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, and grants of restricted stock and performance stock. Please refer to Note 8—Capital Stock for further information regarding stock compensation share issuance.

Stock compensation expense is as follows:



	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2018		2017		2018		2017
Stock compensation expense	$	1,904	$	1,435	$	9,595	$	9,668
Income tax benefit	463		543		2,332		3,650
Stock compensation expense, net of income tax benefit	$	1,441	$	892	$	7,263	$	6,018

A summary of stock option activity for the nine months ended September 30, 2018, follows:



	Shares		Weighted Average Exercise Price
Outstanding at January 1, 2018	955,446		$	42.75
Exercised	(160,617	)	38.31
Forfeited	(4,721	)	44.50
Outstanding at September 30, 2018	790,108		43.66
Exercisable at September 30, 2018	692,773		$	43.55

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 nine months ended September 30, 2018, follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2018	227,161		$	57.50
Granted	73,062		87.00
Vested	(88,298	)	58.18
Forfeited	(4,661	)	58.94
Unvested at September 30, 2018	207,264		$	68.76

Performance stock units have a market condition modifier and are valued at an estimated fair value using the Monte Carlo model. The final number of shares to be issued for performance stock units granted in the first quarter of 2018 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 2018 with a market condition modifier.



Fair value per unit	$83.58
Risk-free interest rate	2.36%
Expected dividend yield	1.82%
Expected volatility	28.3%
MSA stock beta	1.240

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 one year average closing share price. Expected volatility is based on the ten year historical volatility using daily stock prices. Expected life is based on historical stock option exercise data.

A summary of performance stock unit activity for the nine months ended September 30, 2018, follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2018	242,186		$	55.06
Granted	62,775		84.79
Performance adjustments	(3,356	)	44.61
Vested	(41,660	)	40.23
Forfeited	(8,659	)	44.53
Unvested at September 30, 2018	251,286		$	65.45

The performance adjustments above relate to the final number of shares issued for the 2015 Management Performance Units, which were 93.6% of the target award based on Total Shareholder Return during the three year performance period, and vested in the first quarter of 2018.