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 7—Capital Stock for further information regarding stock compensation share issuance.

Stock compensation expense is as follows:



	Three Months Ended March 31,
(In thousands)	2019		2018
Stock compensation expense	$	2,745	$	5,606
Income tax benefit	670		1,362
Stock compensation expense, net of income tax benefit	$	2,075	$	4,244

A summary of stock option activity for the three months ended March 31, 2019, follows:



	Shares		Weighted Average Exercise Price
Outstanding at January 1, 2019	735,001		$	43.79
Exercised	(44,407	)	36.24
Outstanding at March 31, 2019	690,594		44.28
Exercisable at March 31, 2019	690,594		$	44.28

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 three months ended March 31, 2019, follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2019	205,449		$	68.97
Granted	37,320		103.59
Vested	(44,421	)	44.23
Forfeited	(1,062	)	83.33
Unvested at March 31, 2019	197,286		$	81.38

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 2019 may range from 0% to 200% of the target award based on achieving the specified performance targets over the performance period plus an additional payout modifier based on total shareholder return (TSR) performance. The following weighted average assumptions were used in the Monte Carlo model for units granted in the first quarter of 2019 with a market condition modifier.



Fair value per unit	$99.82
Risk-free interest rate	2.47%
Expected dividend yield	1.57%
Expected volatility	26.6%
MSA stock beta	1.094

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 three months ended March 31, 2019, follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2019	218,886		$	68.43
Granted	76,813		100.66
Performance adjustments	77,783		43.77
Vested	(139,476	)	44.75
Unvested at March 31, 2019	234,006		$	84.93

The performance adjustments above relate to the final number of shares issued for the 2016 Management Performance Units which vested in the first quarter of 2019 at 237.6% of the target award based on cumulative performance against the Operating Margin % and Revenue Growth targets with a payout modifier based upon MSA's Total Shareholder Return during the three year performance period.