Stock Options and Incentive Plans

12 Months Ended

Dec. 31, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options and Incentive Plans

21. Stock Options and Incentive Plans

We recognized no stock option expense during 2018, 2017, or 2016 and there are currently no remaining unvested options for which stock-option compensation costs will be recognized in future periods.

There have been no stock options granted since November 2002 and we have no stock option plan under which options may be granted, although options may be granted under the Company’s 2011 incentive plan. Options issued under previous plans and still outstanding were exercisable in five cumulative annual amounts beginning twelve months after date of grant. Option exercise prices were normally equal to and were not permitted to be less than the market value on the date of grant. Unexercised options generally terminate twenty years after the date of grant for all plans, and must be exercised within ten years of retirement.

Activity with respect to these plans is as follows:

	2018		2017		2016
Shares under option January 1		29,340		62,390		88,773
Options canceled		-		150		-
Options exercised		10,400		32,900		26,383
Shares under option at December 31		18,940		29,340		62,390
Options exercisable at December 31		18,940		29,340		62,390

The weighted average exercise price is as follows:

	2018		2017		2016
Shares under option January 1		$18.40		$18.28		$18.67
Options canceled		-		20.63		-
Options exercised		19.38		18.16		19.60
Shares under option December 31		17.87		18.40		18.28
Options exercisable December 31		17.87		18.40		18.28

As of December 31, 2018, the aggregate intrinsic value of vested options was $0.8 million. The aggregate intrinsic value of options exercised was $0.5 million in 2018, $1.1 million in 2017, and $0.5 million in 2016.

Executive Management share-based compensation:

In 2011, shareholders approved the Albany International 2011 Incentive Plan under which awards were granted through 2017. The multi-year awards granted to date under this Plan provide key members of management with incentive compensation based on achieving certain performance targets over a three year period. Such awards are paid out partly in cash and partly in shares of Class A Common Stock. Participants may elect to receive shares net of applicable income taxes. In March 2018, we issued 33,425 shares and made cash payments totaling $1.3 million. In March 2017, we issued 25,899 shares and made cash payments totaling $1.0 million. In March 2016, we issued 26,146 shares and made cash payments totaling $0.8 million. If a person terminates employment prior to the award becoming fully vested, the person may forfeit all or a portion of the incentive compensation award. The grant date share price is determined when the awards are approved each year and that price is used for measuring the cost for the share-based portion of the award. Expense associated with these awards is recognized over the three year vesting period. In connection with this plan, we recognized expense of $0.8 million in 2018, $2.6 million in 2017 and $2.7 million in 2016. For share-based awards that are dependent on performance after 2018, we expect to record additional compensation expense of approximately $0.2 million in 2019.

During 2016 and 2017, the Company had an annual incentive plan for executive management whereby 40 to 50 percent of the earned incentive compensation was payable in the form of shares of Class A Common Stock. Participants could elect to receive shares net of applicable income taxes. In March 2018, the Company issued 10,751 shares and made cash payments totaling $1.4 million as a result of performance in 2017. In March 2017, the Company issued 18,784 shares and made cash payments totaling $1.9 million as a result of performance in 2016. In March 2016, the Company issued 26,774 shares and made cash payments totaling $1.9 million as a result of performance in 2015. The allocation of the award between cash and shares is determined by an average share price after the year of performance. Expense recorded for this plan was $2.6 million in 2017, and $3.3 million in 2016.

In 2017, shareholders approved the Albany International 2017 Incentive Plan. This plan provides key members of management with incentive compensation based on achieving certain performance targets. Awards can be paid in cash, shares of Class A Common Stock, Options, or other stock-based or incentive compensation awards pursuant to the Plan. Participants may elect to receive shares net of applicable income taxes. The first awards were granted in 2018, under this plan, with a performance period of one year, with payments scheduled in March 2019. Awards that were granted in 2018 with a performance period of three years, with payments scheduled in March 2021. If a participant terminates employment prior to the award becoming fully vested, the person may forfeit all or a portion of the incentive compensation award. The grant date share price is determined when the awards are approved each year and that price is used for measuring the cost for the share-based portion of an award. Expense associated with these awards is recognized over the vesting period of the performance period which is generally one to three years.

In connection with this plan, we recognized expense of $3.4 million in 2018. For share-based awards that are dependent on performance after 2018, we expect to record additional compensation expense of approximately $0.8 million in 2019 and $0.3 million in 2020. Shares payable under these plans generally vest immediately prior to payment.

As of December 31, 2018, there were 1,146,440 shares of Company stock authorized for the payment of awards under these plans. Information with respect to these plans is presented below:

	Number of shares			Weighted average grant date value per share		Year-end intrinsic value (000's)
Shares potentially payable at January 1, 2016		188,308			$35.35		$6,657
Forfeitures		-			-
Payments		(86,926	)		$33.43
Shares accrued based on 2016 performance		88,036			$36.78
Shares potentially payable at December 31, 2016		189,418			$36.90		$6,989
Forfeitures		-			-
Payments		(75,545	)		$36.35
Shares accrued based on 2017 performance		43,532			$48.26
Shares potentially payable at December 31, 2017		157,405			$40.30		$6,343
Forfeitures		-
Payments		(79,762	)		$39.90
Shares accrued based on 2018 performance		34,822			$70.59
Shares potentially payable at December 31, 2018		112,465			$49.96		$5,619

Other Management share-based compensation:

In 2012, the Company adopted a Phantom Stock plan whereby awards under this program vest over a five-year period and are paid annually in cash based on current market prices of the Company’s stock. Under this program, employees may earn more or less than the target award based on the Company’s results in the year of the award. Expense recognized for this plan amounted to $4.8 million in 2018, $4.9 million in 2017, and $3.8 million in 2016. Based on awards outstanding at December 31, 2018, we expect to record approximately $9.6 million of compensation cost from 2019 to 2022. The weighted average period for recognition of that cost is approximately 2 years.

The determination of compensation expense for other management share-based compensation plans is based on the number of outstanding share units, the end-of-period share price, and Company performance. Information with respect to these plans is presented below:

	Number of shares			Weighted average value per share		Cash paid for share based liabilities  (000's)
Share units potentially payable at January 1, 2016		252,866
Grants		118,279
Changes due to performance		18,779
Payments		(88,073	)		$33.20		$2,924
Forfeitures		(40,706	)
Share units potentially payable at December 31, 2016		261,145
Grants		96,505
Changes due to performance		(11,891	)
Payments		(89,190	)		$46.64		$4,160
Forfeitures		(20,473	)
Share units potentially payable at December 31, 2017		236,096
Grants		65,370
Changes due to performance		14,343
Payments		(75,545	)		$62.69		$4,736
Forfeitures		(12,963	)
Share units potentially payable at December 31, 2018		227,301

In 2018, the Company granted restricted stock units to two executives. The amount of compensation expense is subject to change in the market price of the Company’s stock and was recorded in Selling, general, and administrative expenses. The vesting and payments due under these grants will occur in various periods from 2019 to 2021. Expense recognized for these grants was $0.5 million in 2018. Based on awards outstanding at December 31, 2018, we expect to record approximately $1.8 million of compensation cost from 2019 to 2021.

The Company maintains a voluntary savings plan covering substantially all employees in the United States. The Plan, known as the Prosperity Plus Savings Plan, is a qualified plan under section 401(k) of the U.S. Internal Revenue Code. The Company matches, in the form of cash, between 50 percent and 100 percent of employee contributions up to a defined maximum. The investment of employee contributions to the plan is self-directed. The Company’s cost of the plan amounted to $6.3 million in 2018, $5.9 million in 2017, and $5.5 million in 2016.

The Company’s profit-sharing plan covers substantially all employees in the United States. After the close of each year, the Board of Directors determines the amount of the profit-sharing contribution. Company contributions to the plan are in the form of cash. The expense recorded for this plan was $3.2 million in 2018, $2.6 million in 2017, and $2.9 million in 2016.