Note 19 – Stock-Based Compensation

2018 Equity Incentive Plan

Our 2018 Equity Incentive Plan (the “Plan”) was approved by stockholders in May 2018 and amended and restated the 2008 Equity Incentive Plan. The Plan authorizes us to issue up to 4.35 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees, non-employee directors and consultants. At September 30, 2018, there were 2.1 million shares available for future grants under this Plan. No more than 1.2 million shares may be used under the Plan as “full value” awards, which include restricted stock and performance stock units. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options.

During the first quarter of 2015, the company implemented a long-term incentive program for the benefit of certain members of company management. The program was designed to strengthen employee retention and to provide a more structured incentive program to stimulate improvement in future company results. Per the terms of the program, each year participants are granted time value restricted stock units (“RSUs”), vesting ratably over a three-year time period, and performance restricted stock units (“PSUs”), with a three-year cliff vesting. Upon vesting, each restricted stock award is exchangeable for one share of the company’s common stock, with accrued dividends. The 2015 PSU grant vested during the first quarter of 2018. The outstanding PSUs are categorized further into three individual categories whose vesting is contingent upon the achievement of certain targets as follows:

•

40% of the PSUs vest upon certain Return on Invested Capital targets for 2018, 2017 and 2016 units

•

40% of the PSUs vest upon certain Cumulative EPS targets for 2018, 2017 and 2016 units

•

20% of the PSUs vest upon certain market-based Shareholder Return targets for 2018, 2017, and 2016 units

Options

Options are granted at not less than fair market value on the date of grant and expire no later than ten years after the date of grant. Options and restricted shares granted under the Plan generally require no less than a three-year ratable vesting period. Stock option activity in the first nine months of 2018 is summarized in the following table:


	Outstanding			Weighted Average Exercise Price		Remaining Contractual Life in Years		Aggregate Intrinsic Value
Balance at December 31, 2017		145,625		$	18.96		2.0	$	—
Granted		—		$
Exercised		(4,500	)	$	15.17
Canceled		(55,125	)	$	18.53
Expired		(27,000	)	$	21.84

Balance at September 30, 2018		59,000		$	18.33

Options vested or expected to vest at September 30, 2018		59,000		$	18.33		2.53	$	27,583

Exercisable at September 30, 2018		59,000

Restricted Stock Units

Restricted stock unit activity in the first nine months of 2018 is summarized in the following table:


	Number of Awards			Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (in Years)
Balance at December 31, 2017		169,266		$	22.27		1.6
Granted		186,089		$	15.60
Vested		(66,138	)	$	22.67
Canceled		(15,867	)	$	17.10

Balance at September 30, 2018		273,350		$	17.93		1.8

Restricted Performance Stock Units

Restricted performance stock unit activity in the first nine months of 2018 is summarized in the following table:


	Number of Awards			Weighted Average Grant Date Fair Value		Weighted Average Remaining Amortization Period (in Years)
Balance at December 31, 2017		239,674		$	22.58		1.7
Granted		289,698		$	16.84
Vested		—		$	—
Canceled		(36,223	)	$	18.05

Balance at September 30, 2018		493,149		$	19.54		1.9

Stock-Based Compensation

Stock-based compensation expense related to our equity incentive plans was allocated as follows:


	Three Months Ended						Nine Months Ended
	September 30, 2018			October 1, 2017			September 30, 2018			October 1, 2017
(Dollars in thousands)
Cost of sales	$	283		$	85		$	694		$	134
Selling, general and administrative expenses		949			(100	)		2,251			838

Stock-based compensation expense before income taxes		1,232			(15	)		2,945			972
Income tax (provision) benefit		(285	)		6			(685	)		(358	)

Total stock-based compensation expense after income taxes	$	947		$	(9	)	$	2,260		$	614

As of September 30, 2018, a total of $7.3 million of unrecognized compensation cost related to non-vested awards is expected to be recognized over a weighted average period of approximately 1.85 years. There were no significant capitalized stock-based compensation costs at September 30, 2018 and December 31, 2017.