Share-Based Compensation

9 Months Ended

Sep. 30, 2021

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense in its Condensed Consolidated Statements of

Operations for the three and nine months ended September 30, 2021 and 2020:

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

2021

2020

2021

2020

Stock options

$

298

$

353

$

938

$

1,138

Non-vested stock awards and restricted stock units

1,277

1,259

3,963

3,782

Non-elective and elective 401(k) matching contribution in stock

—

910

1,553

2,072

Director stock ownership plan

241

243

660

337

Performance stock units

491

280

1,327

560

Annual incentive plan

—

7,102

—

9,931

Total share-based compensation expense

$

2,307

$

10,147

$

8,441

$

17,820

Share-based compensation expense is recorded in SG&A, except for $

0.2

 million and $

0.7

 million for the three and nine months

ended September 30, 2021, respectively, and $

0.4

 million and $

1.2

 million for the three and nine months ended September 30, 2020,

respectively, recorded within Combination, integration and other acquisition-related expenses.

Stock Options

During the first nine months of 2021, the Company granted stock options under its long-term incentive plan (“LTIP”) that are

subject only to time-based vesting over a

three

 year period. For the purposes of determining the fair value of stock option awards, the

Company used a Black-Scholes option pricing model and which primarily used the assumptions set forth in the table below:

Number of options granted

25,250

Dividend yield

0.85

%

Expected volatility

37.33

%

Risk-free interest rate

0.60

%

Expected term (years)

4.0

The fair value of these options is amortized on a straight-line basis over the vesting period. As of September 30, 2021,

unrecognized compensation expense related to all stock options granted was $

2.1

 million, to be recognized over a weighted average

remaining period of 

2.1

 years.

Restricted Stock Awards and Restricted Stock Units

During the nine months ended September 30, 2021, the Company granted

17,692

 non-vested restricted shares and

2,791

 non-

vested restricted stock units under its LTIP, which are subject to time-based vesting, generally over a

three year

 period. The fair value

of these grants is based on the trading price of the Company’s common stock on the date of grant. The Company adjusts the grant

date fair value of these awards for expected forfeitures based on historical experience. As of September 30, 2021, unrecognized

compensation expense related to the non-vested restricted shares was $

5.1

 million, to be recognized over a weighted average

remaining period of

1.7

 years, and unrecognized compensation expense related to non-vested restricted stock units was $

0.9

 million,

to be recognized over a weighted average remaining period of

2.0

 years.

Performance Stock Units

During the first nine months of 2021, the Company granted performance -dependent stock awards (“PSUs”) as a component of its

LTIP, which will be settled in a certain number of shares subject to market-based and time-based vesting conditions. The number of

fully vested shares that may ultimately be issued as settlement for each award may range from

0

% up to

200

% of the target award,

subject to the achievement of the Company’s total shareholder return (“TSR”) relative to the performance of the Company’s peer

group, the S&P Midcap 400 Materials group. The service period required for the PSUs is three years and the TSR measurement

period for the PSUs is from January 1 of the year of grant through December 31 of the year prior to issuance of the shares upon

settlement.

Compensation expense for PSUs is measured based on their grant date fair value and is recognized on a straight-line basis over

the

three year

 vesting period. The grant-date fair value of the PSUs granted during the first nine months of 2021 was estimated using

a Monte Carlo simulation on the grant date and using the following assumptions: (i) a risk-free rate of 

0.29

%; (ii) an expected term of

3.0

 years; and (iii) a three year daily historical volatility for each of the companies in the peer group, including Quaker Houghton. 

As of September 30, 2021, the Company estimates that it will issue approximately

23,756

 fully vested shares as of the applicable

settlement date of all outstanding PSUs awards based on the conditions of the PSUs and performance to date for each award. As of

September 30, 2021, there was approximately $

3.7

 million of total unrecognized compensation cost related to PSUs, which the

Company expects to recognize over a weighted-average period of 

2.1

 years.

Annual Incentive Plan

The Company maintains an Annual Incentive Plan (“AIP”), which may be settled in cash or a certain number of shares subject to

performance-based and time-based vesting conditions. As of September 30, 2020, it had been the Company’s intention to settle the

2020 AIP in shares, and therefore, expense associated with the AIP in 2020 was recorded as a component of share-based

compensation expense. In the fourth quarter of 2020, the Company determined that it would settle the 2020 AIP in cash. Therefore,

the share-based compensation associated with the AIP during the year ended December 31, 2020 was reclassified from a component

of share-based compensation expense to incentive compensation. This determination and conclusion had no impact on the

classification of AIP expense within the Company’s Condensed Consolidated Statement of Operations for the periods as both are a

component of SG&A. As of September 30, 2021, it is the Company’s intention to settle the 2021 AIP in cash.

Defined Contribution Plan 

The Company has a 401(k) plan with an employer match covering a majority of its U.S. employees. The Company matches

50

%

of the first

6

% of compensation that is contributed to the plan, with a maximum matching contribution of

3

% of compensation. 

Additionally, the plan provides for non-elective nondiscretionary contributions on behalf of participants who have completed one year

of service equal to

3

% of the eligible participants’ compensation. Beginning in April 2020 and continuing through March 2021, the

Company matched both non-elective and elective 401(k) contributions in fully vested shares of the Company’s common stock rather

than cash. For the three months ended September 30, 2021, there were

no

 matching contributions in stock. For the nine months ended

September 30, 2021, total contributions were $

1.5

 million. Comparatively, total contributions for the three and nine months ended

September 30, 2020 were $

0.9

 million and $

2.1

 million, respectively.