Forward Air Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Share-Based Payments

Share-Based Payments

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

The Company’s general practice has been to make a single annual grant of share-based compensation to key employees and to make other employee grants only in connection with new employment or promotions. Forms of share-based compensation granted to employees by the Company include stock options, non-vested shares of common stock (“non-vested share”), and performance shares. The Company also typically makes a single annual grant of non-vested shares to non-employee directors in conjunction with the annual election of non-employee directors to the Board of Directors. Share-based compensation is based on the grant date fair value of the instrument and is recognized ratably over the requisite service period, or vesting period. All share-based compensation expense is recognized in salaries, wages and employee benefits.

Employee Activity - Stock Options

Stock option grants to employees generally expire seven years from the grant date and typically vest ratably over a three-year period. The Company used the Black-Scholes option-pricing model to estimate the grant-date fair value of options granted. The weighted-average fair value of options granted and assumptions used to estimate their fair value during the three months ended March 31, 2017 and 2016 were as follows:




	Three months ended
	March 31, 2017			March 31, 2016
Expected dividend yield	1.3		%	1.0		%
Expected stock price volatility	28.7		%	29.0		%
Weighted average risk-free interest rate	2.0		%	1.3		%
Expected life of options (years)	6.0			6.0
Weighted average grant date fair value	$	13		$	12

The following tables summarize the Company’s employee stock option activity and related information:



	Three months ended March 31, 2017
							Weighted-
			Weighted-		Aggregate		Average
			Average		Intrinsic		Remaining
	Options		Exercise		Value		Contractual
	(000)		Price		(000)		Term
Outstanding at December 31, 2016	564		$	41
Granted	118		48
Exercised	(47	)	32
Forfeited	(13	)	46
Outstanding at March 31, 2017	622		$	42	$	3,765	4.4
Exercisable at March 31, 2017	381		$	40	$	3,334	3.2



	Three months ended
	March 31, 2017		March 31, 2016
Share-based compensation for options	$	363	$	348
Tax benefit for option compensation	$	134	$	129
Unrecognized compensation cost for options, net of estimated forfeitures	$	2,683	$	2,789
Weighted average period over which unrecognized compensation will be recognized (years)	2.3

Employee Activity - Non-vested Shares

Non-vested share grants to employees vest ratably over a three-year period. The non-vested shares’ fair values were estimated using closing market prices on the day of grant. The following tables summarize the Company’s employee non-vested share activity and related information:



	Three months ended March 31, 2017
			Weighted-		Aggregate
	Non-vested		Average		Grant Date
	Shares		Grant Date		Fair Value
	(000)		Fair Value		(000)
Outstanding and non-vested at December 31, 2016	222		$	45
Granted	126		48
Vested	(101	)	45
Forfeited	(5	)	46
Outstanding and non-vested at March 31, 2017	242		$	47	$	11,320



	Three months ended
	March 31, 2017		March 31, 2016
Share-based compensation for non-vested shares	$	1,246	$	1,082
Tax benefit for non-vested share compensation	$	459	$	403
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures	$	10,470	$	9,363
Weighted average period over which unrecognized compensation will be recognized (years)	2.3

Employee Activity - Performance Shares

The Company annually grants performance shares to key employees. Under the terms of the performance share agreements, following the end of a three-year performance period, the Company will issue to the employees a calculated number of common stock shares based on the three year performance of the Company’s total shareholder return as compared to the total shareholder return of a selected peer group. No shares may be issued if the Company's total shareholder return outperforms 30% or less of the peer group, but the number of shares issued may be doubled if the Company's total shareholder return performs better than 90% of the peer group. The fair value of the performance shares was estimated using a Monte Carlo simulation. The weighted average assumptions used in the Monte Carlo estimate were as follows:



	Three months ended
	March 31, 2017		March 31, 2016
Expected stock price volatility	24.7	%	22.3	%
Weighted average risk-free interest rate	1.4	%	0.8	%

The following tables summarize the Company’s employee performance share activity, assuming median share awards, and related information:



	Three months ended March 31, 2017
			Weighted-		Aggregate
	Performance		Average		Grant Date
	Shares		Grant Date		Fair Value
	(000)		Fair Value		(000)
Outstanding and non-vested at December 31, 2016	80		$	55
Granted	25		56
Forfeited	(29	)	$	50
Outstanding and non-vested at March 31, 2017	76		$	57	$	4,327



	Three months ended
	March 31, 2017		March 31, 2016
Share-based compensation for performance shares	$	184	$	351
Tax benefit for performance share compensation	$	68	$	131
Unrecognized compensation cost for performance shares, net of estimated forfeitures	$	2,612	$	2,805
Weighted average period over which unrecognized compensation will be recognized (years)	2.2

Non-employee Director Activity - Non-vested Shares

Grants of non-vested shares to non-employee directors vest ratably over the elected term to the Board of Directors, or approximately one year. The following tables summarize the Company’s non-employee non-vested share activity and related information:



	Three months ended March 31, 2017
		Weighted-		Aggregate
	Non-vested	Average		Grant Date
	Shares	Grant Date		Fair Value
	(000)	Fair Value		(000)
Outstanding and non-vested at December 31, 2016	16	$	44
Granted	—	—
Vested	—	—
Outstanding and non-vested at March 31, 2017	16	$	44	$	688



	Three months ended
	March 31, 2017		March 31, 2016
Share-based compensation for non-vested shares	$	169	$	171
Tax benefit for non-vested share compensation	$	63	$	64
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures	$	77	$	114
Weighted average period over which unrecognized compensation will be recognized (years)	0.1

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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