Stock-Based Compensation |
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| Stock-Based Compensation | Stock-Based Compensation Employee Stock-Based Compensation Plans
At September 30, 2022, the Company had stock-based compensation awards outstanding under the following plans: the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP. Refer to the Company’s Annual Report for a summary of its stock-based compensation and equity plans as of December 31, 2021. There have been no material changes to the terms of the Company’s equity incentive plans during the nine months ended September 30, 2022.
As of September 30, 2022, the number of shares of common stock available for future issuance under the 2010 Plan was 15,425,135 shares. As of September 30, 2022, the number of shares of common stock available for future issuance under the ESPP was 4,977,968 shares.
Employee Incentive Bonus
The Company mostly settles bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company’s common stock as determined in trading on the applicable stock exchange, on a date approved by the Board of Directors. In connection with the Company’s bonus programs, in February 2022, the Company issued 0.5 million freely-tradable (subject to certain restrictions for affiliates) shares of the Company’s common stock in settlement of bonus awards to employees, including executives, for the 2021 performance period. At September 30, 2022, the Company has an accrual of $30.0 million for bonus awards for employees for year-to-date achievement in the 2022 performance period. The Company’s compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
Stock-Based Compensation
The Company recognizes stock-based compensation in the consolidated statements of income, based on the department to which the related employee reports, as follows:
The total unrecognized compensation cost related to unvested restricted stock units as of September 30, 2022 was $147.1 million, and the weighted average period over which these equity awards are expected to vest is 2.74 years.
The total unrecognized compensation cost related to unvested performance-based restricted stock units as of September 30, 2022 was $27.8 million, and the weighted average period over which these equity awards are expected to vest is 1.07 years.
There was no unrecognized compensation cost related to unvested stock options as of September 30, 2022.
Restricted Stock Units
A summary of the Company’s restricted stock unit activity is as follows:
Performance-Based Restricted Stock Units
Performance-based restricted stock units are eligible to vest at the end of each performance year, as defined in the underlying agreement, in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over baseline results relative to the growth rates for a peer group of companies for the same metrics and periods.
For the performance-based restricted stock units granted to date, 60% of each performance-based award is subject to the net sales metric for the performance period and 40% is subject to the non-GAAP diluted earnings per share metric for the performance period. The maximum percentage for a particular metric is 250% of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30% and 100%, respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period.
As of September 30, 2022, the Company believes that it is probable that it will achieve certain performance metrics specified in the respective award agreements based on its expected revenue and non-GAAP diluted EPS results over the performance periods and calculated growth rates relative to its peers’ expected results based on data available, as defined in the respective award agreements.
A summary of the Company’s performance-based restricted stock unit activity is as follows:
(1) Number of shares granted is based on the maximum percentage achievable in the performance-based restricted stock unit award.
Employee Stock Purchase Rights and Stock Options
Employee Stock Purchase Rights
During the nine months ended September 30, 2022 and 2021 there were 83,404 and 113,510 shares, respectively, of common stock purchased under the ESPP at a weighted average price of $34.92 and $23.21, respectively.
The fair values of employee stock purchase rights for the latest ESPP offering period were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions:
The risk-free interest rate assumption was based on rates for United States (U.S.) Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term is the duration of the offering period for each grant date. In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company’s daily closing stock prices.
Stock Options
A summary of the Company’s stock options activity is as follows:
No stock options were granted by the Company during the nine months ended September 30, 2022.
The intrinsic value of stock options exercised was $0.1 million and $0.2 million in the three months ended September 30, 2022 and 2021, respectively. The intrinsic value of stock options exercised was $0.9 million and $9.2 million in the nine months ended September 30, 2022 and 2021, respectively.
Cash received from exercise of stock options was $0.1 million and $0.2 million during the three months ended September 30, 2022 and 2021, respectively. Cash received from exercise of stock options was $0.3 million and $4.0 million during the nine months ended September 30, 2022 and 2021, respectively. The tax benefit from stock options exercised was $0.2 million and $10.0 million during the three months ended September 30, 2022 and 2021, respectively. The tax benefit from stock options exercised was $1.2 million and $23.4 million during the nine months ended September 30, 2022 and 2021, respectively.
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