19.    Value Creation Incentive Plan

 

The Company adopted the Continental Materials Corporation Value Creation Incentive Plan (VCIP) effective July 1, 2019. The VCIP is designed to attract and retain key management personnel by providing an incentive and reward for selected executive officers and employees of the Company. The VCIP involves only the payment of cash, not the issuance of common stock, based on appreciation of Phantom Equity or Phantom Equity Appreciation Rights (PE or PEARs, respectively) of the defined business unit, over a certain period of time. Fair value of the PE or PEAR awards was measured as of the balance sheet date presented. The awards vest over a period of four or five years and are payable over a three-year period following vesting. At March 28, 2020 total future compensation expense related to unvested awards yet to be recognized by the Company was approximately $1,595,000. This expense is expected to be recognized over a weighted-average remaining vesting period of approximately 3.8 years.

 

The Company used the Black-Scholes option pricing model as its method for determining fair value of the awards. The compensation expense related to the awards is recognized over the vesting period for each award. For the three months ended March 28, 2020 the Company’s net income included $114,000 of stock-based compensation. The total liability related to the PE and PEAR awards was $610,000, which includes $292,000 from an acquisition recorded at the opening balance sheet date, and is included as Long-term compensation on the Consolidated Balance Sheet as of March 28, 2019. The following table