XML 31 R18.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Stock Plans
 12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock Plans Stock Plans
The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible key employees through May 2026. Management stock-based compensation includes stock options, restricted stock, restricted stock units and performance stock units. Additionally, 2019 amounts granted include outstanding Sierra Monitor Corporation awards converted into MSA awards after the merger and acquisition. See Note 13—Acquisitions for more information. The 2017 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2027. Stock options are granted at market prices and expire after ten years. Stock options are exercisable beginning three years after the grant date. Restricted stock and restricted stock units are granted without payment to the Company and generally vest three years after the grant date. Restricted stock and restricted stock units are valued at the market value of the stock on the grant date. Performance stock units with a market condition are valued at an estimated fair value using the Monte Carlo model. The final number of shares to be issued for performance stock units may range from zero to 200% of the target award based on achieving the specified performance targets over the performance period. In general, unvested stock options, restricted stock and performance stock units are forfeited if the participant’s employment with the Company terminates for any reason other than retirement, death or disability. We issue Treasury shares for stock option exercises and grants of restricted stock and performance stock. Please refer to Note 6 for further information regarding stock compensation share issuance. As of December 31, 2019, there were 903,802 and 103,098 shares, respectively, reserved for future grants under the management and non-employee directors’ equity incentive plans.
Stock-based compensation expense was as follows:
(In thousands)
2019
 
2018
 
2017
Restricted stock
$
6,914

 
$
6,221

 
$
4,691

Stock options
487

 
217

 
380

Performance stock
6,359

 
5,801

 
6,687

Total compensation expense before income taxes
13,760

 
12,239

 
11,758

Income tax benefit
3,357

 
2,974

 
4,440

Total compensation expense, net of income tax benefit
$
10,403

 
$
9,265

 
$
7,318


We did not capitalize any stock-based compensation expense, and all expense is recorded in selling, general and administrative expense in 2019, 2018, and 2017.
Stock option expense is based on the fair value of stock option grants estimated on the grant dates using the Black-Scholes option pricing model and the following weighted average assumptions for options granted in 2019. There were no stock options granted in 2018 or 2017.
 
2019
Fair value per option
$
59.07

Risk-free interest rate
2.3
%
Expected dividend yield
1.7
%
Expected volatility
31
%
Expected life (years)
6.4


The risk-free interest rate is based on the U.S. Treasury yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the one year average closing share price. Expected volatility is based on the historical volatility using daily stock prices. Expected life is based on historical stock option exercise data.
A summary of option activity follows:
 
Shares
 
Weighted
Average
Exercise Price
 
Exercisable at
Year-end
Outstanding January 1, 2017
1,576,092

 
$
37.63

 
 
Exercised
(620,646
)
 
29.75

 
 
Outstanding December 31, 2017
955,446

 
42.75

 
614,414

Exercised
(215,724
)
 
39.25

 
 
Forfeited
(4,721
)
 
44.50

 
 
Outstanding December 31, 2018
735,001

 
43.79

 
638,673

Granted (Note 13)
23,285

 
43.54

 
 
Exercised
(198,535
)
 
38.16

 
 
Forfeited
(95
)
 
49.19

 
 
Outstanding December 31, 2019
559,656

 
$
45.78

 
552,682


For various exercise price ranges, characteristics of outstanding and exercisable stock options at December 31, 2019 were as follows:
 
Stock Options Outstanding
Range of Exercise Prices
Shares
 
Weighted-Average
Exercise Price
 
Remaining Life
$17.83 – $33.00
10,732

 
$
27.88

 
0.30
$33.01 – $45.00
258,806

 
42.19

 
3.92
$45.01 – $57.93
290,118

 
49.63

 
3.74
$17.83 – $57.93
559,656

 
$
45.78

 
3.76
 
Stock Options Exercisable
Range of Exercise Prices
Shares
 
Weighted-Average
Exercise Price
 
Remaining Life
$17.83 – $33.00
10,732

 
$
27.88

 
0.30
$33.01 – $45.00
255,573

 
42.21

 
3.87
$45.01 – $57.93
286,377

 
49.64

 
3.69
$17.83 – $57.93
552,682

 
$
45.78

 
3.71

Cash received from the exercise of stock options was $7.5 million, $8.6 million and $18.5 million for the years ended December 31, 2019, 2018 and 2017, respectively. The tax benefit we realized from these exercises was $4.8 million, $2.5 million and $7.4 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Stock options become exercisable when they are vested. The aggregate intrinsic value of stock options exercisable at December 31, 2019 was $44.5 million. The aggregate intrinsic value of all stock options outstanding at December 31, 2019 was $45.1 million.
A summary of restricted stock and unit activity follows:
 
Shares
 
Weighted Average
Grant Date
Fair Value
Unvested January 1, 2017
234,592

 
$
49.76

Granted
72,878

 
75.27

Vested
(76,834
)
 
52.74

Forfeited
(3,475
)
 
50.46

Unvested at December 31, 2017
227,161

 
57.50

Granted
75,430

 
87.36

Vested
(92,401
)
 
58.10

Forfeited
(4,741
)
 
59.61

Unvested at December 31, 2018
205,449

 
68.97

Granted
70,160

 
104.53

Vested
(97,253
)
 
56.47

Forfeited
(5,655
)
 
85.48

Unvested at December 31, 2019
172,701

 
$
90.38


A summary of performance stock unit activity follows:
 
Shares
 
Weighted Average
Grant Date
Fair Value
Unvested at January 1, 2017
186,621

 
$
46.18

Granted
98,886

 
72.73

Vested
(72,504
)
 
57.19

Performance adjustments
29,183

 
57.27

Unvested at December 31, 2017
242,186

 
55.06

Granted
62,775

 
84.79

Vested
(41,660
)
 
40.23

Performance adjustments
(35,756
)
 
45.21

Forfeited
(8,659
)
 
44.53

Unvested at December 31, 2018
218,886

 
68.43

Granted
83,819

 
101.03

Vested
(139,478
)
 
44.75

Performance adjustments
76,960

 
44.24

Forfeited
(2,152
)
 
99.82

Unvested at December 31, 2019
238,035

 
$
85.39


The 2019 performance adjustments above relate to adjustments made relative to awards that exceeded the performance targets when vested during 2019 including the final number of shares issued for the 2016 Management Performance Units, which were 237.6% of the target award based on Total Shareholder Return during the three year performance period, and vested in the first quarter of 2019.
During the years ended December 31, 2019, 2018 and 2017, the total intrinsic value of stock options exercised (the difference between the market price on the date of exercise and the option price paid to exercise the option) was $14.6 million, $12.2 million and $29.3 million, respectively. The fair values of restricted stock vested during the years ended December 31, 2019, 2018 and 2017 were $5.5 million, $5.4 million and $4.1 million, respectively. The fair value of performance stock units vested during the years ended December 31, 2019, 2018 and 2017 was $6.2 million, $1.7 million and $4.1 million, respectively.
On December 31, 2019, there was $11.6 million of unrecognized stock-based compensation expense. The weighted average period over which this expense is expected to be recognized was approximately 1.53 years.