Note 9—Stock-Based Compensation

For the three months ended March 31, 2019 and 2018, the Company’s income before income taxes was reduced for stock-based compensation expense of $14.4 and $12.7, respectively. In addition, for the three months ended March 31, 2019 and 2018, the Company recognized aggregate income tax benefits of $8.6 and $5.9, respectively, in the provision for income taxes in the accompanying Condensed Consolidated Statements of Income associated with stock-based compensation, which include the excess tax benefits from option exercises of $6.8 and $4.1, respectively. The impact associated with recognizing excess tax benefits from option exercises in the provision for income taxes on our consolidated financial statements could result in significant fluctuations in our effective tax rate in the future, since the provision for income taxes will be impacted by the timing and intrinsic value of future stock-based compensation award exercises.

Stock-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates. Changes in estimated forfeitures are recognized in the period of change and impact the amount of expense to be recognized in future periods. The expense incurred for stock-based compensation plans is included in Selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Income.

Stock Options

In May 2017, the Company adopted the 2017 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (the “2017 Employee Option Plan”). A committee of the Company’s Board of Directors has been authorized to grant stock options pursuant to the 2017 Employee Option Plan. The number of shares of the Company’s Class A Common Stock (“Common Stock”) reserved for issuance under the 2017 Employee Option Plan is 30,000,000 shares. As of March 31, 2019, there were 16,982,040 shares of Common Stock available for the granting of additional stock options under the 2017 Employee Option Plan. The Company also continues to maintain the 2009 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, as amended (the “2009 Employee Option Plan”). No additional stock options will be granted under the 2009 Employee Option Plan. Options granted under the 2017 Employee Option Plan and the 2009 Employee Option Plan generally vest ratably over a period of five years from the date of grant and are generally exercisable over a period of ten years from the date of grant.

In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “2004 Directors Option Plan”). The 2004 Directors Option Plan is administered by the Company’s Board of Directors. The 2004 Directors Option Plan expired in May 2014, except that its terms continue with respect to any outstanding options granted thereunder. Options were last granted under the 2004 Directors Option Plan in May 2011. Options granted under the 2004 Directors Option Plan are fully vested and are generally exercisable over a period of ten years from the date of grant.

Stock option activity for the three months ended March 31, 2019 was as follows:


				Weighted
				Average	Aggregate
		Weighted		Remaining	Intrinsic
		Average		Contractual	Value
	Options	Exercise Price		Term (in years)	(in millions)
Options outstanding at January 1, 2019	35,550,668	$	59.77	6.81	$	798.6
Options granted	40,000		78.12
Options exercised	(1,269,121)		37.30
Options forfeited	(40,440)		75.17
Options outstanding at March 31, 2019	34,281,107	$	60.60	6.67	$	1,160.0
Vested and non-vested options expected to vest at March 31, 2019	32,308,769	$	59.92	6.59	$	1,115.4
Exercisable options at March 31, 2019	15,053,947	$	46.98	5.17	$	714.4

A summary of the status of the Company’s non-vested options as of March 31, 2019 and changes during the three months then ended is as follows:


		Weighted
		Average
		Fair Value at
	Options	Grant Date
Non-vested options at January 1, 2019	19,289,500	$	9.73
Options granted	40,000		10.48
Options vested	(61,900)		8.27
Options forfeited	(40,440)		9.74
Non-vested options at March 31, 2019	19,227,160	$	9.74

During the three months ended March 31, 2019 and 2018, the following activity occurred under the Company’s option plans:


	Three Months Ended
	March 31,
	2019		2018
Total intrinsic value of stock options exercised	$	70.0	$	34.3
Total fair value of stock options vested		0.5		0.5

As of March 31, 2019, the total compensation cost related to non-vested options not yet recognized was approximately $127.3 with a weighted average expected amortization period of 3.25 years.

The grant-date fair value of each option grant under the 2009 Employee Option Plan, the 2017 Employee Option Plan and the 2004 Directors Option Plan is estimated using the Black-Scholes option pricing model. The grant-date fair value of each share grant is determined based on the closing share price of the Company’s Common Stock on the date of the grant. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Use of a valuation model for option grants requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility is calculated based on the historical volatility of the Common Stock and implied volatility derived from related exchange traded options. The average expected life is based on the contractual term of the option and expected exercise and historical post-vesting termination experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issuances with a remaining term equal to the expected life assumed at the date of grant. The expected annual dividend per share is based on the Company’s dividend rate.

Restricted Shares

In 2012, the Company adopted the 2012 Restricted Stock Plan for Directors of Amphenol Corporation (the “2012 Directors Restricted Stock Plan”). The 2012 Directors Restricted Stock Plan is administered by the Company’s Board of Directors. As of March 31, 2019, the number of restricted shares available for grant under the 2012 Directors Restricted Stock Plan was 109,150. Restricted shares granted under the 2012 Directors Restricted Stock Plan generally vest on the first anniversary of the grant date. Grants under the 2012 Directors Restricted Stock Plan entitle the holder to receive shares of the Company’s Common Stock without payment.

Restricted share activity for the three months ended March 31, 2019 was as follows:


				Weighted Average
				Remaining
	Restricted	Fair Value at		Amortization
	Shares	Grant Date		Term (in years)
Restricted shares outstanding at January 1, 2019	14,873	$	87.89	0.39
Restricted shares granted	—		—
Restricted shares outstanding at March 31, 2019	14,873	$	87.89	0.14

As of March 31, 2019, the total compensation cost related to non-vested restricted shares not yet recognized was approximately $0.2 with a weighted average expected amortization period of 0.14 years.