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Preferred and Common Shares and Share-Based Compensation | 9 Months Ended
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Sep. 30, 2022
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Preferred and Common Shares and Share-Based Compensation | 12. Preferred and Common Shares and Share-Based Compensation Preferred Shares In May 2021, the Company’s shareholders approved a special resolution to amend the Company’s articles to authorize up to 7.0 million preferred shares for future issuance. The Company’s Board of Directors is authorized to designate and issue one or more series of preferred shares, fix the rights, preferences and designation, as deemed necessary or advisable, relating to the preferred shares, provided that no shares of any series may be entitled to more than one vote per share. As of September 30, 2022, no preferred shares had been issued and outstanding. Common Share Repurchases In October 2018, the Company’s Board of Directors approved a share repurchase plan (the “2018 Repurchase Plan”), authorizing the repurchase of $25.0 million worth of the Company’s common shares. During the three months ended July 1, 2022, the Company completed the 2018 Repurchase Plan and repurchased 80 thousand shares for an aggregate purchase price of $9.5 million at an average price of $118.97 per share. Since the inception of the 2018 Repurchase Plan, the Company has repurchased a cumulative total of 264 thousand shares for an aggregate purchase price of $25.0 million at an average price of $94.57 per share. In February 2020, the Company’s Board of Directors approved a new share repurchase plan (the “2020 Repurchase Plan”), authorizing the repurchase of an additional $50.0 million worth of the Company’s common shares. During the three months ended July 1, 2022, the Company repurchased 4 thousand shares for an aggregate purchase price of $0.5 million at an average price of $116.95 per share under the 2020 Repurchase Plan. During the three months ended September 30, 2022, the Company did not repurchase any shares. As of September 30, 2022, the Company had $49.5 million available for future share repurchases under the 2020 Repurchase Plan. Share-Based Compensation Expense The table below summarizes share-based compensation expense recorded in the consolidated statements of operations (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| September 30, |  |  | October 1, |  |  | September 30, |  |  | October 1, |
| 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Selling, general and administrative | $ | 4,649 |  |  | $ | 4,360 |  |  | $ | 13,906 |  |  | $ | 13,123 |
Research and development and engineering |  | 586 |  |  |  | 534 |  |  |  | 1,780 |  |  |  | 1,776 |
Cost of revenue |  | 719 |  |  |  | 631 |  |  |  | 2,123 |  |  |  | 2,305 |
Restructuring, acquisition, and related costs |  | — |  |  |  | 2,965 |  |  |  | — |  |  |  | 2,965 |
Total share-based compensation expense | $ | 5,954 |  |  | $ | 8,490 |  |  | $ | 17,809 |  |  | $ | 20,169 |
Share-based compensation expense reported in selling, general and administrative expenses included expenses related to restricted stock units and deferred stock units granted to the members of the Company’s Board of Directo rs of $1.1 million and $1.1 million during the nine months ended September 30, 2022 and October 1, 2021, respectively. Restricted Stock Units and Deferred Stock Units The Company’s restricted stock units (“RSUs”) have generally been issued with vesting periods ranging from zero to five years and vest based solely on service conditions. Accordingly, the Company recognizes compensation expense on a straight-line basis over the requisite service period. The Company reduces the compensation expense by an estimated forfeiture rate which is based on anticipated forfeitures and historical forfeiture experience. Deferred stock units (“DSUs”) are granted to the members of the Company’s Board of Directors (the "Board"). Compensation expense associated with the DSUs is recognized in full on the date of grant, as the DSUs are fully vested and non-forfeitable upon grant. Outstanding DSUs are converted into common shares upon Board members' resignation or retirement from the Board. During the nine months ended September 30, 2022, 52 thousand shares of outstanding DSUs were converted into common shares upon the retirement or resignation of certain Board members. There were 38 thousand and 91 thousand DSUs o utstanding as of September 30, 2022 and December 31, 2021, respectively. Outstanding DSUs are included in the calculation of weighted average basic shares outstanding for the respective periods. The table below summarizes activities relating to RSUs and DSUs issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the nine months ended September 30, 2022:
| Shares (In thousands) |  |  | Weighted Average Grant Date Fair Value |
Unvested at December 31, 2021 |  | 292 |  |  | $ | 115.42 |
Granted |  | 118 |  |  | $ | 136.41 |
Vested |  | (135 | ) |  | $ | 114.12 |
Forfeited |  | (13 | ) |  | $ | 126.79 |
Unvested at September 30, 2022 |  | 262 |  |  | $ | 124.72 |
Expected to vest as of September 30, 2022 |  | 242 |  |  |  |
The total fair value of RSUs and DSUs that vested during the nine months ended September 30, 2022 was $18.1 million based on the market price of the underlying shares on the date of vesting. Performance Stock Units The Company typically grants two types of performance-based stock awards, EPS-PSUs and TSR-PSUs, to certain members of the executive management team on an annual basis. Both types of performance-based restricted stock units generally cliff vest on the first day following the end of the three-year performance period. The number of common shares to be issued upon settlement following the vesting of EPS-PSUs is determined based on the Company’s cumulative non-GAAP EPS over a three-year performance period against the performance targets established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200% of the target number of shares. The Company recognizes compensation expense ratably over the performance period based on the number of shares that are deemed probable of vesting at the end of the three-year performance cycle. This probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made. The number of common shares to be issued upon settlement following the vesting of TSR-PSUs is determined based on the relative market performance of the Company’s common shares compared to the Russell 2000 Index over a three-year performance period using a payout formula established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200% of the target number of shares. The Company recognizes the related compensation expense based on the fair value of the TSR-PSUs, determined using the Monte Carlo valuation method as of the grant date, on a straight-line basis from the grant date to the end of the three-year performance period. Compensation expense will not be affected by the number of TSR-PSUs that will ultimately vest at the end of the three-year performance period. In January 2022, the Company granted ATI-PSUs to ATI employees. The number of common shares to be issued upon settlement following vesting is determined based on a performance matrix for a four-year performance period against certain performance targets and will be in the range of zero to 100% of the target number of shares. The Company recognizes compensation expense ratably over the performance period based on the number of shares that are deemed probable of vesting at the end of the four-year performance cycle. This probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made. The table below summarizes the activities relating to the performance-based awards issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the nine months ended September 30, 2022:
| Shares (In thousands) |  |  | Weighted Average Grant Date Fair Value |
Unvested at December 31, 2021 |  | 162 |  |  | $ | 122.26 |
Granted |  | 107 |  |  | $ | 159.00 |
Vested |  | (41 | ) |  | $ | 108.58 |
Forfeited |  | (10 | ) |  | $ | 156.62 |
Unvested at September 30, 2022 |  | 218 |  |  | $ | 144.40 |
Expected to vest as of September 30, 2022 |  | 230 |  |  |  |
The unvested PSUs are shown at target in the table above. As of September 30, 2022, the maximum number of common shares to be earned under these PSU grants was approximately 343 thousand shares. The total fair value of PSUs that vested during the nine months ended September 30, 2022 was $7.2 million based on the market price of the underlying common shares on the date of vesting. The fair value of the TSR-PSUs at the date of grant was estimated using the Monte Carlo valuation method with the following assumptions:
| Nine Months Ended September 30, 2022 |
Grant-date stock price | $ | 137.29 |
Expected volatility |  | 40.33 | %
Risk-free interest rate |  | 1.81 | %
Expected annual dividend yield |  | — |
Fair value | $ | 144.38 |
Stock Options In February 2022, the Company granted 40 thousand stock options to certain members of the executive management team to purchase common shares of the Company at a strike price equal to the closing market price of the Company’s common shares on the date of grant. The stock options vest ratably over a three-year period from the date of grant and expire on the seven th anniversary of the date of grant. The Company estimates the fair value of stock options using the Black-Scholes valuation model. The Company recognizes compensation expense related to the stock options on a straight-line basis over the vesting period in the consolidated statement of operations. The table below summarizes activities relating to stock options issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the nine months ended September 30, 2022:
| Shares (In thousands) |  |  | Weighted Average Exercise Price |
Outstanding as of December 31, 2021 |  | 60 |  |  | $ | 14.13 |
Granted |  | 40 |  |  | $ | 135.86 |
Exercised |  | — |  |  | $ | — |
Forfeited or expired |  | — |  |  | $ | — |
Outstanding as of September 30, 2022 |  | 100 |  |  | $ | 62.77 |
Exercisable as of September 30, 2022 |  | 60 |  |  |  |
Expected to vest as of September 30, 2022 |  | 40 |  |  |  |
The aggregate Black-Scholes fair value of $1.9 million for the stock options granted during the nine months ended September 30, 2022 was estimated using the following assumptions as of the grant date:
| Nine Months Ended September 30, 2022 |
Expected option term in years |  | 4.5 |
Expected volatility |  | 39.3 | %
Risk-free interest rate |  | 1.83 | %
Expected annual dividend yield |  | — |
The expected option term was calculated using the simplified method permitted under Codification of Staff Accounting Bulletins Topic 14, “Share-Based Payment”. The expected volatility was determined based on the historical volatility of the Company’s common shares over the expected option term. Risk-free interest rate was based upon treasury instrument whose term was six months longer than the expected option term. The expected annual dividend yield is zero as the Company does not have plans to issue dividends.

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