Stock Plans

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

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 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 a Monte Carlo simulation 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 and further range based upon the achieved market metric 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, 2020, there were 802,439 and 94,020 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)	2020		2019		2018
Restricted stock units	$	6,258	$	6,914	$	6,221
Stock options	113		487		217
Performance stock units	549		6,359		5,801
Total stock-compensation expense before income taxes	6,920		13,760		12,239
Income tax benefit	1,668		3,357		2,974
Total stock-compensation expense, net of income tax benefit	$	5,252	$	10,403	$	9,265

We did not capitalize any stock-based compensation expense, and all expense is recorded in selling, general and administrative expense in 2020, 2019, and 2018.

The Company utilized the Black-Scholes valuation model for estimating the fair value of stock option expense with the following weighted average assumptions. There were no stock options granted in 2020 or 2018.


	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, 2018	955,446	$	42.75

Exercised	(215,724)	39.25

Forfeited	(4,721)	44.50
Outstanding December 31, 2018	735,001	43.79		638,673
Granted	23,285	43.54
Exercised	(198,535)	38.16

Forfeited	(95)	49.19
Outstanding December 31, 2019	559,656	45.78		552,682

Exercised	(274,704)	45.31
Forfeited	(954)	42.00
Outstanding December 31, 2020	283,998	$	46.23	281,593

For various exercise price ranges, characteristics of outstanding and exercisable stock options at December 31, 2020 were as follows:


	Stock Options Outstanding
Range of Exercise Prices	Shares	Weighted-Average
		Exercise Price		Remaining Life

$33.01 – $45.00	158,836	43.88		3.06
$45.01 – $57.93	125,162	49.22		2.93
$33.01 – $57.93	283,998	$	46.23	3.00


	Stock Options Exercisable
Range of Exercise Prices	Shares	Weighted-Average
		Exercise Price		Remaining Life

$33.01 – $45.00	158,208	43.90		3.05
$45.01 – $57.93	123,385	49.22		2.87
$33.01 – $57.93	281,593	$	46.23	2.97

Cash received from the exercise of stock options was $12.4 million, $7.5 million and $8.6 million for the years ended December 31, 2020, 2019 and 2018, respectively. The tax benefit we realized from these exercises was $6.4 million, $4.8 million and $2.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Stock options become exercisable when they are vested. The aggregate intrinsic value of stock options exercisable at December 31, 2020 was $29.0 million. The aggregate intrinsic value of all stock options outstanding at December 31, 2020 was $29.3 million.

A summary of restricted stock unit activity follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested January 1, 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
Granted	51,468	124.61
Vested	(70,399)	81.58
Forfeited	(7,579)	106.54
Unvested at December 31, 2020	146,191	$	105.83

A summary of performance stock unit activity follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested at January 1, 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
Granted	67,479	127.48
Vested	(132,036)	73.00
Performance adjustments	33,499	72.36
Forfeited	(6,765)	111.60
Unvested at December 31, 2020	200,212	$	104.69

The 2020 performance adjustments relate to to awards that exceeded the performance targets when vested during 2020, including the final number of shares issued, which were 135.7% of the target award based on actual results during the three year performance period.

During the years ended December 31, 2020, 2019 and 2018, 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 $24.6 million, $14.6 million and $12.2 million, respectively. The fair values of restricted stock vested during the years ended December 31, 2020, 2019 and 2018 were $5.7 million, $5.5 million and $5.4 million, respectively. The fair value of performance stock units vested during the years ended December 31, 2020, 2019 and 2018 was $9.6 million, $6.2 million and $1.7 million, respectively.

On December 31, 2020, there was $8.3 million of unrecognized stock-based compensation expense. The weighted average period over which this expense is expected to be recognized was approximately 1.7 years.