Stock Plans

The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible key employees through May 2026. Management stock-based compensation includes stock options, restricted stock, restricted stock units and performance stock units. The 2017 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2027. We issue treasury shares for stock option exercises, restricted stock grants, restricted stock unit grants, and performance stock unit grants. Please refer to Note 7 for further information regarding stock compensation share issuance.

Stock compensation expense is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017		2016
Stock compensation expense	$	1,908	$	1,453	$	8,233	$	6,951
Income tax benefit	721		563		3,107		2,695
Stock compensation expense, net of income tax benefit	$	1,187	$	890	$	5,126	$	4,256

A summary of stock option activity for the six months ended June 30, 2017 follows:



	Shares		Weighted Average Exercise Price
Outstanding at January 1, 2017	1,576,092		$	37.63
Exercised	(412,967	)	29.20
Outstanding at June 30, 2017	1,163,125		40.63
Exercisable at June 30, 2017	795,121		$	38.07

Restricted stock and restricted stock units are valued at the market value of the stock on the grant date. A summary of restricted stock and unit activity for the six months ended June 30, 2017 follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2017	234,592		$	49.76
Granted	49,189		73.92
Vested	(71,628	)	51.32
Forfeited	(3,174	)	50.11
Unvested at June 30, 2017	208,979		$	55.53

Performance stock units have a market condition modifier and are valued on the grant date using a Monte Carlo valuation model to determine fair value. The final number of shares to be issued for performance stock units granted in the first quarter of 2017 may range from 0% to 200% of the target award based on achieving the specified performance targets over the performance period. The following weighted average assumptions were used in the Monte Carlo model for units granted in the first quarter of 2017 with a market condition modifier.



Fair value per unit	$72.28
Risk-free interest rate	1.45%
Expected dividend yield	2.31%
Expected volatility	29.1%
MSA stock beta	1.272

The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the 1 year average closing share price. Expected volatility is based on the historical volatility using daily stock prices. Stock beta is calculated with three years of daily price data.

A summary of performance stock unit activity for the six months ended June 30, 2017 follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2017	186,621		$	46.18
Granted	98,886		72.73
Performance adjustments	27,915		57.26
Vested	(70,403	)	57.27
Unvested at June 30, 2017	243,019		$	55.04

The performance adjustments above relate to the final number of shares issued for the 2014 Management Performance Units, which were 189.2% of the target award based on Total Shareholder Return during the three year performance period, and vested in the first quarter of 2017.