XML 33 R22.htm IDEA: XBRL DOCUMENT

Note 16 - Stock-based Compensation

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Text Block]

16.	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 six months ended June 30, 2019 and 2018, 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				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
	(Dollars in thousands)
Stock option grants expense	$	245	$	141	$	500	$	197
Restricted stock awards expense		677		620		1,588		1,364
Performance share units expense		3,210		4,063		6,295		4,514
Total stock based compensation	$	4,132	$	4,824	$	8,383	$	6,075

On May 23, 2018, June 20, 2017 and July 25, 2016, the Company granted long term performance stock 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 will be earned based upon the Company’s performance, over a 3 year period (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 and 2018, 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 Goal				Target Goal				Maximum Goal
Awardee	Date of Award	Performance Period	Base Period	Base Period Revenues		PSUs		Home Sale Revenues		PSUs		Home Sale Revenues		PSUs		Home Sale Revenues		Fair Value per Share		Maximum Potential Expense to be Recognized*
CEO		July 1, 2016	July 1, 2015				61,236				122,472				244,944					$	4,815
COO	July 25, 2016	to	to		$1.975 billion		61,236		$2.074 billion		122,472		$2.173 billion		244,944		$2.370 billion	$	19.66		4,815
CFO		June 30, 2019	June 30, 2016				15,309				30,618				61,236						1,204
																				$	10,834

CEO		April 1, 2017	April 1, 2016				64,152				128,304				256,608					$	7,142
COO	June 20, 2017	to	to		$2.426 billion		64,152		$2.547 billion		128,304		$2.669 billion		256,608		$2.911 billion	$	27.83		7,142
CFO		March 31, 2020	March 31, 2017				16,038				32,076				64,152						1,786
																				$	16,070

CEO		April 1, 2018	April 1, 2017				64,800				129,600				259,200					$	6,629
COO	May 23, 2018	to	to		$2.543 billion		64,800		$2.670 billion		129,600		$2.797 billion		259,200		$3.052 billion	$	25.57		6,629
CFO		March 31, 2021	March 31, 2018				16,200				32,400				64,800						1,657
																				$	14,915

* 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. As of June 30, 2019, 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 $0.9 million and $1.8 million for the three and six months ended June 30, 2019. As of June 30, 2018, the Company had concluded that achievement of the Maximum Goals for these awards was probable and as such, recorded share-based award expense related to the awards of $4.1 million and $4.5 million for the three and six months ended June 30, 2018. The awards will vest following the filing of our second quarter Form 10-Q when the Compensation Committee certifies the performance under the PSU agreements.

2017 PSU Grants. As of June 30, 2019, the Company determined that achievement between the Target Goals and Maximum Goals for these awards was probable and as such, the Company recorded share-based award expense related to the awards of $2.3 million and $4.5 million for the three and six months ended June 30, 2019. As of June 30, 2018, 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 the grant of these awards had been recognized as of June 30, 2018.

2018 PSU Grants. For the PSUs granted in May of 2018, 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 June 30, 2019.