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Share-Based Compensation Plans | 12 Months Ended
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Dec. 31, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation Plans | Note 18. Share-Based Compensation Plans Stock option plans The Company has two stock option plans, the Omnibus Long-Term Incentive Plan and the ShareSave Plan 2008 under which it currently grants awards. The stock options have vesting periods ranging from 2 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 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. 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 the fair value is linked to the Innospec Inc. share price. SEUs have vesting periods ranging from six months to 5 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, 2023 the liability for SEUs of $23.2 million is included in accrued liabilities in the consolidated balance sheet, where they will remain until they are cash settled. The fair value of SEUs is re-measured at each balance sheet reporting 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. Compensation cost The compensation cost recorded for stock options was $8.0 million, $6.7 million and $4.4 million for 2023, 2022 and 2021, respectively. The compensation cost for stock options is based on the grant-date fair value and spread evenly over the vesting period. The compensation cost recorded for SEUs was $13.5 million, $24.2 million and $3.1 million for 2023, 2022 and 2021, respectively. The compensation cost for SEUs is spread over the life of the award subject to a revaluation to the fair value at each quarter end. The revaluation may result in a charge or a credit to the income statement in each quarter dependent upon our share price movements and other performance criteria. Forfeits are accounted for as an adjustment to the charge in the period in which the forfeits occur. Transactions in the period The fair value of each stock option or SEU granted in the year was estimated on the date of grant using the Black-Scholes option-pricing model and where appropriate the Monte Carlo simulation model. These models utilized the following weighted average assumptions to determine the grant-date fair values of the share-based compensation granted in the year:
|  | 2023 |  |  | 2022 |  |  | 2021 |
Dividend yield |  |  | 1.16 | % |  |  | 1.27 | % |  |  | 1.17 | %
Expected life |  | 4 years |  |  | 5 years |  |  | 5 years |
Volatility |  |  | 39.7 | % |  |  | 39.8 | % |  |  | 40.2 | %
Risk free interest rate |  |  | 4.47 | % |  |  | 2.90 | % |  |  | 0.45 | %
The dividend yield was based on our recent history of dividend payouts. The expected life was determined based upon historical exercise experience. The volatility was determined based upon the historical daily stock price volatilities. The risk free interest rate was based on the U.S. Federal Reserve 3 year interest rate at the grant dates, which approximates to the expected term of the options. The following tables summarizes the transactions of the Company’s share-based compensation plans for the year ended December 31, 2023.
|  | Number of shares |  |  | Weighted Average Grant-Date Fair Value |
Nonvested at December 31, 2022 |  |  | 757,040 |  |  | $ | 69.0 |
Granted |  |  | 159,322 |  |  | $ | 94.4 |
Vested |  |  | (210,702 | ) |  | $ | 66.6 |
Forfeited |  |  | (52,769 | ) |  | $ | 76.1 |
Nonvested at December 31, 2023 |  |  | 652,891 |  |  | $ | 75.2 |
|  | Number of shares |  |  | Weighted Average Exercise price |  |  | Weighted-Average Remaining Contractual Term (years) |
Outstanding at December 31, 2022 |  |  | 864,518 |  |  | $ | 20.1 |  |  |  |
Granted |  |  | 159,322 |  |  | $ | 9.8 |  |  |  |
Exercised |  |  | (267,297 | ) |  | $ | 4.2 |  |  |  |
Forfeited |  |  | (54,767 | ) |  | $ | 7.9 |  |  |  |
Outstanding at December 31, 2023 |  |  | 701,776 |  |  | $ | 24.8 |  |  |  | 3.3 |
Exercisable at December 31, 2023 |  |  | 48,885 |  |  | $ | 29.2 |  |  |  | 4.3 |
Other disclosures As at December 31, 2023, there was $21.3 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total intrinsic value of share-based compensation plans outstanding at December 31, 2023 was $69.1 million. The total intrinsic value of share-based compensation plans exercisable at December 31, 2023 was $4.6 million. The total intrinsic value of share-based compensation plans exercised, was approximately $27.9 million in 2023 and $18.1 million in 2022. The total cash paid for SEUs exercised was approximately $16.8 million in 2023 and $15.0 million in 2022. The total fair value of share-based compensation that vested was $14.0 million in 2023 and $13.0 million in 2022. The weighted-average grant-date fair value of share-based compensation plans granted during 2023, 2022, and 2021 was $94.4, $60.2, and $84.8, respectively. The Company recorded a current tax charge of $0.3 million in 2023, a current tax charge of $0.7 million in 2022 and a current tax benefit of $1.3 million in 2021, in relation to stock option compensation. This amount is inclusive of excess tax benefits.

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