Annual report pursuant to Section 13 and 15(d)

Note 15 - Stock-based Compensation

v3.19.3.a.u2
Note 15 - Stock-based Compensation
 12 Months Ended
Oct. 31, 2019
Notes to Financial Statements  
Share-based Payment Arrangement [Text Block]
Note
15.
Stock-Based Compensation
 
Successor
 
The Company rolled forward certain vested options from the Predecessor (see discussion below) to
2,783,479
equivalent vested options in the Successor.
No
incremental compensation costs were recognized on conversion as the fair value of the options issued were equivalent to the fair value of the vested options of the Predecessor. Exercise prices for those options range from
$0.87
to
$6.09.
 
During
2019,
pursuant to the Concrete Pumping Holdings, Inc.
2018
Omnibus Incentive Plan, the Company granted stock-based awards to certain employees in the U.S. and U.K. All awards in the U.S. are restricted stock awards while awards granted to employees in the U.K. are stock options with exercise prices of
$0.01.
Regardless of where the awards were granted, the awards vest pursuant to
one
of the following
four
conditions:
 
 
(
1
)
Time-based only – Awards vest in equal installments over a
five
-year period.
 
(
2
)
$13
market-based and time-based vesting – Awards will vest as to
first
condition once the Company’s stock reaches a closing price of
$13.00
for
30
consecutive days. Once the
first
vesting condition is achieved, the stock award will then vest
1/3
annually over a
three
-year period.
 
(
3
)
$16
market-based and time-based vesting – Awards will vest as to
first
condition once the Company’s stock reaches a closing price of
$16.00
for
30
consecutive days. Once the
first
vesting condition is achieved, the stock award will then vest
1/3
annually over a
three
-year period.
 
(
4
)
$19
market-based and time-based vesting – Awards will vest as to
first
condition once the Company’s stock reaches a closing price of
$19.00
for
30
consecutive days. Once the
first
vesting condition is achieved, the stock award will then vest
1/3
annually over a
three
-year period.
 
Included in the table below is a summary of the awards granted, including the location, type of award, fair value of awards, and the date that expense will be recognized through. In accordance with ASC
718,
the market-based awards were assigned the fair values in the table below using a Monte Carlo simulation model.  In addition, while the table below provides a date through which expense will be recognized on a straight-line basis, if at such time these market-based stock awards vest under both vesting conditions, expense recognition will be accelerated. Stock-based compensation expense for Successor period from
December 6, 2018
to
October 31, 2019
was
$3.6
million.
 
Location
  
Type of Award
  
Shares Awarded
    
Fair Value of Awards Per Share
    
Total Fair Value of Awards
  
Date Expense will be Recognized Through (Straight-Line Basis)
U.S.
  
Time Based Only
    
1,156,630
     $
6.67
     $
7,714,722
  
12/6/2023
U.S.
  
$13 Market/Time- Based
    
1,543,044
     $
4.47
     $
6,904,032
  
5/4/2024
U.S.
  
$16 Market/Time- Based
    
1,543,044
     $
3.85
     $
5,940,038
  
8/27/2024
U.S.
  
$19 Market/Time- Based
    
1,543,091
     $
3.34
     $
5,149,194
  
11/19/2024
U.S.
  
Time Based Only
    
25,000
     $
4.05
     $
101,250
  
12/6/2023
U.S.
  
$13 Market/Time- Based
    
25,000
     $
2.72
     $
67,919
  
5/4/2024
U.S.
  
$16 Market/Time- Based
    
25,000
     $
2.34
     $
58,436
  
8/27/2024
U.S.
  
$19 Market/Time- Based
    
25,000
     $
2.03
     $
50,654
  
11/19/2024
U.K.
  
Time Based Only
    
164,744
     $
6.67
     $
1,098,842
  
12/6/2023
U.K.
  
$13 Market/Time- Based
    
238,808
     $
4.46
     $
1,066,272
  
5/4/2024
U.K.
  
$16 Market/Time- Based
    
238,808
     $
3.84
     $
917,096
  
8/27/2024
U.K.
  
$19 Market/Time- Based
    
238,833
     $
3.33
     $
794,772
  
11/19/2024
Total
    
6,767,002
      
 
 
   $
29,863,227
  
 
 
Share-based compensation is recognized on a straight-line basis over the requisite service period of the award based on their grant-date fair value.
 
Stock Options
 
 
The following tables summarize stock option activity for the Successor period from
December 6, 2018
to
October 31, 2019:
 
   
Options
    
Weighted average exercise price
  
Outstanding stock options, December 6, 2018
    
2,783,479
     $
1.48
  
Granted
    
881,193
     $
0.01
  
Forfeited
    
(22,250
 )   $
0.01
  
Exercised
    
(1,573,024
 )   $
0.87
  
Expired
    
-
     $
-
  
Outstanding stock options, October 31, 2019
    
2,069,398
     $
1.33
  
 
The total intrinsic value of stock options exercised for the Successor period from
December 6, 2018
through
October 31, 2019
was
$9.1
million.
 
The following table summarizes information about stock options outstanding at
October 31, 2019:
 
 
 
 
  
Options Outstanding
    
Options Exercisable
  
Exercise price
    
Number of options
    
Weighted average exercise price
    
Weighted average remaining contractual life (yrs)
    
Aggregate Intrinsic Value
    
Number of options
    
Weighted average exercise price
    
Weighted average remaining contractual life (yrs)
    
Aggregate Intrinsic Value
  
$
0.01
      
858,943
     $
0.01
      
9.4
     $
2,946
      
-
     $
-
      
n/a
     $
-
  
$
0.87
      
886,382
     $
0.87
      
5.3
      
2,278
      
886,382
     $
0.87
      
5.3
      
2,278
  
$
6.09
      
324,073
     $
6.09
      
6.4
      
-
      
324,073
     $
6.09
      
6.4
      
-
  
Total
      
2,069,398
     $
1.33
      
7.2
     $
5,224
      
1,210,455
     $
2.27
      
5.6
     $
2,278
  
 
As of
October 31, 2019,
there was
$3.4
million of total unrecognized compensation cost related to stock options that is expected to be recognized as an expense by the Company in the future.
 
The Company did
not
recognize any tax benefit for the Successor period from
December 6, 2018
through
October 31, 2019.
 
Restricted Stock Awards
 
The following table is a summary of Restricted Stock Awards activity for year ended
October 31, 2019:
 
   
Units
    
Weighted average grant-date fair value
  
Unvested as of December 6, 2018
    
-
     $
-
  
Granted
    
5,885,809
     $
4.42
  
Vested
    
-
     $
-
  
Forfeited
    
(130,350
 )   $
4.58
  
Unvested as of October 31, 2019
    
5,755,459
     $
4.44
  
 
As of
October 31, 2019,
there was
$22.8
million of unrecognized compensation expense related to non-vested restricted stock awards that is expected to be recognized as an expense by the Company in the future.
 
Predecessor
 
The Predecessor accounted for share-based awards in accordance with ASC Topic
718
Compensation–Stock Compensation
(“ASC
718”
), which requires the fair value of stock-based compensation awards to be amortized as an expense over the vesting period. Stock-based compensation awards are valued at fair value on the date of grant. As a result of the Business Combination, the acceleration clause within the original award agreements was triggered and all unvested awards immediately vested, resulting in an amount of
$0.6
million of stock-based compensation expense presented “on the line” (see Note
4
- Business Combinations). Stock-based compensation for the Predecessor period from
November 1, 2018
to
December 5, 2018
and the fiscal year ended
October 31, 2018
totaled
$0.1
million and
$0.3
million, respectively, and has been included in general and administrative expenses on the accompanying consolidated statement of income.