Stock Incentive Plans

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock Incentive Plans

Stock Incentive Plans

Stock-Based Compensation Accounting

GCP grants stock options, restricted stock units (the "RSUs") and performance-based units (the "PBUs") with or without market conditions which vest upon the satisfaction of a performance condition and/or a service condition. Please refer to Note 17, "Stock Incentive Plans" to the Company's Consolidated Financial Statements included in the 2019 Annual Report in the Form 10-K for further information on these awards.

GCP estimates the fair value of equity awards issued at the grant date which is recognized as stock-based compensation expense on a straight line basis, net of estimated forfeitures, over the employee’s requisite service period for each separately vesting portion of the award. Total stock-based compensation expense is included in "Income from continuing operations before income taxes" in the accompanying unaudited Consolidated Statements of Operations and was $1.5 million and $2.3 million, respectively, during the three and six months ended June 30, 2020, and $3.1 million and $5.0 million, respectively, during the three and six months ended June 30, 2019.

The Company issues new shares of common stock upon exercise of stock options. In accordance with certain provisions of the GCP Equity and Incentive Plan (the "Plan"), GCP withholds and retains shares issued to certain holders of GCP awards in order to fulfill statutory tax withholding requirements for the employees. During the six months ended June 30, 2020 and 2019, GCP withheld and retained approximately 17,300 shares and 125,700 shares, respectively, in a non-cash transaction with a cost of $0.3 million and $3.2 million, respectively, which were reflected as "Share Repurchases" in the accompanying unaudited Consolidated Statements of Stockholders' Equity. During the six months ended June 30, 2020 and 2019, cash payments for such tax withholding obligations were $0.3 million and $3.2 million, respectively.

As of June 30, 2020, approximately 7.5 million shares of common stock were reserved and available for future grant under the Plan.

Stock Options

There were no stock options granted during the three and six months ended June 30, 2020.

The following assumptions were utilized in the Black-Scholes option pricing model for estimating the fair value of GCP's stock options granted during the six months ended June 30, 2019:

	Six Months Ended June 30,
Assumptions used to calculate expense for stock options:	2019
Risk-free interest rate	2.35 - 2.64%
Average life of options (years)	5.5 - 6.5
Volatility	28.02 - 28.59%
Dividend yield	—
Weighted average fair value per stock option	$8.74

The following table sets forth information relating to stock options denominated in GCP stock during the six months ended June 30, 2020:

Stock Option Activity	Number Of Shares (in thousands)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregated Intrinsic Value (in thousands)
Outstanding, December 31, 2019	1,284	$	22.66	3.18	$	3,171
Options exercised	(40)	18.22
Options forfeited/expired/canceled	(285)	19.88
Outstanding, June 30, 2020	959	$	23.67	3.62	$	522
Exercisable, June 30, 2020	792	$	22.92	3.23	$	522
Vested and expected to vest, June 30, 2020	950	$	23.63	3.60	$	522

The weighted average grant date fair value of options granted during the three months ended June 30, 2019 was $9.58. The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value, determined as the difference between GCP's closing stock price on the last trading day of June 30, 2020 and the exercise price, multiplied by the number of in-the-money options that would have been received by the option holders had all option holders exercised their in-the-money options at period end. The amount changes based on the fair market value of GCP's stock. Total intrinsic value of all options exercised during the six months ended June 30, 2020 was $0.1 million, and during the three and six months ended June 30, 2019 were $0.8 million and $2.5 million, respectively.

At June 30, 2020, total unrecognized stock-based compensation expense for stock options outstanding was $0.4 million and is expected to be recognized over the weighted-average period of approximately 1.0 years.

Restricted Stock Units and Performance Based Units

RSUs and PBUs are granted with the exercise price equal to zero and are converted to shares immediately upon vesting.

As of June 30, 2020, $7.9 million of total unrecognized compensation expense related to the RSU and PBU awards is expected to be recognized over the remaining weighted-average service period of approximately 1.8 years.

RSUs

The Company grants RSUs which are time-based, non-performance units. RSUs generally vest over a three year period, with some awards vesting in substantially equal amounts each year over three years and some awards vesting 100% after the third year from the date of grant. A smaller number of RSUs were designated as sign-on awards which are used for the purposes of attracting key employees and covering outstanding awards from prior employers. Such awards generally vest 100% after two years from the date of grant.

RSUs are recorded at fair value on the grant date. The common stock-settled awards are considered equity awards, with the stock compensation expense being determined based on GCP’s stock price on the grant date.

The following table sets forth the RSU activity for the six months ended June 30, 2020:

RSU Activity	Number Of Shares (in thousands)	Weighted Average Grant Date Fair Value
Outstanding, December 31, 2019	156	$	27.33
RSUs settled	(48)	28.14
RSUs forfeited	(2)	22.83
RSUs granted	190	21.11
RSUs outstanding, June 30, 2020	296	$	23.16
Expected to vest as of June 30, 2020	276	$	23.23

        There were no RSUs granted during the three months ended June 30, 2020. The weighted average grant date fair value of RSUs granted during the three months ended June 30, 2019 was $29.52 per share. The weighted average grant date fair value of RSUs granted during the six months ended June 30, 2020 and 2019 was $21.11 and $26.91 per share, respectively. During the six months ended June 30, 2020 and 2019, GCP distributed 48,000 shares and 237,000 shares, respectively, to settle RSUs upon vesting. The fair value of RSUs vested during the six months ended June 30, 2020 and 2019 was $1.0 million and $6.1 million, respectively.

PBUs

PBUs are performance-based units which are granted by the Company either with or without market conditions and recorded at fair value on the grant date. The performance criteria for PBUs granted in 2020 and 2019 include a 3-year cumulative adjusted diluted earnings per share metric that is modified, up or down, based on the Company's total shareholder return ("TSR") relative to the performance of the Russell 3000 Specialty Chemicals and Building Materials Indices. For PBUs granted in 2018, such metric is modified, up or down, based on the Company's TSR relative to the performance of the Russell 3000 Index. The number of shares that ultimately vest, if any, is based on Company performance against these metrics, and can range from 0% to 200% of the target number of shares granted to employees. The 2020, 2019 and 2018 awards will become vested, if at all, three years from the grant date once actual performance is certified by the Board's Compensation Committee. Vesting is also subject to the employees' continued employment through the vesting date.

The following table summarizes the assumptions used in the Monte Carlo simulations for estimating the grant date fair values of PBUs granted during the six months ended June 30, 2020 and 2019:

	Six Months Ended June 30,
Assumptions used to calculate expense for PBUs:	2020	2019
Expected Term (Remaining Performance Period)	2.85	2.86
Expected volatility	29.85%	28.46%
Risk-free interest rate	1.21%	2.48%
Expected dividends	—	—
Correlation coefficient	53.43%	54.81%
Median correlation coefficient of constituents	54.01%	57.09%

The following table sets forth the PBU activity for the six months ended June 30, 2020:

PBU Activity	Number Of Shares (in thousands)	Weighted Average Grant Date Fair Value
Outstanding, December 31, 2019	382	$	29.51
PBU's settled	—	—
PBU's forfeited	(114)	28.18
PBU's granted	146	22.41
Outstanding, June 30, 2020	414	$	27.37

The weighted average grant date fair value of PBUs granted during the six months ended June 30, 2020 and 2019 was $22.41 and $27.40 per share, respectively. During the six months ended June 30, 2019, GCP distributed 76461 shares to settle PBUs upon vesting. GCP expects to settle in stock all future PBU vestings. The fair value of PBUs vested during the six months ended June 30, 2019 was $2.0 million.