9. Equity Compensation

 

Stock Options

In 2003, the Board of Directors adopted the 2003 Equity Incentive Plan (the “2003 Plan”), which provided for the granting of nonqualified and incentive stock options, stock appreciation rights, stock awards, restricted stock units and restricted stock awards. Under the 2003 Plan, the Company was able to grant nonqualified and incentive stock options to directors, employees and non-employees providing services to the Company. On June 11, 2013, the Company’s Board of Directors adopted the 2013 Stock Option and Incentive Plan (the “2013 Plan”), which was subsequently approved by the Company’s stockholders. To the extent that any awards outstanding under the 2003 Plan are forfeited or lapse unexercised after August 1, 2013, the shares of common stock subject to such awards will become available for issuance under the 2013 Plan. The 2013 Plan provides for annual increases in the number of reserved shares of 5% of the outstanding number of shares of the Company’s Common Stock as of the preceding December 31. On January 1, 2019, the number of reserved shares was increased by 1,325,845 in accordance with the provisions of the 2013 Plan.

 

A summary of stock option activity for the years ended December 31, 2018, 2017 and 2016 is presented below:

 

The following table summarizes information about stock options outstanding and exercisable at December 31, 2018:

 

The total fair value of stock option awards vested during the years ended December 31, 2018, 2017, and 2016 was $1.9 million, $3.9 million and $5.4 million, respectively. The following table summarizes the aggregate intrinsic‑value of options exercised, outstanding and exercisable (in thousands):

 

The Company did not grant any option awards during 2018 or 2017. The fair value of each option awarded during the year ended December 31, 2016, was estimated using an expected volatility of 62%,  no expected dividends, an expected term of 6.1 years, and a risk-free rate of 1.1%.

Restricted stock units

 

A summary of restricted stock unit activity for the years ended December 31, 2018, 2017, and 2016 is presented below:

 

The total fair value of awards vested during the years ended December 31, 2018, 2017 and 2016 was $22.2 million, $16.0 million and $0.4 million, respectively. During the year ended December 31, 2018, 866,515 restricted stock units vested of which 287,050 shares were withheld for tax purposes resulting in the issuance of 579,465 shares of common stock.

 

The aggregate intrinsic value of unvested restricted stock at December 31, 2018 was $14.5 million.  The aggregate intrinsic value represents the total pretax intrinsic value, based on the Company’s stock price of $17.60 as of December 31, 2018, which would have been received by the restricted stock unit participants had all restricted stock units been vested as of that date.  

 

Stock-based compensation expense

 

Total stock‑based compensation expense has been classified as follows in the accompanying Consolidated Statements of Operations (in thousands):

 

For the years ended December 31, 2018, 2017 and 2016, we recognized tax benefits on total stock-based compensation expense, which are reflected in the provision for income taxes in the Consolidated Statements of Operations, of $10.1 million, $0.6 million, and $0.1 million, respectively. For the year ended December 31, 2018, we recognized $4.5 million in tax benefits from stock option awards exercised.

 

At December 31, 2018, there was $0.7 million of total unrecognized compensation cost related to non‑vested stock option awards that will be recognized over a weighted‑average period of 0.4 years.  At December 31, 2018, there was $10.5 million of total unrecognized compensation cost related to non-vested restricted stock units that will be recognized over a weighted-average period of 1.7 years.

 

Company Matching Contribution to 401(k) Plan

 

The Company offers a 401(k) Plan and in November 2016, the Board of Directors authorized a matching contribution by the Company starting in 2017. Matching contributions are as follows: the Company will match 100% of the first 1% of salary contributed by a participant, and 50% of the next 5% of salary contributed by a participant, for a maximum matching contribution of 3.5% of the salary of a participant up to the limit on contributions imposed by the IRS.  Currently, the Company funds its match in contribution with shares of Control4’s common stock. During the years ended December 31, 2018 and 2017, the Company contributed 62,230 and 65,171 shares of stock, respectively, to employees under this plan and recorded $1.5 million and $1.4 million of expenses, respectively, associated with this contribution.