Equity Transactions and Stock-Based Compensation Plans

Equity Transactions

On May 22, 2018, we filed a registration statement that permits us to sell equity or debt in one or more offerings up to a total dollar amount of $300 million. As of December 31, 2018, the entire $300 million under the shelf registration statement is available for equity or debt offerings, subject to the limitations imposed by our Term Loan, ABL Facility and Senior Notes.

Stock-based Compensation Plans

We have stock-based award plans that are administered by the Compensation Committee of our Board of Directors, which selects persons eligible to receive awards and determines the number, terms, conditions and other provisions of the awards.

At December 31, 2018, the total shares available for future grants to employees and directors under existing plans were 2,390,057, which excludes awards we grant in the form of phantom stock unit awards which are expected to be paid in cash. In January 2019, our Board of Directors approved the grant of the following awards:



	Vesting Period	Number of Shares or Units
Restricted stock unit awards	3 years	870,648
Performance-based phantom stock unit awards	39 months	2,467,776
Time-based phantom stock unit awards	3 years	810,648

We grant stock option and restricted stock awards with vesting based on time of service conditions. We grant restricted stock unit awards with vesting based on time of service conditions, and in certain cases, subject to performance and market conditions. We grant phantom stock unit awards with vesting based on time of service, performance and market conditions, which are classified as liability awards under ASC Topic 718, Compensation—Stock Compensation since we expect to settle the awards in cash when they become vested.

We recognize compensation cost for our stock-based compensation awards based on the fair value estimated in accordance with ASC Topic 718, Compensation—Stock Compensation, and we recognize forfeitures when they occur. For our awards with graded vesting, we recognize compensation expense on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

The following table summarizes the stock-based compensation expense recognized, by award type, and the compensation expense recognized for phantom stock unit awards during the years ended December 31, 2018, 2017 and 2016 (amounts in thousands):



	Year ended December 31,
	2018		2017		2016
Stock option awards	$	443	$	974	$	766
Restricted stock awards	460		461		421
Restricted stock unit awards	3,541		2,914		2,757
	$	4,444	$	4,349	$	3,944

Phantom stock unit awards	$	46	$	1,609	$	1,971

The following table summarizes the unrecognized compensation cost (amounts in thousands) to be recognized and the weighted-average period remaining (in years) over which the compensation cost is expected to be recognized, by award type, as of December 31, 2018:



	Weighted-Average Period Remaining	Unrecognized Compensation Cost
Stock options	0.26	$	156
Restricted stock awards	0.38	174
Restricted stock unit awards	1.11	3,132
Phantom stock unit awards (based on fair value as of December 31, 2018)	2.65	1,484
		$	4,946

Stock Options

We grant stock option awards which generally become exercisable over a three-year period and expire ten years after the date of grant. Our stock-based compensation plans require that all stock option awards have an exercise price that is not less than the fair market value of our common stock on the date of grant. We issue shares of our common stock when vested stock option awards are exercised.

We estimate the fair value of each option grant on the date of grant using a Black-Scholes option pricing model. There were no stock options granted during the year ended December 31, 2018. The following table summarizes the assumptions used in the Black-Scholes option pricing model based on a weighted-average calculation for the options granted during the years ended December 31, 2017 and 2016:



	Year ended December 31,
	2017		2016
Expected volatility	76	%	70	%
Risk-free interest rates	2.1	%	1.5	%
Expected life in years	5.86		5.70
Grant-date fair value	$4.28		$0.80

The assumptions used in the Black-Scholes option pricing model are based on multiple factors, including historical exercise patterns of homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and volatility of our stock price. As we have not declared dividends since we became a public company, we did not use a dividend yield. In each case, the actual value that will be realized, if any, will depend on the future performance of our common stock and overall stock market conditions. There is no assurance the value an optionee actually realizes will be at or near the value we have estimated using the Black-Scholes options-pricing model.

The following table summarizes our stock option activity from December 31, 2017 through December 31, 2018:



	Number of Shares	Weighted-Average Exercise Price Per Share	Weighted-Average Remaining Contract Term in Years	Aggregate Intrinsic Value (in thousands)⁽¹⁾
Outstanding stock options as of December 31, 2017	4,269,910	$6.78
Forfeited	(527,000)	15.43
Exercised	(3,000)	3.84
Outstanding stock options as of December 31, 2018	3,739,910	$5.56	4.0	$	—

Stock options exercisable as of December 31, 2018	3,259,125	$5.91	3.5	$	—

(1) Intrinsic value is the amount by which the market price of our common stock exceeds the exercise price of the stock options.

The following table presents the aggregate intrinsic value of stock options exercised during the years ended December 31, 2018, 2017 and 2016 (amounts in thousands):



	Year ended December 31,
	2018		2017		2016
Aggregate intrinsic value of stock options exercised	$	6	$	—	$	12

The following table summarizes our nonvested stock option activity from December 31, 2017 through December 31, 2018:



	Number of Shares	Weighted-Average Grant-Date Fair Value Per Share
Nonvested stock options as of December 31, 2017	981,447	$1.91
Vested	(500,662)	1.76
Nonvested stock options as of December 31, 2018	480,785	$2.07

Restricted Stock

We grant restricted stock awards that vest over a one-year period with a fair value based on the closing price of our common stock on the date of the grant. When restricted stock awards are granted, or when restricted stock unit awards are converted to restricted stock, shares of our common stock are considered issued, but subject to certain restrictions.

The following table presents the weighted-average grant-date fair value per share of restricted stock awards granted and the aggregate fair value of restricted stock awards vested during the years ended December 31, 2018, 2017 and 2016:



	Year ended December 31,
	2018		2017		2016
Grant-date fair value of awards granted (per share)	$	5.85	$	2.75	$	2.76
Aggregate fair value of awards vested (in thousands)	$	979	$	483	$	137

The following table summarizes our restricted stock activity from December 31, 2017 through December 31, 2018:



	Number of Shares	Weighted-Average Grant-Date Fair Value per Share
Nonvested restricted stock as of December 31, 2017	167,272	$2.75
Granted	78,632	5.85
Vested	(167,272)	2.75
Nonvested restricted stock as of December 31, 2018	78,632	$5.85

Restricted Stock Units

We grant restricted stock unit awards with vesting based on time of service conditions only (“time-based RSUs”), and we grant restricted stock unit awards with vesting based on time of service, which are also subject to performance and market conditions (“performance-based RSUs”). Shares of our common stock are issued to recipients of restricted stock units only when they have satisfied the applicable vesting conditions. Our time-based RSUs generally vest over a three-year period, with fair values based on the closing price of our common stock on the date of grant. Our performance-based RSUs generally cliff vest after 39 months from the date of grant and are granted at a target number of issuable shares, for which the final number of shares of common stock is adjusted based on our actual achievement levels that are measured against predetermined performance conditions. The number of shares of common stock awarded will be based upon the Company’s achievement in certain performance conditions, as compared to a predefined peer group, over the performance period, generally three years.

Approximately half of the performance-based RSUs outstanding are subject to a market condition based on relative total shareholder return, as compared to that of our predetermined peer group, and therefore the fair value of these awards is measured using a Monte Carlo simulation model. Compensation expense for equity awards with a market condition is reduced only for actual forfeitures; no adjustment to expense is otherwise made, regardless of the number of shares issued. The remaining performance-based RSUs are subject to performance conditions, based on our EBITDA and EBITDA return on capital employed, relative to our predetermined peer group, and therefore the fair value is based on the closing price of our common stock on the date of grant, applied to the estimated number of shares that will be awarded. Compensation expense ultimately recognized for awards with performance conditions will be equal to the fair value of the restricted stock unit award based on the actual outcome of the service and performance conditions.

In April 2018, we determined that 106% of the target number of shares granted during 2015 were actually earned based on the Company’s achievement of the performance measures as described above, resulting in an increase of 25,807 shares being issued. As of December 31, 2018, we estimate that the achievement level for our outstanding performance-based RSUs granted in 2017 will be approximately 100% of the predetermined performance conditions.

The following table summarizes our restricted stock unit activity from December 31, 2017 through December 31, 2018:



	Time-Based Award		Performance-Based Award
	Number of Time-Based Award Units	Weighted-Average Grant-Date Fair Value per Unit	Number of Performance-Based Award Units		Weighted-Average Grant-Date Fair Value per Unit
Nonvested restricted stock units as of December 31, 2017	251,886	$3.24	986,117		$6.91
Granted	788,377	3.85	—		—
Achieved performance adjustment	—	—	25,807		5.82
Vested	(124,286)	3.04	(448,455	)	5.82
Forfeited	(28,508)	3.65	—		—
Nonvested restricted stock units as of December 31, 2018	887,469	$3.80	563,469		$7.73

The following table presents the weighted-average grant-date fair value per share of restricted stock units granted and the aggregate intrinsic value of restricted stock units vested (converted) during the years ended December 31, 2018, 2017 and 2016:



	Year ended December 31,
	2018		2017		2016
Time-based RSUs:
Grant-date fair value of awards granted (per share)	$	3.85	$	5.61	$	1.47
Aggregate intrinsic value of awards vested (in thousands)	$	424	$	1,206	$	314
Performance-based RSUs:
Grant-date fair value of awards granted (per share)	$	—	$	7.75	$	—
Aggregate intrinsic value of awards vested (in thousands)	$	1,547	$	969	$	609

Phantom Stock Unit Awards

In 2016 and 2018, we granted 1,268,068 and 1,188,216 phantom stock unit awards with weighted-average grant-date fair values of $1.35 and $3.06 per share, respectively. These awards cliff-vest after 39 months from the date of grant, with vesting based on time of service, performance and market conditions. The number of units ultimately awarded will be based upon the Company’s achievement in certain performance conditions, as compared to a predefined peer group, over the respective three-year performance periods, and each unit awarded will entitle the employee to a cash payment equal to the stock price of our common stock on the date of vesting, subject to a maximum of $8.08 and $9.66 (which is four and three times the grant date stock price), respectively.

The fair value of these awards is measured using inputs that are defined as Level 3 inputs under ASC Topic 820, Fair Value Measurements and Disclosures. Half of the 2016 phantom stock unit awards are subject to a market condition based on relative total shareholder return, and therefore the fair values of these awards are measured using a Monte Carlo simulation model, which incorporates the estimate of our relative total shareholder return achievement level. The remaining 2016 phantom stock unit awards are subject to performance conditions, based on our relative EBITDA and EBITDA return on capital employed, and the fair values of these awards are measured using a Black-Scholes pricing model. The 2018 phantom stock unit awards will vest based upon our relative total shareholder return and relative EBITDA return on capital, both of which are subject to market conditions, and therefore, the fair value of these awards is measured using a Monte Carlo simulation model which generates a fair value that incorporates the relative estimated achievement levels. As of December 31, 2018, we estimate the achievement levels for our outstanding 2016 and 2018 phantom stock unit awards to be 175% and 100%, respectively.

These awards are classified as liability awards under ASC Topic 718, Compensation—Stock Compensation, because we expect to settle the awards in cash when they vest, and are remeasured at fair value at the end of each reporting period until they vest. The change in fair value is recognized as a current period compensation expense in our consolidated statements of operations.Therefore, changes in the inputs used to measure fair value can result in volatility in our compensation expense. This volatility increases as the phantom stock awards approach the vesting date. We estimate that a hypothetical increase of $1 in the market price of our common stock, which was $1.23 as of December 31, 2018, if all other inputs were unchanged, would result in an increase in cumulative compensation expense of $0.4 million, which represents the hypothetical increase in fair value of the liability for the 2018 phantom stock unit awards.