Stock Plans

9 Months Ended

Sep. 30, 2022

Share-based Payment Arrangement [Abstract]

The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible employees through May 2026 including stock options, restricted stock awards, restricted stock units and performance stock units. The 2017 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2027.

Stock compensation expense is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2022		2021		2022		2021
Stock compensation expense	$	2,967	$	2,867	$	11,325	$	13,562
Income tax benefit	727		691		2,775		3,269
Stock compensation expense, net of tax	$	2,240	$	2,176	$	8,550	$	10,293

A summary of stock option activity for the nine months ended September 30, 2022, is as follows:


	Shares	Weighted Average Exercise Price
Outstanding at January 1, 2022	161,701	$	45.47

Exercised	(92,833)	44.84


Outstanding at September 30, 2022	68,868	46.32
Exercisable at September 30, 2022	68,861	$	46.32

Restricted stock awards and restricted stock units are valued at the market value of the stock on the grant date. A summary of restricted stock activity for the nine months ended September 30, 2022, is as follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested at January 1, 2022	118,343	$	132.62
Granted	78,023	130.77
Vested	(49,661)	113.52
Forfeited	(8,041)	138.63
Unvested at September 30, 2022	138,664	$	138.07

Performance stock units that have a market condition modifier are valued at an estimated fair value using a Monte Carlo model. The final number of shares to be issued for performance stock units granted in 2022 may range from 0% to 200% of the target award based on achieving the specified performance targets over the performance period plus an additional modifier based on total shareholder return ("TSR") over the performance period. The following weighted average assumptions were used in estimating the fair value of the performance stock units granted in the first quarter of 2022.


Fair value per unit			$143.60
Risk-free interest rate			1.72%
Expected dividend yield			1.14%
Expected volatility			34.4%
MSA stock beta			0.890

The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the one year average closing share price. Expected volatility is based on the three year historical volatility preceding the grant date using daily stock prices. Expected life is based on historical stock option exercise data.

A summary of performance stock unit activity for the nine months ended September 30, 2022, is as follows:


	Shares	Weighted Average Grant Date Fair Value
Unvested at January 1, 2022	193,335	$	129.86
Granted	81,504	142.38
Performance adjustments	(22,147)	99.84
Vested	(55,447)	101.38
Forfeited	(18,180)	147.81
Unvested at September 30, 2022	179,065	$	146.27

The performance adjustments above relate primarily to the final number of shares issued for the 2019 performance unit awards which vested in the first quarter of 2022 at 64.2% of the target award based on both cumulative performance against the EBITDA margin and revenue growth targets and MSA's TSR during the three-year performance period.