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Stock-based Compensation
 9 Months Ended
Sep. 30, 2020
Share-based Payment Arrangement [Abstract]  
Stock-based Compensation Stock-Based Compensation
We account for share-based awards in accordance with ASC Topic 718 Compensation–Stock Compensation (“ASC 718”), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant. The following table sets forth share-based award expense activity for the three and nine months ended September 30, 2020 and 2019, which is included as a component of selling general and administrative expenses and expenses in the homebuilding and financial services sections of our consolidated statements of operations and comprehensive income, respectively:
Three Months Ended
September 30,		Nine Months Ended
September 30,
2020201920202019
(Dollars in thousands)
Stock option grants expense$814 $429 $2,026 $929 
Restricted stock awards expense2,271 1,391 4,841 2,979 
Performance share units expense5,523 7,975 11,669 14,270 
Total stock-based compensation$8,608 $9,795 $18,536 $18,178 
On August 20, 2020, August 5, 2019, May 23, 2018, June 20, 2017 and July 25, 2016, the Company granted long term performance share unit awards (“PSUs”) to each of the CEO, the COO, and the Chief Financial Officer (“CFO”) under the Company’s 2011 Equity Incentive Plan. The PSUs are earned based upon the Company’s performance over a period of three years (the “Performance Period”), measured by increasing home sale revenues over a “Base Period.” Each award is conditioned upon the Company achieving an average gross margin from home sales (excluding impairments) of at least fifteen percent (15%) over the Performance Period. Target goals will be earned if the Company’s three year average home sale revenues over the Performance Period (“Performance Revenues”) exceed the home sale revenues over the Base Period (“Base Revenues”) by at least 10% but less than 20%. If Performance Revenues exceed the Base Revenues by at least 5% but less than 10%, 50% of the Target Goals will be earned (“Threshold Goals”). If Performance Revenues exceed the Base Revenues by at least 20%, 200% of the Target Goals will be earned (“Maximum Goals”).  For the PSUs granted in 2017, 2018, 2019 and 2020, the number of PSUs earned shall be adjusted to be proportional to the partial performance between the Threshold Goals, Target Goals and Maximum Goals. Details for each defined term above for each grant has been provided in the table below.
Threshold GoalTarget GoalMaximum Goal
Maximum Potential Expense to be Recognized *
Maximum Remaining Expense to be Recognized *
Date of AwardPerformance PeriodBase PeriodBase Period RevenuesPSUsHome Sale RevenuesPSUsHome Sale RevenuesPSUsHome Sale RevenuesFair Value per Share
Jul 25, 2016July 1, 2016 - June 30, 2019July 1, 2015 - June 30, 2016$1.975 billion137,781 $2.074 billion275,562 $2.173 billion551,124 $2.370 billion$19.66 $10,834 $— 
Jun 20, 2017April 1, 2017 - March 31, 2020April 1, 2016 - March 31, 2017$2.426 billion144,342 $2.547 billion288,684 $2.669 billion577,368 $2.911 billion$27.83 $16,070 $— 
May 23, 2018April 1, 2018 - March 31, 2021 April 1, 2017 - March 31, 2018$2.543 billion145,800 $2.670 billion291,600 $2.797 billion583,200 $3.052 billion$25.57 $14,915 $2,615 
Aug 5, 2019January 1, 2019 - December 31, 2021January 1, 2018 - December 31, 2018$2.982 billion135,000 $3.131 billion270,000 $3.280 billion540,000 $3.578 billion$32.60 $17,604 $13,391 
Aug 20, 2020January 1, 2020 - December 31, 2022January 1, 2019 - December 31, 2019$3.205 billion135,000 $3.366 billion270,000 $3.526 billion540,000 $3.846 billion$41.89 $22,618 $22,618 
_______________________
* Dollars in thousands
In accordance with ASC 718, the PSUs were valued on the date of grant at their fair value. The fair value of these grants was equal to the closing price of MDC stock on the date of grant less the discounted cash flows of expected future dividends over the respective vesting period (as these PSUs do not participate in dividends). The grant date fair value and maximum potential expense if the Maximum Goals were met for these awards has been provided in the table above. ASC 718 does not permit recognition of expense associated with performance-based stock awards until achievement of the performance targets are probable of occurring.
2016 PSU Grants. The 2016 PSU awards vested on August 7, 2019 at the Maximum Goal following the achievement of the Maximum Goals and certification by the Compensation Committee that the Maximum Goals had been achieved. For the nine months ended September 30, 2019, the Company recorded share-based award expense of $1.8 million related to these awards.
2017 PSU Grants. The 2017 PSU awards vested on May 5, 2020 at the Maximum Goal following the achievement of the Maximum Goals and certification by the Compensation Committee that the Maximum Goals had been achieved. For the nine months ended September 30, 2020, the Company recorded share-based award expense of $1.4 million related to these awards. For the three and nine months ended September 30, 2019, the Company recorded share-based award expense of $5.5 million and $10.0 million, respectively, related to these awards.
2018 PSU Grants. As of September 30, 2020, the Company determined that achievement of the Maximum Goals for these awards was probable and, as such, the Company recorded share-based award expense related to the awards of $1.3 million and $6.0 million, respectively, for the three and nine months ended September 30, 2020. As of September 30, 2019, the Company determined that achievement between the Threshold and Target Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $2.5 million for both the three and nine months ended September 30, 2019.
2019 PSU Grants. As of September 30, 2020, the Company determined that achievement of the Target Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $4.2 million for both the three and nine months ended September 30, 2020. As of September 30, 2019, the Company concluded that achievement of any of the performance metrics had not met the level of probability required to record compensation expense and as such, no expense related to these awards had been recognized.
2020 PSU Grants. For the PSUs granted in August of 2020, the Company concluded that achievement of any of the performance metrics has not met the level of probability required to record compensation expense and, as such, no expense related to these awards has been recognized as of September 30, 2020.