Stockholders' Deficit

3 Months Ended

Mar. 31, 2020

Stockholders’ Deficit

Repurchase of Common Stock

On May 2, 2018, the Board of Directors increased the total authorization to repurchase the Company's issued and outstanding stock to $1.0 billion. This current program has no expiration date and replaced the previous authorizations.

We did not repurchase any shares during the three months ended March 31, 2020. During the three months ended March 31, 2019, we repurchased 406,586 shares, for approximately $17.7 million with an average purchase price of $43.41 per share. These repurchases were made under open market transactions, including through plans complying with Rule 10b5-1 of the Securities Exchange Act of 1934, as amended and pursuant to the share repurchase program previously authorized by our Board of Directors.

Dividends

On February 13, 2020, our Board of Directors declared a quarterly cash dividend of $0.16 per common share, or $24.9 million, which was paid on March 20, 2020, to stockholders of record at the close of business on March 6, 2020.

The dividends paid in the three months ended March 31, 2020 were recorded as a reduction to cash and cash equivalents and retained earnings on our Condensed Consolidated Balance Sheets. Our credit facility and our notes contain covenants that restrict our ability to declare or pay dividends. However, we do not believe these covenants are likely to materially limit the future payment of quarterly cash dividends on our common stock. From time to time, we may consider other means of returning value to our stockholders based on our Condensed Consolidated Statements of Operations. There is no guarantee that our Board of Directors will declare any future dividends.

Share-based Compensation

In 2014, the Board of Directors adopted, and its stockholders approved the Omnibus Incentive Plan (“Omnibus Incentive Plan”). Under the Omnibus Incentive Plan, the maximum number of shares of Common Stock authorized was 4,250,000, plus total shares available to be issued as of May 22, 2014 under the 2002 Directors Stock Plan and the 2005 Contingent Stock Plan (collectively, the “Predecessor Plans”). The Omnibus Incentive Plan replaced the Predecessor Plans and no further awards were

granted under the Predecessor Plans. The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance share units known as PSU awards, other stock awards and cash awards to officers, non-employee directors, key employees, consultants and advisors.

In 2018, the Board of Directors adopted, and its shareholders approved an amendment and restatement to the 2014 Omnibus Incentive Plan. The amended plan adds 2,199,114 shares of common stock to the share pool previously available under the Omnibus Incentive Plan.

We record share-based incentive compensation expense in selling, general and administrative expenses and cost of sales on our Condensed Consolidated Statements of Operations for both equity-classified and liability-classified awards. We record corresponding credit to additional paid-in capital within stockholders’ equity for equity-classified awards, and to either current or non-current liability for liability-classified awards based on the fair value of the share-based incentive compensation awards at the date of grant. Total expense for the liability-classified awards continues to be remeasured to fair value at the end of each reporting period. We recognize an expense or credit reflecting the straight-line recognition, net of estimated forfeitures, of the expected cost of the program. The number of Performance Share Unit ("PSU") earned may equal, exceed or be less than the targeted number of shares depending on whether the performance criteria are met, surpassed or not met.

The table below shows our total share-based incentive compensation expense:


	Three Months Ended March 31,
(In millions)	2020		2019
Total share-based incentive compensation expense⁽¹⁾	$	8.5	$	8.4

⁽¹⁾The amounts included above do not include the expense related to our U.S. profit sharing contributions made in the form of our common stock or the expense or income related to certain cash-based awards, however, the amounts include the expense related to share based awards that are settled in cash.

PSU Awards

During the first 90 days of each year, the Organization and Compensation (“O&C”) Committee of our Board of Directors approves PSU awards for our executive officers and other selected employees, which include for each participant a target number of shares of common stock and performance goals and measures that will determine the percentage of the target award that is earned following the end of the three-year performance period. Following the end of the performance period, in addition to shares earned, participants will also receive a cash payment in the amount of the dividends (without interest) that would have been paid during the performance period on the number of shares that they have earned. Each PSU is subject to forfeiture if the recipient terminates employment with the Company prior to the end of the three-year award performance period for any reason other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such participant’s number of days of service during the award performance period, further adjusted based on the achievement of the performance goals during the award performance period. PSUs are classified as equity in the Condensed Consolidated Balance Sheets, with the exception of awards that are required by local laws or regulations to be settled in cash. These are classified as either current or non-current liabilities in the Condensed Consolidated Balance Sheets.

2020 Three-year PSU Awards

During the first quarter 2020, the O&C Committee approved awards with a three-year performance period beginning January 1, 2020 to December 31, 2022 for executive officers and other selected employees. The O&C Committee established performance goals, which are (i) total shareholder return (TSR) weighted at 34%, (ii) three-year cumulative average growth rate (CAGR) of consolidated Adjusted EBITDA weighted at 33%, and (iii) Return on Invested Capital (ROIC) weighted at 33%. The total number of shares to be issued for these awards can range from zero to 200% of the target number of shares.

The number of PSUs granted and the grant date fair value of the PSUs are shown in the following table:


	TSR		ROIC		Adjusted EBITDA CAGR
February 12, 2020 grant date
Number of units granted	33,335		35,068		35,068
Fair value on grant date	$	38.87	$	35.86	$	35.86
February 13, 2020 grant date
Number of units granted	44,206		42,507		42,507
Fair value on grant date	$	34.08	$	34.40	$	34.40
March 1, 2020 grant date
Number of units granted	31,064		29,690		29,690
Fair value on grant date	$	29.85	$	30.31	$	30.31

The assumptions used to calculate the grant date fair value of the PSUs based on TSR are shown in the following table:


	February 12, 2020 grant date		February 13, 2020 grant date		March 1, 2020 grant date
Expected price volatility	23.7	%	23.7	%	23.7	%
Risk-free interest rate	1.4	%	1.4	%	0.9	%

2017 Three-year PSU Awards

In February 2020, the O&C Committee reviewed the performance results for the 2017-2019 PSUs. Performance goals for these PSUs were based on Adjusted EBITDA margin, net trade sales CAGR and relative TSR. Based on overall performance for 2017-2019 PSUs, these awards paid out at 90.3% of target or 216,581 shares.