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Stock-Based Compensation Plans
 12 Months Ended
Dec. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation Plans
Note 17.    Stock-Based Compensation Plans
Stock option plans
The Company has
two
stock option plans, the Omnibus Long-Term Incentive Plan and the Share
S
ave Plan 2008 under which it currently grants awards. The stock options have vesting periods ranging from 24 months to 5 years and in all cases stock options granted expire within 10 years of the date of grant. All grants are at the sole discretion of the Compensation Committee of the Board of Directors. Grants may be priced at market value or at a premium or discount. The aggregate number of shares of common stock reserved for issuance which can be granted under the plans is 2,550,000.
The fair value of stock options is measured on the grant date using either the Black-Scholes model, or in cases where performance criteria are dependent upon external factors such as the Company’s stock price, using a Monte Carlo model. The following weighted average assumptions were used to determine the grant-date fair value of options:
                         
 
  
2019
 
  
2018
 
  
2017
 
Dividend yield
   
1.09
 %    
1.11
 %    
0.96
 %
Expected life
   
5 years
     
5 years
     
5 years
 
Volatility
   
26.8
 %    
25.6
 %    
25.3
 %
Risk free interest rate
   
2.48
 %    
2.74
 %    
1.50
 %
 
 
 
The following table summarizes the transactions of the Company’s stock option plans for the year ended December 31, 2019:
                         
 
Number of
Options
 
  
Weighted
Average
Exercise
Price
 
  
Weighted
Average
Grant-Date

Fair Value
 
Outstanding at December 31, 2018
   
545,249
    $
32.46
    $
36.06
 
Granted – at discount
   
67,230
    $
0.00
    $
71.54
 
      – at market value
   
12,539
    $
81.07
    $
22.69
 
Exercised
   
(103,633
)   $
11.92
    $
32.12
 
Forfeited
   
(16,926
)   $
47.69
    $
33.50
 
                         
Outstanding at December 31, 2019
   
504,459
    $
33.05
    $
41.35
 
                         
 
 
 
At December 31, 2019, there were 41,525 stock options that were exercisable, 8,530 had performance conditions attached.
The Company’s policy is to issue shares from treasury stock to holders of stock options who exercise those options, but if sufficient treasury stock is not available, the Company will issue previously unissued shares of stock to holders of stock options who exercise options.
The stock option compensation cost for 2019, 2018 and 2017 was $6.6 million, $4.9 million and $4.2 million, respectively. The total intrinsic value of options exercised in 2019, 2018 and 2017 was $3.5 million, $3.2 million and $2.9 million, respectively.
The total compensation cost related to
non-vested
stock options not yet recognized at December 31, 2019 was $8.6 million and this cost is expected to be recognized over the weighted-average period of 1.76 years.
In
2019
, the Company recorded a current tax benefit of $
1.5
 million in respect of stock option compensation
(2018
– $
1.2
million). This amount is inclusive of excess tax benefits.
Forfeits are accounted for as an adjustment to the charge in the period in which the forfeits occur.
Stock equivalent units
The Company awards Stock Equivalent Units (“SEUs”) from time to time as a long-term performance incentive. SEUs are cash settled equity instruments conditional on certain performance criteria and linked to the Innospec Inc. share price. SEUs have vesting periods ranging from 11 months to 4 years and in all cases SEUs granted expire within 10 years of the date of grant. Grants may be priced at market value or at a premium or discount. There is no limit to the number of SEUs that can be granted. As at December 31, 2019 the liability for SEUs of $24.6 million is
in
clu
ded
in accrued liabilities in the consolidated balance sheets until they are cash settled.
The fair value of SEUs is measured at the balance sheet date using either the Black-Scholes model, or in cases where performance criteria are dependent upon external factors such as the Company’s stock price, using a Monte Carlo model. The following assumptions were used to determine the fair value of SEUs at the balance sheet dates:
                         
 
    2019    
 
 
   2018    
 
 
    2017    
 
Dividend yield
   
0.99
 %    
1.44
 %    
1.09
 %
Ex
pected life
 
 
 
 5
 years
 
 
 
5
 years
 
 
 
5
 years
 
Volatility
   
26.6
 %    
27.2
 %    
25.4
 %
Risk free interest rate
   
1.62
 %    
2.46
 %    
1.98
 %
 
 
 
 
 
The following table summarizes the transactions of the Company’s SEUs for the year ended December 31, 2019:
                         
 
Number
of SEUs
 
  
Weighted
Average
Exercise
Price
 
  
Weighted
Average
Grant-Date

Fair Value
 
Outstanding at December 31, 2018
   
418,936
    $
3.47
    $
52.45
 
Granted – at discount
   
123,815
    $
0.00
    $
71.47
 
      – at market value
   
4,359
    $
81.07
    $
22.69
 
Exercised
   
(142,035
)   $
2.22
    $
46.45
 
Forfeited
   
(14,259
)   $
3.42
    $
63.76
 
                         
Outstanding at December 31, 2019
   
390,816
    $
3.69
    $
59.91
 
                         
 
 
 
 
At December 31, 2019, there were 31,649 SEUs that were exercisable, 28,881 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 2019, 2018 and 2017 was $20.1 million, $5.7 million and $6.6 million, respectively. The total intrinsic value of SEUs exercised in 2019, 2018 and 2017 was $7.3 million, $2.7 million and $1.7 million, respectively.
The weighted-average remaining vesting period of
non-vested
SEUs is 1.88 years.
Forfeits are accounted for as an adjustment to the charge in the period in which the forfeits occur.