The West Pharmaceutical Services, Inc. 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. A committee of the Board of Directors determines the terms and conditions of awards to be granted. Vesting requirements vary by award. At December 31, 2022, there were 1,681,526 shares remaining in the 2016 Plan for future grants.

Stock options and stock appreciation rights reduce the number of shares available by one share for each award granted. All other awards under the 2016 Plan will reduce the total number of shares available for grant by an amount equal to 2.5 times the number of shares awarded. If awards made under previous plans would entitle a plan participant to an amount of West stock in excess of the target amount, the additional shares (up to a maximum threshold amount) will be distributed under the 2016 Plan.


($ in millions)	2022		2021		2020
Stock option and appreciation rights	$	5.6	$	12.5	$	10.2
Performance share units, stock-settled	15.6		17.6		16.6
Performance share units, cash-settled	(0.1)		1.0		0.4
Performance share units, dividend equivalents	0.1		0.2		0.6
Employee stock purchase plan	1.3		1.4		1.1
Deferred compensation plans and restricted share awards	1.2		4.8		5.1
Total stock-based compensation expense	$	23.7	$	37.5	$	34.0

The Company estimates expected forfeitures. The amount of unrecognized compensation expense for all non-vested awards as of December 31, 2022 was $28.9 million, which is expected to be recognized over a weighted average period of 1.6 years.


(in millions, except per share data)			2022
Options outstanding, January 1			2.0
Granted			0.1
Exercised			(0.2)
Forfeited			0.0
Options outstanding, December 31			1.9
Options vested and expected to vest, December 31			1.9
Options vested and exercisable, December 31			1.5


Weighted Average Exercise Price	2022
Options outstanding, January 1	$	101.73
Granted	364.47
Exercised	83.77
Forfeited	224.26
Options outstanding, December 31	$	118.72
Options vested and expected to vest, December 31	$	116.88
Options vested and exercisable, December 31	$	84.11

The fair value of the options was estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted average assumptions in 2022, 2021 and 2020: a risk-free interest rate of 1.8%, 0.8%, and 1.3%, respectively; stock volatility of 25.1%, 23.9%, and 22.4%, respectively; and dividend yields of 0.2%, 0.3%, and 0.4%, respectively. Stock volatility is estimated based on historical data and the impact from expected future trends. Expected lives, which are based on prior experience, averaged 5.6 years for 2022 and 2021 and 5.7 years for 2020. The weighted average grant date fair value of options granted in 2022, 2021 and 2020 was $96.43, $64.51 and $40.28, respectively. Stock option expense is recognized over the vesting period, net of forfeitures.

For the years ended December 31, 2022, 2021 and 2020, the intrinsic value of options exercised was $60.1 million, $147.3 million and $88.8 million, respectively. The grant date fair value of options vested during those same periods was $8.8 million, $8.3 million and $8.4 million, respectively.

Stock appreciation rights (“SARs”) granted to eligible international employees vest in equal annual increments over 4 years of continuous service. All awards expire 10 years from the date of grant. The fair value of each cash-settled SAR is adjusted at the end of each reporting period, with the resulting change reflected in expense. As of December 31, 2022, SARs outstanding were 20,402, all of which were cash-settled. Upon exercise of a cash-settled SAR, the employee receives cash for the difference between the grant date price and the fair market value of the Company’s stock on the date of exercise. As a result of the cash settlement feature, cash-settled SARs are recorded within other long-term liabilities. Upon exercise of a stock-settled SAR, shares are issued in exchange for the exercise price of the stock-settled SAR. As a result of the stock settlement feature, stock-settled SARs are recorded within equity.



Weighted Average Exercise Price	2022
SARs outstanding, January 1	$	88.18
Granted	369.13
Exercised	54.64
Forfeited	21.22
SARs outstanding, December 31	$	97.28
SARs vested and expected to vest, December 31	$	97.28
SARs vested and exercisable, December 31	$	74.86

In addition to stock options and SAR awards, we grant performance share unit (“PSU”) awards to eligible employees. These awards are earned based on the Company’s performance against pre-established targets, including annual growth rate of revenue and return on invested capital, over a specified performance period. Depending on the achievement of the targets, recipients of stock-settled PSU awards are entitled to receive a certain number of shares of common stock, whereas recipients of cash-settled PSU awards are entitled to receive a payment in cash per unit based on the fair market value of a share of our common stock at the end of the performance period.


	2022
Non-vested stock-settled PSU awards, January 1	164,474
Granted at target level	32,109
Adjustments above/(below) target	68,426
Vested and converted	(144,490)
Forfeited	(7,966)
Non-vested stock-settled PSU awards, December 31	112,553

Weighted Average Fair Value	2022
Non-vested stock-settled PSU awards, January 1	$	179.88
Granted at target level	362.40
Adjustments above/(below) target	106.57
Vested and converted	369.13
Forfeited	240.19
Non-vested stock-settled PSU awards, December 31	$	278.38

Shares earned under PSU awards may vary from 0% to 200% of an employee’s targeted award. The fair value of stock-settled PSU awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period, adjusted for estimated target outcomes and net of forfeitures. The weighted average grant date fair value of stock-settled PSU awards granted during the years 2022, 2021 and 2020 was $362.40, $333.58 and $177.31, respectively. Including forfeiture and target achievement expectations, we expect that the stock-settled PSU awards will convert to 94,480 shares to be issued over an average remaining term of one year.

The fair value of cash-settled PSU awards is also based on the market price of our stock at the grant date. These awards are revalued at the end of each quarter based on changes in our stock price. As a result of the cash settlement feature, cash-settled PSU awards are recorded within other long-term liabilities.


Weighted Average Fair Value	2022
Non-vested cash-settled PSU awards, January 1	$	169.53
Granted at target level	369.13
Adjustments above/(below) target	104.44
Vested and converted	369.13
Forfeited	—
Non-vested cash-settled PSU awards, December 31	$	242.29

We also offer an Employee Stock Purchase Plan (“ESPP”), which provides for the sale of our common stock to eligible employees at 85% of the current market price on the last trading day of each quarterly offering period. Payroll deductions are limited to 25% of the employee’s base salary, not to exceed $25,000 in any one calendar year. In addition, employees may not buy more than 2,000 shares during any offering period (8,000 shares per year). Purchases under the ESPP were 27,894 shares, 27,016 shares and 36,494 shares for the years 2022, 2021 and 2020, respectively. At December 31, 2022, there were approximately 3,738,000 shares available for issuance under the ESPP.

Our deferred compensation plans include a Non-Qualified Deferred Compensation Plan for Non-Employee Directors, under which non-employee directors may defer all or part of their annual cash retainers. The deferred fees may be credited to a stock-equivalent account. Amounts credited to this account are converted into deferred stock units based on the fair market value of one share of our common stock on the last day of the quarter. For deferred stock units ultimately paid in cash, a liability is calculated at an amount determined by multiplying the number of units by the fair market value of our common stock at the end of each reporting period. In addition, deferred stock awards are granted on the date of our annual meeting, and are distributed in shares of common stock. In 2022, we granted 4,827 deferred stock awards, with a weighted grant date fair value of $300.78. In 2021, we granted 6,034 deferred stock awards, with a grant date fair value of $338.38. Similarly, a non-qualified deferred compensation plan for eligible employees provides for the conversion of compensation into deferred stock units.

In addition, during 2022, we granted 9,648 restricted share awards at a weighted grant-date fair value of $310.52 per share to employees under the 2016 Plan. During 2021, we granted 6,002 restricted share awards at a weighted grant-date fair value of $312.41 per share to employees under the 2016 Plan. During 2020, we granted 8,721 restricted share awards at a weighted grant-date fair value of $200.35 per share to employees under the 2016 Plan. The fair value of these awards is based on the market price of our stock at the grant date and is recognized as expense over the vesting period.