EQUITY-BASED COMPENSATION

Equity-based payments to employees and directors, including grants of stock options, restricted stock units, performance stock units, and restricted stock, are recognized in the statements of operations based on the grant-date fair value of the award. The Company uses the straight-line method of attributing the value of stock-based compensation expense over the vesting periods. Stock compensation expense recognized during the period is based on the value of the portion of equity-based awards that is ultimately expected to vest during the period. Vesting requirements vary for directors, executives, and key employees with vesting periods ranging from one year to four years with either graded or cliff vesting.

On May 6, 2016, the shareholders of the Company authorized the Gibraltar Industries, Inc. 2016 Stock Plan for Non-Employee Directors ("Non-Employee Directors Plan"). The Non-Employee Directors Plan is a compensation plan that allows the Company to grant awards of shares of the Company's common stock to non-employee Directors of the Company. In connection with the Non-Employee Directors Plan, the Company adopted a new stock deferral plan, the Gibraltar Industries, Inc. Non Employee Director Stock Deferral Plan ("Deferral Plan"). The Deferral Plan permits non-employee Directors of the Company to defer receipt of shares of common stock which the non-employee Director is entitled to receive pursuant to the terms of the Non-Employee Directors Plan.

On May 7, 2015, the shareholders of the Company authorized the Gibraltar Industries, Inc. 2015 Equity Incentive Plan (the "Plan") and simultaneously amended the 2005 Equity Incentive Plan (the "Prior Plan") to terminate issuance of further awards from the Prior Plan. The Plan is an incentive compensation plan that allows the Company to grant equity-based incentive compensation awards to eligible participants. Awards under the plan may be in the form of options, restricted shares, restricted units, performance shares, performance stock units, and rights.

Equity Based Awards - Settled in Stock

The following table provides the number of stock unit awards granted which will convert to shares upon vesting as well as restricted shares issued during the years ended December 31, along with the weighted-average grant-date fair value of each award:



	2016			2015			2014
Awards	Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value		Number of Awards	Weighted Average Grant Date Fair Value
Deferred stock units	11,945	$	29.30	—	$	—	—	$	—
Options	—	$	—	37,500	$	25.44	—	$	—
Restricted shares	3,185	$	29.30	21,318	$	17.48	21,721	$	16.76
Restricted stock units	141,982	$	25.44	212,419	$	17.78	218,857	$	16.96
Performance stock units	—	$	—	396,714	$	19.78	—	$	—

At December 31, 2016, 550,000 shares were available for issuance under the Plan as incentive stock options or other stock awards and 85,000 shares were available for issuance under the Non-Employee Directors Plan as awards of shares of the Company's common stock.

Included in the performance stock units disclosed above are 321,714 units awarded in June 2015. The final number of performance stock units that will convert to shares will be determined based on RBI's gross profit performance relative to their targeted gross profit for 2016 and 2017. The remaining 75,000 units were awarded in December 2015. The number of shares to be issued to the recipients will be determined based upon the ranking of the Company's total shareholder return over a three (3) year performance period ended December 31, 2018 compared to the total shareholder return of companies in the S&P Small Cap Industrial Sector over such period.

The Company recognized the following compensation expense in connection with awards that vested under the Plan and the Prior Plan along with the related tax benefits recognized during the years ended December 31 (in thousands):



	2016		2015		2014
Expense recognized under the Prior Plan	$	1,937	$	1,953	$	3,150
Expense recognized under the Plan	3,993		1,938		—
Expense recognized under the Non-Employee Directors Plan	443		—		—
Total stock compensation expense	$	6,373	$	3,891	$	3,150
Tax benefits recognized related to stock compensation expense	$	2,485	$	1,518	$	1,229

The fair value of the restricted shares, restricted stock units, and performance stock units issued during the three years ended December 31, 2016 was based on the grant-date fair value. The fair value of stock options granted was estimated on the date of grant using the Black-Scholes option pricing model. No options were granted in 2016 and 2014. Expected stock volatility was based on volatility of the Company’s stock price using a historical period commensurate with the expected life of the options. The following table provides the weighted average assumptions used to value stock options issued during the year ended December 31:



Year of Grant	Fair Value		Expected Life (in years)	Expected Stock Volatility		Risk-free Interest Rate		Annual Forfeiture Rate		Expected Dividend Yield
2015	$	7.67	4.00	35.7	%	1.5	%	—	%	—	%

The following table summarizes the ranges of outstanding and exercisable options at December 31, 2016:



Range of Exercise Prices	Options Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Options Exercisable	Weighted Average Exercise Price
$8.90 – $8.90	36,500	3.70	$	8.90	36,500	$	8.90
$9.74 – $9.74	95,441	4.70	$	9.74	95,441	$	9.74
$11.89 – $18.78	70,783	1.85	$	15.78	70,783	$	15.78
$20.52 – $23.78	37,000	1.69	$	22.16	37,000	$	22.16
$23.79 – $25.44	37,500	9.00	$	25.44	—	$	—
	277,224				239,724

The following table summarizes information about stock option transactions:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Balance at January 1, 2014	622,124		$	15.48
Exercised	(52,805	)	11.18
Balance at December 31, 2014	569,319		$	15.88
Granted	37,500		25.44
Exercised	(119,096	)	15.13
Forfeited	(750	)	9.74
Expired	(28,624	)	20.56
Balance at December 31, 2015	458,349		$	16.57
Exercised	(175,125	)	19.08
Forfeited	(6,000	)	18.22
Balance at December 31, 2016	277,224		$	14.95	4.02	$	7,401,000

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the $41.65 per share market price of the Company’s common stock as of December 31, 2016, which would have been received by the option holders had all option holders with an exercise price below the per share market price on December 31, 2016, exercised their options as of that date.

The following table sets forth the aggregate intrinsic value of options exercised and aggregate fair value of restricted stock units and restricted shares that vested during the years ended December 31 (in thousands):



	2016		2015		2014
Aggregate intrinsic value of options exercised	$	2,439	$	1,089	$	326
Aggregate fair value of vested restricted stock units	$	4,368	$	6,578	$	2,416
Aggregate fair value of vested restricted shares	$	247	$	111	$	364
Aggregate fair value of vested deferred stock units	$	443	$	—	$	—

The following table summarizes information about non-vested restricted stock units and performance stock units (that will convert to shares upon vesting) and restricted shares:



	Restricted Stock Units		Weighted Average Grant Date Fair Value		Restricted Shares		Weighted Average Grant Date Fair Value		Performance Stock Units	Weighted Average Grant Date Fair Value		Deferred Stock Units (1)	Weighted Average Grant Date Fair Value
Balance at December 31, 2015	548,815		$	15.22	21,485		$	17.59	396,714	$	19.78	—	$	—
Granted	141,982		25.44		3,185		29.30		—	—		11,945	29.30
Vested	(131,369	)	15.64		(17,309	)	19.65		—	—		—	—
Forfeited	(23,264	)	16.18		—		—		—	—		—	—
Balance at December 31, 2016	536,164		$	17.79	7,361		$	17.07	396,714	$	19.78	11,945	$	29.30

(1) Vested and issued upon retirement.

As of December 31, 2016, there was $9,957,000 of total unrecognized compensation cost related to non-vested options, restricted shares, and restricted stock units. That cost is expected to be recognized over a weighted average period of 2.2 years.

Performance Stock Units - Settled in Cash

The Company has also awarded performance stock units ("PSUs") that will convert to cash after three years based upon a one year performance period. The cost of these awards is recognized over the requisite vesting period. The PSUs earned over the performance period are determined based on the Company's actual return on invested capital ("ROIC") relative to the ROIC targeted for the performance period.

The following table provides the number of PSUs which will convert to cash for the years ending December 31:



	2016			2015			2014
Awards	Number of Units (1)	Grant Date Fair Value (in $000s)		Number of Units (2)	Grant Date Fair Value (in $000s)		Number of Units (3)	Grant Date Fair Value (in $000s)
Performance stock units	128,000	$	3,100	219,000	$	4,039	231,000	$	4,233

(1) The participants earned 200% of target aggregating 256,000 PSUs earned. This award will convert to cash and be payable in January 2019.

(2) The participants earned 200% of target aggregating 438,000 PSUs earned. This award will convert to cash and be payable in January 2018.

(3) Based on the actual 2014 ROIC, no shares were earned during the performance period.

During the 2013 performance period, the participants earned an aggregate of 114,000 PSUs, representing 50% of the targeted award of 237,000 units. In January 2016, $2,723,000 was paid to the participants for the 2013 PSUs based on the trailing 90-day closing price of the Company's common stock ended December 31, 2015.

The following table summarizes the compensation expense recognized from the change in fair value and vesting of performance stock units awarded for the years ended December 31 (in thousands):



	2016		2015		2014
Performance stock unit compensation expense	$	10,377	$	6,965	$	31

Management Stock Purchase Plan

The Management Stock Purchase Plan ("MSPP") provides participants the ability to defer a portion of their compensation or Directors’ fees, which deferral is converted to restricted stock units, and credited to an account. Under the MSPP, the Company provides a matching award in restricted stock units equal to a percentage of the employees' compensation or Directors' 2015 fee deferral amount. Beginning January 1, 2016, Directors do not receive any company-matching on deferred fees. The account represents a share-based liability converted to and settled in cash which is payable to participants upon retirement or a termination of their service to the Company.

The following table provides the number of restricted stock units credited to participant accounts, balance of vested and unvested restricted stock units within participant accounts, payments made with respect to restricted stock units issued under the MSPP, and MSPP expense during years ended December 31:



	2016		2015		2014
Restricted stock units credited	198,155		94,047		119,105
Restricted stock units balance, vested and unvested	646,669		519,668		647,371
Share-based liabilities paid (in thousands)	$	3,137	$	1,901	$	2,120
MSPP expense (in thousands)	$	8,565	$	2,767	$	329