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Stock-Based Compensation and Stock Awards | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation and Stock Awards | 18. Stock-Based Compensation and Stock Awards On May 13, 2004, the Company’s stockholders approved the 2004 Incentive Plan of Dril-Quip, Inc. (as amended in 2012 and approved by the Company’s stockholders on May 10, 2012, the “2004 Plan”), which reserved up to 2,696,294 shares of common stock for awards under the 2004 Plan. Persons eligible for awards under the 2004 Plan are employees holding positions of responsibility with the Company or any of its subsidiaries and members of the Board of Directors. On May 12, 2017, the Company’s stockholders approved the 2017 Omnibus Incentive Plan of Dril-Quip, Inc. (the “2017 Plan”), which reserved up to 1,500,000 shares of common stock to be used for awards under the 2017 Plan. Persons eligible for awards under the 2017 Plan are employees of the Company or any of its subsidiaries and members of the Board of Directors. On May 12, 2021, the Company’s stockholders approved an amendment to the 2017 Plan to add 1,900,000 shares of common stock to be used for awards under the 2017 Plan. Stock Options The last outstanding options granted under the 2004 Plan expired on October 28, 2021. No stock options have been granted under the 2017 Plan. Options granted under the 2004 Plan ha d term of ten years and were exercisable in cumulative annual increments of one-fourth of the total num ber of shares of common stock subject thereto, beginning on the first anniversary of the date of the grant. Restricted Stock Awards On October 28, 2021 and 2020 and 2019, pursuant to the 2017 Plan, the Company awarded officers, directors and key employees restricted stock awards (RSAs), which is an award of common stock subject to time vesting. These RSA are restricted as to transference, sale and other disposition, and vest ratably over a three-year period. The RSAs may also vest in the event of a change of control. Upon termination, whether voluntary or involuntary, the RSAs that have not vested will be returned to the Company resulting in stock forfeitures. The fair market value of the stock on the date of grant is amortized and charged to selling, general and administrative expense over the stipulated time period over which the RSAs vest on a straight-line basis, net of estimated forfeitures. The Company’s RSA activity and related information is presented below:
|  | Restricted Stock |  |  | Weighted- average Grant Date Fair Value |
Unvested at December 31, 2020 |  |  | 480,776 |  |  | $ | 30.20 |
Granted |  |  | 276,783 |  |  |  | 23.96 |
Vested |  |  | (265,840 | ) |  |  | 32.21 |
Forfeited |  |  | (26,684 | ) |  |  | 27.78 |
Unvested at December 31, 2021 |  |  | 465,035 |  |  | $ | 25.48 |
RSA compensation expense for the years ended December 31, 2021, 2020 and 2019 totaled $8.0 million, $7.5 million and $8.6 million, respectively. For 2021, 2020 and 2019, the income tax benefit recognized in net income for RSAs was $1.3 million, $1.1 million and $2.0 million, respectively. As of December 31, 2021, there was $5.9 million of total unrecognized compensation cost related to unvested RSAs, which is expected to be recognized over a weighted average period of 2.9 years. There were 485,047 anti-dilutive restricted shares on December 31, 2021. Performance Unit Awards On October 28, 2021, 2020 and 2019, pursuant to the 2017 Plan, the Company awarded performance unit awards (Performance Units) to officers and key employees. The Performance Units were valued on a per unit basis based on a Monte Carlo simulation at $29.88 f or the 2021 grants, $32.05 for the 2020 grants, and $48.47 for the 2019 grants, approximately 126.9%, 134.3% and 108.9%, respectively, of the grant date share price. Under the terms of the Performance Units, participants may earn from 0% to 200% of their target award based upon the Company’s relative total share return (TSR) in comparison to the 15 component companies of the Philadelphia Oil Service Index and, starting with the 2020 grants, the S&P 500 Index. The TSR is calculated over a three -year period from October 1, 2021 and 2020 and 2019 to September 30, 2024 and 2023, and 2022, respectively, and assumes reinvestment of dividends for companies within the index that pay dividends, which Dril-Quip does not. Assumptions used in the Monte Carlo simulation are as follows:
|  | 2021 |  |  | 2020 |  |  | 2019 |
Grant date |  | October 28, 2021 |  |  | October 28, 2020 |  |  | October 28, 2019 |
Performance period |  | October 1, 2021 to September 30, 2024 |  |  | October 1, 2020 to September 30, 2023 |  |  | October 1, 2019 to September 30, 2022 |
Volatility |  | 56.1% |  |  | 50.9% |  |  | 38.8% |
Risk-free interest rate |  | 0.8% |  |  | 0.2% |  |  | 1.7% |
Grant date price |  | $ | 23.54 |  |  | $ | 23.86 |  |  | $ | 44.53 |
The Company’s Performance Unit activity and related information is presented below:
|  | Number of Performance Units |  |  | Weighted Average Grant Date Fair Value Per Unit |
Unvested balance at December 31, 2020 |  |  | 330,967 |  |  | $ | 42.10 |
Granted |  |  | 96,111 |  |  |  | 29.88 |
Vested |  |  | (166,693 | ) |  |  | 45.52 |
Forfeited |  |  | (36,011 | ) |  |  | 38.92 |
Unvested balance at December 31, 2021 |  |  | 224,374 |  |  | $ | 34.83 |
Performance Unit compensation expense was $5.5 million, $4.0 million and $9.6 million for the years ended December 31, 2021, 2020 and 2019, respectively. The income tax benefit recognized in net income for Performance Units was $0.7 million, $0.8 million and $1.9 million, for the years ended December 31, 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $5.0 million of total unrecognized compensation expense related to unvested Performance Units which is expected to be recognized over a weighted average period of 2.2 years. There were 324,781 anti-dilutive Performance Units at December 31, 2021. Director Stock Compensation Awards In June 2014, the Board of Directors authorized a stock compensation program for the directors pursuant to the 2004 Plan. This program continues under the 2017 Plan. Under this program, the Directors may elect to receive all or a portion of their fees in the form of restricted stock awards (DSAs) in an amount equal to 125% of the fees in lieu of cash. The awards are made quarterly on the first business day after the end of each calendar quarter and vest on January 1 of the second year after the grant date. The Company's DSA activity for the year ended December 31, 2021 is presented below:
|  | DSA Number of Shares |  |  | Weighted Average Grant Date Fair Value Per Share |
Unvested balance at December 31, 2020 |  |  | 62,196 |  |  | $ | 30.18 |
Granted |  |  | 52,455 |  |  |  | 25.61 |
Vested |  |  | (43,865 | ) |  |  | 29.94 |
Unvested balance at December 31, 2021 |  |  | 70,786 |  |  | $ | 26.94 |
Director stock compensation awards expense for 2021 was $1,396,356 as compared to $1,464,590 for 2020 and $782,125 for 2019. For 2021, 2020, and 2019, the income tax benefit recognized in net income for DSAs was $230,971, $208,106, and $58,901, respectively. There was $1,030,916 of unrecognized compensation expense related to unvested DSAs, which is expected to be recognized over a weighted average period of one year. There were 62,363 anti-dilutive DSA shares on December 31, 2021. Equity Compensation Plan Information The following table summarizes information for equity compensation plans in effect as of December 31, 2021 :
|  | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) |  |  | Weighted- average exercise price of outstanding options, warrants and rights (2) |  |  | Number of securities remaining available for future issuance under equity compensation plan |
Plan category |  | (a) |  |  | (b) |  |  | (c) |
Equity compensation plans approved by stockholders |  |  | 224,374 |  |  | $ | 34.83 |  |  |  | 1,549,243 |
Total |  |  | 224,374 |  |  | $ | 34.83 |  |  |  | 1,549,243 |
(1) Excludes 535,821 shares of unvested RSAs and DSAs, which were granted pursuant to the 2017 Plan and the 2004 Plan. Includes 224,,374 unvested Performance Units shown at 100% level of performance achievement. (2) The weighted average exercise price does not take into account 224,374 unvested Performance Units, which do not have an exercise price.

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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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