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Share-Based Compensation

9 Months Ended

Sep. 30, 2023

Share-Based Payment Arrangement [Abstract]

Note 10—Share-Based Compensation

The components of the Company’s share-based compensation expense for the nine months ended September 30, 2023 and 2022 are as follows:


	Nine Months Ended September 30,
	2023		2022
	(in thousands)
Stock options	$	716	$	939
Restricted stock, restricted stock units and deferred stock units	4,946		5,310
Performance stock units	888		612
Employee Stock Purchase Plan	243		295
Total pre-tax share-based compensation expense charged against income	$	6,793	$	7,156

The following table summarizes the components of share-based compensation expense included within the Consolidated Statements of Comprehensive (Loss) Income for the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,
	2023		2022
	(in thousands)
Selling, general & administrative expense	$	6,723	$	7,063
Costs of services provided	70		93
Total share-based compensation expense	$	6,793	$	7,156

At September 30, 2023, the unrecognized compensation cost related to unvested stock options and awards was $18.9 million. The weighted average period over which these awards will vest is approximately 3.0 years.

Amended 2020 Omnibus Incentive Plan

On May 26, 2020, the Company adopted the 2020 Omnibus Incentive Plan after approval by the Company’s Shareholders at the 2020 Annual Meeting of Shareholders. On May 30, 2023, the Company increased the authorized shares under the 2020 Omnibus Incentive Plan (as amended, the “Amended 2020 Plan”) by 2,500,000 shares after approval by the Company’s Shareholders at the 2023 Annual Meeting of Shareholders. The Amended 2020 Plan provides that current or prospective officers, employees, non-employee directors and advisors can receive share-based awards such as stock options, performance stock units, restricted stock units and other stock awards. The Amended 2020 Plan seeks to encourage profitability and growth of the Company through short-term and long-term incentives that are consistent with the Company’s operating objectives.

As of September 30, 2023, there were 7.0 million shares of common stock reserved for issuance under the Amended 2020 Plan, of which 3.2 million are available for future grant. The amount of shares available for issuance under the Amended 2020 Plan will increase when outstanding awards under the Company’s Second Amended and Restated 2012 Equity Incentive Plan (the “2012 Plan”) are subsequently forfeited, terminated, lapsed or satisfied thereunder in cash or property other than shares. No stock award will have a term in excess of 10 years. The Nominating, Compensation and Stock Option Committee of the Board of Directors is responsible for determining the terms of the grants in accordance with the Amended 2020 Plan.

Stock Options

A summary of stock options outstanding under the Amended 2020 Plan and the 2012 Plan as of December 31, 2022 and changes during the nine months ended September 30, 2023 are as follows:


	Stock Options Outstanding
	Number of Shares	Weighted Average Exercise Price
	(in thousands)
December 31, 2022	2,375	$	31.56
Granted	207	$	13.72
Exercised	—	$	—
Forfeited	—	$	—
Expired	(141)	$	24.82
September 30, 2023	2,441	$	30.43

The weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2023 and 2022 was $6.53 and $4.06 per common share, respectively. No stock options were exercised during the nine months ended September 30, 2023. The total intrinsic value of stock options exercised during the nine months ended September 30, 2022 was $0.1 million.

The fair value of stock option awards granted in 2023 and 2022 was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions:


	Nine Months Ended September 30,
	2023		2022
Risk-free interest rate	4.0	%	1.5	%
Weighted average expected life	6.9 years		6.7 years
Expected volatility	39.5	%	36.6	%
Dividend yield	—	%	4.6	%

The following table summarizes other information about the stock options at September 30, 2023:


	September 30, 2023
	(amounts in thousands, except per share data)
Outstanding:
Aggregate intrinsic value	$	—
Weighted average remaining contractual life	4.8 years
Exercisable:
Number of options	1,704
Weighted average exercise price	$	34.72
Aggregate intrinsic value	$	—
Weighted average remaining contractual life	3.4 years

Restricted Stock Units

The fair value of outstanding restricted stock units was determined based on the market price of the shares on the date of grant. During the nine months ended September 30, 2023, the Company granted 0.5 million restricted stock units to its employees with a weighted average grant date fair value of $13.73 per unit. During the nine months ended September 30, 2022, the Company granted 0.4 million restricted stock units to its employees with a weighted average grant date fair value of $18.06 per unit.

A summary of the outstanding restricted stock units as of December 31, 2022 and changes during the nine months ended September 30, 2023 is as follows:


	Restricted Stock Units
	Number	Weighted Average Grant Date Fair Value
	(in thousands)
December 31, 2022	825	$	24.37
Granted	534	$	13.73
Vested	(237)	$	27.82
Forfeited	(18)	$	18.83
September 30, 2023	1,104	$	18.58

Performance Stock Units

On February 24, 2023, the Company issued 80,000 Performance Stock Units (“PSUs”) to the Company’s executive officers. Such PSUs are contingent upon the achievement of certain total shareholder return (“TSR”) targets as compared to the TSR of the S&P 400 MidCap Index and the participant’s continued employment with the Company for the three year period ending December 31, 2025, the date at which such PSUs vest. The unrecognized share-based compensation cost of the TSR-based PSU awards at September 30, 2023 is $1.7 million and is expected to be recognized over a weighted-average period of 1.7 years.

A summary of the outstanding PSUs as of December 31, 2022 and changes during the nine months ended September 30, 2023 is as follows:


	Performance Stock Units
	Number	Weighted Average Grant Date Fair Value
	(in thousands)
December 31, 2022	95	$	26.01
Granted	80	$	16.20
Vested	—	$	—
Forfeited	—	$	—
September 30, 2023	175	$	21.52

Deferred Stock Units

The Company grants Deferred Stock Units (“DSUs”) to our non-employee directors. Once vested, the recipient shall be entitled to receive a lump sum payment of a number of shares equal to the total number of DSUs issued to such recipient upon the first to occur of (i) the five year anniversary of the date of grant, (ii) the recipient’s death, disability or separation of service from the Board, or (iii) a change of control (as defined by the 2020 Plan). Non-employee directors can also elect to receive their Board of Directors retainer in the form of DSUs in lieu of cash. The number of DSUs granted to these directors is determined based on the stock price on the award date and approximates the cash value the directors would otherwise receive for their retainer. Two non-employee directors made an election in 2022 to receive DSUs in lieu of cash for their 2023 Board of Directors retainer. The unrecognized share-based compensation cost of outstanding DSU awards at September 30, 2023 is $0.2 million and is expected to be recognized over a weighted-average period of 0.7 years.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“ESPP”) is currently available through 2026 to all eligible employees. All full-time and part-time employees who work an average of 20 hours per week and have completed two years of continuous service with the Company are eligible to participate. Annual offerings commence and terminate on the respective year’s first and last calendar day.

Under the ESPP, the Company is authorized to issue up to 4.1 million shares of its common stock to its employees. Pursuant to such authorization, there are 1.9 million shares available for future grant at September 30, 2023.

The expense associated with the options granted under the ESPP during the nine months ended September 30, 2023 and 2022 was estimated on the date of grant using the Black-Scholes option valuation model with the following assumptions:


	Nine Months Ended September 30,
	2023	2022
Risk-free interest rate	4.8%	0.4%
Weighted average expected life (years)	1.0	1.0
Expected volatility	42.9%	36.9%
Dividend yield	7.1%	4.7%

Deferred Compensation Plan

The Company offers a Supplemental Executive Retirement Plan (“SERP”) for executives and certain key employees. The SERP allows participants to defer a portion of their earned income on a pre-tax basis and as of the last day of each plan year, each participant will be credited with a match of a portion of their deferral in the form of the Company’s common stock based on the then-current market value. Under the SERP, the Company is authorized to issue 1.0 million shares of its common stock to its employees. Pursuant to such authorization, the Company has 0.3 million shares available for future grant at September 30, 2023. At the time of issuance, such shares are accounted for at cost as treasury stock.

The following table summarizes information about the SERP during the nine months ended September 30, 2023 and 2022:


	Nine Months Ended September 30,
	2023		2022
	(in thousands)
SERP expense 1	$	439	$	416
Unrealized gain (loss) recorded in SERP liability account	$	2,629	$	(11,324)

1.Both the SERP match and the deferrals are included in the “selling, general and administrative” caption in the Consolidated Statements of Comprehensive (Loss) Income.