Share-Based Payments

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

We have one share-based compensation plan, the MCBC Incentive Compensation Plan (the "Incentive Compensation Plan"), as of December 31, 2019 and all outstanding awards fall under this plan.

MCBC Incentive Compensation Plan

We issue the following types of awards related to shares of Class B common stock to certain directors, officers, and other eligible employees, pursuant to the Incentive Compensation Plan: RSUs, DSUs, PSUs, and stock options.

RSU awards are issued based upon the market value equal to the price of our stock at the date of the grant and vest over a period of three years. In 2019, 2018 and 2017, we granted 0.5 million, 0.4 million and 0.3 million RSUs, respectively, with a weighted-average market value of $55.03, $72.78 and $92.02 each, respectively. Prior to vesting, RSUs have no voting rights.

DSU awards, under the Directors' Stock Plan pursuant to the Incentive Compensation Plan, are elections made by non-employee directors of MCBC that enable them to receive all or one-half of their annual cash retainer payments in our stock. The deferred stock unit awards are issued at the market value equal to the closing price on the date of the grant. The DSUs are paid in shares of stock upon termination of service. Prior to vesting, DSUs have no voting rights. In 2019, 2018 and 2017, we granted a small number of DSUs with a weighted-average market value of $56.68, $64.48 and $86.06 per share, respectively.

As part of our annual grant in the first quarter of 2019, 2018 and 2017, we granted PSUs. PSUs are granted with a target value established at the date of grant and vest upon completion of a service requirement. The settlement amount of the PSUs is determined based on market and performance metrics, which include our total shareholder return performance relative to the stock market index defined by each award and specified internal performance metrics designed to drive greater shareholder return. PSU compensation expense is based on a fair value assigned to the market metric upon grant using a Monte Carlo model, which remains constant throughout the vesting period of three years and a performance multiplier, which will vary due to changing estimates of the performance metric condition. During 2019, 2018 and 2017, we granted 0.3 million, 0.2 million and 0.2 million PSUs, respectively, each with a weighted-average fair value of $53.31, $78.30 and $97.13, respectively.

Stock options are granted with an exercise price equal to the market value of a share of Class B common stock on the date of grant. Stock options have a term of ten years and generally vest over three years. During 2019, 2018 and 2017, we granted 0.4 million, 0.2 million and 0.2 million options, respectively, each with a weighted-average fair value of $9.20, $15.44 and $18.66, respectively.



	For the years ended
	December 31, 2019			December 31, 2018			December 31, 2017
	(In millions)
Pretax share-based compensation expense⁽¹⁾	$	8.5		$	42.6		$	58.3
Tax benefit	(1.6		)	(6.9		)	(11.1		)
After-tax share-based compensation expense	$	6.9		$	35.7		$	47.2

(1)

The decrease in share-based compensation expense in 2019 was primarily driven by the reversal of cumulative compensation expense previously recognized for our 2018 and 2017 PSU awards as the achievement of the performance conditions are no longer deemed probable for the respective performance periods, as well as the impacts of the reversal of expense associated with forfeitures related to the revitalization plan initiated in 2019. Additionally, our share-based compensation expense in 2018 and 2017 also includes expense associated with replacement awards issued in connection with the Acquisition.

As of December 31, 2019, there was $27.5 million of total unrecognized compensation cost from all share-based compensation arrangements granted under the Incentive Compensation Plan, related to unvested awards. This total compensation expense is expected to be recognized over a weighted-average period of 1.9 years.



	RSUs and DSUs		PSUs
	Units	Weighted-average grant date fair value per unit	Units	Weighted-average grant date fair value per unit
	(In millions, except per unit amounts)
Non-vested as of December 31, 2018	1.0	$88.53	0.5	$86.85
Granted	0.5	$55.05	0.3	$53.31
Vested	(0.4)	$98.91	(0.1)	$88.01
Forfeited	(0.1)	$71.54	(0.1)	$72.53
Non-vested as of December 31, 2019	1.0	$68.18	0.6	$70.37

The weighted-average fair value per unit for the non-vested PSUs is $21.63 as of December 31, 2019.

The total intrinsic values of RSUs and DSUs vested during 2019, 2018 and 2017 were $23.6 million, $24.8 million and $31.5 million, respectively.



	Stock options
	Awards	Weighted- average exercise price	Weighted- average remaining contractual life (years)	Aggregate intrinsic value
	(In millions, except per share amounts and years)
Outstanding as of December 31, 2018	1.3	$70.56	5.2	$	4.3
Granted	0.4	$60.87
Exercised	(0.1)	$43.86
Forfeited	—	—
Outstanding as of December 31, 2019	1.6	$68.77	3.8	$	3.1
Expected to vest as of December 31, 2019	0.3	$67.27	8.8	$	—
Exercisable as of December 31, 2019	1.3	$69.09	2.8	$	3.1

The total intrinsic values of exercises during 2019, 2018 and 2017 were $0.6 million, $9.6 million and $7.0 million, respectively. Total tax benefits realized, including excess tax benefits, from share-based awards vested or exercised was $4.5 million, $8.4 million and $20.2 million, respectively.

The shares of Class B common stock to be issued under the stock option plans are made available from authorized and unissued MCBC Class B common stock. As of December 31, 2019, there were 3.0 million shares of MCBC Class B common stock available for the issuance under the Incentive Compensation Plan.

The fair value of each option granted in 2019, 2018 and 2017 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	For the years ended
	December 31, 2019	December 31, 2018	December 31, 2017
Risk-free interest rate	2.46%	2.65%	2.04%
Dividend yield	4.16%	2.08%	1.64%
Volatility range	24.46% - 24.60%	22.36% - 24.14%	22.40% - 22.88%
Weighted-average volatility	24.48%	22.81%	22.52%
Expected term (years)	5.3	5.3	5.1
Weighted-average fair value	$9.20	$15.44	$18.66

The risk-free interest rates utilized for periods throughout the contractual life of the stock options are based on a zero-coupon U.S. Department of Treasury security yield at the time of grant. Expected volatility is based on a combination of historical and implied volatility of our stock. The expected term of stock options is estimated based upon observations of historical employee option exercise patterns and trends of those employees granted options in the respective year.

The fair value of the market metric for each PSU granted in 2019, 2018 and 2017 was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for MCBC and peer companies with the following weighted-average assumptions:



	For the years ended
	December 31, 2019	December 31, 2018	December 31, 2017
Risk-free interest rate	2.49%	2.34%	1.59%
Dividend yield	4.17%	2.08%	1.64%
Volatility range	13.82% - 42.46%	13.03% - 81.87%	13.71% - 80.59%
Weighted-average volatility	24.97%	22.76%	24.24%
Expected term (years)	2.8	2.8	2.8
Weighted-average fair market value	$53.31	$78.30	$97.13

The risk-free interest rates utilized for periods throughout the expected term of the PSUs are based on a zero-coupon U.S. Department of Treasury security yield at the time of grant. Expected volatility is based on historical volatility of our stock as well as the stock of our peer firms, as shown within the volatility range above, for a period from the grant date consistent with the expected term. The expected term of PSUs is calculated based on the grant date to the end of the performance period.