Stock Compensation

12 Months Ended

Dec. 31, 2019

15. Stock Compensation

Overview

We are currently authorized to grant and have available for grant the following number of shares under our stock plans as of December 31, 2019 and 2018:



	Authorized	Available for Grant
Plan	Shares	2019	2018
1996 Discounted Employee Stock Purchase Plan, as amended	1,900,000	234,000	295,000
2009 Equity and Cash Incentive Plan	9,000,000	2,100,000	958,000
Total	10,900,000	2,334,000	1,253,000

During 2019 the Company amended the 2009 Equity and Cash Incentive Plan to increase the authorized shares under the plan by 1.9 million shares. Upon the exercise of stock options or grants of RSAs, PSAs, RSUs, or PSUs, we may issue the required shares out of authorized but unissued common stock or out of treasury stock, at our discretion.

Stock Awards

In 2019 the Compensation Committee of our Board of Directors (the “Committee”) authorized awards from approved stock incentive plans of RSAs to non-employee directors, RSUs to certain employees, and RSAs and PSUs to certain Company officers, which, counting PSUs at target levels, together totaled 507,000 shares and had an aggregate grant date market value of $15.0 million. Two types of PSUs were granted in 2019, an annual grant with a one-year performance period (“Annual PSU”) and a special Long-Term Incentive Program PSU grant (“LTIP”), which has multiple performance periods over a five-year period. If the highest performance threshold is met, the Annual PSU granted in 2019 represents the right to receive up to 150% of the target number of shares of common stock. The performance component of the Annual PSU awards granted in 2019 is based on attaining specified levels of adjusted earnings before interest, taxes, depreciation, and amortization, (“EBITDA”), as defined in the Annual PSU grant documents, for the 2019 calendar year. The Annual PSU granted in 2019 earned approximately 83% of the target number of shares. If the highest performance thresholds are met, the PSUs granted in 2019 under the LTIP represent the right to receive up to 288%, and up to 192% for a certain key executive, of the target number of shares of common stock. The performance component of the LTIP awards granted in 2019 is based on attaining specified levels of adjusted revenue growth and gross margin, as defined in the LTIP grant document, for the years 2019 through 2023. The first performance period under the LTIP will not conclude until December 31, 2021.

In 2018 the Committee authorized awards from approved stock incentive plans of RSAs to non-employee Directors, RSUs to certain employees, and RSAs and PSUs to certain Company officers, which, counting PSUs at target levels, together totaled 328,000 shares of common stock and had an aggregate grant date market value of $7.5 million. The performance component of PSU awards granted in 2018 was based on attaining specified levels of adjusted EBITDA, as defined in the PSU grant documents, for the 2018 calendar year. The PSUs granted in 2018 earned approximately 80% of the target number of shares.

In 2017 the Committee authorized awards from approved stock incentive plans of RSAs to non-employee Directors, RSUs to certain employees, and RSAs, PSAs, and PSUs to certain Company officers, which, counting PSUs at target levels, together totaled 426,000 shares of common stock and had an aggregate grant date market value of $7.1 million. The performance component of PSU awards granted in 2017 was based on attaining specified levels of adjusted EBITDA, adjusted inventory levels, and adjusted trade accounts receivable days’ sales outstanding, each as defined in the PSU grant documents, for the 2017 calendar year. The PSUs granted in 2017 earned approximately 92% of the target number of shares.

A summary of stock grant activity for the years ended December 31, 2019, 2018, and 2017 for RSAs, PSAs, RSUs, and PSUs, based on the target number of shares, is as follows:


		Weighted
		Average
		Grant Date
RSAs	Shares	Fair Value
Unvested at December 31, 2016	392,000	$	10.64
Granted	138,000		17.00
Vested	(129,000)		10.84
Forfeited	(18,000)		11.78
Unvested at December 31, 2017	383,000		12.81
Granted	128,000		23.83
Vested	(136,000)		12.96
Forfeited	(49,000)		12.07
Unvested at December 31, 2018	326,000		17.19
Granted	93,000		29.77
Vested	(149,000)		14.45
Forfeited	(27,000)		20.53
Unvested at December 31, 2019	243,000		23.30


		Weighted
		Average
		Grant Date
PSAs	Shares	Fair Value
Unvested at December 31, 2016	250,000	$	10.18
Granted	--		--
Vested	(250,000)		10.18
Forfeited	--		--
Unvested at December 31, 2017	--		--
Granted	--		--
Vested	--		--
Forfeited	--		--
Unvested at December 31, 2018	-		--
Granted	--		--
Vested	--		--
Forfeited	--		--
Unvested at December 31, 2019	-		--


		Weighted
		Average
		Remaining		Aggregate
		Contractual		Intrinsic
RSUs	Shares	Term in years		Value
Unvested at December 31, 2016	178,000		1.24	$	3,405,000
Granted	196,000
Vested	(64,000)
Forfeited	(24,000)
Unvested at December 31, 2017	286,000		1.26		5,477,000
Granted	115,000
Vested	(99,000)
Forfeited	(51,000)
Unvested at December 31, 2018	251,000		1.05		7,123,000
Granted	103,000
Vested	(101,000)
Forfeited	(27,000)
Unvested at December 31, 2019	226,000		0.93		6,131,000

Vested and expected to vest	226,000		0.93	$	6,131,000


		Weighted
		Average
		Remaining		Aggregate
		Contractual		Intrinsic
PSUs	Shares	Term in years		Value
Unvested at December 31, 2016	188,000		0.77	$	3,603,000
Granted	126,000
Vested	(128,000)
Forfeited	(17,000)
Unvested at December 31, 2017	169,000		0.71		3,236,000
Granted	104,000
Vested	(109,000)
Forfeited	(17,000)
Unvested at December 31, 2018	147,000		0.72		4,179,000
Granted	322,000
Vested	(87,000)
Forfeited	(35,000)
Unvested at December 31, 2019	347,000		2.33		9,400,000

Vested and expected to vest	347,000		2.33	$	9,400,000

During the years ended December 31, 2019, 2018, and 2017 the total fair value of $9.8 million, $7.3 million, and $11.1 million, respectively, in combined RSAs, PSAs, RSUs, and PSUs vested.

Stock Options

The Compensation Committee of our Board of Directors authorized grants of stock options from approved stock incentive plans to certain Company officers and employees totaling 169,000, 219,000, and 260,000 shares in 2019, 2018, and 2017, respectively, with exercise prices equal to the stock prices on the respective grant dates.

A summary of our stock option activity for the years ended December 31, 2019, 2018, and 2017 is as follows:



				Weighted
				Average
		Weighted		Remaining		Aggregate
		Average		Contractual		Intrinsic
	Shares	Exercise Price		Term in years		Value
Outstanding at December 31, 2016	1,911,000	$	8.59		3.55	$	20,179,000
Granted	260,000		16.30
Exercised	(394,000)		6.30
Forfeited	(31,000)		12.47
Expired	(5,000)		7.01
Outstanding at December 31, 2017	1,741,000		10.19		3.64		15,598,000
Granted	219,000		21.55
Exercised	(578,000)		7.59
Forfeited	(49,000)		14.10
Expired	--		--
Outstanding at December 31, 2018	1,333,000		13.04		3.93		20,439,000
Granted	169,000		29.62
Exercised	(334,000)		9.87
Forfeited	(39,000)		22.64
Expired	--		--
Outstanding at December 31, 2019	1,129,000		16.14		3.67		12,763,000

Vested and expected to vest	1,129,000	$	16.14		3.67	$	12,763,000
Exercisable at December 31, 2019	782,000	$	12.55		2.89	$	11,371,000

Other information concerning stock options for the years ended December 31 is as follows:



	2019		2018		2017
Weighted-average fair value of options granted	$	11.47	$	8.38	$	5.97
Intrinsic value of options exercised		6,519,000		9,961,000		4,748,000

Employees purchased common stock totaling 61,000, 83,000, and 93,000 shares in 2019, 2018, and 2017, respectively, through our ESPP.

Stock Compensation Expense

The following weighted-average assumptions were used to determine the fair value of options:



	2019		2018		2017
	Stock	ESPP	Stock	ESPP	Stock	ESPP
	Options	Options	Options	Options	Options	Options
Expected life of options	5.00 Years	0.50 Years	5.00 Years	0.50 Years	4.75 Years	0.50 Years
Expected stock price volatility	0.40	0.39	0.40	0.34	0.40	0.39
Risk-free interest rate	2.54%	2.35%	2.64%	1.73%	1.87%	0.85%

The following table summarizes stock compensation expense (in thousands):



	2019		2018		2017
RSA, PSA, RSU, and PSU expense	$	7,451	$	5,076	$	5,335
Stock option and ESPP option expense		1,960		1,732		1,978
Total stock compensation expense	$	9,411	$	6,808	$	7,313

Included in the total stock compensation expense, as applicable in each period, were expenses related to RSAs, PSAs, RSUs, PSUs, and stock options issued in each respective year, as well as those issued in prior periods that continue to vest during the period, and compensation related to our ESPP. These amounts were recorded as stock compensation expense and were subject to or normal allocation of expenses to inventory costs and deferred preservation costs. We capitalized $612,000, $484,000, and $394,000 in the years ended December 31, 2019, 2018, and 2017, respectively, of the stock compensation expense into our inventory costs and deferred preservation costs.

As of December 31, 2019 we had total unrecognized compensation costs of $11.9 million related to RSAs, RSUs, and PSUs and $2.0 million related to unvested stock options. As of December 31, 2019 this expense is expected to be recognized over a weighted-average period of 1.5 years for RSUs, 1.4 years for stock options, 1.0 years for RSAs, and 2.3 years for PSUs.
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