SEC Document


On July 31, 2015, our Compensation Committee approved contingent awards of PCRS, (the “2015 PCRS”), for certain executives. During July 2015, 329,000 shares were granted at a weighted-average grant-date price of $46.87. The awards are contingent upon the level of attainment of performance goals for the three-year performance period from June 1, 2015 ending May 31, 2018. Vesting of 67% of the 2015 PCRS relates to an increase in EBIT for the period, and vesting of the remaining 33% relates to an increase in EBIT margin for the period. Compensation cost for these awards is recognized on a straight-line basis over the related performance period, with consideration given to the probability of attaining the performance goals. As of May 31, 2017, there were 324,000 2015 PCRS shares outstanding and $2.6 million unamortized stock-based compensation expense assuming attaining 46% of the goal.

The 2003 Plan was approved on October 10, 2003 by our stockholders, and was established primarily for the purpose of recruiting and retaining directors, and to align the interests of directors with the interests of our stockholders. Only directors who are not our employees are eligible to participate. Under the 2003 Plan, up to 500,000 shares of our common stock may be awarded, with awards cliff vesting over a three-year period. The following table summarizes the share-based activity under the 2003 Plan during fiscal 2017:

 

 (Shares in thousands)   

Weighted-Average
Grant-Date

Fair Value

     2017       

 Balance at June 1, 2016

           $   41.51                86       

 Shares granted to Directors

     50.61                24       

 Shares vested

     39.23                (40)      

 Balance at May 31, 2017

           $ 45.92                70       

The weighted-average grant-date fair value was $50.61, $43.71 and $43.89 for the fiscal years ended May 31, 2017, 2016 and 2015, respectively. Unamortized deferred compensation expense relating to restricted stock grants for directors of $1.5 million at May 31, 2017, is being amortized over the applicable remaining vesting period for each director. Nonvested restricted shares of common stock under the 2003 Plan are eligible for dividend payments. As of May 31, 2017, there were 77,350 shares available for future grant.

During fiscal 2017, a total of 48,041 shares were awarded under the 2007 Plan and the 2014 Omnibus Plan to certain employees as supplemental retirement benefits, generally subject to forfeiture. The shares vest upon the latter of attainment of age 55 and the fifth anniversary of the May 31st immediately preceding the date of the grant. The following table sets forth such awards for the year ended May 31, 2017:

 

 (Shares in thousands)   

Weighted-Average
Grant-Date

Fair Value

     2017       

 Balance at June 1, 2016

           $   23.27                793       

 Shares granted

     50.99                48       

 Shares exercised

     21.06                (39)      

 Balance at May 31, 2017

           $ 25.04                802       

The weighted-average grant-date fair value was $50.99, $46.63 and $44.60 for the fiscal years ended May 31, 2017, 2016 and 2015, respectively. As of May 31, 2017, no shares remain available for future grant under the 2007 Plan, and future issuances of shares as supplemental retirement benefits are intended to be made under the 2014 Omnibus Plan. At May 31, 2017, unamortized stock-based compensation expense of $4.9 million, $0.5 million and $25.5 million relating to the 2007 Plan, the Restricted Stock Units and the 2014 Omnibus Plan, respectively, are being amortized over the applicable vesting period associated with each participant.

The following table summarizes the activity for all nonvested restricted shares during the year ended May 31, 2017:

 

 (Shares in thousands)    Weighted-Average
Grant-Date
Fair Value
     Number of     
Shares     
 

 Balance at June 1, 2016

           $   39.07                2,356       

 Granted

     50.84                558       

 Vested

     33.75                (602)      

 Forfeited

     43.51                (12)      

 Balance at May 31, 2017

           $ 43.32                2,300       

The remaining weighted-average contractual term of nonvested restricted shares at May 31, 2017 is the same as the period over which the remaining cost of the awards will be recognized, which is approximately 3.3 years. The fair value of the nonvested restricted share awards have been calculated using the market value of the shares on the date of issuance. For the years ended May 31, 2017, 2016 and 2015, the weighted-average grant-date fair value for restricted share grants was $50.84, $46.17 and $44.29, respectively. The total fair value of shares that vested during the years ended May 31, 2017, 2016 and 2015 was $20.3 million, $34.2 million and $14.7 million, respectively. We anticipate that approximately 1.9 million shares at a weighted-average grant-date fair value of $43.32 and a weighted-average remaining contractual term of 3.3 years will ultimately vest, based upon the unique terms and participants of each plan. Approximately 263,857 shares of restricted stock were vested at May 31, 2017, with 310,238 restricted shares vested as of May 31, 2016. The total intrinsic value of restricted shares converted during the years ended May 31, 2017, 2016 and 2015 was $9.0 million, $32.3 million and $13.9 million, respectively.

Total unrecognized compensation cost related to all nonvested awards of restricted shares of common stock was $37.7 million as of May 31, 2017. That cost is expected to be recognized over a weighted-average period of 3.3 years. We did not receive any cash from employees as a result of employee vesting and release of restricted shares for the year ended May 31, 2017.

 

 

52    RPM International Inc. and Subsidiaries


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