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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation The Company maintains two share-based compensation plans for executives, non-employee directors and certain key employees that authorize the granting of stock options, restricted stock, performance share units and other types of awards consistent with the purpose of the plans. The number of shares authorized for issuance under the Company’s plans as of December 31, 2021 totaled 15.6 million, of which 2.4 million shares were available for future issuance. The Company’s policy is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award. The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Board of Directors based on the recommendation from the Compensation Committee. Stock Options Stock options granted under the Company’s plans are generally non-qualified and are granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The fair value of each option grant is estimated on the date of the grant using the Binomial lattice option pricing model (for options granted before March 2021) or the Black Scholes valuation model (for options granted after February 2021). The adoption of the Black Scholes model in 2021 was driven by a historical review of option exercise history, which more closely aligned with the methodology of the Black Scholes model. The majority of the options issued to employees vest ratably over four years, with vesting beginning one year from the date of grant, and generally expire 10 years from the date of grant. Weighted average option fair values and assumptions for the periods specified are as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
Weighted average fair value of grants | $38.88 |  | $34.22 |  | $35.15
Dividend yield | 1.01% |  | 1.15% |  | 1.18%
Volatility | 23.78% |  | 22.04% |  | 24.77%
Risk-free interest rate | 0.12% - 1.54% |  | 1.39% - 1.66% |  | 2.53% - 3.04%
Expected life (in years) | 5.70 |  | 5.80 |  | 5.87
The assumptions are as follows: •The Company estimated volatility using its historical share price performance over the contractual term of the option (for the Binomial lattice option pricing model) or over the expected life of the option (for the Black Scholes valuation model). •The Company uses historical data to estimate the expected life of the option. The expected life assumption for options granted before March 2021 is an output of the Binomial lattice option pricing model, which incorporates vesting provisions, rate of voluntary exercise and rate of post-vesting termination over the contractual life of the option to define expected employee behavior. The expected life assumption for options granted after March 2021 is based on IDEX’s own exercise and cancellation history, adjusted for current vesting schedules. •The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option (for the Binomial lattice option pricing model) or commensurate with the expected life of the option (for the Black Scholes valuation model). For options granted before March 2021, the Company presents the range of risk-free one-year forward rates, derived from the U.S. treasury yield curve, utilized in the Binomial lattice option pricing model. For options granted after March 2021, the Company presents the spot rate used in the Black Scholes valuation model. •The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option. A summary of the Company’s stock option activity as of December 31, 2021, and changes during the year ended December 31, 2021 is presented as follows:
| Shares |  | Weighted Average Price |  | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value
| (Dollars in millions except weighted average price)
Stock Options |  |  |  |  |  |  |
Outstanding at January 1, 2021 | 963,726 |  |  | $ | 125.70 |  |  | 6.94 |  | $ | 70.8 |
Granted | 279,785 |  |  | 198.29 |  |  |  |  |
Exercised | (186,897) |  |  | 105.22 |  |  |  |  |
Forfeited/Expired | (48,028) |  |  | 168.36 |  |  |  |  |
Outstanding at December 31, 2021 | 1,008,586 |  |  | $ | 147.60 |  |  | 6.97 |  | $ | 89.5 |
Vested and expected to vest at December 31, 2021 | 967,228 |  |  | $ | 145.97 |  |  | 6.90 |  | $ | 87.4 |
Exercisable at December 31, 2021 | 444,057 |  |  | $ | 108.60 |  |  | 5.22 |  | $ | 56.7 |
The intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the end of the period and the grant price. The total intrinsic value of options exercised in 2021, 2020 and 2019 was $21.4 million, $41.3 million and $49.5 million, respectively. In 2021, 2020 and 2019, cash received from options exercised was $19.7 million, $44.6 million and $38.8 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $4.5 million, $8.7 million and $10.4 million, respectively. Total compensation cost for stock options is recorded in the Consolidated Statements of Income as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In millions)
Cost of goods sold | $ | 0.5 |  |  | $ | 0.5 |  |  | $ | 0.5 |
Selling, general and administrative expenses | 8.0 |  |  | 7.6 |  |  | 8.7 |
Total expense before income taxes | 8.5 |  |  | 8.1 |  |  | 9.2 |
Income tax benefit | (0.8) |  |  | (0.9) |  |  | (1.2) |
Total expense after income taxes | $ | 7.7 |  |  | $ | 7.2 |  |  | $ | 8.0 |
As of December 31, 2021, there was $9.7 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.2 years. Restricted Stock Restricted stock awards generally cliff vest after three years for employees and non-employee directors. Unvested restricted stock carries dividend and voting rights and the sale of the shares is restricted prior to the date of vesting. Dividends are paid on restricted stock awards and their fair value is equal to the market price of the Company’s stock at the date of the grant. A summary of the Company’s restricted stock activity as of December 31, 2021, and changes during the year ending December 31, 2021 is as follows:
Restricted Stock | Shares |  | Weighted-Average Grant Date Fair Value
Unvested at January 1, 2021 | 111,300 |  |  | $ | 147.13 |
Granted | 39,530 |  |  | 206.53 |
Vested | (34,680) |  |  | 140.73 |
Forfeited | (8,675) |  |  | 170.22 |
Unvested at December 31, 2021 | 107,475 |  |  | $ | 169.58 |
Total compensation cost for restricted stock is recorded in the Consolidated Statements of Income as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In millions)
Cost of goods sold | $ | 0.4 |  |  | $ | 0.3 |  |  | $ | 0.3 |
Selling, general and administrative expenses | 5.1 |  |  | 3.9 |  |  | 4.5 |
Total expense before income taxes | 5.5 |  |  | 4.2 |  |  | 4.8 |
Income tax benefit | (1.1) |  |  | (0.9) |  |  | (0.9) |
Total expense after income taxes | $ | 4.4 |  |  | $ | 3.3 |  |  | $ | 3.9 |
As of December 31, 2021, there was $6.8 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.0 year. Cash-Settled Restricted Stock The Company also maintains a cash-settled share based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. Cash-settled restricted stock awards are recorded at fair value on a quarterly basis using the market price of the Company’s stock on the last day of the quarter. Dividend equivalents are paid on certain cash-settled restricted stock awards. A summary of the Company’s unvested cash-settled restricted stock activity as of December 31, 2021, and changes during the year ending December 31, 2021 is as follows:
Cash-Settled Restricted Stock | Shares |  | Weighted-Average Fair Value
Unvested at January 1, 2021 | 63,940 |  |  | $ | 199.20 |
Granted | 22,385 |  |  | 198.85 |
Vested | (22,921) |  |  | 199.78 |
Forfeited | (5,455) |  |  | 236.32 |
Unvested at December 31, 2021 | 57,949 |  |  | $ | 236.32 |
Total compensation cost for cash-settled restricted stock is recorded in the Consolidated Statements of Income as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In millions)
Cost of goods sold | $ | 0.7 |  |  | $ | 0.9 |  |  | $ | 1.2 |
Selling, general and administrative expenses | 4.3 |  |  | 3.7 |  |  | 4.1 |
Total expense before income taxes(1) | 5.0 |  |  | 4.6 |  |  | 5.3 |
Income tax benefit | (0.4) |  |  | (0.4) |  |  | (0.5) |
Total expense after income taxes | $ | 4.6 |  |  | $ | 4.2 |  |  | $ | 4.8 |
(1) The 2020 and 2019 amounts were previously included in Share-based compensation expense on the Consolidated Statements of Cash Flows. These amounts have been reclassified to Accrued expenses and Other-net such that the amounts presented in Share-based compensation expense on the Consolidated Statements of Cash Flows relate solely to non-cash awards for all years presented. There was no change to the reported amount of net cash flows provided by operating activities for either 2020 or 2019 as a result of the reclassification. At December 31, 2021 and 2020, the Company has accrued $5.9 million and $5.4 million, respectively, for cash-settled restricted stock in Accrued expenses in the Consolidated Balance Sheets and has accrued $2.8 million and $2.9 million, respectively, for cash-settled restricted stock in Other non-current liabilities in the Consolidated Balance Sheets. Performance Share Units Beginning in 2013, the Company granted 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 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 companies in the Russell Midcap Index (for awards granted from 2016 through 2019) or the S&P 500 Index (for awards granted in 2020 and 2021) 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 250 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 peer 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. Payments made at the end of the award period will be in the form of stock for performance share units and will be in cash for dividend equivalents. The Company’s performance share units are market condition awards, have been assessed at fair value on the date of grant using a Monte Carlo simulation model and are expensed ratably over the three-year term of the awards. The Company granted 29,020, 42,690 and 56,860 performance share units in 2021, 2020 and 2019, respectively. Weighted average performance share unit fair values and assumptions for the period specified are as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
Weighted average fair value of grants | $247.49 |  | $224.14 |  | $207.26
Dividend yield | —% |  | —% |  | —%
Volatility | 28.60% |  | 19.50% |  | 19.11%
Risk-free interest rate | 0.33% |  | 1.30% |  | 2.49%
Expected life (in years) | 2.93 |  | 2.94 |  | 2.83
The assumptions are as follows: •The Company estimated volatility using its historical share price performance over the remaining performance period as of the grant date. •The Company uses a Monte Carlo simulation model that uses an expected life commensurate with the performance period. As a result, the expected life of the performance share units was assumed to be the period from the grant date to the end of the performance period. •The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term commensurate with the remaining performance period. •Total Shareholder Return is determined assuming that dividends are reinvested in the issuing entity over the performance period, which is mathematically equivalent to utilizing a 0% dividend yield. A summary of the Company’s performance share unit activity as of December 31, 2021, and changes during the year ending December 31, 2021, is as follows:
Performance Share Units | Shares |  | Weighted-Average Grant Date Fair Value
Unvested at January 1, 2021 | 58,695 |  |  | $ | 218.16 |
Granted | 29,020 |  |  | 247.49 |
Vested | (29,840) |  |  | 212.46 |
Forfeited | (5,850) |  |  | 212.44 |
Unvested at December 31, 2021 | 52,025 |  |  | $ | 236.75 |
Based on the Company’s relative total shareholder return rank during the three year period ended December 31, 2021, the Company achieved a 143% payout factor and issued 42,688 common shares in February 2022 for awards that vested in 2021. Total compensation cost for performance share units is as follows:
| Years Ended December 31,
| 2021 |  | 2020 |  | 2019
| (In millions)
Cost of goods sold | $ | — |  |  | $ | — |  |  | $ | — |
Selling, general and administrative expenses | 6.4 |  |  | 2.6 |  |  | 8.4 |
Total expense before income taxes | 6.4 |  |  | 2.6 |  |  | 8.4 |
Income tax benefit | (0.3) |  |  | (0.2) |  |  | (0.6) |
Total expense after income taxes | $ | 6.1 |  |  | $ | 2.4 |  |  | $ | 7.8 |
As of December 31, 2021, there was $4.7 million of total unrecognized compensation cost related to performance shares that is expected to be recognized over a weighted-average period of 0.8 years.

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