Share-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

Share-Based CompensationThe Company maintains two share-based compensation plans for executives, non-employee directors and certain key employees that authorize the granting of stock options, restricted stock, performance share units and other types of awards consistent with the purpose of the plans. The number of shares authorized for issuance under the Company’s plans as of December 31, 2020 totaled 15.6 million, of which 3.0 million shares were available for future issuance. The Company’s policy

is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award.

The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Board of Directors based on their recommendation from the Compensation Committee.

Stock Options

Stock options granted under the Company’s plans are generally non-qualified and are granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The fair value of each option grant is estimated on the date of the grant using the Binomial lattice option pricing model. The majority of the options issued to employees vest ratably over four years, with vesting beginning one year from the date of grant, and generally expire 10 years from the date of grant. The fair value of each option grant was estimated on the date of the grant using the Binomial lattice option pricing model.

Weighted average option fair values and assumptions for the periods specified are as follows:


	Years Ended December 31,
	2020	2019	2018
Weighted average fair value of grants	$34.22	$35.15	$38.13
Dividend yield	1.15%	1.18%	1.07%
Volatility	22.04%	24.77%	28.46%
Risk-free interest rate	1.39% - 1.66%	2.53% - 3.04%	2.03% - 3.17%
Expected life (in years)	5.80	5.87	5.83

The assumptions are as follows:

•The Company estimated volatility using its historical share price performance over the contractual term of the option.

•The Company uses historical data to estimate the expected life of the option. The expected life assumption for the years ended December 31, 2020, 2019 and 2018 is an output of the Binomial lattice option pricing model, which incorporates vesting provisions, rate of voluntary exercise and rate of post-vesting termination over the contractual life of the option to define expected employee behavior.

•The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. For the years ended December 31, 2020, 2019 and 2018, we present the range of risk-free one-year forward rates, derived from the U.S. treasury yield curve, utilized in the Binomial lattice option pricing model.

•The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option.

A summary of the Company’s stock option activity as of December 31, 2020, and changes during the year ended December 31, 2020 is presented as follows:


Stock Options	Shares	Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2020	1,386,539	$	103.58	6.95	$	94,764,140
Granted	353,130	172.93
Exercised	(511,960)	87.09
Forfeited/Expired	(263,983)	147.68
Outstanding at December 31, 2020	963,726	$	125.70	6.94	$	70,829,529
Vested and expected to vest at December 31, 2020	919,724	$	124.01	6.86	$	69,151,533
Exercisable at December 31, 2020	424,926	$	92.26	5.24	$	45,447,769

The intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the end of the period and the grant price. The total intrinsic value of options exercised in 2020, 2019 and 2018 was $41.3 million, $49.5 million and $38.0 million, respectively. In 2020, 2019 and 2018, cash received

from options exercised was $44.6 million, $38.8 million and $27.6 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $8.7 million, $10.4 million and $8.0 million, respectively.

Total compensation cost for stock options is recorded in the Consolidated Statements of Operations as follows:


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	501	$	445	$	470
Selling, general and administrative expenses	7,567		8,705		8,313
Total expense before income taxes	8,068		9,150		8,783
Income tax benefit	(907)		(1,209)		(1,616)
Total expense after income taxes	$	7,161	$	7,941	$	7,167

As of December 31, 2020, there was $9.1 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.3 years.

Restricted Stock

Restricted stock awards generally cliff vest after three years for employees and non-employee directors. Unvested restricted stock carries dividend and voting rights and the sale of the shares is restricted prior to the date of vesting. Dividends are paid on restricted stock awards and their fair value is equal to the market price of the Company’s stock at the date of the grant. A summary of the Company’s restricted stock activity as of December 31, 2020, and changes during the year ending December 31, 2020 is as follows:


Restricted Stock	Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2020	130,248	$	124.61
Granted	39,065	168.42
Vested	(39,683)	95.25
Forfeited	(18,330)	142.03
Unvested at December 31, 2020	111,300	$	147.13

Total compensation cost for restricted stock is recorded in the Consolidated Statements of Operations as follows:


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	318	$	261	$	367
Selling, general and administrative expenses	3,857		4,527		4,201

Total expense before income taxes	4,175		4,788		4,568
Income tax benefit	(876)		(920)		(825)
Total expense after income taxes	$	3,299	$	3,868	$	3,743

As of December 31, 2020, there was $5.8 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.0 year.

Cash-Settled Restricted Stock

The Company also maintains a cash-settled share based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. Cash-settled restricted stock awards are recorded at fair value on a quarterly

basis using the market price of the Company’s stock on the last day of the quarter. Dividend equivalents are paid on certain cash-settled restricted stock awards. A summary of the Company’s unvested cash-settled restricted stock activity as of December 31, 2020, and changes during the year ending December 31, 2020 is as follows:


Cash-Settled Restricted Stock	Shares	Weighted-Average Fair Value
Unvested at January 1, 2020	74,560	$	172.08
Granted	20,780	173.30
Vested	(25,405)	173.26
Forfeited	(5,995)	199.20
Unvested at December 31, 2020	63,940	$	199.20

Total compensation cost for cash-settled restricted stock is recorded in the Consolidated Statements of Operations as follows:


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	882	$	1,230	$	809
Selling, general and administrative expenses	3,677		4,118		2,391

Total expense before income taxes	4,559		5,348		3,200
Income tax benefit	(427)		(509)		(337)
Total expense after income taxes	$	4,132	$	4,839	$	2,863

At December 31, 2020 and 2019, the Company has accrued $5.4 million and $5.5 million, respectively, for cash-settled restricted stock in Accrued expenses in the Consolidated Balance Sheets and has accrued $2.9 million and $2.8 million, respectively, for cash-settled restricted stock in Other non-current liabilities in the Consolidated Balance Sheets.

Performance Share Units

Beginning in 2013, the Company granted performance share units to selected key employees that may be earned based on IDEX total shareholder return over the three-year period following the date of grant. Performance share units are expected to be made annually and are paid out at the end of a three-year period based on the Company’s performance. Performance is measured by determining the percentile rank of the total shareholder return of IDEX common stock in relation to the total shareholder return of companies in the Russell Midcap Index (for awards granted from 2016 through 2019) or the S&P 500 Index (for awards granted in 2020) for the three-year period following the date of grant. The payment of awards following the three-year award period will be based on performance achieved in accordance with the scale set forth in the plan agreement and may range from 0 percent to 250 percent of the initial grant. A target payout of 100 percent is earned if total shareholder return is equal to the 50th percentile of the peer group. Performance share units earn dividend equivalents for the award period, which will be paid to participants with the award payout at the end of the period based on the actual number of performance share units that are earned. Payments made at the end of the award period will be in the form of stock for performance share units and will be in cash for dividend equivalents. The Company’s performance share units are considered market condition awards, have been assessed at fair value on the date of grant using a Monte Carlo simulation model and are expensed ratably over the three-year term of the awards. The Company granted 42,690, 56,860 and 52,375 performance share units in 2020, 2019 and 2018, respectively.

Weighted average performance share unit fair values and assumptions for the period specified are as follows:


	Years Ended December 31,
	2020	2019	2018
Weighted average fair value of grants	$224.14	$207.26	$216.59
Dividend yield	—%	—%	—%
Volatility	19.50%	19.11%	17.42%
Risk-free interest rate	1.30%	2.49%	2.40%
Expected life (in years)	2.94	2.83	2.85

The assumptions are as follows:

•The Company estimated volatility using its historical share price performance over the remaining performance period as of the grant date.

•The Company uses a Monte Carlo simulation model that uses an expected life commensurate with the performance period. As a result, the expected life of the performance share units was assumed to be the period from the grant date to the end of the performance period.

•The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with a term commensurate with the remaining performance period.

•Total Shareholder Return is determined assuming that dividends are reinvested in the issuing entity over the performance period, which is mathematically equivalent to utilizing a 0% dividend yield.

A summary of the Company’s performance share unit activity as of December 31, 2020, and changes during the year ending December 31, 2020, is as follows:


Performance Share Units	Shares	Weighted-Average Grant Date Fair Value
Unvested at January 1, 2020	100,575	$	178.97
Granted	42,690	224.14
Vested	(24,395)	220.14
Forfeited	(60,175)	213.89
Unvested at December 31, 2020	58,695	$	218.16

Based on the Company’s relative total shareholder return rank during the three year period ended December 31, 2020, the Company achieved a 201% payout factor and issued 48,223 common shares in February 2021 for awards that vested in 2020.

Total compensation cost for performance share units is as follows:


	Years Ended December 31,
	2020		2019		2018
	(In thousands)
Cost of goods sold	$	—	$	—	$	—
Selling, general and administrative expenses	2,573		8,383		8,203

Total expense before income taxes	2,573		8,383		8,203
Income tax benefit	(217)		(641)		(1,586)
Total expense after income taxes	$	2,356	$	7,742	$	6,617

As of December 31, 2020, there was $4.8 million of total unrecognized compensation cost related to performance shares that is expected to be recognized over a weighted-average period of 0.9 years.