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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-Based Compensation |
17) | Stock-Based Compensation
Employee Stock Purchase Plans The 2014 Employee Stock Purchase Plan (“2014 ESPP”) was adopted by the Board of Directors on February 10, 2014 and approved by the Company’s stockholders on May 5, 2014. The 2014 ESPP authorizes the issuance of up to an aggregate of 2,500,000 shares of common stock to participating employees. Offerings under the 2014 ESPP commence on June 1 and December 1 and terminate, respectively, on November 30 and May 31. Under the 2014 ESPP, eligible employees can purchase shares of common stock through payroll deductions up to 10% of their compensation, up to a defined maximum annual amount. The price at which an employee’s purchase option is exercised for each offering period is the lower of (1) 90% of the closing price on the common stock on the Nasdaq Global Select Market on the day that each offering commences, or (2) 90% of the closing price on the day that the offering terminates. During 2020, 2019 and 2018, the Company issued 102,719, 126,407, and 105,672 shares, respectively, of common stock to employees who participated in the 2014 ESPP at exercise prices of $95.07 and $93.77 per share in 2020, $64.31 and $63.78 per share in 2019, and $84.11 and $70.61 per share in 2018. As of, December 31, 2020 there were 1,697,604 shares reserved for future issuance under the 2014 ESPP. Equity Incentive Plans The Company grants RSUs to employees and directors under the 2014 Stock Incentive Plan (the “2014 Plan”). The 2014 Plan is administered by the Compensation Committee of the Company’s Board of Directors. The 2014 Plan is intended to attract and retain employees and directors, and to provide an incentive for these individuals to assist the Company to achieve long-range performance goals and to enable these individuals to participate in the long-term growth of the Company. The 2014 Plan was adopted by the Board of Directors on February 10, 2014 and was approved by the Company’s stockholders on May 5, 2014. Up to 18,000,000 shares of common stock (subject to adjustment in the event of stock splits and other similar events) may be issued pursuant to awards granted under the 2014 Plan. The Company may grant options, RSUs, restricted stock, SARs and other stock-based awards to employees, officers, directors, consultants and advisors under the 2014 Plan. Any full-value awards granted under the 2014 Plan will be counted against the shares reserved for issuance under the 2014 Plan as 2.4 shares for each share of common stock subject to such award. A ny award granted under the 2014 Plan that is not a full-value award (including, without limitation, any option or SAR) will be counted against the shares reserved for issuance under the plan as one share for each one share of common stock subject to such award. “Full-value award” means any RSU, or other stock-based award with a per share price or per unit purchase price lower than 100% of fair market value on the date of grant. To the extent a share that was subject to an award that counted as one share is returned to the 2014 Plan, each applicable share reserve will be credited with one share. To the extent that a share that was subject to an award that counts as 2.4 shares is returned to the 2014 Plan, each applicable share reserve will be credited with 2.4 shares. As of December 31, 2020, there were 12,690,974 shares reserved for future issuance under the 2014 Plan. Time-based RSUs granted to employees in 2020, 2019 and 2018 generally vest 33% per year beginning on the first anniversary of the date of grant. Performance-based RSUs granted to the Company’s executive officers in 2020 were based on the Company’s achievement of non-GAAP EBITDA for 2020, defined as GAAP operating income excluding any charges or income not related to the operating performance of the Company plus depreciation and stock compensation expense, set at varying revenue levels. Performance-based RSUs granted to the Company’s executive officers in 2019 and 2018 were based on the Company’s achievement of non-GAAP cash flows from operations for the relevant year, defined as GAAP net income plus depreciation, amortization and non-cash stock-based compensation and excluding any charges or income not related to the operating performance of the Company, set at varying revenue levels. The final number of performance-based RSUs that vest vary based on the level of performance achieved, from 0% to 150% of the underlying target shares. The performance-based RSUs earned will vest 33% per year beginning on the first anniversary of the date of grant. RSUs granted to certain employees who meet certain retirement eligibility requirements will vest in full upon each such employee’s retirement and are expensed immediately. RSUs granted to directors generally vest at the earliest of (1) one day prior to the next annual meeting, (2) 13 months from date of grant, or (3) the effective date of a change in control of the Company. In connection with the completion of the Newport Merger, the Company assumed:
| • | all RSUs granted under any Newport equity plan that were outstanding immediately prior to the effective time of the Newport Merger, and as to which shares of Newport common stock were not fully distributed in connection with the closing of the Newport Merger (the “Newport RSUs”), and
| • | all SARs granted under any Newport equity plan, whether vested or unvested, that were outstanding immediately prior to the effective time of the Newport Merger (the “Newport SARs”).
As of the effective time of the Newport Merger, based on a formula provided in the merger agreement, (a) the Newport RSUs were converted automatically into RSUs with respect to 360,674 shares of the Company’s common stock (the “Newport Assumed RSUs”), and (b) the Newport SARs were converted automatically into SARs with respect to 899,851 shares of the Company’s common stock (the “Newport Assumed SARs”). Included in the total number of Newport Assumed RSUs were 36,599 RSUs for outside directors that were part of the Newport Deferred Compensation Plan (the “Newport DC Plan”), from which 5,561 shares were released in May 2018, 967 shares were released in May 2019 and 976 shares were released in May 2020. As of December 31, 2020, 4,875 Company RSUs remained outstanding under the Newport DC Plan, and an additional 35 shares of the Company’s common stock were added to the Newport DC Plan due to reinvested dividends. As of December 31, 2019, 5,794 Company RSUs remained outstanding under the Newport DC Plan, and an additional 57 shares of the Company’s common stock were added to the Newport DC Plan due to reinvested dividends. These Newport Assumed RSUs will not become issued shares until their respective release dates. The shares of the Company’s common stock that are subject to the Newport Assumed SARs and the Newport Assumed RSUs are issuable pursuant to the 2014 Plan. The 1,260,525 shares of the Company’s common stock were issuable pursuant to the Newport Assumed RSUs and the Newport Assumed SARs under the 2014 Plan were registered under the Securities Act of 1933, as amended (“Securities Act”), on a registration statement on Form S-8. These shares did not include the 18,000,000 shares of the Company’s common stock reserved for issuance under the 2014 Plan and previously registered under the Securities Act on a registration statement on Form S-8. In connection with the completion of the ESI Merger, the Company assumed:
| • | all RSUs that vest based solely on the satisfaction of service conditions, granted under any ESI equity plan, arrangement or agreement (“ESI Plan”) that were outstanding immediately prior to the effective time of the ESI Merger, and as to which shares of ESI common stock were not fully distributed in connection with the closing of the ESI Merger (the “ESI Time-Based RSUs”),
| • | all RSUs that were granted subject to vesting based on both the achievement of performance goals and the satisfaction of service conditions granted under any ESI Plan that were outstanding immediately prior to the effective time of the ESI Merger (the “ESI Performance-Based RSUs and collectively with the ESI Time-Based RSUs, the “ESI RSUs”), and
| • | all SARs granted under any ESI Plan, whether vested or unvested, that were outstanding immediately prior to the effective time of the ESI Merger and held by an individual who was a service provider of ESI as of the date on which the effective time of the ESI Merger occurred (the “ESI SARs”).
As of the effective time of the ESI Merger, based on a formula in the merger agreement, (a) such ESI RSUs were converted automatically into RSUs with respect to 736,133 shares of the Company’s common stock (the “ESI Assumed RSUs”), and (b) such ESI SARs were converted automatically into SARs with respect to 12,787 shares of the Company’s common stock (the “ESI Assumed SARs”). Included in the total number of ESI Assumed RSUs are 326,283 shares of the Company’s common stock for employees and outside directors that are part of the ESI Deferred Compensation plan (the “ESI DC Plan”), from which 300,654 shares were released in January 2020. As of December 31, 2020, 31,458 Company RSUs remained outstanding under the ESI DC Plan, and an additional 203 shares of the Company’s common stock were added to the ESI DC Plan due to reinvested dividends. As of December 31, 2019, 327,328 Company RSUs remained outstanding under the ESI DC Plan, and an additional 3,086 shares of the Company’s common stock were added to the ESI DC Plan due to reinvested dividends. These shares will not become issued shares until their respective release dates. The shares of the Company’s common stock that are subject to the ESI Assumed RSUs and the ESI Assumed SARs are issuable pursuant to the 2014 Plan. The 748,920 shares of the Company’s common stock were issuable pursuant to the ESI Assumed RSUs and the ESI Assumed SARs under the 2014 Plan were registered under the Securities Act on a registration statement on Form S-8. These shares did not include the 18,000,000 shares of the Company’s common stock reserved for issuance under the 2014 Plan and the 1,260,525 shares of the Company’s common stock that were issuable in connection with the Newport Merger, all of which shares were previously registered under the Securities Act on a registration statement on Form S-8. The following table presents the activity for RSUs under the 2014 Plan, including the Newport Assumed RSUs and the ESI Assumed RSUs:
|  | Year Ended December 31, 2020 |
|  | RSUs |  |  | Weighted Average Grant Date Fair Value |
RSUs — beginning of period |  |  | 1,102,533 |  |  | $ | 85.93 |
Accrued dividend shares |  |  | 629 |  |  | $ | 114.35 |
Granted |  |  | 309,435 |  |  | $ | 98.72 |
Vested |  |  | (737,007 | ) |  | $ | 85.32 |
Forfeited or expired |  |  | (69,504 | ) |  | $ | 85.71 |
RSUs — end of period |  |  | 606,086 |  |  | $ | 93.26 |
The following table presents the activity for SARs under the 2014 Plan, including the Newport Assumed SARs and the ESI Assumed SARs:
|  | Year Ended December 31, 2020 |
|  | Outstanding and Exercisable SARs |  |  | Weighted Average Base Value |
SARs — beginning of period |  |  | 108,854 |  |  | $ | 29.05 |
Exercised |  |  | (55,865 | ) |  | $ | 27.76 |
Forfeited or expired |  |  | (1,400 | ) |  | $ | 22.39 |
SARs — end of period |  |  | 51,589 |  |  | $ | 30.64 |
At December 31, 2020, the Company’s outstanding and exercisable SARs, the weighted-average base value, the weighted average remaining contractual life and the aggregate intrinsic value thereof, were as follows:
|  | Number of Shares |  |  | Weighted Average Base Value |  |  | Weighted Average Remaining Contractual Life (years) |  |  | Aggregate Intrinsic Value |
SARs outstanding and exercisable |  |  | 51,589 |  |  | $ | 30.64 |  |  |  | 1.0 |  |  | $ | 6.2 |
The Company settles employee RSU vesting and SARs exercises with newly issued shares of the Company’s common stock. Stock-Based Compensation Expense The Company recognized the full impact of its share-based payment plans in the consolidated statements of operations and comprehensive income. The following table reflects the effect of recording stock-based compensation:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Stock-based compensation expense by type of award: |  |  |  |  |  |  |  |  |  |  |  |
RSUs |  | $ | 27.0 |  |  | $ | 47.0 |  |  | $ | 24.9 |
SARs |  |  | — |  |  |  | 0.1 |  |  |  | 0.1 |
Employee stock purchase plan |  |  | 2.5 |  |  |  | 2.1 |  |  |  | 2.3 |
Total stock-based compensation |  |  | 29.5 |  |  |  | 49.2 |  |  |  | 27.3 |
Windfall tax effect on stock-based compensation |  |  | (2.2 | ) |  |  | (2.2 | ) |  |  | (8.3 | )
Net effect on net income |  | $ | 27.3 |  |  | $ | 47.0 |  |  | $ | 19.0 |
Effect on net earnings per share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.50 |  |  | $ | 0.86 |  |  | $ | 0.35 |
Diluted |  | $ | 0.49 |  |  | $ | 0.85 |  |  | $ | 0.35 |
The pre-tax effect within the consolidated statements of operations and comprehensive income of recording stock-based compensation was as follows:
|  | Years Ended December 31, |
|  | 2020 |  |  | 2019 |  |  | 2018 |
Cost of revenues |  | $ | 4.2 |  |  | $ | 2.8 |  |  | $ | 3.5 |
Research and development expense |  |  | 4.0 |  |  |  | 3.8 |  |  |  | 2.8 |
Selling, general and administrative expense |  |  | 20.4 |  |  |  | 20.5 |  |  |  | 21.0 |
Acquisition and integration related expense |  |  | 0.9 |  |  |  | 21.7 |  |  |  | — |
Restructuring related expense |  |  | — |  |  |  | 0.4 |  |  |  | — |
Total pre-tax stock-based compensation expense |  | $ | 29.5 |  |  | $ | 49.2 |  |  | $ | 27.3 |
Valuation Assumptions The Company determines the fair value of RSUs based on the closing market price of the Company’s common stock on the date of the award and estimates the fair value of SARs and employee stock purchase plan rights using the Black-Scholes valuation model. Such values are recognized as expense on a straight-line basis for time-based awards and using the accelerated graded vesting method for performance-based awards, both over the requisite service periods. The weighted average fair value per share of employee stock purchase plan rights granted in 2020, 2019 and 2018 was $23.88, $16.04, and $21.74, respectively. The fair value of employee stock purchase plan rights was estimated using the Black-Scholes option-pricing model with the following weighted average assumptions:
|  | Years Ended December 31, |
Employee stock purchase plan rights: |  | 2020 |  |  | 2019 |  |  | 2018 |
Expected life (years) |  |  | 0.5 |  |  |  | 0.5 |  |  |  | 0.5 |
Risk-free interest rate |  |  | 0.9 | % |  |  | 2.4 | % |  |  | 1.8 | %
Expected volatility |  |  | 45.4 | % |  |  | 38.7 | % |  |  | 38.6 | %
Expected annual dividends per share |  | $ | 0.80 |  |  | $ | 0.80 |  |  | $ | 0.76 |
Expected volatilities for 2020, 2019 and 2018 are based on a combination of implied and historical volatilities of the Company’s common stock; the expected life represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The total intrinsic value of SARs exercised and the total fair value of RSUs vested during 2020, 2019 and 2018 was approximately $86.2, $68.1 and $61.6, respectively. As of December 31, 2020, the unrecognized compensation cost related to RSUs and SARs was approximately $31.5 and will be recognized over an estimated weighted average amortization period of 1.0 year.

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