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Stock-Based Incentive Plans | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Incentive Plans | Note 15. Stock-Based Incentive Plans Stock-Based Incentive Plans Stock-based awards may be granted under the 2015 Incentive Award Plan (the “2015 Plan”) in the form of stock options, SARs, RSUs and other stock-based and cash-based awards. As of December 31, 2021, there were approximately 3,098,419 shares available for future grants under the 2015 Plan. During the year ended December 31, 2021, we issued stock-based compensatory awards with terms approved by the Compensation Committee of our Board of Directors. The awards with service conditions generally vest ratably from two to four years and are subject to forfeiture unless service conditions are met. Market performance-based awards were issued that cliff vest after three years subject to the rank of our total shareholder return for the three-year period ending December 31, 2023 relative to the total shareholder returns for a peer group of companies. Operating performance-based awards were issued that cliff vest after three years subject to the achievement of a target based on the adjusted free cash flow for fiscal year 2021. Additionally, operating performance-based awards were issued that cliff vest after three years subject to the achievement of a target based on the return on invested capital for fiscal year 2021. On January 1, 2019, we initiated the LivaNova Global Employee Share Purchase Plan (“ESPP”). Compensation expense related to the ESPP for the years ended December 31, 2021, 2020 and 2019 was $1.5 million, $1.2 million and $1.3 million, respectively. Stock-Based Compensation Amounts of stock-based compensation recognized on our consolidated statements of income (loss), by expense category, are as follows (in thousands):
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Cost of goods sold |  | $ | 2,451 |  |  | $ | 1,898 |  |  | $ | 1,343 |
Selling, general and administrative |  | 29,449 |  |  | 29,661 |  |  | 25,588 |
Research and development |  | 8,664 |  |  | 3,530 |  |  | 5,622 |
Total stock-based compensation expense |  | 40,564 |  |  | 35,089 |  |  | 32,553 |
Income tax benefit |  | 588 |  |  | 992 |  |  | 6,590 |
Total expense, net of income tax benefit |  | $ | 39,976 |  |  | $ | 34,097 |  |  | $ | 25,963 |
Amounts of stock-based compensation expense recognized on our consolidated statements of income (loss), by type of arrangement, are as follows (in thousands):
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Service-based restricted stock units |  | $ | 19,614 |  |  | $ | 18,320 |  |  | $ | 14,113 |
Service-based stock appreciation rights |  | 12,489 |  |  | 12,715 |  |  | 10,349 |
Market performance-based restricted stock units |  | 3,522 |  |  | 3,200 |  |  | 2,900 |
Operating performance-based restricted stock units |  | 3,434 |  |  | (370) |  |  | 3,918 |
Employee stock purchase plan |  | 1,505 |  |  | 1,224 |  |  | 1,273 |
Total stock-based compensation expense from continuing operations |  | $ | 40,564 |  |  | $ | 35,089 |  |  | $ | 32,553 |
Unrecognized Stock-Based Compensation Amounts of stock-based compensation cost not yet recognized related to non-vested awards, including awards assumed or issued, as of December 31, 2021, are as follows (in thousands):
|  | Unrecognized Compensation Cost |  | Weighted Average Remaining Vesting Period (in years)
Service-based stock appreciation rights |  | $ | 25,025 |  |  | 2.59
Service-based restricted stock unit awards |  | 35,770 |  |  | 2.46
Performance-based restricted stock unit awards |  | 11,208 |  |  | 2.03
Total stock-based compensation cost unrecognized |  | $ | 72,003 |  |  | 2.36
Stock Appreciation Rights and Stock Options We use the Black-Scholes option pricing methodology to calculate the grant date fair market value of SARs. The following table lists the assumptions we utilized as inputs to the Black-Scholes model:
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Dividend yield (1) |  | — |  | — |  | —
Risk-free interest rate (2) |  | 1.0% |  | 0.4% |  | 1.4 | % | - | 2.2 | %
Expected option term - in years (3) |  | 5.6 |  | 5.4 |  | 5.0 | - | 5.1
Expected volatility at grant date (4) |  | 42.1% |  | 39.5% |  | 32.2 | % | - | 35.7 | %
(1)We have not paid dividends and no future dividends have been approved. (2)We use yield rates on U.S. Treasury securities for a period that approximates the expected term of the awards granted to estimate the risk-free interest rate. (3)We estimated the expected term of the awards granted using historic data of actual time elapsed between the date of grant and the exercise or forfeiture of options or SARs for employees. (4)We determine the expected volatility of the awards based on historical volatility. The following tables detail the activity for service-based SARs and stock option awards:
SARs and Stock Options |  | Number of Optioned Shares |  | Wtd. Avg. Exercise Price per Share |  | Wtd. Avg. Remaining Contractual Term (years) |  | Aggregate Intrinsic Value (in thousands) (1)
Outstanding — at December 31, 2020 |  | 2,884,020 |  |  | $ | 63.20 |  |  |  |  |
Granted |  | 594,617 |  |  | $ | 73.25 |  |  |  |  |
Exercised |  | (424,122) |  |  | $ | 52.95 |  |  |  |  |
Forfeited |  | (291,534) |  |  | $ | 62.36 |  |  |  |  |
Expired |  | (128,608) |  |  | $ | 88.67 |  |  |  |  |
Outstanding — at December 31, 2021 |  | 2,634,373 |  |  | $ | 65.94 |  |  | 7.2 |  | $ | 61,693 |
Fully vested and exercisable — end of year |  | 1,154,459 |  |  | $ | 68.18 |  |  | 5.6 |  | $ | 25,149 |
Fully vested and expected to vest — end of year (2) |  | 2,579,659 |  |  | $ | 66.01 |  |  | 7.1 |  | $ | 60,305 |
(1)The aggregate intrinsic value of SARs and options is based on the difference between the fair market value of the underlying stock at December 31, 2021, using the market closing stock price, and exercise price for in-the-money awards. (2)Includes the impact of expected future forfeitures.
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Weighted average grant date fair value of SARs granted during the year (per share) |  | $ | 29.22 |  |  | $ | 15.73 |  |  | $ | 31.22 |
Aggregate intrinsic value of SARs and stock options exercised during the year (in thousands) |  | $ | 12,223 |  |  | $ | 773 |  |  | $ | 2,064 |
Restricted Stock Units Awards The following tables detail the activity for service-based RSU awards:
RSUs |  | Number of Shares |  | Wtd. Avg. Grant Date Fair Value
Non-vested shares at December 31, 2020 |  | 848,459 |  |  | $ | 58.00 |
Granted |  | 363,372 |  |  | $ | 74.17 |
Vested |  | (279,064) |  |  | $ | 61.82 |
Forfeited |  | (141,610) |  |  | $ | 55.85 |
Non-vested shares at December 31, 2021 |  | 791,157 |  |  | $ | 64.53 |
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Weighted average grant date fair value of service-based RSUs issued during the year (per share) |  | $ | 74.17 |  |  | $ | 44.28 |  |  | $ | 92.54 |
Aggregate fair value of RSUs that vested during the year (in thousands) |  | $ | 21,501 |  |  | $ | 13,674 |  |  | $ | 12,710 |
The following tables detail the activity for performance-based and market-based RSU awards:
Performance-based and market-based RSUs |  | Number of Shares |  | Wtd. Avg. Grant Date Fair Value
Non-vested shares at December 31, 2020 |  | 380,799 |  |  | $ | 56.55 |
Granted |  | 123,956 |  |  | $ | 89.29 |
Vested |  | (107,455) |  |  | $ | 67.09 |
Forfeited |  | (51,356) |  |  | $ | 28.42 |
Non-vested shares at December 31, 2021 |  | 345,944 |  |  | $ | 68.36 |
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Weighted average grant date fair value of performance and market-based restricted share units granted during the year (per share) |  | $ | 89.29 |  |  | $ | 41.70 |  |  | $ | 98.50 |
Aggregate fair value of performance and market-based restricted share units that vested during the year (in thousands) |  | $ | 8,268 |  |  | $ | 4,106 |  |  | $ | 6,697 |

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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