Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based compensation [Abstract]

Share-based compensation [Text Block]

Note 8 – Share-Based Compensation

The Company recognized the following share-based compensation expense in its Consolidated Statements of Income for the years

ended December 31, 2021, 2020 and 2019:

2021

2020

2019

Stock options

$

1,235

$

1,491

$

1,448

Non-vested stock awards and restricted stock units

5,438

5,012

3,206

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

1,553

3,112

-

Employee stock purchase plan

-

-

84

Director stock ownership plan

901

541

123

Performance stock units

1,911

840

-

Total share-based compensation expense

$

11,038

$

10,996

$

4,861

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

0.9

 million, $

1.5

 million and $

0.9

 million during the years

ended December 31, 2021, 2020 and 2019, respectively, recorded within Combination, integration and other acquisition-related

expenses.

Stock Options

Stock option activity under all plans is as follows:

Weighted 

Weighted

Average

Average

Exercise 

Remaining

Aggregate

Number of

Price 

Contractual

Intrinsic

Options

(per option)

Term (years)

Value

Options outstanding as of January 1, 2021

110,336

$

143.51

Options granted

25,250

245.17

Options exercised

(22,540)

143.49

Options forfeited

(3,362)

190.65

Options outstanding as of December 31, 2021

109,684

$

165.47

4.8

$

7,550

Options expected to vest after December 31, 2021

67,680

$

178.10

5.4

$

3,929

Options exercisable as of December 31, 2021

42,004

$

145.12

3.9

$

3,621

The total intrinsic value of options exercised during the years ended December 31, 2021, 2020 and 2019 was approximately $

2.7

million, $

6.5

 million and $

2.5

 million, respectively. Intrinsic value is calculated as the difference between the current market price of

the underlying security and the strike price of a related option.

A summary of the Company’s outstanding stock options as of December 31, 2021 is as follows:

Weighted

Average

Weighted

Weighted

Number

Remaining

Average

Number

Average

Range of

of Options

Contractual

Exercise Price

of Options

Exercise Price

Exercise Prices

Outstanding

Term (years)

(per option)

Exercisable

(per option)

$

49.01

-

$

80.00

711

-

$

72.12

711

$

72.12

$

80.01

-

$

100.00

1,309

-

87.30

1,309

87.30

$

120.01

-

$

150.00

43,482

5.2

136.62

12,873

136.59

$

150.01

-

$

180.00

40,593

3.7

154.23

27,111

153.88

$

220.01

-

$

250.00

23,589

6.2

245.15

-

-

109,684

4.8

165.47

42,004

145.12

As of December 31, 2021, unrecognized compensation expense related to options granted in 2021, 2020 and 2019 was $

1.8

million, $

1.2

 million and $

0.3

 million, respectively, to be recognized over a weighted average period of

1.9

 years.

The Company granted stock options under its LTIP plan that are subject only to time vesting generally over a

three year

 period

during 2021, 2020, 2019 and 2018. 

For the purposes of determining the fair value of stock option awards, the Company used a Black-

Scholes option pricing model

 and primarily used the assumptions set forth in the table below:

2021

2020

2019

2018

Number of stock options granted

25,250

49,115

51,610

35,842

Dividend yield

0.85

%

0.99

%

1.12

%

1.37

%

Expected volatility

37.33

%

31.57

%

26.29

%

24.73

%

Risk-free interest rate

0.60

%

0.36

%

1.52

%

2.54

%

Expected term (years)

4.0

4.0

4.0

4.0

The fair value of these options is being amortized on a straight-line basis over the respective vesting period of each award. The

compensation expense recorded on each award during the years ended December 31, 2021, 2020 and 2019, respectively, is as follows:

2021

2020

2019

2021 Stock option awards

$

429

$

-

$

-

2020 Stock option awards

516

385

-

2019 Stock option awards

234

698

665

2018 Stock option awards

56

357

364

2017 Stock option awards

-

51

369

Restricted Stock Awards

Activity of non-vested restricted stock awards granted under the Company’s LTIP plan is shown below:

Number of

Weighted Average Grant 

Shares

Date Fair Value (per share)

Nonvested awards, December 31, 2020

71,768

$

151.17

Granted

23,536

242.29

Vested

(23,638)

157.63

Forfeited

(2,973)

172.15

Nonvested awards, December 31, 2021

68,693

$

179.26

The fair value of the non-vested stock 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 for expected forfeitures based on historical experience for similar awards. As of December

31, 2021, unrecognized compensation expense related to these awards was $

5.1

 million, to be recognized over a weighted average

remaining period of

1.5

 years.

Restricted Stock Units

Activity of non-vested restricted stock units granted under the Company’s LTIP plan is shown below:

Number of

Weighted Average Grant 

Units

Date Fair Value (per unit)

Nonvested awards, December 31, 2020

10,845

$

147.70

Granted

2,791

245.49

Vested

(2,570)

155.34

Forfeited

(89)

141.77

Nonvested awards, December 31, 2021

10,977

$

170.82

The fair value of the non-vested restricted stock units 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 for expected forfeitures based on historical experience for similar awards. As of

December 31, 2021, unrecognized compensation expense related to these awards was $

0.8

 million, to be recognized over a weighted

average remaining period of

1.8

 years.

Performance Stock Units

The Company grants 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 generally

from January 1 of the year of grant through December 31 of the year prior to issuances 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 was estimated using a Monte Carlo simulation on the grant date

and using the following assumptions

 set forth in the table below:

CEO Grant

2021 (1)

2021

2020

Fully vested shares

3,775

12,103

18,485

Risk-free interest rate

0.65

%

0.29

%

0.28

%

Dividend yield

0.72

%

0.64

%

1.13

%

Expected term (years)

3.0

3.0

3.0

(1) On September 2, 2021, the Board appointed Andrew Tometich to serve as CEO and entered into an Employment Agreement,

and granted an equity award consisting of a mix of time-based restricted stock and PSUs.

As of December 31, 2021, there was approximately $

4.3

 million of total unrecognized compensation cost related to PSUs which

the Company expects to recognize over a weighted-average period of

1.4

 years.

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 participant's 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 years ended December 31, 2021, and 2020, total contributions were $

1.5

 million and $

3.1

 million, respectively.

Employee Stock Purchase Plan

In 2000, the Board adopted an Employee Stock Purchase Plan (“ESPP”) whereby employees may purchase Company stock

through a payroll deduction plan. Purchases were made from the plan and credited to each participant’s account on the last day of

each calendar month in which the organized securities trading markets in the U.S. were open for business (the “Investment Date”). 

The purchase price of the stock was

85

% of the fair market value on the Investment Date. The plan was compensatory, and the

15

%

discount was expensed on the Investment Date. All employees, including officers, were eligible to participate in this plan. A

participant could withdraw all uninvested payment balances credited to a participant’s account at any time. An employee whose stock

ownership of the Company exceeds

five percent

 of the outstanding common stock was not eligible to participate in this plan. 

Effective January 1, 2020, the Company discontinued the ESPP.

2013 Director Stock Ownership Plan

In 2013, the Company adopted the 2013 Director Stock Ownership Plan (the “Plan”), to encourage the Directors to increase their

investment in the Company, which was approved at the Company’s May 2013 shareholders’ meeting. The Plan authorizes the

issuance of up to

75,000

 shares of Quaker common stock in accordance with the terms of the Plan in payment of all or a portion of the

annual cash retainer payable to each of the Company’s non-employee directors in 2013 and subsequent years during the term of the

Plan. Under the Plan, each director who, on May 1

of the applicable calendar year, owns less than

400

% of the annual cash retainer

for the applicable calendar year, divided by the average of the closing price of a share of Quaker Common Stock as reported by the

composite tape of the New York Stock Exchange for the previous calendar year (the “Threshold Amount”), is required to receive

75

%

of the annual cash retainer in Quaker common stock and

25

% of the retainer in cash, unless the director elects to receive a greater

percentage of Quaker common stock, up to

100

% of the annual cash retainer for the applicable year. Each director who owns more

than the Threshold Amount may elect to receive common stock in payment of a percentage (up to

100

%) of the annual cash retainer. 

The annual retainer is $

0.1

 million and the retainer payment date is June 1.