Stock-based Compensation

3 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

As of June 30, 2019, the KEMET Corporation Omnibus Incentive Plan (the “Incentive Plan”) is the only plan utilized by the Company to issue equity-based awards to executives and key employees.

The Incentive Plan has authorized, in the aggregate, the grant of up to 12.2 million shares of the Company’s Common Stock, comprised of 11.4 million shares under the Incentive Plan and 0.8 million shares remaining from prior plans and authorizes the Company to provide equity-based compensation in the form of:


•	stock options, including incentive stock options, entitling the optionee to favorable tax treatment under Section 422 of the Code;


•	stock appreciation rights;


•	restricted stock and restricted stock units (“RSUs”);


•	other share-based awards; and


•	performance awards.

Except as described below, options issued under these plans vest within one to three years and expire ten years from the grant date.

Restricted Stock Units (“RSUs”) and Long-term Incentive Plans (“LTIP”)

Time-based RSUs vest over three years, except for RSUs granted to members of the Board of Directors (the “Board”), which vest immediately. The Company grants RSUs to members of the Board, the Chief Executive Officer and key members of management. Once vested and settled, RSUs are converted into stock. For members of the Board and key members of management, such stock cannot be sold until 90 days after termination of service with the Company, or until the individual achieves the targeted ownership under the Company’s stock ownership guidelines, and only to the extent that such ownership level exceeds the target. Compensation expense is recognized over the respective vesting periods.

Historically, the Board of the Company has approved annual LTIPs, which cover two-year periods and are primarily based upon the achievement of an adjusted EBITDA range for the two-year period. At the time of the award, the individual plans entitle the participants to receive cash or RSUs, or a combination of both as determined by the Company's Board. The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis and adjusts compensation expense to match expectations. The 2017/2018 LTIP, 2018/2019 LTIP, 2019/2020 LTIP and 2020/2021 LTIP also awarded time-based RSUs which vest over the course of three years from the anniversary of the grant date and are not subject to a performance metric. Any related liability (for the cash portion of the LTIP) is reflected in the line item “Accrued expenses” on the Condensed Consolidated Balance Sheets and any RSU commitment is reflected in the line item “Additional paid-in capital” on the Condensed Consolidated Balance Sheets.

On May 18, 2019, the Company granted RSUs under the 2020/2021 LTIP with a grant date fair value of $17.43 that vest as follows (amounts in thousands):



	Shares
May 18, 2020	66
May 18, 2021	141
May 18, 2022	144
Total RSUs granted ⁽¹⁾	351

__________________

⁽¹⁾ RSUs granted include a performance component. Therefore, the granted RSUs shown above are an estimate based upon current performance expectations. The final number of RSUs granted depends on the achievement of performance metrics.

The following is the vesting schedule of RSUs under each respective LTIP, which vested during the three months ended June 30, 2019 (shares in thousands):



	2019/2020	2018/2019	2017/2018
Time-based award vested	53	58	156
Performance-based award vested	—	—	—

RSU activity, including performance-based and time-based LTIP activity, for the three months ended June 30, 2019 is as follows (amounts in thousands except fair value):



	Shares		Weighted- average Fair Value on Grant Date
Non-vested RSUs at March 31, 2019	1,415		$	15.19
Granted	351		17.43
Vested	(267	)	7.92
Forfeited	(8	)	15.32
Non-vested RSUs at June 30, 2019	1,491		$	17.02

The compensation expense associated with stock-based compensation for the three months ended June 30, 2019 and 2018 is recorded on the Condensed Consolidated Statements of Operations as follows (amounts in thousands):



	Three Months Ended June 30, 2019						Three Months Ended June 30, 2018
	Stock Options		RSUs		LTIPs		Stock Options		RSUs		LTIPs
Cost of sales	$	—	$	490	$	384	$	—	$	351	$	238
Selling, general and administrative expenses	—		1,005		730		—		2,881		521
Research and development	—		34		82		—		16		53
Total	$	—	$	1,529	$	1,196	$	—	$	3,248	$	812

In the “Operating activities” section of the Condensed Consolidated Statements of Cash Flows, stock-based compensation expense was treated as an adjustment to net income for the three months ended June 30, 2019, and 2018. There were 16,667 stock options exercised in the three months ended June 30, 2019 and 44,100 stock options were exercised in the three months ended June 30, 2018.