MERCER INTERNATIONAL INC.MERC
MERCER INTERNATIONAL INC. Stock Compensation Disclosure
Shareholders’ Equity
Dividends
During the years ended December 31, 2017 and 2016 the Company’s Board of Directors declared the following quarterly dividends:
Date Declared | Dividend Per Common Share | Amount | ||||||
February 9, 2017 | $ | 0.115 | $ | 7,472 | ||||
April 27, 2017 | 0.115 | 7,477 | ||||||
July 27, 2017 | 0.115 | 7,477 | ||||||
October 26, 2017 | 0.125 | 8,127 | ||||||
$ | 0.470 | $ | 30,553 | |||||
Date Declared | Dividend Per Common Share | Amount | ||||||
February 11, 2016 | $ | 0.115 | $ | 7,435 | ||||
April 28, 2016 | 0.115 | 7,440 | ||||||
July 28, 2016 | 0.115 | 7,440 | ||||||
October 27, 2016 | 0.115 | 7,440 | ||||||
$ | 0.460 | $ | 29,755 | |||||
Dividends are paid in the quarter subsequent to the quarter in which they were declared.
In February 2018, the Company’s Board of Directors declared a quarterly dividend of $0.125 per common share. Payment of the dividend will be made on April 4, 2018 to all shareholders of record on March 28, 2018. Future dividends are subject to approval by the Board of Directors and may be adjusted as business and industry conditions warrant.
Share Capital
Preferred shares
The Company has authorized 50,000,000 preferred shares (2016 – 50,000,000) with $1 par value issuable in series, of which 2,000,000 shares have been designated as Series A. The preferred shares may be issued in one or more series. Designations and preferences for each series shall be stated in the resolutions providing for the designation and issuance of each such series adopted by the Company's Board of Directors. The Board of Directors is authorized by the Company’s articles of incorporation to determine the voting, dividend, redemption and liquidation preferences pertaining to each such series. As at December 31, 2017, no preferred shares had been issued by the Company.
Stock Based Compensation
In June 2010, the Company adopted a stock incentive plan which provides for options, restricted stock rights, restricted shares, performance shares, PSUs and stock appreciation rights to be awarded to employees, consultants and non-employee directors. During the year ended December 31, 2017, there were no issued and outstanding options, restricted stock rights, performance shares or stock appreciation rights. As at December 31, 2017, after factoring in all allocated shares, there remain approximately 3.2 million common shares available for grant.
PSUs
PSUs comprise rights to receive common shares at a future date that are contingent on the Company and the grantee achieving certain performance objectives. The performance objective period is generally three years.
For the year ended December 31, 2017, the Company recognized an expense of $2,437 related to PSUs (2016 – $4,210; 2015 – $1,819).
The following table summarizes PSU activity during the year:
Number of PSUs | Weighted Average Grant Date Fair Value Per Unit | |||||
Outstanding as at January 1, 2017 | 2,068,174 | $ | 8.63 | |||
Granted | 542,788 | 12.00 | ||||
Vested and issued | (279,515 | ) | 9.48 | |||
Forfeited | (464,289 | ) | 9.44 | |||
Outstanding as at December 31, 2017 | 1,867,158 | $ | 9.28 | |||
The weighted-average grant date fair value per unit of all PSUs granted in 2016 and 2015 was $6.04 and $12.95, respectively. The total fair value of PSUs vested and issued in 2017, 2016 and 2015 was $3,445, $1,382 and $2,031, respectively.
Restricted Shares
Restricted shares generally vest at the end of one year.
Expense recognized for the year ended December 31, 2017 was $453 (2016 – $449; 2015 – $590). As at December 31, 2017, the total remaining unrecognized compensation cost related to restricted shares amounted to approximately $215 which will be amortized over the remaining vesting periods.
The following table summarizes restricted share activity during the year:
Number of Restricted Shares | Weighted Average Grant Date Fair Value Per Share | |||||
Outstanding as at January 1, 2017 | 38,000 | $ | 9.41 | |||
Granted | 43,635 | 11.80 | ||||
Vested and issued | (38,000 | ) | 9.41 | |||
Outstanding as at December 31, 2017 | 43,635 | $ | 11.80 | |||
The weighted-average grant date fair value per share of all restricted shares granted in 2016 and 2015 was $9.41 and $14.48, respectively. The total fair value of restricted shares vested and issued in 2017, 2016 and 2015 was $437, $697 and $1,096, respectively.
Settlement of Short Swing Profit Claim
In March 2017, the Company and a shareholder entered into a settlement agreement pursuant to which the shareholder paid $3,000 (net $2,450 after costs) to the Company to settle a claim by the Company for short swing profits under Section 16(b) in the Exchange Act. The net settlement was classified as additional paid-in-capital.
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.