Share-Based Compensation

3 Months Ended

Mar. 31, 2013

Share-Based Compensation

15.    Share-Based Compensation

During the three months ended March 31, 2013, the Company granted approximately 0.6 million stock options and 0.2 million unvested shares, respectively. During the three months ended March 31, 2012, the Company granted approximately 0.7 million stock options and 0.2 million unvested shares, respectively.

Beginning in 2013, the Company provides 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 (referred to as “TSR awards”) 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 the S&P Midcap 400 Industrial Group 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 200 percent of the initial grant. A target payout of 100 percent is earned if total shareholder return is equal to the 50^th percentile of the S&P Midcap 400 Industrial 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. Any payments made at the end of the award period will be in the form of stock. During the three months ended March 31, 2013, the Company granted approximately 0.1 million performance share units.

The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.

Weighted average option fair values and assumptions for the periods specified are disclosed in the following table:

	Three Months Ended March 31,
	2013	2012
Weighted average fair value of option grants	$ 12.85	$ 11.47
Dividend yield	1.57%	1.57%
Volatility	30.94%	32.01%
Risk-free forward interest rate	0.17%-4.10%	0.17%-3.98%
Expected life (in years)	5.87	5.98

Weighted average performance share unit fair values and assumptions for the period specified are disclosed in the following table:

	Three Months Ended March 31, 2013
Weighted average fair value of performance share units	$50.45
Dividend yield	0.00%
Volatility	28.99%
Risk-free forward interest rate	0.40%
Expected life (in years)	2.87

The Company’s policy is to recognize compensation cost on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s general policy is to issue newly issued shares of common stock to satisfy stock option exercises, grants of unvested shares and vesting of performance share units.

Total compensation cost for the stock options is as follows:

	Three Months Ended March 31,
	2013			2012
	(in thousands)
Cost of goods sold	$	192		$	293
Selling, general and administrative expenses		2,169			1,966
Total expense before income taxes		2,361			2,259
Income tax benefit		(737	)		(708	)
Total expense after income taxes	$	1,624		$	1,551

Total compensation cost for unvested shares is as follows:

	Three Months Ended March 31,
	2013			2012
	(in thousands)
Cost of goods sold	$	402		$	406
Selling, general and administrative expenses		2,660			1,996
Total expense before income taxes		3,062			2,402
Income tax benefit		(715	)		(663	)
Total expense after income taxes	$	2,347		$	1,739

Total compensation cost for performance share units is as follows:

	Three Months Ended March  31, 2013
	(in thousands)
Cost of goods sold	$	—
Selling, general and administrative expenses		189
Total expense before income taxes		189
Income tax benefit		(37	)
Total expense after income taxes	$	152

Classification of stock compensation cost within the Consolidated Statements of Operations is consistent with classification of cash compensation for the same employees.

As of March 31, 2013, there was $12.4 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.6 years, $15.6 million of total unrecognized compensation cost related to unvested shares that is expected to be recognized over a weighted-average period of 1.3 years, and $2.3 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.5 years.

A summary of the Company’s stock option activity as of March 31, 2013, and changes during the quarter ended March 31, 2013 is presented in the following table:

Stock Options	Shares			Weighted Average Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		3,223,742		$	33.16		6.37	$	43,106,153
Granted		617,715			50.26
Exercised		(386,937	)		27.87
Forfeited/Expired		(52,575	)		42.01
Outstanding at March 31, 2013		3,401,945		$	36.73		7.00	$	56,781,822
Vested and expected to vest at March 31, 2013		2,987,418		$	36.33		6.85	$	51,055,880
Exercisable at March 31, 2013		1,913,459		$	30.63		5.47	$	43,606,478