Stock-Based Compensation Plans

6 Months Ended

Jul. 03, 2022

Share-Based Payment Arrangement [Abstract]

2019 Omnibus Stock and Incentive Plan ("2019 OSIP")

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 July 3, 2022, the number of common shares reserved and available for awards under the 2019 OSIP is 4,253,691, 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 Company recorded stock-based compensation expense of $2.9 million and $2.6 million during the three months ended July 3, 2022 and June 27, 2021, respectively, and $5.8 million and $5.4 million during the six months ended July 3, 2022 and June 27, 2021, respectively.

The following table summarizes the performance-based restricted stock units (“PRSUs”), time-based restricted stock units (“RSUs”) granted by the Company to certain employees and restricted stock awards (“RSAs”) granted by the Company to non-employee directors in accordance with the 2019 OSIP during the three and six months ended July 3, 2022:


	Three Months Ended July 3, 2022			Six Months Ended July 3, 2022
	Number of Awards Granted	Weighted Average Grant Date Fair Value		Number of Awards Granted	Weighted Average Grant Date Fair Value
PRSUs - Performance Condition	1,474	$	37.93	116,304	$	38.36
PRSUs - Market Condition	—	$	—	32,825	$	42.18
RSUs	38,153	$	37.93	231,721	$	38.30
RSAs	35,282	$	35.00	35,282	$	35.00

PRSUs - Performance Condition: The PRSUs granted to certain executive officers and certain other employees 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.

PRSUs - Market Condition: The PRSUs granted to certain executive officers and certain other employees vest based upon the Company's total stockholder return relative to the performance of a peer group over a three year performance period ending December 31, 2024. The grant date fair value of $42.18 per share underlying each PRSU award was calculated using a Monte Carlo simulation. The significant assumptions used to estimate the fair value were: grant date stock price of $38.37; term of 2.76 years; risk-free interest rate of 2.49%; expected volatility of IAA's common stock of 45.48% and the average expected volatility of the common stock of the peer group of 45.18%; correlation coefficients of IAA of 0.60 and the peer group's average of 0.72; and a dividend yield of 0.00%.

RSUs - The RSUs granted to certain executive officers and certain other employees of the Company are contingent upon continued employment and vest in three equal annual installments.

RSAs - The RSAs granted to non-employee directors vest in one installment on the earlier of the one-year anniversary date of the grant date or the day preceding the Company's next annual meeting of stockholders following the date of grant