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OPTIONS AND AWARDS
12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
OPTIONS AND AWARDS OPTIONS AND AWARDS
Outstanding options and restricted stock awards of the Company were granted under the 2019 Omnibus Incentive Plan (the “OIP”) and Long-Term Incentive Plan (the “LTIP”), together referred to as the “Pennant Plans”).

Under the Pennant Plans, stock-based payment awards, including employee stock options, restricted stock awards (“RSA”), and restricted stock units (“RSU” and together with RSA, “Restricted Stock”) are issued based on estimated fair value. The following disclosures represent share-based compensation expense relating to employees of the Company’s subsidiaries and non-employee directors who have awards under the Pennant Plans.

Share-Based Compensation

The following disclosures represent share-based compensation expense relating to the Pennant Plans, including awards to employees of the Company’s subsidiaries.
Total share-based compensation expense for all of the Plans for the years ended December 31, 2022, 2021 and 2020:

Year Ended December 31,
202220212020
Share-based compensation expense related to stock options3,266 3,093 1,660 
Share-based compensation expense related to Restricted Stock(467)6,141 6,200 
Share-based compensation expense related to Restricted Stock to non-employee directors287 806 475 
Total share-based compensation$3,086 $10,040 $8,335 

In future periods, the Company estimates it will recognize the following share-based compensation expense for unvested stock options and unvested Restricted Stock, which were unvested as of December 31, 2022:

Unrecognized Compensation ExpenseWeighted Average Recognition Period (in years)
Unvested stock options$10,005 3.3
Unvested Restricted Stock3,126 4.5
Total unrecognized share-based compensation expense$13,131 

On July 25, 2022 the Company modified certain outstanding RSUs granted to the former chief executive officer in connection with the Spin-off. All the RSUs had an original vesting date of October 1, 2022. The modification resulted in the forfeiture of 250,000 outstanding RSUs and accelerated the vesting on the remaining 942,842 RSUs from October 1, 2022 to July 31, 2022. The modification of the award resulted in a net reduction of share-based compensation expense related to the awards of $3,812 recorded in general and administrative expense during the year.

Stock Options

Under the Pennant Plans, options granted to employees of the subsidiaries of Pennant generally vest over five years at 20% per year on the anniversary of the grant date. Options expire ten years after the date of grant.

The Company uses the Black-Scholes option-pricing model to recognize the value of share-based compensation expense for share-based payment awards under the Plans. Determining the appropriate fair-value model and calculating the fair value of share-based awards at the grant date requires considerable judgment, including estimating stock price volatility and expected option life. The Company develops estimates based on historical data and market information, which can change significantly over time.

The fair value of each option is estimated on the grant date using a Black-Scholes option-pricing model with the following weighted average assumptions for stock options granted after the Spin-Off:

Grant YearOptions GrantedRisk-Free Interest Rate
Expected Life(a)
Expected Volatility(b)
Dividend YieldWeighted Average Fair Value of Options
2022448 2.7 %6.539.8 %— %$6.35 
2021454 1.1 %6.538.4 %— %$13.84 
2020693 0.5 %6.535.9 %— %$11.05 
(a)
Under the midpoint method, the expected option life is the midpoint between the contractual option life and the average vesting period for the options being granted. This resulted in an expected option life of 6.5 years for the options granted.
(b)Because the Company’s equity shares have been traded for a relatively short period of time, expected volatility assumption was based on the volatility of related industry stocks.
The following table represents the employee stock option activity during the year ended December 31, 2022:

Number of
Options
Outstanding
Weighted
Average
Exercise Price
Number of
Options Vested
Weighted
Average
Exercise Price
of Options
Vested
December 31, 20212,242 $21.38 840 $12.28 
Granted448 $14.39 
Exercised(125)$8.69 
Forfeited(245)$23.54 
Expired(101)$14.03 
December 31, 20222,219 $20.76 973 $16.90 

The aggregate intrinsic value of options outstanding, vested, unvested and exercised as of and for the period ended December 31, 2022 is as follows:
OptionsDecember 31, 2022
Outstanding$2,049 
Vested1,971 
Unvested78 
Exercised902 
The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the options. There were 1,246 unvested and outstanding options at December 31, 2022. The weighted average contractual life for options outstanding, vested and expected to vest at December 31, 2022 was 6.95 years.

Restricted Stock

Under the Pennant Plans, the Company granted Restricted Stock to Pennant employees, Ensign employees, and to non-employee directors. All awards generally vest between three to five years. A summary of the status of Pennant’s non-vested Restricted Stock, and changes during the period ended December 31, 2022, is presented below:

Non-Vested Restricted AwardsWeighted Average Grant Date Fair Value
December 31, 20211,493 $15.00 
Granted281 13.55 
Vested(1,079)14.92 
Forfeited(277)14.93 
December 31, 2022418 $14.26