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STOCK-BASED COMPENSATION PLANS | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
STOCK-BASED COMPENSATION PLANS | STOCK-BASED COMPENSATION PLANS As of December 31, 2022, the Company maintains employee stock-based compensation plans for stock options, restricted stock, and incentive stock units as governed by the 2011 Stock Incentive Compensation Plan, as amended and restated (the “2011 Plan”) and the 2000 Stock Incentive Plan, as amended (the “2000 Plan”). The 2011 Plan has a term through May 10, 2027 and as of December 31, 2022 the number of shares available for future grants under the 2011 Plan was approximately 5.5 million shares. The Company also maintains a 1995 Non-Employee Directors’ Fee and Stock Option Plan as amended and restated (“the Directors Plan”). The Directors Plan, as amended, authorizes a total of 1,100,000 shares of Common Stock to be issued. Under the Directors Plan options issued become exercisable over a three-year vesting period and expire ten years from the date of grant, and restricted stock issued under the plan vests one year from the date of grant. The amount of restricted stock issued to non-employee directors as compensation for directors’ fees was as follows: 14,269 shares for 2022; 18,142 shares for 2021; and 23,152 shares for 2020. The total number of shares issued under the Directors Plan as of December 31, 2022 was approximately 1.0 million shares. Stock-based compensation expense for all of the plans was $49 million, $46 million and $20 million for the years ended December 31, 2022, 2021 and 2020, respectively. Associated tax benefits related to the stock-based compensation plans for the years ended December 31, 2022, 2021 and 2020 were not material. Included in the stock-based compensation expense for 2022 above is $2 million of expense related to stock options, $19 million related to non-vested restricted stock, $8 million related to restricted stock units, $1 million related to units issued for Directors’ fees, and $19 million of expense related to incentive stock units. The restricted stock units are liability-classified equity awards as they can be settled in cash. At December 31, 2022, unamortized compensation expense related to those stock options, non-vested restricted shares and incentive stock units expected to vest totaled $47 million and will be recognized over a weighted period of 1.4 years. Stock Options Stock options are granted to eligible employees and directors at fair market value, which is the average of the high and low Wabtec stock price on the date of grant. Under the 2011 Plan and the 2000 Plan, options become exercisable over a three year vesting period and expire 10 years from the date of grant. The following table summarizes the Company’s stock option activity and related information for the 2011 Plan, the 2000 Plan and Directors Plan for the years ended December 31:
|  | Options |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life |  | Aggregate Intrinsic value (in millions)
Outstanding at December 31, 2019 |  | 588,024 |  |  | $ | 63.36 |  |  | 5.7 |  | $ | 9 |
Granted |  | 136,506 |  |  | $ | 77.75 |  |  |  |  | — |
Exercised |  | (86,145) |  |  | $ | 35.47 |  |  |  |  | — |
Canceled |  | (85,716) |  |  | $ | 73.73 |  |  |  |  | — |
Outstanding at December 31, 2020 |  | 552,669 |  |  | $ | 69.82 |  |  | 6.1 |  | $ | 4 |
Granted |  | 126,794 |  |  | $ | 81.21 |  |  |  |  | — |
Exercised |  | (113,728) |  |  | $ | 50.38 |  |  |  |  | — |
Canceled |  | (33,820) |  |  | $ | 73.53 |  |  |  |  | — |
Outstanding at December 31, 2021 |  | 531,915 |  |  | $ | 75.40 |  |  | 6.5 |  | $ | 9 |
Exercised |  | (116,590) |  |  | $ | 68.57 |  |  |  |  | — |
Canceled |  | (15,387) |  |  | $ | 77.10 |  |  |  |  | — |
Outstanding at December 31, 2022 |  | 399,938 |  |  | $ | 77.32 |  |  | 5.9 |  | $ | 11 |
Exercisable at December 31, 2022 |  | 293,952 |  |  | $ | 76.45 |  |  | 5.8 |  | $ | 7 |
Options outstanding at December 31, 2022 were as follows:
Range of Exercise Prices |  | Number of Options Outstanding |  | Weighted Average Exercise Price of Options Outstanding |  | Weighted Average Remaining Contractual Life |  | Number of Options Currently Exercisable |  | Weighted Average Exercise Price of Options Currently Exercisable
35.00 - 50.00 |  | 2,296 |  |  | $ | 48.29 |  |  | 0.1 |  | 2,296 |  |  | $ | 48.29 |
50.00 - 65.00 |  | 34,892 |  |  | $ | 58.74 |  |  | 3.7 |  | 33,342 |  |  | $ | 59.52 |
65.00 - 80.00 |  | 189,926 |  |  | $ | 74.63 |  |  | 5.9 |  | 157,047 |  |  | $ | 73.85 |
Over 80.00 |  | 172,824 |  |  | $ | 84.42 |  |  | 6.4 |  | 101,267 |  |  | $ | 86.70 |
|  | 399,938 |  |  | $ | 77.32 |  |  | 5.9 |  | 293,952 |  |  | $ | 76.45 |
There were no stock options granted during the year ended December 31, 2022. The following weighted-average assumptions were used to estimate the fair value of each grant on the date of grant using the Black-Scholes option-pricing model for the years ended December 31, 2021 and 2020:
|  | For the year ended December 31,
|  | 2021 |  | 2020
Dividend yield |  | 0.60 | % |  | 0.60 | %
Risk-free interest rate |  | 0.8 | % |  | 1.5 | %
Stock price volatility |  | 36.1 | % |  | 28.1 | %
Expected life (years) |  | 5.0 |  | 5.0
Weighted average fair value of options granted during the year |  | $ | 25.01 |  |  | $ | 21.05 |
The dividend yield is based on the Company’s dividend rate and the current market price of the underlying common stock at the date of grant. Expected life in years is determined from historical stock option exercise data. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free interest rate is based on the 7 years U.S. Treasury bond rates for the expected life of the option. Restricted Stock and Incentive Stock As provided for under the 2011 and 2000 Plans, eligible employees are granted restricted stock that generally vests over three years from the date of grant. Under the Directors Plan, restricted stock units vest one year from the date of grant. In addition, the Company has issued incentive stock units to eligible employees that vest upon attainment of certain cumulative three-year performance goals. Significant judgments and estimates are used in determining the estimated three-year performance, which is then used to estimate the total shares expected to vest over the three year vesting cycle and corresponding expense based on the grant date fair value of the award. When determining the estimated three-year performance, the Company utilizes a combination of historical actual results, budgeted results and forecasts. Upon the initial grant of a performance cycle, the Company estimates the three-year performance at 100%. Quarterly, the Company reviews and updates performance estimates based on actual performance results and current projections. Based on the Company’s performance for each three year period then ended, the incentive stock units can vest and be awarded ranging from 0% to 200% of the initial incentive stock units granted. The incentive stock units included in the table below represent the number of shares that are expected to vest based on the Company’s estimate for meeting those established performance targets. As of December 31, 2022, the Company estimates that it will achieve 132%, 125% and 110% for the incentive stock awards expected to vest based on performance for the three year periods ending December 31, 2022, 2023, and 2024, respectively, and has recorded incentive compensation expense accordingly. If estimates of the number of these stock units expected to vest changes in a future accounting period, cumulative compensation expense could increase or decrease and will be recognized in the current period for the elapsed portion of the vesting period and would change future expense for the remaining vesting period. Compensation expense for the non-vested restricted stock and incentive stock units is based on the closing price of the Company’s common stock on the date of grant and recognized over the applicable vesting period. Expense for incentive stock units is updated as necessary based on the Company's performance. The following table summarizes the restricted stock activity and related information for the 2011 Plan, the 2000 Plan, and Directors Plan, and incentive stock units activity and related information for the 2011 Plan and the 2000 Plan with related information for the years ended December 31:
|  | Restricted Stock and Units |  | Incentive Stock Awards |  | Weighted Average Grant Date Fair Value
Outstanding at December 31, 2019 |  | 791,031 |  |  | 572,002 |  |  | $ | 73.64 |
Granted |  | 283,587 |  |  | 250,197 |  |  | $ | 75.68 |
Vested |  | (345,859) |  |  | (147,069) |  |  | $ | 77.45 |
Adjustment for incentive stock awards expected to vest |  | — |  |  | (331,004) |  |  | $ | 71.32 |
Canceled |  | (72,753) |  |  | (73,481) |  |  | $ | 72.83 |
Outstanding at December 31, 2020 |  | 656,006 |  |  | 270,645 |  |  | $ | 73.80 |
Granted |  | 235,902 |  |  | 241,467 |  |  | $ | 81.64 |
Vested |  | (350,955) |  |  | (37,672) |  |  | $ | 71.82 |
Adjustment for incentive stock awards expected to vest |  | — |  |  | 180,767 |  |  | $ | 76.26 |
Canceled |  | (33,255) |  |  | (48,106) |  |  | $ | 76.24 |
Outstanding at December 31, 2021 |  | 507,698 |  |  | 607,101 |  |  | $ | 78.06 |
Granted |  | 460,841 |  |  | 176,657 |  |  | $ | 91.19 |
Vested |  | (234,597) |  |  | (43,039) |  |  | $ | 75.14 |
Adjustment for incentive stock awards expected to vest |  | — |  |  | 45,301 |  |  | $ | 84.55 |
Canceled |  | (44,522) |  |  | (41,176) |  |  | $ | 76.84 |
Outstanding at December 31, 2022 |  | 689,420 |  |  | 744,844 |  |  | $ | 84.73 |

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