Shared-Based Compensation

3 Months Ended

Mar. 31, 2022

Share-based Payment Arrangement [Abstract]

Shared-Based Compensation

Share-Based Compensation

The following table lists the components of share-based compensation expense by type of award, which is recognized in the “Selling, general, and administrative expense” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss). 

	Three Months Ended March 31,
	2022		2021
Stock options	$	56	$	89
Restricted stock	604		548
Performance share units	289		249
Share-based compensation expense	$	949	$	886

Stock Options

The following table presents stock option activity for the three months ended March 31, 2022.

	Number of Options (in thousands)	Weighted- Average Exercise Price (per share)		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2022	621	$	12.24
Expired	(71)	9.83
Outstanding at March 31, 2022	550	$	12.55	4.0 years	$	—	(1)
Exercisable at March 31, 2022	523	$	12.71	3.8 years	$	—	(1)

_______________________________ 

(1)The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant. The intrinsic value is the amount by which the closing market price of our stock at March 31, 2022, was greater than the exercise price of any individual option grant.

Restricted Stock

During the three months ended March 31, 2022, we granted 897,000 shares of restricted stock to non-executive directors, officers and certain other key employees. The shares of restricted stock granted during the three months ended March 31, 2022, vest pro-rata generally over three years for employees and over one year for non-executive directors. We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant. The weighted average grant date fair value of restricted stock granted in the three months ended March 31, 2022, was $3.31 per share. Total grant date fair value of restricted stock that vested in the three months ended March 31, 2022, was $1.8 million.

The following table presents the status of unvested restricted stock awards as of March 31, 2022 and changes during the three months then ended.

	Nonvested Restricted Shares (in thousands)	Weighted Average Grant-Date Fair Value (per share)
Unvested at January 1, 2022	469	$	7.28
Granted	897	3.31
Vested	(261)	7.01
Forfeited	(4)	7.49
Unvested at March 31, 2022	1,101	$	4.11

Performance Share Units

Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value. Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on

return on invested capital (“ROIC Awards”). TSR Awards granted in 2022 were made pursuant to the NN, Inc. 2019 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”). No ROIC Awards were granted during the three months ended March 31, 2022.

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of a specified index during specified performance periods as defined in the 2019 Omnibus Agreement. The ROIC Awards vest, if at all, upon our achieving a specified average return on invested capital during the performance periods. Each performance period generally begins on January 1 of the year of grant and ends 3 years later on December 31.

We recognize compensation expense over the performance period in which the performance and market conditions are measured. If the PSUs do not vest at the end of the performance periods, then the PSUs will expire automatically. Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the award recipient’s continued employment. The actual number of shares of common stock to be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the performance period; however, dividend equivalents will be paid based on dividends declared and the number of shares of common stock that are ultimately earned at the end of the performance periods.

The following table presents the goals with respect to TSR Awards granted in 2022.

TSR Awards:	Threshold  Performance (25% of Shares)	Target Performance (100% of Shares)	Maximum Performance (150% of Shares)
2022 grants	25th Percentile	55th Percentile	75th Percentile

We estimate the grant date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation.

The following table presents the status of unvested PSUs as of March 31, 2022 and changes during the three months then ended.

	Nonvested TSR Awards			Nonvested ROIC Awards
	Shares (in thousands)	Weighted Average Grant-Date Fair Value (per share)		Shares (in thousands)	Weighted  Average Grant-Date Fair Value (per share)
Nonvested at January 1, 2022	194	$	9.59	228	$	8.14
Granted	382	2.53		—	—
Nonvested at March 31, 2022	576	$	4.90	228	$	8.14