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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2022
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | 16) Stock-Based Compensation Employee Stock Purchase Plans The 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 2.5 shares of common stock to participating employees. Offerings under the 2014 ESPP commence on June 1 and December 1 and terminate on November 30 and May 31, respectively. 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. The Company issued 0.1 shares of common stock during each of 2022, 2021 and 2020 to employees who participated in the 2014 ESPP at exercise prices of $111.15 and $75.47 per share in 2022, $126.00 and $136.94 per share in 2021, and $95.07 and $93.77 per share in 2020. As of December 31, 2022 there were 1.5 shares reserved for future issuance under the 2014 ESPP. Equity Incentive Plans Prior to May 10, 2022, the Company granted RSUs to employees and directors under the 2014 Stock Incentive Plan (the “2014 Plan”). Following shareholder approval of the 2022 Stock Incentive Plan (the “2022 Plan,” and together with the 2014 Plan, the “Plans”) on May 10, 2022, the Company discontinued granting RSUs to employees and directors under the 2014 Plan and began granting them under the 2022 Plan. The Plans are administered by the Compensation Committee of the Company's Board of Directors. The Plans are 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 enable these individuals to participate in the long-term growth of the Company. Up to 6.6 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 2022 Plan. The Company may grant options, RSUs, restricted stock, stock appreciation rights (“SARs”) and other stock-based awards to employees, officers, directors, consultants and advisors under the 2022 Plan. Any full-value awards granted under the 2022 Plan will be counted against the shares reserved for issuance under the 2022 Plan as 1.91 shares for each share of common stock subject to such award. Any award granted under the 2022 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 on a one-for-one basis of common stock subject to such award. “Full-value award” means any restricted stock, RSUs, 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 an award that is not a full-value award is returned to the 2022 Plan, the share reserve under the 2022 Plan will be credited with one share. To the extent that a full-value award is returned to the 2022 Plan, the share reserve under the 2022 Plan will be credited with 1.91 shares. As of December 31, 2022, there were 5.8 shares reserved for future issuance under the 2022 Plan. Time-based RSUs granted to employees 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 2022, 2021 and 2020 were based on the Company’s achievement of adjusted EBITDA for each respective year, 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. The final number of performance-based RSUs that vest varies based on the level of performance achieved from 0% to 150% of the underlying target shares granted in 2020 and from 0% to 200% of the underlying target shares granted in 2021 and 2022. The performance-based RSUs earned generally 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 Atotech Acquisition, all Atotech time-based RSUs and performance-based RSU awards outstanding immediately prior to the acquisition were cancelled and replaced with the Company's time-based RSUs under the 2022 Plan in accordance with the Implementation Agreement. These RSUs are subject to the terms and conditions of the 2022 Plan and the related RSU agreements. The following tables present the activity for the RSUs under the Plans:
|  | Year ended December 31, 2022 |
|  | RSUs |  |  | Weighted Average Grant Date Fair Value |
RSUs — beginning of period |  |  | 0.5 |  |  | $ | 127.93 |
RSUs issued in Atotech Acquisition |  |  | 0.1 |  |  | $ | 110.30 |
Granted |  |  | 0.5 |  |  | $ | 111.60 |
Vested |  |  | (0.3 | ) |  | $ | 118.06 |
RSUs — end of period |  |  | 0.8 |  |  | $ | 118.96 |
|  | Year ended December 31, 2021 |
|  | RSUs |  |  | Weighted Average Grant Date Fair Value |
RSUs — beginning of period |  |  | 0.6 |  |  | $ | 93.26 |
Granted |  |  | 0.2 |  |  | $ | 177.71 |
Vested |  |  | (0.3 | ) |  | $ | 95.95 |
RSUs — end of period |  |  | 0.5 |  |  | $ | 127.93 |
The Company had no outstanding SARs as of December 31, 2022 and an immaterial amount of SARs as of December 31, 2021. 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, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Stock-based compensation expense by type of award: |  |  |  |  |  |  |  |  |
RSUs |  | $ | 42 |  |  | $ | 34 |  |  | $ | 27 |
Employee stock purchase plan |  |  | 3 |  |  |  | 3 |  |  |  | 3 |
Total stock-based compensation |  |  | 45 |  |  |  | 37 |  |  |  | 30 |
Windfall tax effect on stock-based compensation |  |  | (1 | ) |  |  | (5 | ) |  |  | (2 | )
Net effect on net income |  | $ | 44 |  |  | $ | 32 |  |  | $ | 28 |
Effect on net earnings per share: |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.74 |  |  | $ | 0.58 |  |  | $ | 0.49 |
Diluted |  | $ | 0.73 |  |  | $ | 0.58 |  |  | $ | 0.49 |
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, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Cost of revenues |  | $ | 5 |  |  | $ | 4 |  |  | $ | 4 |
Research and development expense |  |  | 6 |  |  |  | 5 |  |  |  | 4 |
Selling, general and administrative expense |  |  | 34 |  |  |  | 28 |  |  |  | 21 |
Acquisition and integration related expense |  |  | — |  |  |  | — |  |  |  | 1 |
Total pre-tax stock-based compensation expense |  | $ | 45 |  |  | $ | 37 |  |  | $ | 30 |
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 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 2022, 2021 and 2020 was $29.68, $33.55, and $23.88, 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: |  | 2022 |  |  | 2021 |  |  | 2020 |
Expected life (years) |  |  | 0.5 |  |  |  | 0.5 |  |  |  | 0.5 |
Risk-free interest rate |  |  | 0.9 | % |  |  | 0.1 | % |  |  | 0.9 | %
Expected volatility |  |  | 41.9 | % |  |  | 39.3 | % |  |  | 45.4 | %
Expected annual dividends per share |  | $ | 0.88 |  |  | $ | 0.88 |  |  | $ | 0.80 |
Expected volatilities 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 fair value of RSUs vested during 2022, 2021 and 2020 was approximately $40, $57 and $86, respectively. As of December 31, 2022, the unrecognized compensation cost related to RSUs was approximately $46 and will be recognized over an estimated weighted average amortization period of 1 year.

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