AMERICAN COASTAL INSURANCE CorpACIC
AMERICAN COASTAL INSURANCE Corp Stock Compensation Disclosure
STOCK-BASED COMPENSATION
We account for stock-based compensation under the fair value recognition provisions of ASC Topic 718 - Compensation - Stock Compensation. We recognize stock-based compensation cost over the award’s requisite service period on a straight-line basis for time-based restricted stock grants and performance-based restricted stock grants. We record forfeitures as they occur for all stock-based compensation.
Under the Company’s 2013 Omnibus Incentive Plan, 1,000,000 shares were authorized for issuance at December 31, 2019.
The following table presents our total stock-based compensation expense:
Year ended December 31, | |||||||||||
2019 | 2018 | 2017 | |||||||||
Employee stock-based compensation expense | |||||||||||
Pre-tax (1) | $ | 2,019 | $ | 1,095 | $ | 1,616 | |||||
Post-tax (2) | 1,595 | 865 | 1,277 | ||||||||
Director stock-based compensation expense | |||||||||||
Pre-tax (1) | 988 | 1,319 | 996 | ||||||||
Post-tax (2) | 781 | 1,042 | 787 | ||||||||
(1) This table does not include withholding of vested shares for tax liabilities, which totaled $296,000, $418,000, and $287,000 in 2019, 2018, and 2017, respectively.
(2) The after tax amounts are determined using the 21% corporate federal tax rate.
We had approximately $3,560,000 of unrecognized stock compensation expense at December 31, 2019 related to non-vested stock-based compensation granted, which we expect to recognize over a weighted-average period of approximately 1.9 years. We had approximately $246,000 of unrecognized director stock-based compensation expense at December 31, 2019 related to non-vested director stock-based compensation granted, which we expect to recognize over a weighted-average period of approximately 0.4 years.
Restricted stock, restricted stock units and performance stock units
Stock-based compensation cost for restricted stock awards, restricted stock units and performance stock units is measured based on the closing fair market value of our common stock on the date of grant, which vest in equal installments over the requisite service period of typically three years. Restricted stock awards granted to non-employee directors vest over a one-year period. Each restricted stock unit and performance stock unit represents our obligation to deliver to the holder one share of common stock upon vesting.
Performance stock units vest based on the Company’s return on average equity compared to a defined group of peer companies. On the grant date, we issue the target number of performance stock units. They are subject to forfeitures if performance goals are not met. The actual number of performance stock units earned can vary from zero to 150 percent of the target for the 2018 and 2019 awards.
We granted 134,231, 174,602, and 167,622 shares of restricted common stock, which had a weighted-average grant date fair value of $16.24, $20.07, and $15.62 per share during the years ended December 31, 2019, 2018, and 2017, respectively. Additionally, during the year ended December 31, 2019, the Company granted 45,000 shares of restricted common stock, with a fair value of $15.70 per share, which is contingent upon stockholder approval of the 2020 Omnibus Incentive Plan. Stockholders will vote on this matter at our 2020 annual meeting of stockholders.
The following table presents certain information related to the activity of our non-vested common stock grants:
Number of Restricted Shares | Weighted Average Grant Date Fair Value | |||||
Outstanding as of December 31, 2016 | 169,642 | $ | 16.87 | |||
Granted | 167,622 | 15.62 | ||||
Less: Forfeited | 17,537 | 14.07 | ||||
Less: Vested | 107,633 | 16.24 | ||||
Outstanding as of December 31, 2017 | 212,094 | $ | 16.44 | |||
Granted | 174,602 | 20.07 | ||||
Less: Forfeited | 21,502 | 18.82 | ||||
Less: Vested | 147,258 | 16.68 | ||||
Outstanding as of December 31, 2018 | 217,936 | $ | 18.96 | |||
Granted (1) | 134,231 | 16.24 | ||||
Less: Forfeited | 6,059 | 20.15 | ||||
Less: Vested | 131,613 | 19.22 | ||||
Outstanding as of December 31, 2019 | 214,495 | $ | 17.49 | |||
(1) Contingent shares have been excluded from the calculations in the table above.
Stock options
Stock option fair value was estimated on the grant date using the Black-Scholes-Merton formula. Stock options vest in equal installments over the requisite service period of typically three years. The following weighted-average assumptions were used to value the stock options granted:
2019 | ||
Expected annual dividend yield | 1.28 | % |
Expected volatility | 41.07 | % |
Risk-free interest rate | 3.11 | % |
Expected term | 6 | years |
Expected annual dividend yield is based on the current quarterly dividend of $0.06 per share and the stock price on the grant date. The expected volatility is a historical volatility calculated based on the daily closing prices over a period equal to the expected term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the grant date. Expected term takes into account the three-year graded vesting term and the 10-year contractual term of the option.
We granted 99,181 stock options during the year ended December 31, 2019, which had a weighted average grant date fair value of $5.96 per share. We granted 107,888 stock options during the year ended December 31, 2018 which had a weighted-average grant date fair value of $8.26 per share.
The following table presents certain information related to the activity of our non-vested stock option grants:
Number of Stock Options | Weighted Average Exercise Prices | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | ||||||||||
Outstanding as of December 31, 2017 | — | $ | — | — | $ | — | |||||||
Granted | 107,888 | 20.94 | — | — | |||||||||
Less: Forfeited | — | — | — | — | |||||||||
Less: Exercised | — | — | — | — | |||||||||
Outstanding as of December 31, 2018 | 107,888 | $ | 20.94 | 9.76 | $ | — | |||||||
Vested as of December 31, 2018 | — | $ | — | — | $ | — | |||||||
Exercisable as of December 31, 2018 | — | $ | — | — | $ | — | |||||||
Outstanding as of December 31, 2018 | 107,888 | $ | 20.94 | — | $ | — | |||||||
Granted | 99,181 | 16.25 | — | — | |||||||||
Less: Forfeited | — | — | — | — | |||||||||
Less: Exercised | — | — | — | — | |||||||||
Outstanding as of December 31, 2019 | 207,069 | $ | 18.69 | 9.00 | $ | — | |||||||
Vested as of December 31, 2019 | 35,965 | $ | 20.94 | 8.76 | $ | — | |||||||
Exercisable as of December 31, 2019 | 35,965 | $ | 20.94 | 8.76 | $ | — | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2019 | Mar 12, 2020 | Showing above |
| 2017 | Mar 28, 2018 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.