STOCK OWNERSHIP AND BENEFIT PLANS

Our stock-based compensation expense results from restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance share units ("PSUs"), and stock issued under the Employee Stock Purchase Plan. The following table sets forth the total stock-based compensation expense included in the Consolidated Statements of Operations for the years ended December 31:



	2019		2018		2017
Cost of products sold	$	620	$	342	$	282
General and administrative expenses	4,052		2,862		2,337
Selling and distribution expenses	532		376		356
Stock-based compensation expense, net of income taxes	5,204		3,580		2,975

Earnings per share impact
Basic	$	0.36	$	0.25	$	0.21
Diluted	$	0.36	$	0.24	$	0.21

On November 4, 2016, our stockholders approved the 2016 Omnibus Incentive Plan (“2016 Plan”). The 2016 Plan provides for the granting of various types of equity-based incentives, including stock options, RSAs, RSUs, stock appreciation rights, performance shares, performance units, other stock-based awards, and cash-based awards. Our stockholders approved a total of 5,000,000 shares available for grant under the 2016 Plan, less 1,639,881 of RSAs and RSUs previously granted under the 2006 Stock Incentive Plan ("2006 Plan") as of the 2006 Plan's expiration of September 21, 2016. As of the inception of the 2016 plan on September 21, 2016, 3,360,119 shares were available for grant under the 2016 Plan. As of December 31, 2019, we have granted RSAs, RSUs, and PSUs representing an aggregate of 661,672 shares of stock under the 2016 Plan, and 2,698,447 shares are available for future grant.

RSAs and RSUs are granted to employees and non-employee directors based on time-vesting. For RSAs or RSUs granted to employees, vesting occurs in one-third increments on the first, second, and third anniversary of the grant date. For RSAs or RSUs granted to non-employee directors, vesting occurs on the first anniversary of the grant date. Each RSA represents a restricted share that has voting and dividend rights and becomes fully unrestricted upon vesting. Each RSU represents the right to receive one share of stock upon vesting.

The fair value of RSAs and RSUs granted to employees and non-employee directors is based on the fair value of DMC’s stock on the grant date. RSAs and RSUs granted to employees and non-employee directors are amortized to compensation expense over the vesting period on a straight-line basis. Our policy is to recognize forfeitures of RSAs and RSUs as they occur.

PSUs are granted to employees with vesting based on performance and market conditions. Each PSU represents the right to receive one share of stock upon the achievement of two separate, equally-weighted performance conditions - the achievement of a targeted Adjusted EBITDA goal and total shareholder return ("TSR") performance relative to a disclosed peer group. A target number of PSUs is awarded on the grant date, and the recipient is eligible to earn shares of common stock between 0% and 200% of the number of targeted PSUs awarded. The PSUs earned, if any, cliff vest at the end of the third year following the year of grant based on the degree of satisfaction of the PSUs performance and market conditions.

The fair value of PSUs with target Adjusted EBITDA performance conditions is based on the fair value of DMC’s stock on the grant date, and the value is amortized to compensation expense over the vesting period based on the relative satisfaction of the performance condition to date. The fair value of PSUs with TSR performance conditions is based on a third-party valuation simulating a range of possible TSR outcomes over the performance period, and the resulting fair value is amortized to compensation expense over the vesting period based on a straight-line basis. Our policy is to recognize forfeitures of PSUs as they occur.

A summary of the activity of our nonvested shares of RSAs issued under the 2016 Plan is as follows:



	Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2017	256,068		$	15.31
Granted	102,817		25.11
Vested	(63,288	)	14.89
Forfeited	(5,666	)	19.26
Balance at December 31, 2018	289,931		$	18.81
Granted	75,531		48.74
Vested	(71,317	)	24.67
Forfeited	(2,665	)	18.65
Balance at December 31, 2019	291,480		$	25.12

A summary of the activity of our nonvested shares of RSAs issued under the 2006 Plan is as follows:



	Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2017	153,030		$	15.14
Vested	(71,223	)	10.03
Forfeited	(18,772	)	8.40
Balance at December 31, 2018	63,035		$	22.91
Vested	(62,537	)	8.65
Forfeited	(498	)	6.22
Balance at December 31, 2019	—		$	—

A summary of the activity of our nonvested RSUs issued under the 2016 Plan is as follows:



	Shares		Weighted Average Grant Date Fair Value
Balance at December 31, 2017	72,500		$	15.62
Granted	36,000		21.88
Vested	(13,175	)	15.61
Balance at December 31, 2018	95,325		$	17.99
Granted	25,576		45.97
Vested	(28,843	)	18.16
Forfeited	(4,999	)	19.67
Balance at December 31, 2019	87,059		$	26.05

A summary of the activity of our nonvested RSUs issued under the 2006 Plan is as follows:



	Share Units		Weighted Average Grant Date Fair Value
Balance at December 31, 2017	58,398		$	13.42
Vested	(32,069	)	10.74
Balance at December 31, 2018	26,329		$	16.69
Vested	(26,329	)	6.96
Balance at December 31, 2019	—		$	—

A summary of the activity of our nonvested PSUs issued under the 2016 Plan is as follows:



	Shares	Weighted Average Grant Date Fair Value
Balance at December 31, 2017	23,000	$	18.18
Granted	23,000	26.47
Balance at December 31, 2018	46,000	$	22.32
Granted	17,640	60.75
Balance at December 31, 2019	63,640	$	32.97

As of December 31, 2019, total unrecognized stock-based compensation related to unvested awards was as follows:



	Unrecognized stock compensation		Weighted-average recognition period
Unvested RSAs	$	4,241	1.8 years
Unvested RSUs	$	1,282	1.6 years
Unvested PSUs	$	1,192	1.1 years

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan (“ESPP”) pursuant to which we are authorized to issue up to 850,000 shares of DMC common stock, of which 224,812 shares remain available for future purchase as of December 31, 2019. The offerings begin on the first day following each previous offering (“Offering Date”) and end six months from the Offering Date (“Purchase Date”). The ESPP provides that full time employees may authorize DMC to withhold up to 15% of their earnings, subject to certain limitations, to be used to purchase stock at the lesser of 85% of the fair market value of the stock on the Offering Date or the Purchase Date. In connection with the ESPP, 16,553, 18,100, and 26,519 shares of our stock were purchased during the years ended December 31, 2019, 2018, and 2017, respectively. Our total stock-based compensation expense for 2019, 2018, and 2017 includes $159, $121, and $92, respectively, in compensation expense associated with the ESPP.

401(k) Plan

We offer a contributory 401(k) plan to our employees. We make matching contributions equal to 100% of each employee’s contribution up to 3% of qualified compensation and 50% of the next 2% of qualified compensation contributed by each employee. Total DMC contributions were $1,156, $828, and $511 for the years ended December 31, 2019, 2018 and 2017, respectively.

Deferred Compensation Plan

The Company maintains a Non-Qualified Deferred Compensation Plan (the “Plan”) as part of its overall compensation package for certain employees. Participants are eligible to defer a portion of their annual salary, their annual incentive bonus, and their equity awards through the Plan on a tax-deferred basis. Deferrals into the Plan are not matched or subsidized by the Company, nor are they eligible for above-market or preferential earnings.

The Plan provides for deferred compensation obligations to be settled either by delivery of a fixed number of shares of DMC’s common stock or in cash, in accordance with participant contributions and elections. For deferred equity awards, subsequent to equity award vesting and after a period prescribed by the Plan, participants can elect to diversify contributions of equity awards into other investment options available to Plan participants. Once diversified, contributions of equity awards will be settled by delivery of cash.

During the second quarter of 2019, the Company established a grantor trust commonly known as a “rabbi trust” and contributed certain assets to satisfy the future obligations to participants in the Plan. These assets are subject to potential claims of the Company’s general creditors. The assets held in the trust include unvested RSAs, vested company stock awards, company-owned life insurance (“COLI”) on certain employees, and money market and mutual funds. Unvested RSAs and common stock held by the trust are reflected in the Consolidated Balance Sheets within “Treasury stock, at cost, and company stock held for deferred compensation, at par” at the par value of the common stock or unvested RSAs. These accounts are not adjusted for subsequent changes in the fair value of the common stock. COLI is accounted for at the cash surrender value while money market and mutual funds held by the trust are accounted for at fair value, and the balance of $4,461 as of December 31, 2019 is reflected in the Consolidated Balance Sheets within “Other assets”, and subsequent increases or decreases in the fair values of the assets are recorded as compensation expense or benefit, respectively, within “General and administrative expenses” in the Consolidated Statements of Operations.

Deferred compensation obligations that will be settled in cash are accounted for on an accrual basis in accordance with the terms of the Plan and the balance of $6,090 as of December 31, 2019 is reflected in the Consolidated Balance Sheets within “Other long-term liabilities.” These obligations are adjusted based on changes in value of the underlying investment options chosen by Plan participants. Deferred compensation obligations that will be settled by delivery of a fixed number of previously vested shares of the Company’s common stock are reflected in the Consolidated Statements of Stockholders’ Equity within “Common stock” at the par value of the common stock or unvested RSAs. These accounts are not adjusted for subsequent changes in the fair value of the common stock.

Defined Benefit Plans

We have defined benefit pension plans at certain foreign subsidiaries for which we have recorded an unfunded pension obligation of $2,079 and $1,708 as of December 31, 2019 and 2018, respectively, which is included in other long-term liabilities in the Consolidated Balance Sheets. All necessary adjustments to the obligation are based upon actuarial calculations and the service cost component is recorded within "General and administrative expenses" while all other costs are included within "Other expense, net" in the Consolidated Statements of Operations. We recognized expense of $406, $406 and $10 for the years ended December 31, 2019, 2018 and 2017, respectively.