STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

We issue restricted stock units (“RSUs”), which consist of time-based and performance-based awards, to employees under stock awards plans approved by stockholders. In addition, RSUs are issued to non-employee directors under a Restricted Stock Unit Award Agreement for Directors pursuant to the Company’s 2018 Equity Incentive Plan. RSUs granted to employees vest according to a specified performance period and/or vesting period. Time-based RSUs generally vest over three years. Performance-based RSUs vest at the end of the specified performance period, generally three years, assuming required performance or market vesting conditions are met. Performance-based RSUs have one of two vesting conditions: (1) based on our internal financial performance metrics and (2) based on our total shareholder return (“TSR”) relative to total shareholder returns of an industrial peer group. At the time of vesting, the vested shares of common stock are issued in the employee’s name. In addition, RSU awards are generally net settled (shares are withheld to cover the employee tax obligation). RSUs granted to directors are only time-based and generally vest over one year.

The fair value of both time-based RSUs and performance-based RSUs pertaining to internal performance metrics is determined using the closing price of our common stock on the grant date. The fair value of performance-based RSUs pertaining to TSR is estimated using a Monte Carlo simulation. Inputs and assumptions used to calculate the fair value are shown in the table below. The fair value of these RSUs is expensed over the vesting period using the straight-line method or using the graded vesting method when an employee becomes eligible to retain the award at retirement.


Nine Months Ended September 30,	2020			2019
Fair value per stock award	$	94.98		$	134.97
Grant date stock price	$	83.93		$	104.51
Assumptions:
Aptar's stock price expected volatility	23.80		%	16.50		%
Expected average volatility of peer companies	48.50		%	31.90		%
Correlation assumption	63.50		%	37.40		%
Risk-free interest rate	0.31		%	2.19		%
Dividend yield assumption	1.72		%	1.30		%

A summary of RSU activity as of September 30, 2020 and changes during the nine month period then ended is presented below:



	Time-Based RSUs			Performance-Based RSUs
	Units	Weighted Average Grant-Date Fair Value		Units	Weighted Average Grant-Date Fair Value
Nonvested at January 1, 2020	480,729	$	95.45	181,680	$	117.26
Granted	232,802	86.05		417,313	93.08
Vested	(130,654)	85.62		—	—
Forfeited	(5,692)	99.08		(6,714)	108.10
Nonvested at September 30, 2020	577,185	$	92.33	592,279	$	100.29

Included in the September 30, 2020 time-based RSUs are 12,379 units granted to non-employee directors and 11,490 units vested related to non-employee directors.

Compensation expense recorded attributable to RSUs for the first nine months of 2020 and 2019 was approximately $24.5 million and $13.7 million, respectively. The actual tax benefit realized for the tax deduction from RSUs was approximately $4.5 million in the nine months ended September 30, 2020. The fair value of units vested during the nine months ended September 30, 2020 and 2019 was $11.2 million and $4.1 million, respectively. The intrinsic value of units vested during the nine months ended September 30, 2020 and 2019 was $13.5 million and $4.9 million, respectively. As of September 30, 2020, there was $51.1 million of total unrecognized compensation cost relating to RSU awards which is expected to be recognized over a weighted-average period of 2.0 years.

Historically we issued stock options to our employees and non-employee directors. Beginning in 2019, we no longer issue stock options. Stock options were awarded with the exercise price equal to the market price on the date of grant and generally vest over three years and expire 10 years after grant. Compensation expense attributable to employee stock options for the first nine months of 2020 was approximately $1.7 million ($1.3 million after tax). Approximately $1.4 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense attributable to stock options for the first nine months of 2019 was approximately $4.4 million ($3.6 million after tax). Approximately $3.7 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. The reduction in stock option expense is due to our move to RSUs as discussed above. For stock option grants, we used historical data to estimate expected life and volatility.

A summary of option activity under our stock plans during the nine months ended September 30, 2020 is presented below:



	Stock Awards Plans				Director Stock Option Plans
	Options		Weighted Average Exercise Price		Options		Weighted Average Exercise Price
Outstanding, January 1, 2020	5,044,180		$	68.32	135,251		$	58.45
Granted	—		—		—		—
Exercised	(785,478)		59.98		(34,151)		51.75
Forfeited or expired	(14,200)		76.07		—		—
Outstanding at September 30, 2020	4,244,502		$	69.91	101,100		$	60.71
Exercisable at September 30, 2020	4,089,846		$	69.11	101,100		$	60.71
Weighted-Average Remaining Contractual Term (Years):
Outstanding at September 30, 2020	4.9				2.9
Exercisable at September 30, 2020	4.8				2.9
Aggregate Intrinsic Value:
Outstanding at September 30, 2020	$	183,753			$	5,306
Exercisable at September 30, 2020	$	179,771			$	5,306
Intrinsic Value of Options Exercised During the Nine Months Ended:
September 30, 2020	$	44,086			$	2,183
September 30, 2019	$	76,797			$	722

The grant date fair value of options vested during the nine months ended September 30, 2020 and 2019 was $7.6 million and $12.2 million, respectively. Cash received from option exercises was approximately $51.1 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $10.8 million in the nine months ended September 30, 2020. As of September 30, 2020, the remaining valuation of stock option awards to be expensed in future periods was $0.6 million and the related weighted-average period over which it is expected to be recognized is 0.4 years.