Annual report pursuant to Section 13 and 15(d)

Management Incentive Plans

v3.8.0.1
Management Incentive Plans
12 Months Ended
Dec. 31, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Management Incentive Plan Disclosure [Text Block]
Note 21 – Management Incentive Plans
 
Successor
 
Upon approval of the Business Combination, the Company adopted the Limbach Holdings, Inc. Omnibus Incentive Plan (the “2016 Plan”). Certain employees, directors and consultants will be eligible to be granted awards under the 2016 Plan, other than incentive stock options, which may be granted only to employees. The Company has reserved 800,000 shares of its common stock for issuance under the 2016 Plan. The number of shares issued or reserved pursuant to the 2016 Plan will be adjusted by the plan administrator, as they deem appropriate and equitable, as a result of stock splits, stock dividends, and similar changes in the Company’s common stock. In connection with the grant of an award, the plan administrator may provide for the treatment of such award in the event of a change in control. All awards are made in the form of shares only.
 
Service-Based Awards
 
In 2017, the Company granted 226,867 service-based restricted stock units (“RSUs”) to its executives, certain employees, and non-employee directors under the 2016 Plan.
 
The following table summarizes our service-based RSU activity for the fiscal year ended December 31, 2017:
 
 
 
 
 
Weighted-Average
 
 
 
 
 
 
 
Grant Date
 
Aggregate
 
 
 
Awards
 
Fair Values
 
Intrinsic Value
 
Unvested at December 31, 2016
 
 
-
 
 
-
 
 
-
 
Granted
 
 
226,867
 
$
13.25
 
$
3,005,348
 
Vested
 
 
49,902
 
 
13.25
 
 
647,064
 
Forfeited
 
 
-
 
 
-
 
 
-
 
Unvested at December 31, 2017
 
 
176,965
 
$
13.25
 
$
2,358,284
 
 
Performance-Based Awards
 
In 2017, the Company granted 66,500 performance-based restricted stock units (“PRSUs”) to its executives and certain employees under the 2016 Plan. The vesting of the PRSUs is contingent upon the Company’s achievement of certain predetermined adjusted EBITDA, EPS growth and EBITDA margin performance goals over the 3-year period commencing on January 1, 2017 and concluding on December 31, 2019. No PRSUs shall be deemed earned unless the Company meets a minimum performance goal which requires the Company’s cumulative adjusted EBITDA for the three (3) year performance period to be at least 80% of the Company’s cumulative adjusted EBITDA target for the performance period. In order for the PRSUs to be earned, the Company must also achieve a predetermined minimum fully diluted annualized EPS growth percentage (40% weighting) and an EBITDA margin percentage (60% weighting) over the performance period. The number of shares ultimately issued could range from 0% to 150% (Distinguished Performance Level) of the number of PRSUs granted, based on the Company’s achievement of the performance conditions. Linear interpolation will be applied should performance metrics fall between the threshold and Distinguished Performance Levels. Any PRSUs earned under this grant will vest upon the determination by the Compensation Committee of the Board of Directors (“Compensation Committee”) that the PRSUs have been earned by the participant, subject to the participant’s continuous service with the Company from the grant date through the performance vesting date, except as may otherwise be provided in the participant’s employment or other services agreement with the Company. If the minimum performance goal is not achieved during the performance period, all PRSUs shall be forfeited for no consideration as of the expiration of the performance period. The Company will recognize stock-based compensation expense for these awards over the vesting period based on the projected probability of achievement of the aforementioned performance conditions as of the end of each reporting period during the performance period and may periodically adjust the recognition of such expense, as necessary, in response to any changes in the Company’s forecasts with respect to the performance conditions. For the year ended December 31, 2017, the Company did not recognize any stock-based compensation expense related to these awards based on the Company’s determination that achievement of the minimum performance goal was not probable as of that date.
 
The following table summarizes our PRSU activity for the fiscal year ended December 31, 2017:
 
 
 
 
 
Weighted-Average
 
 
 
 
 
 
 
Grant Date
 
Aggregate
 
 
 
Awards
 
Fair Values
 
Intrinsic Value
 
Unvested at December 31, 2016
 
 
-
 
 
-
 
 
-
 
Granted
 
 
66,500
 
$
13.25
 
$
881,125
 
Vested
 
 
-
 
 
-
 
 
-
 
Forfeited
 
 
-
 
 
-
 
 
-
 
Unvested at December 31, 2017
 
 
66,500
 
$
13.25
 
$
881,125
 
 
Market-Based Awards
 
In 2017, the Company granted 146,500 market-based restricted stock units (“MRSUs”) to its executives and certain employees under the 2016 Plan. The vesting of the MRSUs is contingent upon the Company’s closing price of a share of the Company's common stock on the Nasdaq Capital market, or such other applicable principal securities exchange or quotation system, achieving at least $18.00 over a period of eighty (80) consecutive trading days during the 3-year period commencing on August 1, 2018 and concluding on July 31, 2021. Any MRSUs earned under this grant will vest upon the Compensation Committee’s determination and certification of the achievement of the performance goal, subject to the participant’s continuous service with the Company, except as may otherwise be provided in the participant’s employment or other services agreement with the Company. If the market condition is not met but the service condition is met, the MRSUs will not vest; however, any compensation expense we have recognized to date will not be reversed. Additionally, any compensation cost will be reversed if a participant terminates their employment prior to achievement of the performance vesting date. The Company estimated the fair value and derived service period of the MRSUs on the grant date using a Monte Carlo simulation model.
 
The following table summarizes our MRSU activity for the fiscal year ended December 31, 2017:
 
 
 
 
 
Weighted-Average
 
 
 
 
 
 
 
Grant Date
 
Weighted-Average
 
 
 
Awards
 
Fair Values
 
Fair Value
 
Unvested at December 31, 2016
 
 
-
 
 
-
 
 
-
 
Granted
 
 
146,500
 
$
6.58
 
$
963,970
 
Vested
 
 
-
 
 
-
 
 
-
 
Forfeited
 
 
-
 
 
-
 
 
-
 
Unvested at December 31, 2017
 
 
146,500
 
$
6.58
 
$
963,970
 
 
The table below sets forth the assumptions used within the Monte Carlo simulation model to value the MRSU awards:
 
 
 
Year-ended
 
 
 
December 31, 2017
 
Risk-free interest rate
 
 
1.56
%
Dividend yield
 
 
0
%
Remaining performance period (years)
 
 
3.92
 
Expected volatility
 
 
28.54
%
Estimated grant date fair value (per share)
 
$
6.58
 
Derived service period (years)
 
 
1.96
 
 
Total recognized stock-based compensation expense amounted to $1.7 million for the year ended December 31, 2017. Total unrecognized stock-based compensation expense   related to unvested RSUs which are probable of vesting amounted to $2.3 million at December 31, 2017. These costs are expected to be recognized over a weighted average period of 1.71 years.
 
Predecessor
 
Effective July 20, 2006, the Board of Directors adopted a management option plan for executives and key employees and reserved 1,697,500 Class C units for that purpose. The option plan was amended by the Board of Directors in 2015 to increase the number of Class C units available to 2,000,000. These options vested over four years; 50% in year two and 25% in years three and four respectively, and all unexercised options were set to expire fifteen years from the date of issuance. These management options were only exercisable in conjunction with a change in control of the Company, consummation of an initial public offering, or dissolution of the Company, as defined by the agreement. No additional management options were granted during 2016.
 
In conjunction with the Business Combination on July 20, 2016, 440,000 unvested options immediately vested and those options along with the 1,312,500 previously vested Predecessor options were exercised in a cashless exercise. Related compensation expense of $1.5 million for all outstanding options was recorded in the predecessor period from January 1, 2016 to July 19, 2016; thus, there were no stock options outstanding at December 31, 2016.