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Stock-Based Compensation | 12 Months Ended
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Mar. 31, 2022
Stock-Based Compensation [Abstract] |
Stock-Based Compensation | Note 5: Stock-Based Compensation The Company’s stock-based incentive programs consist of the following: (1) a long-term incentive plan (“LTIP”) for officers and other executives that consists of stock awards, stock options, and performance-based stock awards granted for retention and performance, (2) a discretionary equity program for other management and key employees, and (3) stock awards for non-employee directors. The Company’s Board of Directors and the Human Capital and Compensation Committee, as applicable, have discretionary authority to set the terms of the stock-based awards. Grants to employees during fiscal 2022 were issued under the Company’s 2020 Incentive Compensation Plan. In lieu of performance-based stock awards, the Company granted performance cash awards to the LTIP participants in fiscal 2022 and 2021. At present, the Company accomplishes the fulfillment of equity-based grants through the issuance of new common shares. As of March 31, 2022, approximately 1.3 million shares authorized under the 2020 Incentive Compensation Plan remain available for future grants. Employee participants have the opportunity to deliver back to the Company the number of shares from the vesting of stock awards sufficient to satisfy the individual’s minimum tax withholding obligations. These shares are held as treasury shares. The Company recorded stock-based compensation expense of $5.7 million, $6.3 million, and $6.6 million in fiscal 2022, 2021, and 2020, respectively. Stock Options The Company recorded $1.1 million, $0.9 million, and $1.3 million of compensation expense related to stock options in fiscal 2022, 2021, and 2020, respectively. The fair value of stock options that vested during fiscal 2022, 2021, and 2020, was $0.9 million, $1.3 million, and $1.2 million, respectively. As of March 31, 2022, the total compensation expense not yet recognized related to non-vested stock options was $2.0 million and the weighted-average period in which the remaining expense is expected to be recognized was 2.7 years. The Company estimated the fair value of option awards on the date of grant using the Black-Scholes option valuation model and the following assumptions:
|  | Years ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Fair value of options |  | $ | 8.79 |  |  | $ | 3.46 |  |  | $ | 5.56 |
Expected life of awards in years |  |  | 6.1 |  |  |  | 6.1 |  |  |  | 6.3 |
Risk-free interest rate |  |  | 1.1 | % |  |  | 0.4 | % |  |  | 2.2 | %
Expected volatility of the Company’s stock |  |  | 56.5 | % |  |  | 54.1 | % |  |  | 39.2 | %
Expected dividend yield on the Company’s stock |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %
Stock options expire no later than 10 years after the grant date and have an exercise price equal to the fair market value of Modine’s common stock on the date of grant. The risk-free interest rate was based upon yields of U.S. Treasury zero-coupon issues with a term corresponding to the expected life of the options. The expected volatility assumption was based upon changes in the Company’s historical common stock prices over the same time period as the expected life of the awards. The expected dividend yield is zero, as the Company currently does not anticipate paying dividends over the expected life of the options. The expected lives of the awards are based upon historical patterns and the terms of the options. Based upon the terms of the annual awards, outstanding stock options vest 25 percent per year for four years. A summary of stock option activity for fiscal 2022 was as follows:
|  | Shares |  |  | Weighted-average exercise price |  |  | Weighted-average remaining contractual term (years) |  |  | Aggregate intrinsic value |
Outstanding, beginning of year |  |  | 1.1 |  |  | $ | 11.63 |  |  |  |  |  |  |
Granted |  |  | 0.2 |  |  |  | 16.64 |  |  |  |  |  |  |
Exercised |  |  | (0.1 | ) |  |  | 13.72 |  |  |  |  |  |  |
Forfeited or expired |  |  | (0.2 | ) |  |  | 13.51 |  |  |  |  |  |  |
Outstanding, end of year |  |  | 1.0 |  |  | $ | 12.12 |  |  |  | 6.8 |  |  | $ | 0.7 |
Exercisable, March 31, 2022 |  |  | 0.5 |  |  | $ | 12.47 |  |  |  | 5.1 |  |  | $ | 0.2 |
The aggregate intrinsic value represents the difference between the closing price of Modine’s common shares on the last trading day of fiscal 2022 over the exercise price of the stock options, multiplied by the number of options outstanding or exercisable. The aggregate intrinsic value is not recorded for financial statement purposes, and this value will change based upon daily changes in the price of Modine’s common shares. Additional information related to stock options exercised is as follows:
|  | Years ended March 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
Intrinsic value of stock options exercised |  | $ | 0.1 |  |  | $ | 1.4 |  |  | $ | 0.1 |
Proceeds from stock options exercised |  |  | 1.4 |  |  |  | 4.1 |  |  |  | 0.1 |
Restricted Stock The Company recorded $5.0 million, $4.3 million, and $4.5 million of compensation expense related to restricted stock in fiscal 2022, 2021, and 2020, respectively. The fair value of restricted stock awards that vested during fiscal 2022, 2021, and 2020 was $4.4 million, $4.5 million, and $4.4 million, respectively. At March 31, 2022, the Company had $6.0 million of unrecognized compensation expense related to non-vested restricted stock, which it expects to recognize over a weighted-average period of 2.4 years. The Company values restricted stock awards using the closing market price of its common shares on the date of grant. Based upon the terms of the annual awards, outstanding restricted stock awards vest 25 percent per year for four years. Restricted stock awards to non-employee directors were fully vested at the time of grant. A summary of restricted stock activity for fiscal 2022 was as follows:
|  | Shares |  |  | Weighted-average price |
Non-vested balance, beginning of year |  |  | 0.7 |  |  | $ | 10.05 |
Granted |  |  | 0.4 |  |  |  | 15.13 |
Vested |  |  | (0.3 | ) |  |  | 12.05 |
Forfeited |  |  | (0.1 | ) |  |  | 12.44 |
Non-vested balance, end of year |  |  | 0.7 |  |  | $ | 11.61 |
Restricted Stock – Performance-Based Shares The Company granted performance-based cash awards in fiscal 2022 and 2021 in lieu of performance-based stock awards. For performance-based stock awards, the Company values the awards using the closing market price of its common shares on the date of grant. In fiscal 2022, the Company recorded a $0.4 million benefit related to the performance-based stock awards granted in fiscal 2020. The payout earned for the fiscal 2020 awards was less than previously estimated. In fiscal 2021 and 2020, the Company recorded $ 1.1 million and $0.8 million of compensation expense related to performance-based stock awards, respectively. At March 31, 2022, the performance period associated with the most recent performance-based stock awards granted in fiscal 2020 was complete; therefore, there was no unrecognized compensation expense remaining. The payouts earned under the performance portion of the restricted stock award program are based upon the attainment of certain financial goals over a three-year period and are paid after the end of that three-year performance period, if the performance targets have been achieved. The performance metrics for the performance-based stock awards granted in fiscal 2020 and the performance-based cash awards granted in fiscal 2021 are based upon both a target three-year average consolidated cash flow return on invested capital and a target three-year average annual revenue growth at the end of a three-year performance period, commencing with the fiscal year of grant. The performance metrics for the performance-based cash awards granted in fiscal 2022 are based upon both a target three-year average consolidated cash flow return on invested capital and a target three-year average growth in consolidated net earnings before interest, taxes, depreciation, amortization, and certain other adjustments (“Adjusted EBITDA”) at the end of the three-year performance period ending March 31, 2024.

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