XML 36 R21.htm IDEA: XBRL DOCUMENT v3.20.4
Stock Compensation Plans
 12 Months Ended
Dec. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock Compensation Plans STOCK COMPENSATION PLANS
We have two compensation plans that provide for the granting of stock options and other share-based awards to key employees and non-employee members of the Board of Directors. The 2009 Equity Incentive Plan (“2009 Plan”), and the 2014 Equity Incentive Plan (“2014 Plan”) provide for granting options, restricted stock, restricted stock units or stock appreciation rights to employees and non-employee directors.
We were authorized to grant awards for up to 1,781,546 shares of common stock under the 2009 Plan, as well as any shares underlying awards outstanding under our 2004 Equity Incentive Plan (the “2004 Plan”) as of the effective date of the 2009 Plan that thereafter terminated or expired unexercised or were canceled, forfeited or lapsed for any reason. There were 17,150 options outstanding at December 31, 2020 under the 2009 Plan at an exercise price of $57.54. The options outstanding under the 2009 Plan have a 7-year term.
In May 2014, our shareholders approved the 2014 Plan authorizing us to grant awards for up to 1,974,543 shares of common stock, as well as any shares underlying awards outstanding under the 2004 Plan and 2009 Plan as of the effective date of the 2014 Plan that thereafter terminate or expire unexercised or are canceled, forfeited or lapse for any reason.  In May 2018, our shareholders approved an amendment to the 2014 Plan, which increased the number of shares available for issuance under the 2014 Plan by 1,000,000 shares. A maximum of 2,974,543 shares are available for issuance under the 2014 Plan, as amended, plus the number of shares (not to exceed 891,960) underlying awards outstanding under the 2004 Plan and the 2009 Plan as of May 29, 2014 that thereafter terminate or expire unexercised or are canceled, forfeited or lapse for any reason. There were 137,898 options outstanding at December 31, 2020 under the 2014 Plan at exercise prices between $33.05 and $61.30. The options outstanding under the 2014 Plan have a 7-year term and generally vest over a 3-year period.
Upon election to the Board, each non-employee director receives an initial equity grant of shares of restricted common stock with a value equal to $100,000, calculated using the closing share price on the date of the non-employee director’s election to the Board. The initial restricted stock grant vests on the third anniversary of the grant date, subject to the non-employee director’s continued membership on the Board. Annually, the non-employee directors are granted restricted shares equal to $100,000 on the first business day following the annual meeting of shareholders, calculated using the closing price of our common stock on that day. In addition, the independent Chairman of the Board is annually granted restricted shares with a value equal to $50,000, and the Lead Director, if one has been appointed, would be annually granted restricted shares with a value equal to $40,000 on the first business day following the annual meeting of shareholders, calculated using the closing price of our common stock on that day. The shares of restricted stock granted annually to our non-employee directors, our independent Chairman of the Board and, if applicable, our Lead Director vest on the day prior to the following year’s annual meeting date, subject to a non-employee director’s continued membership on the Board. We record compensation cost associated with our restricted stock grants on a straight-line basis over the vesting term. Our non-employee directors also may elect to have their annual cash retainers and annual equity retainers paid in the form of deferred stock units pursuant to the 2014 Plan and the 2018 Non-Employee Director Deferred Compensation Plan. Each deferred stock unit represents the right to receive one share of our common stock upon the non-employee director's separation of service from the Company. We record compensation cost associated with our deferred stock units over the period of service.
Annually, upon approval by our Compensation Committee, we grant stock-based awards, which historically have been in the form of stock options and/or restricted stock units, to certain employees. We also grant stock-based awards, which historically have been in the form of stock options and/or restricted stock units, to certain new employees throughout the year. The fair value of these stock-based awards is determined by using (a) the current market price of our common stock on the grant date in the case of restricted stock units without a market condition, (b) the Monte Carlo Simulation valuation model in the case of performance-based restricted stock units with a market condition, or (c) the Black-Scholes option valuation model in the case of stock options.
For the stock-based awards granted in 2019 and 2020, the time-based restricted stock units vest in three equal annual installments beginning one year after the grant date. The performance-based restricted stock unit awards vest at the end of the 3-year performance period if the applicable performance measure is achieved. The related stock-based compensation expense will be recognized over the requisite service period, taking into account the probability that we will satisfy the performance measure. The performance-based restricted stock units granted in 2020 will be earned and will vest based upon our total shareholder return (“TSR”) relative to the TSR attained by companies within our defined benchmark group, the Russell 2000 Growth Index. Due to the TSR presence in these performance-based restricted stock units, the fair value of these awards was determined using the Monte Carlo Simulation valuation model. We expense these market condition awards over the three-year vesting period regardless of the value the award recipients ultimately receive.

The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend yield. The weighted-average grant-date fair value of the performance-based restricted stock units that were granted during 2020 and 2019 valued using the Monte Carlo Simulation valuation model was $80.38 and $66.16, respectively. For performance-based restricted stock units granted during 2020 and 2019 valued using the Monte Carlo Simulation valuation model, we used the following assumptions:
Year ended December 31
20202019
Risk-free interest rate1.2 %
1.8% - 2.48%
Expected dividend yield— %— %
Term3 years3 years
Expected volatility40.0 %45.0 %
Weighted-average expected volatility40.0 %45.0 %

Historical information was the primary basis for the selection of the expected dividend yield, expected volatility and the expected lives of the options. The risk-free interest rate was based on the yields of U.S. zero coupon issues and U.S. Treasury issues, with a term equal to the expected life of the option being valued.

A summary of stock option activity and weighted average exercise prices follows:
OptionsWeighted-
Average
Exercise Price		Weighted-Average
Remaining
Contractual Term
(Years)		Aggregate Intrinsic
Value as of
December 31, 2020
Outstanding at January 1, 2020486,682 $52.37 
Granted— — 
Forfeited(34,605)57.51 
Exercised(297,029)49.60 
Outstanding at December 31, 2020155,048 $56.53 2.3$2,187 
Options exercisable at December 31, 2020148,469 $56.31 0.8$2,125 
The aggregate intrinsic value of stock options exercised during the years ended December 31, 2020, 2019, and 2018 was $4.2 million, $3.4 million and $7.5 million, respectively. The total fair value of stock options vested during the years ended December 31, 2020, 2019, and 2018 was $0.8 million, $5.1 million and $3.7 million, respectively.
The following table summarizes the restricted stock and restricted stock unit activity and weighted-average grant date fair values for the year ended December 31, 2020:
SharesWeighted-Average
Grant Date
Fair Value
Non-vested at January 1, 2020398,318 $49.53 
Granted208,405 65.36 
Forfeited(56,850)56.56 
Vested(172,426)41.46 
Non-vested at December 31, 2020377,447 $60.92 
We recorded total stock-based compensation expense associated with our stock incentive plans of $8.3 million, $11.1 million and $7.6 million in 2020, 2019 and 2018, respectively.
As of December 31, 2020, there was $13.6 million in total unrecognized stock-based compensation expense related to non-vested stock-based compensation arrangements. The expense is expected to be recognized over a weighted-average period of 1.9 years.
The following table summarizes total stock-based compensation expense for each of the line items on our consolidated statement of operations:
Years ended December 31,
202020192018
Cost of Sales
Product$356 $628 $477 
Service346 373 351 
Total cost of sales$702 $1,001 $828 
Operating Expenses
Selling, general and administrative$6,327 $8,786 $5,210 
Research and development1,285 1,282 1,583 
Total operating expenses$7,612 $10,068 $6,793