Stock-Based Compensation |
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| Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation |
23. Stock-Based Compensation:
The Company has an equity incentive plan under which it grants common stock awards to employees, directors and affiliates of the Company. As of December 31, 2022, 10,065,830 shares of common stock were available for issuance under the plan. The Company settles these awards through the issuance of new shares.
Modifications
Sale of Performance Chemicals
As described in Note 9 to these consolidated financial statements, the Company’s Board of Directors declared a special cash dividend of $3.20 per share to stockholders of record as of the close of business on August 12, 2021. The dividend declaration also included a dividend equivalent for all unvested restricted stock units, performance stock units and restricted stock awards (collectively, the “awards”) as of August 23, 2021 equal to $3.20 per award. Additionally, the Company’s Board of Directors approved a reduction in the strike price on all outstanding vested and unvested stock options by the amount of the dividend payment.
Further, with respect to stock options and awards held by employees of Performance Chemicals at the time of the sale (see Note 5 to these consolidated financial statements), the Company’s Board of Directors approved modifications to the post-termination stock option exercise, and stock option and award vesting periods. The modifications provided that all stock options held by Performance Chemicals employees that were vested as of the date of the sale are eligible to be exercised for a period of one year from the date of the sale. Additionally, modifications to unvested stock options and awards allowed holders to continue to vest in those instruments under the original terms of the instruments for a period of up to one year from the date of sale, depending on the award. The terms of the modifications to the Performance Chemicals awards are contingent upon the employee providing continued service to the Buyer.
The modifications impacted all holders of the Company’s stock options and awards, and along with modifications for a retired executive during the same period, resulted in incremental stock-based compensation expense recognized at the time of the modifications of $6,667 during the year ended December 31, 2021. Of this amount, $2,635 was included in loss from discontinued operations, net of tax on the Company’s consolidated statements of income.
Sale of Performance Materials
As described in Note 9 to these consolidated financial statements, the Company’s Board of Directors declared a special cash dividend of $1.80 per share to stockholders of record as of the close of business on December 21, 2020. The dividend declaration also included a dividend equivalent for all unvested awards as of December 21, 2020 equal to $1.80 per award. Additionally, the Company’s Board of Directors approved a reduction in the strike price on all outstanding vested and unvested stock options by the amount of the dividend payment.
Further, with respect to stock options and awards held by employees of Performance Materials at the time of the sale (see Note 4 to these consolidated financial statements), the Company’s Board of Directors approved modifications to the post-termination stock option exercise, and stock option and award vesting periods. The modifications provided that all stock options held by Performance Materials employees that were vested as of the date of the sale are eligible to be exercised for a period of one year from the date of the sale. Additionally, modifications to unvested stock options and awards allowed holders to continue to vest in those instruments under the original terms of the instruments for a period of one year from the date of sale. The terms of the modifications to the Performance Materials awards are contingent upon the employee providing continued service to the Purchaser.
The modifications impacted all holders of the Company’s stock options and awards, and resulted in incremental stock-based compensation expense recognized at the time of the modifications of $2,144 during the year ended December 31, 2020. Of this amount, $654 was included in loss from discontinued operations, net of tax on the Company’s consolidated statements of income.
Stock Options
The Company has issued stock options to purchase Ecovyst Inc. common stock as part of its equity incentive compensation program. There are various vesting conditions associated with stock options issued prior to the launch of the Company’s initial pubic offering (“IPO”) in September 2017, including satisfaction of certain service and/or performance based conditions. Subsequent to the IPO, the Company’s stock option grants have been subject to graded vesting conditions based on service. The maximum contractual term of the Company’s stock options is ten years.
The following table summarizes the activity of common stock options for the period from December 31, 2019 through the year ended December 31, 2022:
(1)Reflects the impact of the reduction in the strike price on all outstanding vested and unvested stock options by $1.80 per share as described above.
(2)Reflects the impact of the reduction in the strike price on all outstanding vested and unvested stock options by $3.20 per share as described above.
The aggregate intrinsic value per the above table represents the difference between the fair value the Company’s common stock on the last trading day of the reporting period (determined in accordance with the plan terms) and the exercise price of in-the-money stock options multiplied by the respective number of stock options as of that date. The total intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 and the resulting tax benefits recognized by the Company were $1,306 and $1,767, respectively, and were not material for the year ended December 31, 2020. Additionally, cash proceeds received by the Company from the exercise of stock options were not material for the years ended December 31, 2022, 2021, and 2020.
There were no stock option awards granted during the years ended December 31, 2022, 2021 and 2020. The Company uses the Black-Scholes option pricing model to determine the fair value of its stock option grants.
Restricted Stock Awards, Restricted Stock Units and Performance Stock Units
Restricted Stock Awards
The Company has granted restricted stock awards subject to vesting conditions based on (1) service only, (2) performance only, or (3) a combination of service and performance conditions, dependent on which event occurs first. The vesting requirements for the majority of these awards were based upon the achievement of a performance condition. As defined in the award agreements, each award subject to the performance condition fully vests upon the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding certain thresholds. Although achievement of the performance condition is subject to continued service with the Company, the terms of awards issued with performance conditions stipulate that the performance vesting condition can be attained for a period of six months following separation from service under certain circumstances, depending on the means of separation from the Company and subject to other factors such as individual separation agreements. The same
performance vesting condition for the Company’s restricted stock awards also governs the achievement of the performance vesting condition for the Company’s stock options. As of December 31, 2022, all of the Company’s outstanding unvested restricted stock awards were subject to the performance vesting condition.
In addition to restricted stock awards, the Company has granted restricted stock units and performance stock units as part of its equity incentive compensation program.
Restricted Stock Units
Each restricted stock unit provides the recipient with the right to receive a share of common stock subject to graded vesting terms based on service, which generally requires one year of service for members of the Company’s board of directors and three years of service for employees. The value of the restricted stock units granted by the Company is based on the average of the high and low trading prices of the Company’s common stock on the NYSE on the preceding trading day, in accordance with the Company’s policy for valuing such awards. Compensation expense related to the restricted stock units is recognized on a straight-line basis over the respective vesting period.
Performance Stock Units
2019 Grants
During the year ended December 31, 2022, the Compensation Committee of the Company’s Board of Directors (“Compensation Committee”) certified the achievement of the performance metrics for the -year period ended December 31, 2021, related to the performance stock units granted during the year ended December 31, 2019. These awards provided the recipients with the right to receive shares of common stock dependent on the achievement of two Company-specific financial performance targets and the provision of service through the vesting date, with each award holder eligible to earn a percentage of the target number of shares granted to the holder, ranging from zero to 200%. The awards vested during the year ended December 31, 2022 at 100% of target.
2020 Grants
The Company granted 456,311 performance stock units (at target) during the year ended December 31, 2020. The performance stock units granted in 2020 provide the recipients with the right to receive shares of common stock dependent 50% on the achievement of a Company-specific financial performance target and 50% on a total shareholder return (“TSR”) goal, and are generally subject to the provision of service through the vesting date of the award. The Company-specific financial performance target and the TSR goal are measured independently of each other, but achievement of both of the metrics is measured based on the same three-year performance period from January 1, 2020 through December 31, 2022. The TSR goal is based on the Company’s relative TSR performance against the companies included in the Russell 2000 Index over the performance period. Achievement of the Company-specific financial performance target is measured based on the average levels of achievement across the performance period. Depending on the Company’s performance against the predetermined thresholds for achievement, each performance stock unit award recipient is eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The performance stock units, to the extent earned, will vest on the date the Compensation Committee certifies the achievement of the performance metrics for the -year period ending December 31, 2022, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ended December 31, 2022. As of December 31, 2022, the Company adjusted the anticipated vesting amount of these awards to approximately 37% of target based on actual performance.
The value of the portion of the performance stock units granted during the year ended December 31, 2020 eligible to be earned based on the achievement of the Company-specific financial performance target was measured on the same basis as that of the restricted stock units, and based on the target number of shares granted; because the performance vesting conditions affect the ability of the recipients to vest in the awards, they are not factored into the fair value measure of the award. Compensation expense related to such performance stock units is recognized ratably over the requisite service period, and the Company must assess the probability that the performance conditions will be met each reporting period and the level at which they are estimated to be attained. Should the probability assessment change during a given reporting period, the total compensation cost (both recognized and unrecognized) will be adjusted to reflect the revised assessment.
The TSR goal, which determines how much of the 50% of the performance stock units granted during 2020 may be earned, is considered a market condition as opposed to a vesting condition. Because a market condition is not considered a vesting condition, it is reflected in the grant date fair value of an award and the associated compensation cost based on the fair value of the award is recognized over the performance period, regardless of whether the Company actually achieves the market condition or the level of achievement, as long as service is provided by the recipient. The Company used a Monte Carlo simulation to estimate the $24.11 weighted average fair value of the portion of the awards subject to the TSR goal, with the following weighted average assumptions:
2021 Grants
The Company granted 211,985 performance stock units (at target) during the year ended December 31, 2021 that provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a -year performance period from January 1, 2021 through December 31, 2023. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to earn a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The performance stock units, to the extent earned, will vest on the date the Compensation Committee certifies the achievement of the performance metric for the three-year period ending December 31, 2023, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2023. The Company used a Monte Carlo simulation to estimate the $13.21 weighted average fair value of the awards, with the following weighted average assumptions:
2022 Grants
During the year ended December 31, 2022, the Company granted 295,132 performance stock units (at target) under its equity incentive plan. The performance stock units granted during the year ended December 31, 2022 provide the recipients with the right to receive shares of common stock dependent on the achievement of a TSR goal, and are generally subject to the provision of service through the vesting date of the award. The performance period for the TSR goal is measured based on a -year performance period from January 1, 2022 through December 31, 2024. The TSR goal is based on the Company’s actual TSR percentage increase over the performance period. Depending on the Company’s performance relative to the TSR goal, each performance stock unit award recipient is eligible to receive a percentage of the target number of shares granted to the recipient, ranging from zero to 200%. The performance stock units, to the extent earned, will vest on the date the Compensation Committee certifies the achievement of the performance metric for the three-year period ending December 31, 2024, which will occur subsequent to the end of the performance period and after the Company files its annual consolidated financial statements for the year ending December 31, 2024.
The Company used a Monte Carlo simulation to estimate the $8.82 weighted average fair value of the awards, with the following weighted average assumptions:
Award Activity
The following table summarizes the activity of restricted stock awards, restricted stock units and performance stock units for the period from December 31, 2019 through the year ended December 31, 2022:
(1) Reflects the impact of the modification on all unvested restricted stock awards as described above.
(2) Based on target.
The total fair value of restricted stock awards that vested during the years ended December 31, 2022, 2021 and 2020 was $749, $0 and $510, respectively. The total fair value of restricted stock units that vested during the years ended December 31, 2022, 2021 and 2020 was $15,579, $11,507 and $11,269, respectively. The total fair value of performance stock units that vested during the years ended December 31, 2022, 2021 and 2020 was $5,277, $0 and $0, respectively.
Total Stock-Based Compensation Expense
For the years ended December 31, 2022, 2021 and 2020, total stock-based compensation expense for the Company on a continuing operations basis was $20,632, $31,838 and $17,194, respectively. The associated income tax benefit recognized in the statements of income for the years ended December 31, 2022, 2021 and 2020 was $2,799, $7,735 and $3,933, respectively.
As of December 31, 2022, there was no unrecognized compensation cost related to nonvested stock options or nonvested restricted stock awards subject to service vesting conditions. As of December 31, 2022, unrecognized compensation cost was $13,966 for restricted stock units and $1,650 for performance stock units considered probable of vesting. The weighted-average period over which these costs are expected to be recognized at December 31, 2020 is 1.24 years for the restricted stock units and 1.03 years for the performance stock units. No expense has been recognized for any stock options subject to the performance condition for the years ended December 31, 2022, 2021 and 2020, and no expense has been recognized for any restricted stock awards subject to the performance condition for the years ended December 31, 2021 and 2020, as the performance-based criteria was not achieved nor considered probable of achievement. During the year ended December 31, 2022, $749 of stock-based compensation expense was recognized for a modification to a set of restricted stock awards subject to the performance condition for an individual whose awards immediately vested in connection with a separation agreement.
Restricted stock awards and stock options issued with performance conditions vest based on the occurrence of a defined liquidity event upon which certain investment funds affiliated with CCMP receive proceeds exceeding certain thresholds. If an exit event occurs that exceeds the defined threshold, then all of these restricted stock awards and stock options of the Company vest 100%, with no potential for partial vesting or excess achievement. If an exit event or events occur with no further possibility of meeting the defined threshold, then all of the Company’s restricted stock awards and stock options subject to the performance vesting condition will be forfeited. In addition to the defined liquidity event, subsequent to the Company’s IPO, the performance vesting condition can also be achieved if the average closing trading price of the Company’s common stock on the NYSE over any consecutive ten-day trading period equals or exceeds a price that would be equivalent to the achievement of the threshold proceeds to CCMP. See Note 24 to these consolidated financial statements for further information on the number of restricted stock awards and stock options outstanding subject to performance-based vesting.
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