Stock-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock-based compensation expense for each employee and director is presented in the same statement of operations caption as their cash compensation. Stock-based compensation expense by statement of operations caption and the related income tax benefit were as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Cost of sales	$	182	$	139	$	84
Research and development expenses	1,099		1,096		744
Selling, general and administrative expenses:
Employees	6,257		6,431		6,491
Outside directors	1,584		1,179		1,501
Total employee and director stock-based compensation expense	$	9,122	$	8,845	$	8,820

Income tax benefit	$	1,594	$	1,877	$	1,870

Stock Options

The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants were the following:


	Year Ended December 31,
	2020			2019			2018
Weighted average fair value of grants	$	17.70		$	11.51		$	14.26
Risk-free interest rate	1.44		%	2.38		%	2.51		%
Expected volatility	43.95		%	41.73		%	33.09		%
Expected life in years	4.59			4.60			4.53

Stock option activity was as follows:


	2020						2019						2018
	Number of Options (in 000's)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in 000's)		Number of Options (in 000's)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in 000's)		Number of Options (in 000's)	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in 000's)
Outstanding at beginning of the year	745	$	41.73				597	$	44.27				520	$	42.56
Granted	109	46.17					170	30.08					119	44.95
Exercised	(80)	35.28			$	1,334	(22)	20.34			$	569	(35)	24.67			$	744
Forfeited/canceled/expired	—	—					—	—					(7)	27.74
Outstanding at end of the year (1)	774	$	43.01	3.71	$	9,228	745	$	41.73	3.97	$	9,798	597	$	44.27	4.08	$	758
Vested and expected to vest at the end of the year (1)	774	$	43.01	3.71	$	9,228	745	$	41.73	3.97	$	9,798	597	$	44.27	4.08	$	758
Exercisable at the end of the year (1)	582	$	43.90	2.98	$	6,887	517	$	44.95	3.01	$	5,636	430	$	42.30	3.43	$	758

(1)The aggregate intrinsic value represents the total pre-tax value (the difference between our closing stock price on the last trading day of 2020, 2019, and 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on December 31, 2020, 2019, and 2018. This amount will change based on the fair market value of our stock.

The value of shares withheld in lieu of receiving cash from option exercises in the year ended December 31, 2020 was $2.8 million. Cash received from option exercises for the years ended December 31, 2019 and 2018 was $0.4 million and $0.9 million, respectively. The actual tax benefit realized from option exercises was $0.3 million, $0.01 million and $0.2 million for the years ended December 31, 2020, 2019, and 2018, respectively.

Significant option groups outstanding at December 31, 2020 and the related weighted average exercise price and life information were as follows:


	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding (in 000's)	Weighted-Average Remaining Contractual Term (in years)	Weighted-Average Exercise Price		Number Exercisable (in 000's)	Weighted-Average Exercise Price
$19.25 to $27.07	263	3.72	$	23.83	200	$	22.82
$35.28 to $46.17	229	5.44	45.47		113	44.84
$51.38 to $65.54	282	2.61	58.85		269	59.15
	774	3.71	$	43.01	582	$	43.90

As of December 31, 2020, we expect to recognize $2.2 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 1.8 years.

On February 11, 2021, certain executive employees were granted 80,315 stock options in connection with the 2020 annual review cycle. The options were granted as part of long-term incentive compensation to assist us in meeting our performance and retention objectives and are subject to a three-year vesting period (33.33% on February 11, 2021 and 8.33% each quarter thereafter). The total grant date fair value of these awards was $1.9 million.

Restricted Stock

Non-vested restricted stock award activity was as follows:


	2020			2019			2018
	Shares (in 000's)	Weighted-Average Grant Date Fair Value		Shares (in 000's)	Weighted-Average Grant Date Fair Value		Shares (in 000's)	Weighted-Average Grant Date Fair Value
Non-vested at beginning of the year	310	$	34.99	204	$	49.23	162	$	61.19
Granted	238	36.85		268	30.67		167	42.65
Vested	(166)	38.28		(141)	47.26		(109)	56.16
Forfeited	(8)	43.44		(21)	35.78		(16)	54.16
Non-vested at end of the year	374	$	34.53	310	$	34.99	204	$	49.23

As of December 31, 2020, we expect to recognize $8.4 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 1.7 years.

In February 2021, certain executives and employees were granted 111,775 restricted stock awards in connection with the 2020 annual review cycle. These awards were granted as part of long-term incentive compensation to assist us in meeting our performance and retention objectives and are subject to a three-year vesting period (32,395 of these awards will vest 33.33% on February 11, 2022 and 8.33% each quarter thereafter and 79,380 of these awards will vest at a rate of 33.33% per year beginning on February 25, 2022). The total grant date fair value of these awards was $6.7 million.

Stock Incentive Plans

Our active stock-based incentive plans include those adopted in 2003, 2006, 2010, 2014 and 2018 ("Stock Incentive Plans"). Under the Stock Incentive Plans, we may grant stock options, stock appreciation rights, restricted stock units, performance stock units, or any combination thereof for a period of ten years from the approval date of each respective plan, unless the plan is terminated by resolution of our Board of Directors. No stock appreciation rights or performance stock units have been awarded under our Stock Incentive Plans. Only directors and employees meeting certain employment qualifications are eligible to receive stock-based awards.

The grant price of stock option and restricted stock awards granted under our Stock Incentive Plans is the average of the high and low trades of our stock on the grant date. We prohibit the re-pricing or backdating of stock options. Our stock options become exercisable in various proportions over a three- or four-year time frame. Stock options have a maximum ten-year term. Restricted stock awards vest in various proportions over a one- to three-year time period.

Detailed information regarding our active Stock Incentive Plans was as follows at December 31, 2020:


Name	Approval Date	Initial Shares Available for Grant Under the Plan	Remaining Shares Available for Grant Under the Plan	Outstanding Shares Granted Under the Plan
2003 Stock Incentive Plan	6/18/2003	1,000,000	—	14,391
2006 Stock Incentive Plan	6/13/2006	1,000,000	—	25,275
2010 Stock Incentive Plan	6/15/2010	1,000,000	—	123,131
2014 Stock Incentive Plan	6/12/2014	1,100,000	—	357,860
2018 Equity and Incentive Compensation Plan	6/4/2018	1,000,000	223,199	627,545
			223,199	1,148,202