Stock-Based Compensation Plans

6 Months Ended

Jun. 28, 2020

Share-based Payment Arrangement [Abstract]

Prior to the Separation, KAR issued equity awards from time to time to select employees and non-employee directors

of IAA. In connection with the Separation, IAA created its own equity plan - the 2019 Omnibus Stock and Incentive Plan (as amended, the "2019 OSIP"), as described below under 2019 Omnibus Stock and Incentive Plan.

The employee matters agreement entered into with KAR in connection with the Separation required that the outstanding KAR equity awards held by IAA employees and non-employee directors be converted into adjusted awards of IAA pursuant to the 2019 OSIP. The awards were adjusted based on the following principles:

•For each award recipient, the intent was to maintain the economic value of those awards before and after the Separation Date; and

•The terms of the equity awards, such as the vesting schedule, will generally continue unchanged, except that the performance criteria for certain performance-based restricted stock units ("PRSUs") granted in 2019 were subject to adjusted performance criteria. Such PRSUs were converted into time-based restricted stock units ("RSUs") with two-year cliff vesting in February 2020, since the adjusted performance criteria were determined to have been met.

2019 Omnibus Stock and Incentive Plan

On June 27, 2019, the Company's board of directors approved the 2019 OSIP. The purpose of the 2019 OSIP is to provide an additional incentive to selected management employees, directors, independent contractors, and consultants of the Company whose contributions are essential to the growth and success of the Company, in order to strengthen the commitment of such persons, motivate such persons to faithfully and diligently perform their responsibilities and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability for the Company.

Benefits granted under the 2019 OSIP may be granted in any one or a combination of (i) options to purchase IAA common stock; (ii) IAA share appreciation rights (“SARs”); (iii) restricted shares of IAA common stock; (iv) other IAA stock-based awards; or (v) other cash-based awards. Options, restricted shares, and other share-based awards or cash awards may constitute performance-based awards. The granting or vesting of any performance-based awards will be based on achievement of performance objectives that are based on one or more financial or business criteria, with respect to one or more business units of IAA and its subsidiaries as a whole. Such financial or business criteria may be adjusted to account for unusual or infrequently occurring items or changes in accounting.

Participants include any employee, director, independent contractor or consultant of IAA or any affiliate of IAA selected to receive awards under the 2019 OSIP, and, upon his or her death, his or her successors, heirs, executors and administrators, as the case may be. As of June 28, 2020, the number of common shares reserved and available for awards under the 2019 OSIP is 4,661,799, subject to adjustment made in accordance with the 2019 OSIP. Upon the occurrence of certain corporate events that affect the common stock, including but not limited to any extraordinary cash dividend, stock split, reorganization or other relevant change in capitalization, appropriate adjustments may be made with respect to the number of shares available for grants under the 2019 OSIP, the number of shares covered by outstanding awards and the maximum number of shares that may be granted to any participant.

The aggregate awards granted during any calendar year to any single individual will not exceed: (i) 1,000,000 shares subject to options or SARs, (ii) 500,000 shares subject to restricted shares or other share-based awards and (iii) $5,000,000 with respect to any cash-based award. A non-employee director of IAA may not be granted awards under the 2019 OSIP during any calendar year that, when aggregated with such non-employee director’s cash fees received with respect to such calendar year, exceed $750,000 in total value.

The following table summarizes the Company's stock-based compensation expense by type of award granted under both the KAR plans and the 2019 OSIP (in millions):


	Three Months Ended						Six Months Ended
	June 28, 2020		June 30, 2019		June 28, 2020		June 30, 2019
Performance-based Restricted Stock Units	$	0.4	$	0.2	$	0.6	$	0.4
Restricted Stock Units and Awards	1.8		0.7		3.5		1.5
Stock Options	0.2		—		0.4		—
Total Stock-based Compensation Expense	$	2.4	$	0.9	$	4.5	$	1.9

The following table summarizes the stock-based awards granted by the Company to certain employees and non-employee directors in accordance with the 2019 OSIP during the six months ended June 28, 2020:


	Three Months Ended June 28, 2020				Three Months Ended March 29, 2020
	Number of Awards Granted	Weighted Average Grant Date Fair Value		Number of Awards Granted	Weighted Average Grant Date Fair Value
Performance-based Restricted Stock Units	426	$	40.57	99,264	$	50.11
Restricted Stock Awards	25,704	42.99		1,127	48.05
Restricted Stock Units	1,862	40.57		114,252	48.05

The performance-based restricted stock units granted to certain executive officers and management of the Company vest at the end of a three-year performance period if and to the extent that the Company's three year average return on invested capital achieves certain specified goals. The restricted share awards granted to non-employee directors vest in four equal installments over a one year vesting term. The restricted stock units granted to certain executive officers and management of the Company are contingent upon continued employment and have a three year vesting term.