NOTE 15. STOCK INCENTIVE PLAN

 

Our Amended and Restated 1999 Stock Incentive Plan (the “Plan”) provides for grants of equity-based awards to employees, non-employee directors and officers, and advisors of the company (“Eligible Persons”). The Plan is designed to promote the interests of the company using equity investment interests to attract, motivate, and retain individuals.

 

 

Under the Plan, the Board, or a committee appointed by the Board, may impose restrictions on the exercise of awards during pre-defined blackout periods. Insiders may participate in plans established pursuant to Rule 10b5-1 under the Exchange Act that allow them to exercise awards subject to pre-established criteria.

 

We recognize non-cash stock-based compensation expense based on the estimated fair value of awards in accordance with FASB ASC Topic 718 Compensation—Stock Compensation. Stock-based compensation expense fluctuates over time as a result of the vesting periods for outstanding awards and the number of awards that actually vest. We adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting as of January 1, 2017. The adoption of this ASU did not materially impact our financial position, results of operations, or cash flows.

The following table reflects the components of stock-based compensation expense recognized in the Consolidated Statements of Operations for the years ended December 31, 2015, 2016 and 2017:

 

		Year Ended December 31,
		2015			2016			2017
		(Dollars in thousands)
Stock option compensation expense included in unallocated corporate expenses		$	474		$	378		$	153
Restricted stock shares compensation expense included in unallocated corporate expenses			34			24			1,100
Stock option compensation expense included in broadcast operating expenses			130			85			33
Restricted stock shares compensation expense included in broadcast operating expenses			—			—			224
Stock option compensation expense included in digital media operating expenses			92			60			30
Restricted stock shares compensation expense included in digital media operating expenses			—			—			124
Stock option compensation expense included in publishing operating expenses			41			35			21
Restricted stock shares compensation expense included in publishing operating expenses			—			—			36
Total stock-based compensation expense, pre-tax		$	771		$	582		$	1,721
Tax expense from stock-based compensation expense			(308)			(233)			(688)
Total stock-based compensation expense, net of tax		$	463		$	349		$	1,033

 

Stock option and restricted stock grants

 

Eligible employees may receive stock option awards annually with the number of shares and type of instrument generally determined by the employee’s salary grade and performance level. Incentive and non-qualified stock option awards allow the recipient to purchase shares of our common stock at a set price, not to be less than the closing market price on the date of award, for no consideration payable by the recipient. The related number of shares underlying the stock option is fixed at the time of the grant. Options generally vest over a four-year period with a maximum term of five years from the vesting date. In addition, certain management and professional level employees may receive stock option awards upon the commencement of employment.

 

The Plan also allows for awards of restricted stock, which have been granted periodically to non-employee directors of the company. Awards granted to non-employee directors are made in exchange for their services to the company as directors and therefore, the guidance in FASB ASC Topic 505-50 Equity Based Payments to Non Employees is not applicable. Restricted stock awards contain transfer restrictions under which they cannot be sold, pledged, transferred or assigned until the period specified in the award, generally from one to five years. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards are considered issued and outstanding from the vest date of grant.

The fair value of each award is estimated as of the date of the grant using the Black-Scholes valuation model. The expected volatility reflects the consideration of the historical volatility of our common stock as determined by the closing price over a six to ten year term commensurate with the expected term of the award. Expected dividends reflect the amount of quarterly distributions authorized and declared on our Class A and Class B common stock as of the grant date. The expected term of the awards are based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rates for periods within the expected term of the award are based on the U.S. Treasury yield curve in effect during the period the options were granted. We have used historical data to estimate future forfeiture rates to apply against the gross amount of compensation expense determined using the valuation model. These estimates have approximated our actual forfeiture rates.

 

There were no stock options granted during the year ended December 31, 2017. The weighted-average assumptions used to estimate the fair value of the stock options and restricted stock awards using the Black-Scholes valuation model were as follows for the years ended December 31, 2015 and 2016:

 

		Year Ended December 31,
		2015				2016
Expected volatility			52.37	%			47.03	%
Expected dividends			4.28	%			5.36	%
Expected term (in years)			3.0				7.4
Risk-free interest rate			0.85	%			1.64	%

 

Activity with respect to the company’s option awards during the three years ended December 31, 2017 is as follows (Dollars in thousands, except weighted average exercise price and weighted average grant date fair value):

 

Options		Shares			Weighted Average Exercise Price			Weighted Average Grant Date Fair Value			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2015			1,816,204		$	4.88		$	3.39		5.5 years		$	5,718
Granted			10,000			6.08			1.98					—
Exercised			(163,994)			2.35			1.53					589
Forfeited or expired			(81,087)			10.32			6.93					12
Outstanding at December 31, 2015			1,581,123		$	4.87		$	3.39		4.3 years		$	1,738
Exercisable at December 31, 2015			947,573			4.92			3.54		3.3 years			1,001
Outstanding at January 1, 2016			1,581,123		$	4.87		$	3.39		4.3 years		$	1,738
Granted			549,500			4.85			1.33					—
Exercised			(336,996)			2.95			2.02					1,418
Forfeited or expired			(73,627)			8.06			3.07					3
Outstanding at December 31, 2016			1,720,000		$	5.12		$	2.89		4.5 years		$	2,428
Exercisable at December 31, 2016			841,625			5.56			3.94		2.9 years			948
Expected to Vest			601,557		$	4.80		$	3.15		5.6 years		$	700
Outstanding at January 1, 2017			1,720,000		$	5.12		$	2.89		4.5 years		$	2,428
Granted			—
Exercised			(127,663)			4.02			2.03					401
Forfeited or expired			(163,875)			5.75			2.99					136
Outstanding at December 31, 2017			1,428,462		$	5.20		$	2.96		3.7 years		$	653
Exercisable at December 31, 2017			934,959			5.66			3.77		2.7 years			414
Expected to Vest			468,581		$	5.21		$	2.98		3.7 years		$	239

The aggregate intrinsic value represents the difference between the company’s closing stock price on December 31, 2017 of $4.50 and the option exercise price of the shares for stock options that were in the money, multiplied by the number of shares underlying such options. The total fair value of options vested during the years ended December 31, 2017, 2016 and 2015 was $0.9 million, $1.1 million and $1.5 million, respectively.

As of December 31, 2017, there was $0.3 million of total unrecognized compensation cost related to non-vested stock option awards. This cost is expected to be recognized over a weighted-average period of 1.5 years.

 

On August 9, 2017, a restricted stock award of 33,066 shares was granted to an executive that vested immediately. The fair value of the restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. The restricted stock award contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until 90 days from the vesting date. The recipient of this restricted stock award is entitled to all of the rights of absolute ownership of the restricted stock from the date of grant, including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The award is considered issued and outstanding from the vest date of grant. 

On February 24, 2017,  a restricted stock award of a total of 178,592 shares was granted to certain members of management that vested immediately. The fair value of each restricted stock award was measured based on the grant date market price of our common shares and expensed as of the vesting date. These restricted stock awards contained transfer restrictions under which they could not be sold, pledged, transferred or assigned until three months from the vesting date. Recipients of these restricted stock awards were entitled to all of the rights of absolute ownership of the restricted stock from the date of grant including the right to vote the shares and to receive dividends. Restricted stock awards are independent of option grants and are granted at no cost to the recipient other than applicable taxes owed by the recipient. The awards were considered issued and outstanding from the vest date of grant.

 

The fair values of shares of restricted stock awards are determined based on the closing price of the company’s common stock on the grant dates. Activity with respect to the company’s restricted stock awards during the year ended December 31, 2017 and 2016 is as follows:

 

Restricted Stock Awards

Shares

Weighted Average Grant Date Fair Value

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Non-Vested at January 1, 2016

10,000

$

5.83

0.2 years

$

40

Granted

—

—

—

—

Lapse of restrictions

(10,000)

(5.83)

—

52

Forfeited or expired

—

—

—

—

Outstanding at December 31, 2016

—

$

—

—

$

—

 

Restricted Stock Awards

Shares

Weighted Average Grant Date Fair Value

Weighted Average Remaining Contractual Term

Aggregate Intrinsic Value

Non-Vested at January 1, 2017

—

$

—

— years

$

—

Granted

211,658

7.01

—

1,484

Lapse of restrictions

(211,658)

(7.01)

—

1,488

Forfeited or expired

—

—

—

—

Outstanding at December 31, 2017

—

$

—

—

$

—

 

Additional information regarding options outstanding as of December 31, 2017, is as follows:

 

					Weighted Average
					Contractual Life			Weighted						Weighted Average
Range of					Remaining			Average			Exercisable			Grant Date
Exercise Prices		Options			(Years)			Exercise Price			Options			Fair Value
$2.38 - $3.37			351,370			3.2		$	2.65			215,370		$	2.59
$3.38 - $4.42			4,250			2.2			3.99			4,250			3.99
$4.43 - $4.85			428,292			5.7			4.85			83,039			4.85
$4.86 - $6.65			61,000			1.3			5.35			57,250			5.38
$6.66 - $7.54			553,550			2.7			6.92			553,550			6.92
$7.55 - $8.76			30,000			3.8			8.37			21,500			8.38
			1,428,462			3.7		$	5.20			934,959		$	5.66