Stock compensation plans

In May of 2014, the stockholders of the Company approved the Teleflex Incorporated 2014 Stock Incentive Plan (the "2014 Plan") which replaced the Company's 2008 Stock Incentive Plan and 2000 Stock Compensation Plan (the "Prior Plans"), under which stock options and restricted stock awards previously were granted. The 2014 Plan provides for several different kinds of awards, including stock options, stock appreciation rights, stock awards and other stock-based awards to directors, officers and key employees. Under the 2014 Plan, the Company is authorized to issue up to 5.3 million shares of common stock, subject to adjustment in accordance with special share counting rules in the 2014 Plan that, among other things, (i) count shares underlying a stock option or stock appreciation right (each, an "option award") as one share and each share underlying any other type of award (a "stock award") as 1.8 shares, (ii) increases the shares the Company is authorized to issue by one or 1.8 shares for each share underlying an option award or stock award, respectively, under the Prior Plans that have been canceled, expired, settled in cash or forfeited after December 31, 2013 and (iii) decrease the number of shares the Company is authorized to issue by one share and 1.8 shares for each share underlying an option award or stock award, respectively, granted under the Prior Plans between January 1, 2014 and the May 2, 2014 adoption of the 2014 Plan by the Company's stockholders. Options granted under the 2014 Plan have an exercise price equal to the closing price of the Company's common stock on the date of the grant. In 2018, the Company granted, under the 2014 Plan, non-qualified options to purchase 155,498 shares of common stock and granted restricted stock units relating to 62,221 shares of common stock under the 2014 Plan. The Company also granted performance share units (“PSUs”), as described in the following paragraph.

On June 22, 2018, the Company granted PSUs to specified senior managers. The PSUs are designed to provide further incentive to the Company’s senior management with respect to achievement of the Company’s long term financial objectives. The PSU component of the equity incentive program is designed to provide shares of Teleflex common stock to the holder based upon the Company’s achievement of certain financial performance criteria during the designated performance period (2018-2020 with respect to the PSUs granted in 2018). The number of shares to be awarded under the PSUs granted in 2018 will be subject to modification based upon the Company’s total stockholder return relative to a designated group of public companies. Assuming target performance is achieved, a total of 8,915 shares of common stock would be issuable in respect of the PSUs granted in 2018, and a maximum of 22,290 shares would be issuable in respect of such PSUs upon achievement of maximum performance levels.

The unrecognized compensation expense for awards granted in 2018 as of the grant date was $27.2 million, which will be recognized over the vesting period of the awards. As of December 31, 2018, 3,578,241 shares were available for future grants under the 2014 Plan.

Share-based compensation expense for 2018, 2017 and 2016 was $22.4 million, $19.4 million and $16.9 million, respectively, and is included in cost of goods sold or selling, general and administrative expenses based on the employees' functional classification. The total income tax benefit recognized for share-based compensation arrangements for 2018, 2017 and 2016 was $20.7 million (inclusive of a $15.9 million net excess tax benefit), $12.8 million (inclusive of a $6.6 million net excess tax benefit) and $5.5 million, respectively.

Option Awards

The fair value of options granted in 2018, 2017 and 2016 was estimated at the date of grant using a Black-Scholes option pricing model. The following weighted-average assumptions were used:



	2018		2017		2016
Risk-free interest rate	2.67	%	1.88	%	1.30	%
Expected life of option	4.98 years		4.94 years		4.91 years
Expected dividend yield	0.54	%	0.71	%	0.94	%
Expected volatility	22.65	%	21.74	%	21.64	%

The following table summarizes the option activity during 2018:



	Shares Subject to Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life In Years	Aggregate Intrinsic Value
						(Dollars in thousands)
Outstanding, beginning of the year	1,708,928		$	113.49	—	—
Granted	155,498		254.60		—	—
Exercised	(383,198	)	80.51		—	—
Forfeited or expired	(9,779	)	170.78		—	—
Outstanding, end of the year	1,471,449		136.62		5.7	179,396
Exercisable, end of the year	1,073,198		$	112.13	5.0	157,070

The weighted average grant date fair value for options granted during 2018, 2017 and 2016 was $58.16, $39.70 and $27.42, respectively. The total intrinsic value of options exercised during 2018, 2017 and 2016 was $69.4 million, $15.7 million and $11.3 million, respectively.

The Company recorded $9.1 million of expense related to options during 2018, which is included in cost of goods sold or selling, general and administrative expenses. As of December 31, 2018, the unamortized share-based compensation cost related to non-vested stock options, net of expected forfeitures, was $9.1 million, which is expected to be recognized over a weighted-average period of 1.7 years. Authorized but unissued shares of the Company’s common stock are issued upon exercises of options.

Stock Awards

The fair value of PSUs granted in 2018 was determined using a Monte Carlo simulation valuation model. The grant date fair value for these awards was $284.33.

The fair value for restricted stock units granted in 2018, 2017 and 2016 was estimated at the date of grant based on the market price for the underlying stock on the grant date discounted for the risk free interest rate and the present value of expected dividends over the vesting period. The following weighted-average assumptions were used:



	2018		2017		2016
Risk-free interest rate	2.41	%	1.47	%	0.94	%
Expected dividend yield	0.53	%	0.71	%	0.93	%

The following table summarizes the non-vested restricted stock unit activity during 2018:



	Number of Non-Vested Shares		Weighted Average Grant-Date Fair Value		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
					(In years)	(Dollars in thousands)
Outstanding, beginning of the year	233,742		$	148.79
Granted	62,221		250.66
Vested	(83,396	)	125.70
Forfeited	(10,755	)	179.08
Outstanding, end of the year	201,812		188.10		1.1	$	52,164

The Company issued 62,221, 82,865 and 93,367 of non-vested restricted stock units in 2018, 2017 and 2016, respectively, the majority of which provide for vesting as to all underlying shares on the third anniversary of the grant date. The weighted average grant-date fair value for non-vested restricted stock units granted during 2018, 2017 and 2016 was $250.66, $187.85 and $142.71, respectively.

The Company recorded $13.3 million of expense related to stock awards during 2018, which is included in cost of goods sold or selling, general and administrative expenses. The unamortized share-based compensation cost related to stock awards granted in 2018, net of estimated forfeitures, was $16.5 million, which is expected to be recognized over a weighted-average period of 1.8 years. The Company uses treasury stock to provide shares of common stock in connection with vesting of the stock awards.