16. STOCK-BASED COMPENSATION

Stock-based Compensation

To provide additional incentives to selected employees, directors and consultants whose contributions are considered essential to the growth and success of our business, our board of directors adopted the Equity Incentive Plan, effective January 15, 2009. The Equity Incentive Plan provides for the grant of stock options, share appreciation rights, restricted stock, restricted stock units (“RSUs”), deferred shares, performance shares, unrestricted shares and other share-based awards. Awards under the Equity Incentive Plan, as amended on July 20, 2016 and August 18, 2016, are limited to 16,562,730 shares of our common stock, subject to adjustment as provided for in the Equity Incentive Plan document. Board of director discretion is allowed, under the Equity Incentive Plan, with respect to the determination of vesting periods, contractual lives and stock option exercise prices. The amendment on July 20, 2016 provided for the increase in the maximum grants allowed to 16,562,730 shares, and the amendment on August 18, 2016 effected the name change to the Equity Incentive Plan that is disclosed in Note 12.

Restricted Stock

Prior to July 20, 2016, the only awards issued under the Equity Incentive Plan were restricted stock, and, pursuant to the First Amended and Restated Stockholders’ Agreement by and among the Company and its stockholders and the individual award agreements, transfers of such awards were restricted. In addition, prior to July 20, 2016, such restricted stock provided us with the right, but not the obligation to repurchase all or any portion of a recipient’s vested equity interests in the event such recipient’s employment was terminated for any reason. The purchase price that we paid for the restricted stock was based on a valuation made in good faith by our board of directors. Since we had previously exercised this right in every instance of employment termination, the awardees did not bear the risks and rewards of ownership. Therefore, we determined that liability classification of these awards was appropriate until the point that the shares had been vested for six months, a sufficient period of time (six months) to allow the holder to fully bear the risks and rewards of ownership. If the employee remained with us after the six month period, the award was reclassified from liabilities to equity. In connection with the IPO, The First Amended and Restated Stockholders Agreement was terminated.

Under liability classification, we were required to recognize a liability based on the stock award’s fair value at each reporting date with reference to its vesting schedule. Following the IPO, more than 25% of our common stock was available for trading on the New York Stock Exchange (“NYSE”) on July 20, 2016, thereby resulting in a termination of the call right on that date. Hence, 24 awardees began to bear the risks and rewards of ownership. As a result, the liability award was converted to an equity award as of July 20, 2016, since the call right feature was the only condition that prevented it from being classified as an equity award. As of that date, the fair value of the award was determined to be $23.53, based on the opening price of our common stock, and accordingly, additional compensation expense of $6,477 was recognized for the period that spanned the beginning of the third fiscal quarter of 2016 to July 20, 2016. On the same date, the amount of $35,312 was transferred from liabilities to equity. While the award was a liability award, pursuant to ASC 718, “Compensation – Stock Compensation,” we were required to re-measure the fair value of the award at each reporting date and record additional compensation with reference to the vesting schedule. Fair values were, at those times, estimated at the grant dates using estimates of enterprise value, adjusted by liquidity discounts. The enterprise value estimates were calculated by applying market benchmark multiples to the most recent quarter’s adjusted earnings before interest, taxes, depreciation and amortization for the trailing twelve months period. Annually, those computations were also compared with our estimated future discounted cash flows.

Further, during the third quarter of 2016, the dividend provision of the restricted stock award agreement was modified to provide for the payment of non-forfeitable dividends on vested and unvested restricted stock.

The table below reflects the restricted stock activity for the year to date period as well as other information related to awards of restricted stock that were granted under the Equity Incentive Plan. Restricted stock granted under the Equity Incentive Plan generally vests over a three- or four-year period on a graded-vesting basis with equal proportions of the shares vesting on the annual anniversary date of the grant in each of the three or four years in the vesting period.


	Shares			Weighted Average Grant Date Fair value per Share
Unvested Restricted Stock:
Balance at beginning of fiscal year		551,511		$	5.99
Granted		—
Vested		(69,585	)	$	5.62
Forfeited		—

Balance at end of period		481,926		$	6.05

Vested Restricted Stock:
Balance at beginning of fiscal year		3,866,430		$	2.05
Vested		69,585			5.62
Repurchased		—

Balance at end of period		3,936,015		$	2.11

Compensation expense, included in selling, general and administrative expenses, associated with outstanding restricted stock awards, including credits for stock forfeitures, was $1,204 and $2,739 for 1^st Quarter 2017 and 1^st Quarter 2016, respectively. As of April 1, 2017, total unrecognized compensation cost related to unvested restricted stock awards granted under the Equity Incentive Plan was approximately $4,836. This cost is expected to be recognized over the weighted average period of 1.3 years.

Since all of the restricted stock awards were reclassified from liabilities to equity as of July 20, 2016, there was no liability to holders of grants as of April 1, 2017 and December 31, 2016. No restricted stock was granted in 1^st Quarter 2017.

RSUs and Stock Options

Between August 26, 2016 and December 31, 2016, we awarded certain employees and nonemployee directors RSUs as well as nonqualified stock options (“stock options”) with the right to acquire shares of our common stock. These awards vest on a graded-vesting basis over varying periods ranging from two to four years. The awards are subject to service conditions only. Each RSU may be exchanged on the vesting date for one share of our common stock and can only be settled in shares. Awardees of the RSUs are also entitled to non-forfeitable dividend-equivalent payments on vested and unvested RSUs. The contractual term of the stock option award is 10 years. No awards of RSUs and stock options were made in 1^st Quarter 2017.

Compensation expense for the RSUs and the stock options are being recognized over the vesting period on a graded-vesting basis based on their grant-date fair values or modified fair values, as applicable. The grant date fair values or modified fair values of the RSUs are based on the closing price of our common stock on the date of grant or date of modification. The grant-date fair values or modified fair values of the stock option awards granted during Fiscal 2016 were determined using the Black-Scholes model, and the weighted average inputs to that model are disclosed in our Fiscal 2016 Consolidated Financial Statements.

The table below provides additional information relating to the RSU awards:


				Weighted
				Average
				Grant Date
				Fair value
	Shares			per Share
Unvested RSUs:
Balance at beginning of fiscal year		820,409		$	25.69
Granted		—
Vested		(61,856	)	$	27.58
Forfeited		(1,521	)	$	25.69

Balance at end of period		757,032		$	25.68

RSUs Expected to vest		709,702		$	25.69

Vested RSUs:
Balance at beginning of fiscal year		4,948		$	25.69
Vested		61,856		$	27.58

Balance at end of period		66,804		$	27.44

Unrecognized compensation expense related to the RSUs was $14,858 at April 1, 2017, which is expected to be recognized over the weighted average period of 1.7 years (if there are no forfeitures). Compensation expense recognized with respect to the RSUs in 1^st Quarter 2017 was $3,315.

The table below provides additional information with respect to our stock option awards:


						Weighted
				Weighted		Average		Aggregate
				Average		Remaining		Intrinsic
	Number of			Exercise		Contractual		Value (1)
	Shares			Price		Term		(in thousands)
Unvested stock options:
Balance at beginning of fiscal year		649,385		$	25.70
Granted		—
Vested		(185,567	)	$	25.69
Forfeited		(4,562	)	$	25.69

Balance outstanding at end of period		459,256		$	25.71		9.41 years	$	2,508

Options expected to vest		431,992		$	25.71		8.85 years	$	2,359

Vested stock options:
Balance at beginning of fiscal year		—
Vested		185,567		$	25.69

Balance at end of period		185,567		$	25.69

(1)	Represents the total pre-tax intrinsic value, based on the closing price of our common stock on the NYSE on April 1, 2017 and is the amount the option holders would have received had all option holders exercised their options on April 1, 2017.

None of the stock options have been exercised and none have expired. Unrecognized compensation expense related to the stock options was $1,339 on April 1, 2017, which is expected to be recognized over the weighted average period of 1.3 years (if there are no forfeitures). Compensation expense recognized with respect to the stock options in 1^st Quarter 2017 was $632.

On April 1, 2017, a total of 5,053,192 shares remained available for grant under the Equity Incentive Plan.