10. Stock-based and Other Compensation

12 Months Ended

Dec. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation

Stock Options

In December 2015, Lifeway stockholders approved the 2015 Omnibus Incentive Plan, which authorized the issuance of an aggregate of 3.5 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares and performance units. At December 31, 2017, 3.448 million shares remain available under the Omnibus Incentive Plan. Lifeway has not established a pace for the frequency of awards under the Omnibus plan, and may choose to suspend the issuance of new awards in the future and may grant additional awards at any time including issuing special grants of restricted stock, restricted stock units, and stock options to attract and retain new and existing executives.

Pursuant to the Omnibus Incentive Plan, Lifeway granted 26 stock options to certain key employees effective January 1, 2016 and 24 stock options on July 1, 2016 (the “2016 options”). The 2016 options generally vest over a three-year period, on a relatively accelerated basis. The accelerated vesting reflects the landmark nature of the awards and the relative tenure of individual participants.

The following table summarizes stock option activity during the year ended December 31, 2017:

	Options		Weighted average exercise price		Weighted average remaining contractual life		Aggregate intrinsic value
Outstanding at December 31, 2016		45	$	10.45
Granted		–	$	–
Exercised		–	$	–
Forfeited		–	$	–
Outstanding at December 31, 2017		45	$	10.45		8.20	$	–
Exercisable at December 31, 2017		29	$	10.42		8.20	$	–

For the years ended December 31, 2017 and 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income (loss) and comprehensive income (loss) was $41 and $134, respectively. For the years ended December 31, 2017 and 2016 tax-related benefits of $17 and $51 were also recognized. As of December 31, 2017, the total remaining unearned compensation related to non-vested stock options was $19, which is expected to be amortized over the weighted-average remaining service period of 1.30 years.

We measure the fair value of stock options using the Black-Scholes option pricing model. The expected term of options granted was based on the weighted average time of vesting and the end of the contractual term. We utilized this simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The following assumptions were used for the 2016 stock option grants:

Risk free interest rate	1.00 - 1.11%
Expected dividend yield		0.27%
Expected volatility		38.96 - 39.94%
Expected term (years)		5.03 - 5.88

Restricted Stock Units

Pursuant to the 2015 Omnibus Incentive Plan, Lifeway granted 2 Restricted Stock Units (“RSUs”) to certain key employees in December 2016. An RSU represents the right to receive one share of common stock in the future. RSUs have no exercise price.

The following table summarizes RSU activity during the year ended December 31, 2017:

	RSU’s
Outstanding at December 31, 2016		2
Granted		–
Shares issued upon vesting		(2)
Forfeited		–
Outstanding at December 31, 2017		–
Weighted average grant date fair value per share	$	10.54

We expense RSU’s over the service period. For the years ended December 31, 2017 and 2016 total pre-tax stock-based compensation expense recognized in the consolidated statements of income (loss) and comprehensive income (loss) was $18 and $1, respectively. For the years ended December 31, 2017 and 2016 tax-related benefits of $7 and $0, respectively, were also recognized. As of December 31, 2017, the total remaining unearned compensation related to non-vested RSU’s was $3, which is expected to be amortized over the weighted-average remaining service period of 0.96 years.

Incentive Compensation

In March 2016, Lifeway established an incentive-based compensation program (the “2016 Plan”) for certain senior executives and key employees (the “participants”). The incentive compensation was based on the achievement of certain sales and adjusted EBITDA performance levels versus respective targets in 2016. Under the 2016 Plan, the senior executives had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $4,000 for fiscal 2016 depending on the performance levels compared to the respective targets. For the year ended December 31, 2016, senior executive participants earned bonuses of $1,720 under the 2016 Plan, all of which was paid or was payable in cash at December 31, 2016.

In December 2016, Lifeway awarded 12 shares of fully vested common stock to key employee participants. Stock-based compensation of $191 was recognized in 2016.

In January 2017, Lifeway established an incentive-based compensation program (the “2017 Plan”) for certain senior executives and key employees (the “participants”). The number of participants under the 2017 Plan was expanded from the 2016 Plan. Under the 2017 Plan, incentive compensation was based on (a) the achievement of certain sales and adjusted EBITDA performance levels versus respective targets in 2017, and (b) for certain senior executives, the achievement of individual performance objectives. Under the 2017 Plan, collectively the participants had the opportunity to earn cash and equity-based incentive compensation in amounts ranging from $0 to $11,025 depending on Lifeway’s performance levels compared to the respective targets and the senior executive’s performance compared to their individual objectives. The equity portion of the incentive compensation is payable in restricted stock that vests one-third in each of the three years from the 2017 grant dates.

For the year ended December 31, 2017, incentive compensation earned by participants under the plan was $3,589 of which $1,610 will be settled through the issuance of stock, subject to vesting, and $1,979 will be settled in cash. For the year ended December 31, 2017, incentive compensation recognized in the consolidated statement of income (loss) and comprehensive income (loss) under the 2017 Plan was $2,516. As of December 31, 2017, the total remaining unearned compensation related to the 2017 Plan was $1,073 of which $710, $309 and $54 is expected to be recognized in 2018, 2019 and 2020 respectively, subject to vesting.

Retirement Benefits

Lifeway has a defined contribution plan which is available to substantially all full-time employees. Under the terms of the plan Lifeway matches employee contributions under a prescribed formula. For the years ended December 31, 2017 and 2016 total contribution expense recognized in the consolidated statements of income (loss) and comprehensive income (loss) was $376 and $368, respectively.