Stock Incentive Plans

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Incentive Plans

Stock Incentive Plans

The Company has granted nonstatutory stock options to certain key employees under the Plans. The Plans are administered by the Compensation Committee of the Board of Directors. Stock options are generally non-qualified and are at exercise prices not less than 100% of the per share fair market value on the date of grant. Stock-based compensation awards granted under the Company's stock incentive plans are generally subject to a vesting period from the date of the grant ranging from 1 - 3 years. Currently outstanding options expire on various dates through November 2018.

The following table sets forth information relating to such options during 2013, 2012, and 2011:

Stock Option Activity	Number Of Shares		Average Exercise Price		Weighted- Average Grant Date Fair Value
Balance, January 1, 2011	4,468,341		$	18.48
Options exercised	(765,693	)	15.76
Options forfeited	(45,369	)	22.30
Options terminated	(7,011	)	8.03
Options granted	1,287,152		42.18		$	15.44
Balance, December 31, 2011	4,937,420		25.08
Options exercised	(1,679,359	)	19.14
Options forfeited	(51,573	)	37.67
Options terminated	(10,995	)	15.74
Options granted	828,991		49.01		16.67
Balance, December 31, 2012	4,024,484		32.33
Options exercised	(1,464,294	)	23.46
Options forfeited	(95,139	)	52.17
Options terminated	(1,381	)	42.26
Options granted	421,385		76.70		19.26
Balance, December 31, 2013	2,885,055		42.60

The following is a summary of non-vested option activity for the year ended December 31, 2013:

Stock Option Activity	Number Of Shares		Weighted- Average Grant Date Fair Value
Non-vested options outstanding at beginning of year	2,067,673		$	14.90
Granted	421,385		19.26
Vested / exercised	(1,101,080	)	12.83
Forfeited	(105,053	)	16.44
Non vested options outstanding at end of year	1,282,925

As of December 31, 2013, the intrinsic value (the difference between the exercise price and the market price) for options outstanding was $160.5 million and for options exercisable was $105.9 million. The total intrinsic value of all options exercised during the years ended December 31, 2013, 2012 and 2011 was $83.2 million, $65.3 million and $21.9 million, respectively. A summary of our stock options outstanding and exercisable at December 31, 2013, follows:

Exercise Price Range	Number Outstanding	Number Exercisable	Outstanding Weighted- Average Remaining Contractual Life (Years)	Exercisable Weighted- Average Exercise Price
$0 - $10	253,551	253,551	0.35	$	9.79
$20 - $30	644,916	644,916	1.34	27.75
$30 - $40	11,192	5,794	2.61	37.06
$40 - $50	1,550,004	689,602	2.84	44.07
$60 - $70	24,787	8,267	3.93	66.57
$70 - $80	398,380	—	4.33	—
$80 - $90	2,225	—	4.49	—
	2,885,055	1,602,130

At December 31, 2013, the weighted-average remaining contractual term of all options outstanding and exercisable was 2.50 years.

Options GrantedThe Company granted approximately 0.4 million, 0.8 million, and 1.3 million nonstatutory stock options in 2013, 2012, and 2011, respectively, under the Plans.

For the years ended December 31, 2013, 2012 and 2011, Grace recognized non-cash stock-based compensation expense of $12.7 million, $14.7 million and $14.0 million, respectively, which is included in selling, general and administrative expense.

Grace values options using the Black-Scholes option-pricing model, which was developed for use in estimating the fair value of traded options. The risk-free rate is based on the U.S. Treasury yield curve published as of the grant date, with maturities approximating the expected term of the options. The expected term of the options is estimated using the simplified method as allowed by ASC 718-20, whereby the average between the vesting period and contractual term is used. The expected volatility was estimated using both actual stock volatility and the volatility of an industry peer group. Grace believes its actual stock volatility in the last several years may not be representative of expected future volatility. The following summarizes the assumptions used for estimating the fair value of stock options granted during 2013, 2012 and 2011, respectively.

	2013	2012	2011
Expected volatility	32.3% - 34.3%	35.8% - 46.4%	46.5% -50.7%
Weighted average expected volatility	33.3%	40.6%	48.7%
Expected term	3.00 - 4.00 years	3.00 - 4.00 years	3.00 - 4.00 years
Risk-free rate	0.61%	0.55%	1.43%
Dividend yield	—%	—%	—%

Total unrecognized stock-based compensation expense at December 31, 2013, was $6.3 million and the weighted-average period over which this expense will be recognized is 0.7 years.

Performance Based Units    During 2013 the Company granted 111,770 Performance Based Units (PBUs) under the Company's Long-term Incentive Plan (LTIP), of which 5,513 were forfeited. The awards cliff vest on December 31, 2015, and have a weighted average grant date fair value of $76.66. The Company anticipates that approximately 54% of the PBUs will be settled in common stock and approximately 46% will be settled in cash, assuming full vesting. PBUs are recorded at fair value at the date of grant. The estimated grant date fair value is based on the expected payout of the award, which may range from 0% to 200% of the payout target. The common stock settled portion is considered an equity award with the payout being valued based on the Company’s stock price on the grant date. The cash settled portion of the award is considered a liability award with payout being remeasured each reporting period based on the Company’s current stock price. Both equity and cash awards are remeasured each reporting period based on anticipated attainment of the payout target; therefore these portions of the awards are subject to volatility until the payout is established. During 2013 the Company recognized $1.7 million in compensation expense for these awards. As of December 31, 2013, $5.3 million of total unrecognized compensation expense related to the PBUs is expected to be recognized over the remaining weighted-average service period of 2 years.