Stock-Based Compensation

3 Months Ended

Mar. 31, 2024

Stock-Based Compensation

Stock-Based Compensation

Note 8—Stock-Based Compensation

For the three months ended March 31, 2024 and 2023, the Company’s Income before income taxes was reduced for stock-based compensation expense of $23.8 and $21.7, respectively. In addition, for the three months ended March 31, 2024 and 2023, the Company recognized aggregate income tax benefits (associated with stock-based compensation) of $32.2 and $19.3, respectively, in Provision for income taxes in the accompanying Condensed Consolidated Statements of Income. These aggregate income tax benefits during the three months ended March 31, 2024 and 2023 include excess tax benefits of $29.7 and $17.1, respectively, from option exercises.

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”), which provided for the issuance of 60,000,000 shares.  In March 2021, the Board authorized and approved the Amended and Restated 2017 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries (the “Amended 2017 Employee Option Plan” and, together with the 2017 Employee Option Plan, the “2017 Option Plan”), which among other things, increased the number of shares reserved for issuance under the plan by 40,000,000 shares. The Amended 2017 Employee Option Plan was approved by the Company’s stockholders and became effective on May 19, 2021. As of March 31, 2024, there were 31,265,713 shares of Common Stock available for the granting of additional stock options under the 2017 Option Plan. Prior to the approval of the 2017 Employee Option Plan, the Company issued stock options under the 2009 Stock Purchase and Option Plan for Key Employees of Amphenol and Subsidiaries, and its amendment (the “2009 Employee Option Plan”). No additional stock options will be granted under the 2009 Employee Option Plan.  Options granted under the 2017 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 10 years from the date of grant.  

Stock option activity for the three months ended March 31, 2024 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, 2024	60,390,162	$	50.45	5.81	$	2,939.5
Options granted	58,031		90.72
Options exercised	(3,156,425)		37.27
Options forfeited	(43,137)		65.02
Options outstanding at March 31, 2024	57,248,631	$	51.21	5.69	$	3,671.9
Vested and non-vested options expected to vest at March 31, 2024	55,794,585	$	50.80	5.63	$	3,601.3
Exercisable options at March 31, 2024	34,849,870	$	43.54	4.53	$	2,502.7

A summary of the status of the Company’s non-vested options as of March 31, 2024 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, 2024	22,523,981	$	14.57
Options granted	58,031		26.36
Options vested	(146,726)		15.79
Options forfeited	(36,525)		17.73
Non-vested options at March 31, 2024	22,398,761	$	14.58

During the three months ended March 31, 2024 and 2023, the following activity occurred under the Company’s option plans:

	Three Months Ended
	March 31,
	2024		2023
Total intrinsic value of stock options exercised	$	215.8	$	125.7
Total fair value of stock options vested		2.3		2.3

As of March 31, 2024, the total compensation cost related to non-vested options not yet recognized was approximately $228.1 with a weighted average expected amortization period of 3.19 years.

The grant-date fair value of each option grant under the 2009 Employee Option Plan and the 2017 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 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.

Phantom Stock

On June 5, 2023, the Company granted 2,375 shares of phantom stock to each then-current non-employee director (19,000 shares in the aggregate), which will vest and, pursuant to written elections made by each non-employee director, convert into unrestricted shares of the Company’s Common Stock on the earlier of May 19, 2024 or the day immediately prior to the date of the 2024 annual meeting of the Company’s stockholders. As of March 31, 2024, the total compensation cost related to non-vested shares of phantom stock not yet recognized was approximately $0.2 (with a weighted average expected amortization period of 0.12 years).