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Note 17 - Share Plans | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Share-based Payment Arrangement [Text Block] |
17. | Share Plans
The Company adopted an equity incentive plan (the 2010 Plan) on February 10, 2010 in connection with its initial public offering. The 2010 Plan, as amended, allowed for granting of up to 9.1 million share-based awards to executives, directors and employees. Awards available for grant under the 2010 Plan included stock options, stock appreciation rights, restricted stock, other share-based awards and performance-based compensation awards. Awards under the 2010 Plan ceased in June 2019. Total share-based compensation expense related to the 2010 Plan, net of estimated forfeitures, was $6,249, $11,681, and $15,738, for the years ended December 31, 2021, 2020 and 2019, respectively, which is recorded in operating expenses in the consolidated statements of comprehensive income. On June 13, 2019, the stockholders of Generac Holdings Inc. approved the Company’s 2019 Equity Incentive Plan (the 2019 Plan). Following the effectiveness of the 2019 Plan, no new awards may be made under the 2010 Plan. The 2019 Plan allows for granting of up to 2.7 million share-based awards to executives, directors and employees. Awards available for grant under the 2019 Plan include stock options, stock appreciation rights, restricted stock, other share-based awards and performance-based compensation awards. Total share-based compensation expense related to the 2019 Plan, net of estimated forfeitures, was $17,705, $9,201 and $956 for the years ended December 31, 2021, 2020 and 2019, respectively, which is recorded in operating expenses in the consolidated statements of comprehensive income. Stock Options - Stock options granted in 2021 have an exercise price between $323.66 per share and $438.83 per share; stock options granted in 2020 have an exercise price between $91.00 per share and $158.89 per share; and stock options granted in 2019 have an exercise price of $52.07 per share. Stock options vest in equal installments over four years, subject to the grantee’s continued employment or service and expire ten years after the date of grant. Stock option exercises can be net-share settled such that the Company withholds shares with value equivalent to the exercise price of the stock option awards plus the employees’ minimum statutory obligation for the applicable income and other employment taxes. Total shares withheld were 8,608, 24,070, and 32,211 for the years ended December 31, 2021, 2020 and 2019, respectively, and were based on the value of the stock on the exercise dates. The net-share settlement has the effect of share repurchases by the Company as they reduce the number of shares that would have otherwise been issued. Employees can also utilize a cashless for cash exercise of stock options, such that all exercised shares will be sold in the market immediately. Cash equivalent to the exercise price of the awards plus the employees’ minimum statutory tax obligations is remitted to the Company, with the remaining cash being transferred to the employee. Total net proceeds from the cashless for cash exercise of stock options were $38,787, $13,089, and $9,395 for the years ended December 31, 2021, 2020 and 2019, respectively, and are reflected as a financing activity in the consolidated statements of cash flows. Total payments made by the Company to the taxing authorities for the employees’ tax obligations related to stock option exercises were $31,680, $7,297, and $3,360 for the years ended December 31, 2021, 2020 and 2019, respectively, and are reflected as a financing activity in the consolidated statements of cash flows. The grant-date fair value of each option grant is estimated using the Black-Scholes-Merton option pricing model. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility is calculated based on an analysis of historic volatility of the Company’s stock price. The average expected life is based on the contractual term of the option using the simplified method. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The compensation expense recognized is net of estimated forfeitures. Forfeitures are estimated based on actual share option forfeiture history and are trued up upon vesting based on actual forfeiture activity. The weighted-average assumptions used in the Black-Scholes-Merton option pricing model for 2021, 2020 and 2019 are as follows:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Weighted average grant date fair value |  | $ | 129.47 |  |  | $ | 35.79 |  |  | $ | 19.33 |
Assumptions: |  |  |  |  |  |  |  |  |  |  |  |
Expected stock price volatility |  |  | 37 | % |  |  | 32 | % |  |  | 33 | %
Risk free interest rate |  |  | 0.45 | % |  |  | 1.56 | % |  |  | 2.52 | %
Expected annual dividend per share |  | $ | - |  |  | $ | - |  |  | $ | - |
Expected life of options (years) |  |  | 6.25 |  |  |  | 6.25 |  |  |  | 6.25 |
A summary of the Company’s stock option activity and related information for the years ended December 31, 2021, 2020 and 2019 is as follows:
|  | Number of Options |  |  | Weighted-Average Exercise Price |  |  | Weighted-Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value ($ in thousands) |
Outstanding as of December 31, 2018 |  |  | 1,521,167 |  |  | $ | 37.70 |  |  |  | 7.0 |  |  | $ | 19,212 |
Granted |  |  | 369,779 |  |  |  | 52.07 |  |  |  |  |  |  |  |  |
Exercised |  |  | (263,250 | ) |  |  | 30.75 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (35,010 | ) |  |  | 43.79 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2019 |  |  | 1,592,686 |  |  |  | 42.04 |  |  |  | 6.9 |  |  | $ | 93,242 |
Granted |  |  | 173,650 |  |  |  | 102.32 |  |  |  |  |  |  |  |  |
Exercised |  |  | (216,196 | ) |  |  | 39.88 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (21,450 | ) |  |  | 50.25 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2020 |  |  | 1,528,690 |  |  |  | 49.08 |  |  |  | 6.3 |  |  | $ | 272,553 |
Granted |  |  | 70,392 |  |  |  | 335.70 |  |  |  |  |  |  |  |  |
Exercised |  |  | (229,921 | ) |  |  | 45.95 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (27,030 | ) |  |  | 63.27 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2021 |  |  | 1,342,131 |  |  |  | 64.29 |  |  |  | 5.5 |  |  | $ | 386,069 |
Exercisable as of December 31, 2021 |  |  | 896,456 |  |  |  | 42.04 |  |  |  | 4.4 |  |  | $ | 277,794 |
As of December 31, 2021, there was $12,829 of total unrecognized compensation cost, net of expected forfeitures, related to unvested options. The cost is expected to be recognized over the remaining service period, having a weighted-average period of 2.6 years. Total share-based compensation cost related to the stock options for the years ended December 31, 2021, 2020 and 2019 was $6,462, $5,860, and $5,597, respectively, which is recorded in operating expenses in the consolidated statements of comprehensive income. Restricted Stock – Restricted stock awards vest in equal installments over three years, subject to the grantee’s continued employment or service. Certain restricted stock awards also include performance shares, whereby the number of performance shares that can be earned are contingent upon Company performance measures over a three-year period. Performance measures are based on a weighting of a number of financial metrics, from which grantees may earn from 0% to 200% of their target performance share award. The performance period for the 2019 awards covers the years 2019 through 2021, the performance period for the 2020 awards covers the years 2020 through 2022, and the performance period for the 2021 awards covers the years 2021 through 2023. The Company estimates the number of performance shares that will vest based on projected financial performance. The fair value of restricted awards is determined based on the market value of the Company's shares on the grant date. The fair market value of the restricted awards at the time of the grant is amortized to expense over the period of vesting. The compensation expense recognized for restricted share awards is net of estimated forfeitures and is trued up upon vesting based on actual forfeiture activity. Restricted stock vesting is net-share settled such that, upon vesting, the Company withholds shares with value equivalent to the employees’ minimum statutory tax obligation, and then pays the cash to the taxing authorities on behalf of the employees. In effect, the Company repurchases these shares and classifies them as treasury stock. Total shares withheld were 80,583, 70,718, and 55,953 for the years ended December 31, 2021, 2020 and 2019, respectively, and were based on the value of the stock on the vesting dates. Total payments made by the Company to the taxing authorities for the employees’ tax obligations related to restricted stock vesting were $27,223, $7,613, and $3,078 for the years ended December 31, 2021, 2020 and 2019, respectively, and are reflected as a financing activity within the consolidated statements of cash flows. A summary of the Company's restricted stock activity for the years ended December 31, 2021, 2020 and 2019 is as follows:
|  | Shares |  |  | Weighted-Average Grant-Date Fair Value |
Non-vested as of December 31, 2018 |  |  | 425,996 |  |  | $ | 40.50 |
Granted |  |  | 265,255 |  |  |  | 62.38 |
Vested |  |  | (184,628 | ) |  |  | 38.78 |
Forfeited |  |  | (14,986 | ) |  |  | 44.23 |
Non-vested as of December 31, 2019 |  |  | 491,637 |  |  |  | 52.84 |
Granted |  |  | 183,868 |  |  |  | 95.14 |
Vested |  |  | (200,390 | ) |  |  | 45.10 |
Forfeited |  |  | (18,921 | ) |  |  | 56.58 |
Non-vested as of December 31, 2020 |  |  | 456,194 |  |  |  | 68.42 |
Granted |  |  | 126,339 |  |  |  | 223.09 |
Vested |  |  | (202,327 | ) |  |  | 58.99 |
Forfeited |  |  | (14,241 | ) |  |  | 138.64 |
Non-vested as of December 31, 2021 |  |  | 365,965 |  |  |  | 124.25 |
As of December 31, 2021, there was $35,104 of unrecognized compensation cost, net of expected forfeitures, related to non-vested restricted stock awards. That cost is expected to be recognized over the remaining service period, having a weighted-average period of 2.2 years. Total share-based compensation cost related to the restricted stock for the years ended December 31, 2021, 2020 and 2019, inclusive of performance shares, was $17,492, $15,022, and $11,097, respectively, which is recorded in operating expenses in the consolidated statements of comprehensive income. During 2021, 2020 and 2019, 4,677, 15,275, and 22,544 shares of stock, respectively, were granted to certain members of the Company’s Board of Directors as a component of their compensation for their service on the Board, all of which were fully vested at time of grant. A non-employee director can elect to receive his or her director fees in the form of deferred stock units, which voluntarily defers the issuance of the related shares granted until the director separates from the Company or a triggering event occurs. 3,160, 10,528, and 16,604 of deferred stock units are included in the shares of stock granted to certain members of the Company’s Board of Directors for the years 2021, 2020, and 2019, respectively. Total share-based compensation cost for these share grants in 2021, 2020 and 2019 was $1,579, $1,558, and $1,391, respectively, which is recorded in operating expenses in the consolidated statements of comprehensive income.

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