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, 2018

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, 2018 and 2017 were as follows:




	Three months ended
	March 31, 2018			March 31, 2017
Expected dividend yield	1.1		%	1.3		%
Expected stock price volatility	24.9		%	28.7		%
Weighted average risk-free interest rate	2.6		%	2.0		%
Expected life of options (years)	6.0			6.0
Weighted average grant date fair value	$	15		$	13

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



	Three months ended March 31, 2018
						Weighted-
		Weighted-		Aggregate		Average
		Average		Intrinsic		Remaining
	Options	Exercise		Value		Contractual
	(000)	Price		(000)		Term
Outstanding at December 31, 2017	440	$	45
Granted	86	59
Exercised	—	—
Forfeited	—	—
Outstanding at March 31, 2018	526	$	47	$	3,075	4.5
Exercisable at March 31, 2018	313	$	44	$	2,877	3.5



	Three months ended
	March 31, 2018		March 31, 2017
Share-based compensation for options	$	342	$	363
Tax benefit for option compensation	$	88	$	134
Unrecognized compensation cost for options, net of estimated forfeitures	$	2,589	$	2,683
Weighted average period over which unrecognized compensation will be recognized (years)	2.2

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, 2018
			Weighted-		Aggregate
	Non-vested		Average		Grant Date
	Shares		Grant Date		Fair Value
	(000)		Fair Value		(000)
Outstanding and non-vested at December 31, 2017	227		$	47
Granted	122		58
Vested	(105	)	56
Forfeited	(2	)	52
Outstanding and non-vested at March 31, 2018	242		$	52	$	12,690



	Three months ended
	March 31, 2018		March 31, 2017
Share-based compensation for non-vested shares	$	1,399	$	1,246
Tax benefit for non-vested share compensation	$	360	$	459
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures	$	11,747	$	10,470
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 25% 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, 2018		March 31, 2017
Expected stock price volatility	24.3	%	24.7	%
Weighted average risk-free interest rate	2.2	%	1.4	%

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



	Three months ended March 31, 2018
			Weighted-		Aggregate
	Performance		Average		Grant Date
	Shares		Grant Date		Fair Value
	(000)		Fair Value		(000)
Outstanding and non-vested at December 31, 2017	69		$	58
Granted	18		72
Forfeited	(22	)	$	67
Outstanding and non-vested at March 31, 2018	65		$	58	$	3,795



	Three months ended
	March 31, 2018		March 31, 2017
Share-based compensation for performance shares	$	335	$	184
Tax benefit for performance share compensation	$	86	$	68
Unrecognized compensation cost for performance shares, net of estimated forfeitures	$	2,343	$	2,612
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, 2018
		Weighted-		Aggregate
	Non-vested	Average		Grant Date
	Shares	Grant Date		Fair Value
	(000)	Fair Value		(000)
Outstanding and non-vested at December 31, 2017	11	$	52
Granted	1	61
Vested	—	—
Forfeited	—	$	—
Outstanding and non-vested at March 31, 2018	12	$	52	$	615



	Three months ended
	March 31, 2018		March 31, 2017
Share-based compensation for non-vested shares	$	185	$	169
Tax benefit for non-vested share compensation	$	47	$	63
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures	$	65	$	77
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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