|12 Months Ended|
Mar. 31, 2019
|Disclosure of Compensation Related Costs, Share-based Payments [Abstract]|
The Company’s stock-based compensation plans are broad-based, long-term retention programs intended to attract and retain talented employees and align stockholder and employee interests.
The major components of stock-based compensation expense are as follows (amounts in thousands):
Employee Stock Options
As of March 31, 2019, the KEMET Corporation Omnibus Incentive Plan (the “Incentive Plan”), which amended and restated the KEMET Corporation 2014 Amendment and Restatement of the KEMET Corporation 2011 Omnibus Equity Incentive Plan, approved by the Company’s stockholders on August 2, 2017, is the only plan the Company has to issue equity-based awards to executives and key employees. Upon adoption of the Incentive Plan, no further awards were permitted to be granted under the Company’s prior plans, including the 1992 Key Employee Stock Option Plan, the 1995 Executive Stock Option Plan, and the 2004 Long-Term Equity Incentive Plan (collectively, the “Prior Plans”).
The Incentive Plan has authorized, in the aggregate, the grant of up to 12.2 million shares of the Company’s Common Stock, comprised of 11.4 million shares under the Incentive Plan and 0.8 million shares remaining from the Prior Plans and authorizes the Company to provide equity-based compensation in the form of:
Options issued under these plans vest within one to three years and expire ten years from the grant date.
If available, the Company issues shares of Common Stock from treasury stock upon exercise of stock options and vesting of restricted stock units. The Company has no plans to purchase additional shares in conjunction with its employee stock option plans in the near future.
Employee stock option activity for fiscal year 2019 is as follows:
Amounts included in the following table are in thousands, except weighted average fair value and weighted average exercise price:
All option plans provide that options to purchase shares be supported by the Company’s authorized but unissued common stock or treasury stock. All restricted stock and performance awards are also supported by the Company’s authorized but unissued common stock or treasury stock. The prices of the options granted pursuant to these plans are not less than 100% of the value of the shares on the date of the grant.
Restricted Stock Units (“RSU’s”) and Long-term Incentive Plans (“LTIP”)
The Company grants RSUs to members of the Board of Directors (“Board”), the Chief Executive Officer and a limited group of executives. In fiscal year 2019, RSUs granted to the Board vested immediately and RSUs granted to certain officers under the key manager stock program vest over 3 years. Once vested, RSUs are converted into restricted shares of common stock, except for RSUs granted to members of the Board, who can elect to defer settlement of the RSUs to a later date. Restricted shares cannot be sold until 90 days after the Chief Executive Officer, executive, key manager, or member of the Board, as applicable, resigns from his or her position, or until the KEMET employee achieves the targeted ownership under the Company’s stock ownership guidelines, and only to the extent that such ownership exceeds the target. As of March 31, 2019, and 2018, unrecognized compensation costs related to the non-vested restricted stock share-based compensation arrangements granted were $8.0 million and $8.1 million, respectively. The expense is being recognized over the respective vesting periods.
Historically the Board of the Company has approved annual LTIPs which cover two-year periods and are primarily based upon the achievement of an adjusted EBITDA range for the two-year period. At the time of the award, the individual plans entitle the participants to receive cash or RSUs, or a combination of both as determined by the Company's Board. The Company assesses the likelihood of meeting the Adjusted EBITDA financial metric on a quarterly basis and adjusts compensation expense to match expectations. The 2016/2017 LTIP, 2017/2018 LTIP, 2018/2019 LTIP and 2019/2020 LTIP also awarded time-based RSUs which vest over the course of three years from the anniversary of the establishment of the plan and are not subject to a performance metric. Any related liability (for the cash portion of the LTIP) is reflected in the line item “Accrued expenses” on the Consolidated Balance Sheets and any restricted stock commitment is reflected in the line item “Additional paid-in capital” on the Consolidated Balance Sheets. As of March 31, 2019 and 2018, unrecognized compensation costs related to the cash portion of LTIP arrangements granted were $2.4 million and $0.1 million, respectively. As of March 31, 2019 and 2018, unrecognized compensation costs related to the stock portion of LTIP arrangements granted were $4.1 million and $1.6 million, respectively. The expense is being recognized over the respective vesting periods.
The following is the performance-based vesting schedule of RSUs under each respective LTIP, subject to the respective participant’s continued employment with KEMET (shares in thousands):
(1) The performance portion of the 2018/2019 and 2017/2018 LTIP are payable in cash.
(2) Estimated shares to vest based upon current performance expectations. The final number of shares depends on the achievement of performance metrics.
The following is the time-based vesting schedule of RSUs under each respective LTIP, subject to the respective participant’s continued employment with KEMET (shares in thousands):
RSU activity, including performance-based and time-based LTIP activity, for fiscal year 2019 is as follows (amounts in thousands except fair value):
(1) 33,292 in RSUs were settled for $0.2 million in cash.
(2) 85,956 in RSUs were forfeited by Per-Olof Loof, the Company's former Chief Executive Officer upon his resignation in December 2018.
Vested shares in the table above include the acceleration of 275,000 shares related to the April 18, 2018 Amended and Restated Employment Agreement for the former Chief Executive Officer, which amended and restated Mr. Loof's prior employment agreement with the Company dated June 29, 2015. Upon the signing of the Amended and Restated Employment Agreement, certain RSUs previously granted to Mr. Loof on June 29, 2015, totaling 175,000 shares, and on September 6, 2017, totaling 100,000 shares, both of which were scheduled to vest over time, became fully vested. Incremental compensation cost resulting from the modification totaled $1.7 million.
Additionally, vested shares in the table above include the acceleration of 44,302 shares related to the March 20, 2019 Employment Agreement for the current Chief Executive Officer William Lowe. Upon the signing of the Employment Agreement, certain RSUs previously granted to Mr. Lowe on May 18, 2016, totaling 20,220 shares, May 18, 2017, totaling 11,237 shares, and May 18, 2018, totaling 12,845 shares, each of which were scheduled to vest over time, became fully vested. Incremental compensation cost resulting from the modification totaled $0.2 million.
In the Operating activities section of the Consolidated Statements of Cash Flows, stock-based compensation expense was treated as an adjustment to net income for fiscal years 2019, 2018 and 2017.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef