15. Share-Based Compensation

During the six months ended June 30, 2013, the Company granted approximately 0.6 million stock options and 0.2 million unvested shares. During the six months ended June 30, 2012, the Company granted approximately 0.7 million stock options and 0.2 million unvested shares.

Beginning in 2013, the Company provides performance share units to selected key employees that may be earned based on IDEX total shareholder return over the three-year period following the date of grant. Performance share units (referred to as “TSR awards”) are expected to be made annually and are paid out at the end of a three-year period based on the Company’s performance. Performance is measured by determining the percentile rank of the total shareholder return of IDEX common stock in relation to the total shareholder return of the S&P Midcap 400 Industrial Group for the three-year period following the date of grant. The payment of awards following the three-year award period will be based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0 percent to 200 percent of the initial grant. A target payout of 100 percent is earned if total shareholder return is equal to the 50^th percentile of the S&P Midcap 400 Industrial Group. Performance share units earn dividend equivalents for the award period, which will be paid to participants with the award payout at the end of the period based on the actual number of performance share units that are earned. Any payments made at the end of the award period will be in the form of stock. During the six months ended June 30, 2013, the Company granted approximately 0.1 million performance share units.

Weighted average performance share unit fair values and assumptions for the period specified are disclosed below. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.


		Three and Six Months Ended June 30, 2013
Weighted average fair value of performance share units		$50.45
Dividend yield		0.00%
Volatility		28.99%
Risk-free forward interest rate		0.40%
Expected life (in years)		2.87

Weighted average option fair values and assumptions for the periods specified are disclosed below. The fair value of each option grant was estimated on the date of grant using the Binomial lattice option pricing model.


	Three Months Ended June 30,
	2013	2012
Weighted average fair value of option grants	$ 13.28	$ 11.23
Dividend yield	1.51%	1.83%
Volatility	30.76%	31.91%
Risk-free forward interest rate	0.14% - 3.94%	0.19% - 3.99%
Expected life (in years)	5.84	5.92


	Six Months Ended June 30,
	2013	2012
Weighted average fair value of option grants	$ 12.85	$ 11.44
Dividend yield	1.57%	1.58%
Volatility	30.94%	32.01%
Risk-free forward interest rate	0.17% - 4.10%	0.17% - 3.98%
Expected life (in years)	5.87	5.98

The Company’s policy is to recognize compensation cost on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s general policy is to issue newly issued shares of common stock to satisfy stock option exercises, grants of unvested shares and vesting of performance share units.

Total compensation cost for stock options is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In thousands)
Cost of goods sold	$	99		$	189		$	291		$	482
Selling, general and administrative expenses		1,253			1,462			3,421			3,428

Total expense before income taxes		1,352			1,651			3,712			3,910
Income tax benefit		(445	)		(492	)		(1,182	)		(1,200	)

Total expense after income taxes	$	907		$	1,159		$	2,530		$	2,710

Total compensation cost for the unvested shares is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
	(In thousands)
Cost of goods sold	$	212		$	197		$	614		$	603
Selling, general and administrative expenses		2,098			1,667			4,758			3,663

Total expense before income taxes		2,310			1,864			5,372			4,266
Income tax benefit		(609	)		(477	)		(1,319	)		(1,140	)

Total expense after income taxes	$	1,701		$	1,387		$	4,053		$	3,126

Total compensation cost for performance share units is as follows:


	Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
	(In thousands)
Cost of goods sold	$	0		$	0
Selling, general and administrative expenses		216			405

Total expense before income taxes		216			405
Income tax benefit		(77	)		(114	)

Total expense after income taxes	$	139		$	291

Classification of stock compensation cost within the Consolidated Statements of Operations is consistent with classification of cash compensation for the same employees.

As of June 30, 2013, there was $11.3 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.5 years, $13.9 million of total unrecognized compensation cost related to unvested shares/units that is expected to be recognized over a weighted-average period of 1.2 years, and $2.1 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.4 years.

A summary of the Company’s stock option activity as of June 30, 2013, and changes during the six months ended June 30, 2013 is presented in the following table:


Stock Options	Shares			Weighted Average Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		3,223,742		$	33.16		6.37	$	43,106,153
Granted		619,385			50.27
Exercised		(813,702	)		28.60
Forfeited/Expired		(62,421	)		42.10

Outstanding at June 30, 2013		2,967,004		$	37.79		6.95	$	47,524,458

Vested and expected to vest at June 30, 2013		2,323,450		$	37.33		6.71	$	38,284,375
Exercisable at June 30, 2013		1,501,547		$	31.12		5.24	$	34,065,352