Stock-Based Compensation Plans

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

NOTE 13 – STOCK-BASED COMPENSATION PLANS

The Company grants stock options and stock equivalent units (“SEUs”) from time to time as a long-term performance incentive. In certain cases the grants are subject to performance conditions such as the Company’s stock price. Where performance conditions apply the Monte Carlo simulation model is used to determine the fair values. Otherwise the Black-Scholes model is used to determine the fair values.

Stock option plans

The following table summarizes the transactions of the Company’s stock option plans for the nine months ended September 30, 2016:


	Number of Options			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2015		667,439		$	19.87	$	20.19
Granted - at discount		67,546		$	0.00	$	38.13
- at market value		24,794		$	44.34	$	9.17
Exercised		(58,125	)	$	5.42	$	28.50
Forfeited		(24,273	)	$	21.15	$	21.12

Outstanding at September 30, 2016		677,381		$	19.97	$	20.83

At September 30, 2016, there were 112,604 stock options that were exercisable, of which 30,712 had performance conditions attached.

The stock option compensation cost for the first nine months of 2016 was $2.8 million (2015 – $2.7 million). The total intrinsic value of options exercised in the first nine months of 2016 was $1.8 million (2015 – $2.1 million).

The total compensation cost related to non-vested stock options not yet recognized at September 30, 2016 was $4.3 million and this cost is expected to be recognized over the weighted-average period of 2.08 years.

Stock equivalent units

The following table summarizes the transactions of the Company’s SEUs for the nine months ended September 30, 2016:


	Number of SEUs			Weighted Average Exercise Price		Weighted Average Grant-Date Fair Value
Outstanding at December 31, 2015		279,750		$	3.79	$	31.72
Granted - at discount		70,153		$	0.00	$	36.56
- at market value		7,316		$	44.18	$	9.11
Exercised		(49,623	)	$	1.74	$	27.79
Forfeited		(8,980	)	$	4.41	$	30.73

Outstanding at September 30, 2016		298,616		$	4.21	$	32.99

At September 30, 2016 there were 59,765 SEUs that are exercisable, of which 51,163 had performance conditions attached.

The charges for SEUs are spread over the life of the award subject to a revaluation to fair value each quarter. The revaluation may result in a charge or a credit to the income statement in the quarter dependent upon our share price and other performance criteria.

The SEU compensation cost for the first nine months of 2016 was $3.7 million (2015 - $2.4 million). The total intrinsic value of SEUs exercised in the first nine months of 2016 was $1.5 million (2015 – $2.2 million).

The weighted-average remaining vesting period of non-vested SEUs is 1.61 years.

Additional exceptional long-term incentive plan

A maximum of $3.0 million of our cash-settled long-term incentives is accounted for as share-based compensation and the fair value is calculated on a quarterly basis using a Monte Carlo model. The fair values at each of the balance sheet dates are summarized as follows:


(in millions)	2016		2015
Balance at January 1	$	1.0	$	0.1
Compensation charge for the period		0.6		0.4

Balance at September 30	$	1.6	$	0.5

The following assumptions were used in the Monte Carlo model at September 30:


	2016			2015
Dividend yield		1.05	%		1.25	%
Volatility of Innospec’s share price		25.55	%		24.47	%
Risk free interest rate		0.88	%		0.92	%

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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