Stock-Based Compensation Plans

9 Months Ended

Sep. 27, 2020

Share-based Payment Arrangement [Abstract]

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stock and performance shares to certain employees. The Company also has non-employee Board of Director stock compensation plans, pursuant to which common stock, stock options and restricted stock units have been issued to its directors.

Stock Incentive Plan

Stock option compensation expense was $5.7 million for both the third quarter of 2020 and 2019. Stock option compensation expense was $18.8 million for the first nine months of 2020 and was $20.4 million for the first nine months of 2019. Employee stock option grants are charged to expense evenly over the three year vesting period except for stock options that were granted after 2018 to Teledyne’s Executive Chairman and Teledyne’s President and Chief Executive Officer which were expensed immediately. For 2020, the Company currently expects approximately $25.0 million in stock option compensation expense based on stock options outstanding at September 27, 2020. This amount can be impacted by employee retirements and terminations or stock options granted during the remainder of the year. The Company issues shares of common stock upon the exercise of stock options.

The following assumptions were used in the valuation of stock options granted in the first nine months of 2020:


			2020
Expected volatility			23.7%
Risk-free interest rate range			1.50% to 1.75%
Expected life in years			6.6
Expected dividend yield			—

Based on the assumptions used in the valuation of stock options, the grant date weighted average fair value of stock options granted in the first nine months of 2020 was $106.26 per share.

Stock option transactions for the third quarter and first nine months of 2020 are summarized as follows:


	2020
	Third Quarter				Nine Months
	Shares	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
Beginning balance	1,927,076	$	166.66	1,988,576	$	130.67
Granted	820	$	304.19	247,273	$	382.91
Exercised	(14,486)	$	86.13	(302,659)	$	97.40
Canceled	(7,173)	$	270.61	(26,953)	$	253.13
Ending balance	1,906,237	$	166.93	1,906,237	$	166.93
Options exercisable at end of period	1,322,591	$	116.55	1,322,591	$	116.55

Performance Share Plan and Restricted Stock Award Program

Under the 2015 to 2017 Performance Share Plan, the Company issued 7,673 shares of Teledyne common stock in the first quarter of 2020, 8,586 shares in the first quarter of 2019 and 6,481 shares in the first quarter of 2018.

In the first quarter of 2018, the performance cycle for the three-year period ending December 31, 2020, was set. Subject to the terms of the plan, the maximum number of shares that could be issued in three equal installments in 2021, 2022 and 2023 is 61,194.

The following table shows the restricted stock activity for the first nine months of 2020:


	Shares	Weighted average fair value per share
Balance, December 29, 2019	56,412	$	158.62
Granted	10,080	$	360.33
Vested	(23,087)	$	114.74

Balance, September 27, 2020	43,405	$	228.80