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Equity-Based Compensation
9 Months Ended
Sep. 30, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Equity-Based Compensation

15.

Equity-Based Compensation

Equity Incentive Plans

The Company issues stock-based awards, including stock options, restricted stock and restricted stock units, to certain officers, employees and non-employee directors under the Acadia Healthcare Company, Inc. Incentive Compensation Plan (the “Equity Incentive Plan”). At September 30, 2021, a maximum of 12,700,000 shares of the Company’s common stock were authorized for issuance as stock options, restricted stock and restricted stock units or other share-based compensation under the Equity Incentive Plan, of which 4,484,084 were available for future grant. Stock options may be granted for terms of up to 10 years. The Company recognizes expense on all share-based awards on a straight-line basis over the requisite service period of the entire award. Grants to employees generally vest in annual increments of 25% each year, commencing one year after the date of grant. The exercise prices of stock options are equal to the most recent closing price of the Company’s common stock on the most recent trading date prior to the date of grant.

The Company recognized $8.9 million and $5.5 million in equity-based compensation expense for the three months ended September 30, 2021 and 2020, respectively, and $25.0 million and $16.3 million for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, there was $48.5 million of unrecognized compensation expense related to unvested

options, restricted stock and restricted stock units, which is expected to be recognized over the remaining weighted average vesting period of 1.2 years.

The Company recognized a deferred income tax benefit of $2.3 million and $1.4 million for the three months ended September 30, 2021 and 2020, respectively, related to equity-based compensation expense. The Company recognized a deferred income tax benefit of $6.4 million and $4.2 million for the nine months ended September 30, 2021 and 2020, respectively, related to equity-based compensation expense.

Stock Options

Stock option activity during 2020 and 2021 was as follows:

 

 

 

Number

of

Options

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Remaining

Contractual

Term (in years)

 

 

Aggregate

Intrinsic

Value (in thousands)

 

Options outstanding at January 1, 2020

 

 

1,360,068

 

 

$

39.40

 

 

 

7.57

 

 

$

1,650

 

Options granted

 

 

507,600

 

 

 

33.13

 

 

 

9.18

 

 

 

157

 

Options exercised

 

 

(68,700

)

 

 

29.15

 

 

N/A

 

 

 

854

 

Options cancelled

 

 

(288,662

)

 

 

39.67

 

 

N/A

 

 

N/A

 

Options outstanding at December 31, 2020

 

 

1,510,306

 

 

 

37.56

 

 

 

7.35

 

 

 

1,414

 

Options granted

 

 

306,520

 

 

 

57.58

 

 

 

7.66

 

 

 

823

 

Options exercised

 

 

(547,522

)

 

 

39.48

 

 

N/A

 

 

 

10,846

 

Options cancelled

 

 

(143,165

)

 

 

39.97

 

 

N/A

 

 

N/A

 

Options outstanding at September 30, 2021

 

 

1,126,139

 

 

$

41.77

 

 

 

7.39

 

 

$

20,808

 

Options exercisable at December 31, 2020

 

 

596,606

 

 

$

45.37

 

 

 

5.55

 

 

$

543

 

Options exercisable at September 30, 2021

 

 

332,934

 

 

$

43.20

 

 

 

6.00

 

 

$

5,767

 

Fair values are estimated using the Black-Scholes option pricing model. The following table summarizes the grant-date fair value of options and the assumptions used to develop the fair value estimates for options granted during the nine months ended September 30, 2021 and year ended December 31, 2020:

 

 

September 30,

2021

 

 

December 31,

2020

 

Weighted average grant-date fair value of options

 

$

20.67

 

 

$

12.37

 

Risk-free interest rate

 

 

0.9

%

 

 

1.6

%

Expected volatility

 

 

40

%

 

 

41

%

Expected life (in years)

 

 

5.0

 

 

 

5.0

 

 

The Company’s estimate of expected volatility for stock options is based upon the volatility of our stock price over the expected life of the award. The risk-free interest rate is the approximate yield on U.S. Treasury Strips having a life equal to the expected option life on the date of grant. The expected life is an estimate of the number of years an option will be held before it is exercised.

Other Stock-Based Awards

Restricted stock activity during 2020 and 2021 was as follows:

 

 

 

Number of

Shares

 

 

Weighted

Average

Grant-Date

Fair Value

 

Unvested at January 1, 2020

 

 

805,136

 

 

$

34.14

 

Granted

 

 

637,312

 

 

 

25.82

 

Cancelled

 

 

(129,683

)

 

 

34.56

 

Vested

 

 

(289,769

)

 

 

35.88

 

Unvested at December 31, 2020

 

 

1,022,996

 

 

$

28.41

 

Granted

 

 

324,530

 

 

 

58.48

 

Cancelled

 

 

(66,801

)

 

 

38.56

 

Vested

 

 

(352,184

)

 

 

30.63

 

Unvested at September 30, 2021

 

 

928,541

 

 

$

37.35

 

 

Restricted stock unit activity during 2020 and 2021 was as follows:

 

 

 

Number of

Units

 

 

Weighted

Average

Grant-Date

Fair Value

 

Unvested at January 1, 2020

 

 

447,357

 

 

$

38.89

 

Granted

 

 

583,680

 

 

 

10.60

 

Performance adjustment

 

 

117,772

 

 

 

13.50

 

Cancelled

 

 

(63,056

)

 

 

43.35

 

Vested

 

 

(12,691

)

 

 

42.09

 

Unvested at December 31, 2020

 

 

1,073,062

 

 

$

20.15

 

Granted

 

 

149,416

 

 

 

61.52

 

Performance adjustment

 

 

345,731

 

 

 

24.10

 

Cancelled

 

 

 

 

 

 

Vested

 

 

(184,051

)

 

 

42.30

 

Unvested at September 30, 2021

 

 

1,384,158

 

 

$

22.66

 

 

Restricted stock awards are time-based vesting awards that vest over a period of three or four years and are subject to continuing service of the employee or non-employee director over the ratable vesting periods. The fair values of the restricted stock awards were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

Restricted stock units are granted to employees and are subject to Company performance compared to pre-established targets and Company performance compared to peers. In addition to Company performance, these performance-based restricted stock units are subject to the continuing service of the employee during the two- or three-year period covered by the awards. The performance condition for the restricted stock units is based on the Company’s achievement of annually established targets for diluted earnings per share. Additionally, the number of shares issuable pursuant to restricted stock units granted during 2020 are subject to adjustment based on the Company’s three-year annualized total stockholder return relative to a peer group consisting of S&P 1500 companies within the Healthcare Providers & Services 6 digit GICS industry group and selected other companies deemed to be peers. The number of shares issuable at the end of the applicable vesting period of restricted stock units ranges from 0% to 200% of the targeted units based on the Company’s actual performance compared to the targets and, for 2021 and 2020 awards, performance compared to peers.

The fair values of restricted stock units were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date for units subject to performance conditions, or at its Monte-Carlo simulation value for units subject to market conditions.