Stock-Based Compensation

12 Months Ended

Dec. 31, 2021

Stock-Based Compensation [Abstract]

Stock-Based Compensation

9. Stock–Based Compensation

At December 31, 2021, the Company had the following stock-based employee compensation plans:

Equity Incentive Plans

In April 2010, the Company’s board of directors approved the Nu Skin Enterprises, Inc. 2010 Omnibus Incentive Plan (the “2010 Omnibus Incentive Plan”). This plan was approved by the Company’s stockholders at the Company’s 2010 Annual Meeting of Stockholders held in May 2010. The 2010 Omnibus Incentive Plan provides for granting of a variety of equity-based awards including stock options, stock appreciation rights, restricted stock, restricted stock units, other share-based awards, performance cash, performance shares and performance units to executives, other employees, independent consultants and directors of the Company and its subsidiaries. Options granted under the 2010 Omnibus Incentive Plan are generally non-qualified stock options, but the 2010 Omnibus Incentive Plan permits some stock options granted to qualify as “incentive stock options” under the U.S. Internal Revenue Code. The exercise price of a stock option generally is equal to the fair market value of the Company’s common stock on the stock option grant date. The contractual term of a stock option granted under the 2010 Omnibus Incentive Plan is seven years. Currently, all shares issued upon the exercise of stock options are from the Company’s treasury shares. Subject to certain adjustments, 7.0 million shares were authorized for issuance under the 2010 Omnibus Incentive Plan. On June 3, 2013, the Company’s stockholders approved an Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 3.2 million shares. On May 24, 2016, the Company’s stockholders approved a Second Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 3.8 million shares. On June 3, 2020, the Company’s stockholders approved a Third Amended and Restated 2010 Omnibus Incentive Plan, which among other things increased the number of shares available for awards by 5.9 million shares.

The fair value of stock option awards was estimated using the Black-Scholes option-pricing model with the following assumptions and weighted-average fair values as follows:

	December 31,
Stock Options:	2021			2020			2019
Weighted-average grant date fair value of grants	$	16.10		$	8.59		$	19.72
Risk-free interest rate(1)		0.5	%		1.4	%		2.5	%
Dividend yield(2)		2.9	%		2.9	%		2.7	%
Expected volatility(3)		49.5	%		40.7	%		42.4	%
Expected life in months(4)	56 months			59 months			60 months

(1) The risk-free interest rate is based upon the rate on a zero-coupon U.S. Treasury bill, for periods within the contractual life of the option, in effect at the time of the grant.

(2) The dividend yield is based on the average of historical stock prices and actual dividends paid.

(3) Expected volatility is based on the historical volatility of the Company’s stock price, over a period similar to the expected life of the option.

(4) The expected term of the option is based on the historical employee exercise behavior, the vesting terms of the respective option, and a contractual life of either seven or ten years.

Options under the plans as of December 31, 2021 and changes during the year ended December 31, 2021 were as follows:

	Shares (in thousands)			Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Options activity – service based
Outstanding at December 31, 2020		770.6		$	38.71
Granted		—			—
Exercised		(188.8	)		37.74
Forfeited/cancelled/expired		(43.6	)		77.71
Outstanding at December 31, 2021		538.2			35.89		1.15	$	8,303
Exercisable at December 31, 2021		538.2			35.89		1.15		8,303
Options activity – performance based
Outstanding at December 31, 2020		2,398.0		$	46.71
Granted		877.9			41.68
Exercised		(297.6	)		32.00
Forfeited/cancelled/expired		(758.2	)		63.77
Outstanding at December 31, 2021		2,220.1			40.87		4.62	$	27,353
Exercisable at December 31, 2021		974.6			40.39		3.59		13,361
Options activity – all options
Outstanding at December 31, 2020		3,168.6		$	44.76
Granted		877.9			41.68
Exercised		(486.4	)		34.23
Forfeited/cancelled/expired		(801.8	)		64.53
Outstanding at December 31, 2021		2,758.3			39.90		3.95	$	35,657
Exercisable at December 31, 2021		1,512.8			38.79		2.72		21,665

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the respective years and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2021. This amount varies based on the fair market value of the Company’s stock.

Cash proceeds, tax benefits and intrinsic value related to total stock options exercised during 2021, 2020 and 2019, were as follows (U.S. dollars in thousands):

	December 31,
	2021		2020			2019
Cash proceeds from stock options exercised	$	14,435	$	7,419		$	368
Tax (expense) / benefit realized for stock options exercised		807		(459	)		430
Intrinsic value of stock options exercised		8,402		5,232			934

Nonvested restricted stock awards as of December 31, 2021 and changes during the year ended December 31, 2021 were as follows:

	Number of Shares (in thousands)			Weighted-average Grant Date Fair Value
Nonvested at December 31, 2020		931.1		$	46.38
Granted		380.4			50.39
Vested		(307.6	)		48.59
Forfeited		(119.0	)		45.95
Nonvested at December 31, 2021		884.9		$	47.39

Stock-based compensation expense is recognized on a straight-line basis, except for performance-based awards for which expense is recognized using a graded-attribution method if the results are materially different than the straight-line method. The Company recognized none, $0.3 million and $2.6 million of expense related to service condition stock options in 2021, 2020 and 2019, respectively; and $15.4 million, $13.9 million and $11.5 million of expense related to service condition restricted stock units in 2021, 2020 and 2019, respectively. For performance stock options and performance stock units, an expense is recorded each period for the estimated expense associated with the projected achievement of the performance-based targets. The Company recognized $7.8 million of expense, $9.9 million of expense and $4.1 million of income related to performance stock options in 2021, 2020 and 2019, respectively; and none, none, and $0.1 million of expense related to performance stock units in 2021, 2020 and 2019, respectively. The amount in 2019 reflects the reversal of stock compensation for awards no longer expected to vest.

As of December 31, 2021, there was $5.5 million of unrecognized stock-based compensation expense related to nonvested stock option awards. That cost is expected to be recognized over a weighted-average period of 1.3 years. As of December 31, 2021, there was $25.3 million of unrecognized stock-based compensation expense related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 2.4 years.