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Equity and Cash Incentive Program | 12 Months Ended
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Dec. 31, 2018
Share-based Compensation [Abstract] |
Share-based Compensation [Abstract] | 14. Equity and Cash Incentive Program The Company's share-based awards are typically granted annually at its regularly scheduled first quarter Compensation Committee meeting. Additionally, in the second quarter, the Company granted equity awards to its new President and Chief Executive Officer. Awards made pursuant to the terms of the Company's 2012 Equity and Cash Incentive Plan (the "2012 Plan"), which was approved by shareholders on May 3, 2012. This plan replaced the 2005 Equity and Cash Incentive Plan (the "2005 Plan"), which would have otherwise terminated according to its terms on January 31, 2015 and the 1996 Non-Employee Directors Stock Compensation Plan (the "Directors Plan"), which would have otherwise terminated according to its terms on December 31, 2012. Upon adoption of the 2012 Plan, no additional awards could be granted under the 2005 Plan. Officers and other key employees, as well as non-employee directors, are eligible to participate in the 2012 Plan, which has a ten-year term and will terminate on May 3, 2022. The 2012 Plan provides for stock options and SARs grants, restricted stock awards, restricted stock unit awards, performance share awards, cash performance awards, directors' shares and deferred stock units. Under the 2012 Plan, a total of 17,000,000 shares of common stock are reserved for issuance, subject to adjustments resulting from stock dividends, stock splits, recapitalizations, reorganizations and other similar changes. The exercise price per share for SARs is equal to the closing price of the Company’s stock on the New York Stock Exchange on the date of grant. New common shares are issued when SARs are exercised. The period during which SARs are exercisable is fixed by the Company’s Compensation Committee at the time of grant. Generally, the SARs vest after three years of service and expire at the end of ten years. In addition, in connection with the separation of Apergy, the Company modified the outstanding equity awards for its employees. The awards were modified such that all individuals received an equivalent fair value both before and after the separation of Apergy. This modification resulted in the issuance of an additional 1,138,008 SARs, 26,316 performance shares, and 47,063 RSUs. The exercise price of these outstanding awards, where applicable, was adjusted to preserve the value of the awards immediately prior to the separation. As no incremental fair value was awarded as a result of the issuance of these additional shares, the modification did not result in additional compensation expense. Stock-based compensation costs are reported within Selling, general and administrative expenses in the Consolidated Statements of Earnings. The following table summarizes the Company’s compensation expense relating to all stock-based incentive plans:
| Years Ended December 31, |  |  |  |
| 2018 |  | 2017 |  | 2016
Pre-tax stock-based compensation expense (continuing) | $ | 23,698 |  | $ | 24,073 |  | $ | 18,650
Tax benefit | (2,722) |  | (8,411) |  | (6,579)
Total stock-based compensation expense, net of tax | $ | 20,976 |  | $ | 15,662 |  | $ | 12,071
Pre-tax stock-based compensation expense attributable to Apergy employees for the year ended December 31, 2018, 2017 and 2016 was $744, $2,454 and $2,366, respectively. These costs are reported within earnings from discontinued operations in the Condensed Consolidated Statement of Earnings. On January 1, 2017, the Company adopted ASU 2016-09, Compensation: Stock Compensation (Topic 718). The adoption of the new standard resulted in the recognition of excess tax benefits in the Company's provision for income taxes within the Consolidated Statements of Earnings rather than paid-in capital of $14,759 and $8,365 for the years ended December 31, 2018 and 2017, respectively. The Company recognized a net tax benefit of $4,964 during 2016 for the exercise of SARs, restricted stock awards, restricted stock unit awards and performance share awards. These benefits for 2016 have been recorded as an increase to additional paid-in capital and are reflected as financing cash inflows in the Consolidated Statements of Cash Flows. SARs In 2018, 2017 and 2016, the Company issued SARs covering 757,603, 1,028,116 and 1,346,354 shares, respectively. Since 2006, the Company has only issued SARs and does not anticipate issuing stock options in the future. The fair value of each SAR grant was estimated on the date of grant using a Black-Scholes option-pricing model with the following assumptions:
| 2018 |  |  |  | 2017 |  | 2016
Risk-free interest rate | 2.58 | % | - |  | 2.87% |  |  | 1.80 | % |  | 1.05 | %
Dividend yield | 1.99 | % | - |  | 2.43% |  |  | 2.27 | % |  | 3.09 | %
Expected life (years) | 5.6 | - | 5.7 |  | 4.6 |  | 4.6
Volatility | 20.95 | % | - |  | 21.20% |  |  | 21.90 | % |  | 26.17 | %
Grant price (1) | $79.75 | - | $82.09 |  | $ | 66.85 |  | $ | 48.28
Fair value at date of grant (1) | $14.58 | - | $15.41 |  | $ | 10.65 |  | $ | 7.80
(1) Updated to reflect the modification of grants in connection with the separation of Apergy on May 9, 2018. Expected volatilities are based on Dover's stock price history, including implied volatilities from traded options on Dover stock. The Company uses historical data to estimate SAR exercise and employee termination patterns within the valuation model. The expected life of SARs granted is derived from the output of the option valuation model and represents the average period of time that SARs granted are expected to be outstanding. The interest rate for periods within the contractual life of the awards is based on the U.S. Treasury yield curve in effect at the time of grant. A summary of activity relating to SARs granted under the 2012 Plan and the predecessor plans for the year ended December 31, 2018 is as follows:
| SARs |  |  |  |
| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years)
Outstanding at January 1, 2018 | 6,573,979 |  | $ | 62.78 |  |
Granted (1) | 757,603 |  | 81.43 |  |
Surrendered upon spin-off (2) | (210,119) |  | 68.36 |  |
Modification upon spin-off (3) | 1,138,008 |  | — |  |
Forfeited / expired | (438,014) |  | 68.76 |  |
Exercised | (2,492,253) |  | 47.17 |  |
Outstanding at December 31, 2018 | 5,329,204 |  | 60.19 |  | 6.2
Exercisable at December 31, 2018 | 2,661,980 |  | $ | 57.26 |  | 4.5
(1) Weighted average grant-date fair value updated to reflect the modification of grants in connection with the separation of Apergy on May 9, 2018. (2) In connection with the spin-off on May 9, 2018, Apergy employees surrendered their outstanding Dover equity awards, which were then converted to Apergy equity awards. (3) Subsequent to the separation of Apergy, the Company modified its outstanding equity awards to employees such that all individuals received an equivalent fair value both before and after the separation, which resulted in a lower exercise price for all outstanding equity awards at the time of modification. The following table summarizes information about outstanding SARs at December 31, 2018:
|  | SARs Outstanding |  |  |  |  |  |  |  | SARs Exercisable |  |  |  |  |  |
Range of Exercise Prices |  | Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Life in Years |  | Aggregate Intrinsic Value |  | Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Life in Years |  | Aggregate Intrinsic Value
$21.89 - $37.79 |  | 135,497 |  | $ | 29.61 |  | 0.9 |  | $ | 5,601 |  | 135,497 |  | $ | 29.61 |  | 0.9 |  | $ | 5,601
$40.54 - $58.69 |  | 2,323,949 |  | $ | 50.13 |  | 5.3 |  | 48,394 |  | 1,233,688 |  | $ | 31.87 |  | 3.6 |  | 23,646
$61.79 - $82.51 |  | 2,869,758 |  | $ | 69.79 |  | 7.3 |  | 10,881 |  | 1,292,795 |  | $ | 65.33 |  | 5.7 |  | 7,368
|  | 5,329,204 |  |  |  |  |  | $ | 64,876 |  | 2,661,980 |  |  |  |  |  | $ | 36,615
Unrecognized compensation expense related to SARs not yet exercisable was $8,315 at December 31, 2018. This cost is expected to be recognized over a weighted average period of 1.8 years. Other information regarding the exercise of SARs is listed below:
| 2018 |  | 2017 |  | 2016
SARs |  |  |  |  |
Fair value of SARs that became exercisable | $ | 12,832 |  | $ | 16,006 |  | $ | 24,843
Aggregate intrinsic value of SARs exercised | $ | 101,365 |  | $ | 44,646 |  | $ | 34,916
Performance Share Awards Performance share awards granted are expensed over the three-year requisite performance and service period. Awards become vested if (1) the Company achieves certain specified internal metrics and (2) the employee remains continuously employed by the Company during the performance period. Partial vesting may occur after separation from service in the case of certain terminations not for cause and for retirements. In 2018, 2017 and 2016, the Company issued performance shares covering 122,459, 57,958 and 79,561 shares, respectively. The performance share awards granted in these years are considered performance condition awards as attainment is based on Dover's performance relative to established internal metrics. The fair value of these awards was determined using Dover's closing stock price on the date of grant. The expected attainment of the internal metrics for these awards is analyzed each reporting period, and the related expense is adjusted up or down based on expected attainment, if that attainment differs from previous estimates. The cumulative effect on current and prior periods of a change in attainment is recognized in Selling, general and administrative expenses in the Consolidated Statements of Earnings in the period of change. The fair value and average attainment used in determining compensation cost of the performance shares issued in 2018, 2017 and 2016 are as follows for the year ended December 31, 2018:
|  |  | Performance shares |  |  |  |
| 2018 |  |  |  | 2017 |  | 2016
Fair value per share at date of grant (1) | $79.75 | - | $82.09 |  | $66.85 |  | $48.28
Average attainment rate reflected in expense | 285.39 % |  |  |  |  | 280.00 | % |  | 34.61 | %
(1) Updated to reflect the modification of grants in connection with the separation of Apergy on May 9, 2018. A summary of activity for performance share awards for the year ended December 31, 2018 is as follows:
| Number of Shares |  | Weighted Average Grant-Date Fair Value
Unvested at January 1, 2018 | 124,467 |  | $ | 65.80
Granted (1) | 122,459 |  | 80.30
Surrendered upon spin-off (2) | (10,683) |  | 67.39
Modification upon spin-off (3) | 26,316 |  | —
Forfeited | (57,015) |  | 67.88
Vested | (60,587) |  | 48.27
Unvested at December 31, 2018 | 144,957 |  | $ | 76.99
(1) Weighted average grant-date fair value updated to reflect the modification of grants in connection with the separation of Apergy on May 9, 2018. (2) In connection with the spin-off on May 9, 2018, Apergy employees surrendered their outstanding Dover equity awards, which were then converted to Apergy equity awards. (3) Subsequent to the separation of Apergy, the Company modified its outstanding equity awards to employees such that all individuals received an equivalent fair value both before and after the separation. Unrecognized compensation expense related to unvested performance shares as of December 31, 2018 was $21,603, which will be recognized over a weighted average period of 1.9 years. Restricted Stock Units The Company also has restricted stock authorized for grant (as part of the 2012 Plan). Under this Plan, common stock of the Company may be granted at no cost to certain officers and key employees. In general, restrictions limit the sale or transfer of these shares during a three-year period, and restrictions lapse proportionately over the three-year period. The Company granted 284,721, 174,203 and 249,263 of restricted stock units in 2018, 2017 and 2016, respectively. The fair value of these awards was determined using Dover's closing stock price on the date of grant. A summary of activity for restricted stock units for the year ended December 31, 2018 is as follows:
| Number of Shares |  | Weighted Average Grant-Date Fair Value
Unvested at January 1, 2018 | 333,886 |  | $ | 70.06
Granted (1) | 284,721 |  | 80.59
Surrendered upon spin-off (2) | (26,762) |  | 70.21
Modification upon spin-off (3) | 47,063 |  | —
Forfeited | (58,436) |  | 69.66
Vested | (189,991) |  | 70.06
Unvested at December 31, 2018 | 390,481 |  | $ | 73.35
(1) Weighted average grant-date fair value updated to reflect the modification of grants in connection with the separation of Apergy on May 9, 2018. (2) In connection with the spin-off on May 9, 2018, Apergy employees surrendered their outstanding Dover equity awards, which were then converted to Apergy equity awards. (3) Subsequent to the separation of Apergy, the Company modified its outstanding equity awards to employees such that all individuals received an equivalent fair value both before and after the separation. Unrecognized compensation expense relating to unvested restricted stock units as of December 31, 2018 was $18,987, which will be recognized over a weighted average period of 1.9 years. Directors' Shares The Company issued the following shares to its non-employee directors under the 2012 Plan as partial compensation for serving as directors of the Company:
| Years ended December 31, |  |  |  |
| 2018 |  | 2017 |  | 2016
Aggregate shares granted | 15,802 |  | 16,231 |  | 21,023
Shares deferred | (9,917) |  | (11,337) |  | (11,882)
Net shares issued | 5,885 |  | 4,894 |  | 9,141

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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