Stock-Based Compensation

The Company currently maintains an equity incentive plan, the Simpson Manufacturing Co., Inc. Amended and Restated 2011 Incentive Plan (the “2011 Plan”). The 2011 Plan amended and restated in their entirety, and incorporated and superseded, both the Simpson Manufacturing Co., Inc. 1994 Stock Option Plan (the “1994 Plan”), which was principally for the Company’s employees, and the Simpson Manufacturing Co., Inc. 1995 Independent Director Stock Option Plan (the “1995 Plan”), which was for the Company's independent directors. Awards previously granted under the 1994 Plan or the 1995 Plan will not be affected by the adoption of the 2011 Plan and will continue to be governed by the 1994 Plan or the 1995 Plan, respectively.

The Company generally granted options under each of the 1994 Plan and the 1995 Plan once each year. Options vest and expire according to terms established at the grant date. Shares of common stock issued on exercise of stock options under the 1994 Plan and the 1995 Plan are registered under the Securities Act of 1933, as amended (the "Securities Act").

Under the 2011 Plan, the Company may grant incentive stock options, non-qualified stock options, restricted stock and restricted stock units, although the Company currently intends to award primarily performance-based and/or time-based restricted stock units ("RSUs"), and to a lesser extent, if at all, non-qualified stock options. The performance-based RSUs may vest, only if the applicable Company-wide or profit-center operating goals, or both, or strategic goals, established by the Compensation and Leadership Development Committee (the “Committee”) of the Board, are met.

The Company does not currently intend to award incentive stock options or restricted stock. Under the 2011 Plan, no more than 16.3 million shares of the Company’s common stock in aggregate may be issued including shares already issued pursuant to prior awards granted under the 2011 Plan and shares issued on exercise of options previously granted under the 1994 Plan and the 1995 Plan. Shares of common stock underlying awards to be issued pursuant to the 2011 Plan are registered under the Securities Act.

The Company granted RSUs under the 2011 Plan in 2015, 2016 and 2017 to its employees, including officers, and directors. The fair value of each RSU award is estimated on the measurement date as determined in accordance with GAAP and is based on the closing price of shares of the Company’s common stock on the day preceding the measurement date. The fair value excludes the present value of the dividends that the RSUs do not participate in. The RSUs granted to the Company’s employees may be time-based, performance-based or time- and performance-based. The restrictions on a portion of the time-based RSUs generally lapse pursuant to a vesting schedule. The restrictions on the performance-based RSUs generally lapse following a performance period, and the underlying shares of the Company’s common stock are subject to performance-based adjustment before becoming vested. The time- and performance-based RSUs require the underlying shares of the Company’s common stock to be subject to performance-based adjustment before starting to vest according to a vesting schedule.

The following table shows the Company’s stock-based compensation activity:



	Fiscal Years Ended December 31,
(in thousands)	2017		2016			2015
Stock-based compensation expense recognized in operating expenses	$	12,744	$	13,113		$	11,212
Tax benefit of stock-based compensation expense in provision for income taxes	4,575		4,757			3,987
Stock-based compensation expense, net of tax	$	8,169	$	8,356		$	7,225
Fair value of shares vested	$	11,043	$	13,186		$	10,997
Proceeds to the Company from the exercise of stock-based compensation	$	6,610	$	7,976		$	9,720
Tax benefit from exercise of stock-based compensation, including shortfall tax benefits	$	—	$	(251	)	$	(318	)

The stock-based compensation expense included in cost of sales, research and development and engineering expense, selling expense, or general and administrative expense depends on the job functions performed by the employees to whom the stock options were granted, or the restricted stock units were awarded. Stock-based compensation cost capitalized in inventory was $0.2 million in 2017, and was $0.4 million in both 2016 and 2015, respectively.

The following table summarizes the Company’s unvested restricted stock unit activity for the year ended December 31, 2017:



	Shares (in thousands)		Weighted- Average Price		Aggregate Intrinsic Value * (in thousands)
Unvested Restricted Stock Units (RSUs)	Shares (in thousands)		Weighted- Average Price		Aggregate Intrinsic Value * (in thousands)
Outstanding at January 1, 2017	615		$	31.81	$	26,915
Awarded	589		38.79
Vested	(336	)	32.85
Forfeited	(172	)	35.96
Outstanding at December 31, 2017	696		$	35.34	$	39,976
Outstanding and expected to vest at December 31, 2017	690		$	35.33	$	39,609

* The intrinsic value for outstanding and expected to vest is calculated using the closing price per share of $57.41, as reported by the New York Stock Exchange on December 31, 2017.

On February 4, 2017, 579,139 RSUs were awarded to the Company's employees, including officers, at an estimated fair value of $38.74 per share, based on the closing price on February 3, 2017 of $43.42 per share and adjusted for certain market factors, and to a lesser extent, the present value of dividends. On May 16, 2017, 10,066 RSUs were awarded to each of the Company’s seven non-employee directors at an estimated fair value of $41.52 per share based on the closing price on May 15, 2017, which RSUs vested fully on the date of the grant.

The total intrinsic value of RSUs vested during the years ended December 31, 2017, 2016 and 2015 was $14.7 million, $10.8 million and $10.3 million, respectively, based on the market value on the award date.

No stock options were granted under the 2011 Plan in 2015, 2016 or 2017.

The following table summarizes the Company’s stock option activity for the year ended December 31, 2017:



	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value* (in thousands)
Non-Qualified Stock Options	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value* (in thousands)
Outstanding at January 1, 2017	251		$	29.66	1.1	$	3,538
Exercised	(223	)	$	29.66
Forfeited	—		$	—
Outstanding and exercisable at December 31, 2017	28		$	29.66	0.1	$	780

* The intrinsic value as of December 31, 2017 represents the amount by which the fair market value of the underlying common stock exceeds the exercise price of the option, and is calculated using the closing price per share of $57.41, as reported by the New York Stock Exchange on December 31, 2017.

The total intrinsic value of stock options exercised during each of the three years ended December 31, 2017, 2016 and 2015, was $4.6 million, $3.1 million and $2.4 million, respectively.

As of December 31, 2017, there was $10.2 million total unrecognized compensation cost related to unvested stock-based compensation arrangements under the 2011 Plan for awards made through December 31, 2017, which is expected to be recognized over a weighted-average period of 1.8 years.

On February 15, 2018, approximately 186 thousand RSUs were awarded to the Company's employees, including officers. The Company's closing price of its stock was $57.16 on February 14, 2018. The fair value of the awards has not yet been determined, but the Company expects it will be less after adjustment for expected dividends the RSUs do not participate in.

Stock Bonus Plan

The Company also maintains a stock bonus plan, the Simpson Manufacturing Co., Inc. 1994 Employee Stock Bonus Plan (the “Stock Bonus Plan”), whereby it awards shares of the Company’s common stock to employees, who do not otherwise participate in any of the Company’s equity-based incentive plans and meet minimum service requirements as determined by the Committee. The number of shares awarded, as well as the required period of service, is determined by the Committee. Shares have generally been issued under the Stock Bonus Plan following the year in which the respective employee reached his or her tenth, twentieth, thirtieth, fortieth or fiftieth anniversary of employment with the Company or any direct or indirect subsidiary thereof. The Company committed to issuing 12 thousand shares for 2017, (8,100 shares to be issued and 3,900 shares of which are expected to be settled in cash for the Company's foreign employees). In 2016 and 2015, the Company issued 12 thousand and 10 thousand shares, respectively. As a result, we recorded pre-tax compensation charges of $1.2 million, $0.8 million and $0.7 million for each of the years ended December 31, 2017, 2016 and 2015, respectively. Employees are also awarded cash bonuses as included in these charges, to compensate for income taxes payable as a result of the stock bonuses.