Incentive Award Plan and Employee Benefit Plan
 12 Months Ended
Dec. 31, 2018
Compensation Cost Items [Abstract]  
Incentive Award Plan and Employee Benefit Plan
INCENTIVE AWARD PLAN AND EMPLOYEE BENEFIT PLAN
Amended Incentive Award Plan
Under the Amended Incentive Award Plan, the Company may grant equity incentive awards to eligible employees, directors and other service providers. Awards under the Amended Incentive Award Plan may be in the form of stock options, restricted stock, dividend equivalents, restricted stock units, stock appreciation rights, performance awards, stock payment awards, market-based awards, LTIP units and other incentive awards. If an award under the Amended Incentive Award Plan is forfeited, expires or is settled for cash, any shares subject to such award may, to the extent of such forfeiture, expiration or cash settlement, be used again for new grants under the Amended Incentive Award Plan. As of December 31, 2018, 604.1 thousand shares remained available for award under the Amended Incentive Award Plan.
During the years ended December 31, 2018, 2017 and 2016, portions of awards of restricted common stock granted to certain of the Company’s officers and other employees vested. The vesting of these shares, granted pursuant to the Amended Incentive Award Plan, resulted in federal and state income tax liabilities for the recipients. As permitted by the terms of the Amended Incentive Award Plan and the award grants, certain executive officers and employees elected to surrender 58 thousand, 88 thousand and 15 thousand shares of common stock, respectively, valued at $2.4 million, $3.5 million and $0.8 million, respectively, solely to pay the associated minimum statutory tax withholdings during the years ended December 31, 2018, 2017 and 2016. Common shares repurchased are considered retired under Maryland law and the cost of the stock repurchased is recorded as a reduction to common stock and accumulated deficit on the consolidated balance sheets.
Restricted Shares of Common Stock
During the year ended December 31, 2018, the Company granted 0.2 million restricted shares under the Amended Incentive Award Plan to certain executive officers, employees and members of the Board of Directors. The fair value of the restricted stock grants was determined based on the Company's closing stock price on the date of grant. The Company recorded $8.2 million in deferred compensation associated with these grants. Deferred compensation for restricted shares will be recognized in expense over the requisite service period, generally which is three years, with a remaining weighted average recognition period of 0.9 years for all grants under the Amended Incentive Award Plan. During the year ended December 31, 2018, 0.1 million restricted shares vested under the Amended Incentive Award Plan, with an aggregate fair value of $5.6 million based on the Company's closing stock price on the date of vest.
In connection with the Spin-Off on May 31, 2018, holders of unvested restricted shares of Spirit common stock received unrestricted shares of SMTA common stock on a pro rata basis of one share of SMTA common stock for every ten shares of Spirit common stock. The distribution of unrestricted SMTA shares is considered an award modification that did not result in incremental fair value and, therefore, incremental compensation expense was not recognized. However, since the vesting period of the unrestricted SMTA shares was accelerated, $1.4 million of unrecognized stock-based compensation expense was accelerated and is reflected within general and administrative expenses on the accompanying consolidated statements of operations and comprehensive income.
The following table summarizes restricted share activity under the Amended Incentive Award Plan:
 
2018
 
2017
 
2016
 
Number of Shares
 
Weighted Average Price (1)
(per share)
 
Number of Shares
 
Weighted Average Price (1)
(per share)
 
Number of Shares
 
Weighted Average Price (1)
(per share)
Outstanding non-vested shares, beginning of year
286,917

 
$
53.00

 
206,899

 
$
62.73

 
154,177

 
$
56.44

Shares granted
207,253

 
39.43

 
220,712

 
46.13

 
189,758

 
62.92

Shares vested
(137,292
)
 
52.11

 
(131,534
)
 
56.49

 
(112,516
)
 
55.51

Shares forfeited
(10,697
)
 
45.02

 
(9,160
)
 
58.30

 
(24,520
)
 
57.79

Outstanding non-vested shares, end of year
346,181

 
$
45.48

 
286,917

 
$
53.00

 
206,899

 
$
62.73


(1) Based on grant date fair values.
The Company adopted ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, effective January 1, 2017 and made an accounting policy election to recognize stock-based compensation forfeitures as they occur, whereas previously stock-based compensation forfeitures were estimated and recognized based on historical forfeiture rates.
Market-Based Awards
Since August 2013, market-based awards have been granted to executive officers upon approval from the Board of Directors or committee thereof. These awards are granted at a target number of units and represent shares that are potentially issuable in the future. The market-based share awards vest based on the Company’s stock price and dividend performance, TSR, at the end of, generally, three-year periods relative to a group of industry peers. Potential shares of the Corporation's common stock that each participant is eligible to receive is based on the initial target number of shares granted multiplied by a percentage range between 0% and 250%. Grant date fair value of the market-based share awards was calculated using the Monte Carlo simulation model, which incorporated stock price volatility, projected dividend yields and other variables over the time horizons matching the performance periods. Significant inputs for the calculation were expected volatility of the Company, ranging from 21.9% to 30.8%, and expected volatility of the Company's peers, ranging from 16.3% to 32.8%. Stock-based compensation expense associated with unvested market-based share awards is recognized on a straight-line basis over the minimum required service period, with a remaining weighted average recognition period of 1.7 years as of December 31, 2018.
In addition, final shares issued under each market-based share award entitle its holder to a cash payment equal to the aggregate declared dividends with record dates during the performance period, beginning on the grant date and ending the day before the awards are released. The projected shares to be awarded are not considered issued under the Amended Incentive Award Plan until the performance period has ended and the actual number of shares to be released is determined. The market-based shares and dividend rights are subject to forfeiture in the event of a non-qualifying termination of a participant prior to the performance period end date. During the year ended December 31, 2018, 27.3 thousand shares vested related to market-based awards, with an aggregate fair value of $1.1 million based on the Company's closing stock price on the date of vest.
The following table summarizes market-based award activity under the Amended Incentive Award Plan:
 
2018
 
2017
 
2016
 
Number of Target Shares
 
Weighted Average Fair Value
(per share)
 
Number of Target Shares
 
Weighted Average Fair Value
(per share)
 
Number of Target Shares
 
Weighted Average Fair Value
(per share)
Outstanding non-vested awards, beginning of year
168,694

 
$
62.25

 
98,859

 
$
77.79

 
94,542

 
$
71.38

Grants at target (1)
100,899

 
51.98

 
171,642

 
59.38

 
80,158

 
80.30

Earned (below) above performance target (2)
—

 
—

 
—

 
—

 
(8,528
)
 
67.80

Vested (3)
(27,267
)
 
70.24

 
(93,333
)
 
72.38

 
(43,085
)
 
71.80

Forfeited
(2,168
)
 
80.32

 
(8,474
)
 
73.90

 
(24,228
)
 
75.25

Incremental Shares (4)
26,643

 
N/A

 
—

 
N/A

 
—

 
N/A

Outstanding non-vested awards, end of year
266,801

 
$
51.19

 
168,694

 
$
62.25

 
98,859

 
$
77.79

(1) The performance period for the 2018 market-based awards began January 1, 2018 and continues through December 31, 2020. The performance period for the 2017 market-based awards began January 1, 2017 and continues through December 31, 2019. The performance period for the 2016 market-based awards began January 1, 2016 and continues through December 31, 2018.
(2) Represents shares that were earned below or in excess of target for the grants whose performance periods ended on December 31, 2018, 2017 and 2016.
(3) The number of shares that vested in 2018, 2017 and 2016 includes 27,267, 93,333, and 31,156 shares, respectively, released at target in connection with qualifying terminations. Dividend rights of $0.1 million, $0.5 million and $0.2 million associated with all shares released were paid in cash during 2018, 2017 and 2016, respectively.
(4) In connection with the Spin-Off and in accordance with the rights granted per the Amended Incentive Award Plan, the Board of Directors made an equitable adjustment for all performance share awards outstanding, resulting in incremental shares. Because the fair value of the outstanding performance awards the day prior to and the day after the Spin-Off did not materially change, there was no change to unrecognized compensation expense and did not result in any incremental compensation expense.
Approximately $1.7 million and $0.8 million in dividend rights have been accrued as of December 31, 2018 and 2017, respectively. For outstanding non-vested awards at December 31, 2018, 0.3 million shares would have been released based on the Corporation's TSR relative to the specified peer groups through that date.
Stock-based Compensation Expense
For the years ended December 31, 2018, 2017 and 2016, the Company recognized $15.1 million, $16.6 million and $9.6 million, respectively, in stock-based compensation expense, which is included in general and administrative expenses in the accompanying consolidated statements of operations.
As of December 31, 2018, the remaining unamortized stock-based compensation expense totaled $15.5 million, including $8.1 million related to restricted stock awards and $7.4 million related to market-based awards. Amortization is recognized on a straight-line basis over the service period of each applicable award.
401(k) Plan
The Company has a 401(k) Plan, which is available to full-time employees who have completed at least three months of service with the Company. Currently, the Company provides a matching contribution in cash, up to a maximum of 4% of compensation, which vests immediately.