Company paid 320,074 performance-based shares to key employees, based on the Company’s achievement of its 2020 backlog target.

In September 2019, the Company granted to a new employee, out of treasury stock, 100,000 service-based restricted stock units (with vesting in three equal annual installments on each of March 31, 2020, 2021 and 2022) and 50,000 performance-based restricted stock units (with vesting in two equal annual installments on each of March 31, 2021 and 2022, subject to achievement of the performance metrics to be established by the Board of Directors of the Company for the years ended December 31, 2020 and 2021), as an inducement grant. The fair value of service-based restricted stock units represents the closing price of the Company’s common stock on the date of grant. The fair value of the performance-based restricted stock units is estimated using the Monte Carlo simulation model. This resulted in 33,333 service-based shares being vested on March 31, 2020.

During 2018, the Company granted 429,165 service-based restricted stock units to employees, under the 2018 long-term incentive program, out of treasury stock, at a grant date fair value of $2.94 per share. Restricted stock units granted to employees in 2018 vest ratably over a three-year period beginning on March 31, 2019. The fair value of service-based restricted stock units represents the closing price of the Company’s common stock on the date of grant. On March 31, 2020, the Company vested 104,888 service-based shares to key employees. The Company also granted 357,545 performance-based restricted stock units, out of treasury stock, at a grant date fair value of $3.00 per share which vest in three equal annual installments on March 31 of each of 2019, 2020 and 2021, provided that the Company achieves a per share stock price of at least $5.00 for any period of 30 consecutive trading days at any time prior to June 30, 2021. The fair value of the performance-based restricted stock units is estimated using the Monte Carlo simulation model.

During the first half of 2019, the Company also granted an additional 21,500 service-based restricted stock units and 21,500 performance-based restricted stock units, both out of treasury stock, under the 2018 long-term incentive program at a grant date fair value of $2.60 per share and $0.75 per share, respectively. The fair value of the service-based restricted stock units represents the closing price of the Company’s common stock on the date of grant. The fair value of the performance-based restricted stock units is estimated using the Monte Carlo simulation model. On March 31, 2020, the Company vested 5,500 of the service-based restricted stock units to key employees.

Stock-based compensation expense for the three months ended June 30, 2020 and 2019 remained approximately unchanged at $0.6 million, and for the six months ended June 30, 2020 and 2019 was $1.1 million and $0.9 million, respectively, and was included in general and administrative expenses on the Company’s unaudited condensed consolidated statements of operations.