BRUKER CORP Stock Compensation Disclosure
Note 18—Stock-Based Compensation
On March 9, 2010, the Company’s Board of Directors unanimously approved and adopted the Bruker Corporation 2010 Incentive Compensation Plan (the “2010 Plan”), and on May 14, 2010, the 2010 Plan was approved by the Company’s stockholders. The 2010 Plan provided for the issuance of up to 8,000,000 shares of the Company’s common stock. The 2010 Plan allowed a committee of the Board of Directors (the “Compensation Committee”) to grant incentive stock options, non-qualified stock options and restricted stock awards. The Compensation Committee had the authority to determine which employees would receive the awards, the amount of the awards and other terms and conditions of any awards. Awards granted under the 2010 Plan typically were made subject to a vesting period of to five years.
In May 2016, the Bruker Corporation 2016 Incentive Compensation Plan (the “2016 Plan”) was approved by the Company’s stockholders. With the approval of the 2016 Plan, no further grants will be made under the 2010 Plan. The 2016 Plan provides for the issuance of up to 9,500,000 shares of the Company’s common stock and permits the grant of awards of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, performance shares and performance units, as well as cash-based awards. The 2016 Plan is administered by the Compensation Committee. The Compensation Committee has the authority to determine which employees will receive awards, the amount of any awards, and other terms and conditions of such awards. Stock option awards granted under the 2016 Plan typically vest over a period of to four years.
Starting in 2017, members of the Company’s Board of Directors receive an annual award of restricted stock units which vest over a one-year service period.
Stock option activity for the year ended December 31, 2019 was as follows:
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| Weighted |
| ||||||
Average | ||||||||||
Shares | Weighted | Remaining | Aggregate | |||||||
Subject to | Average | Contractual | Intrinsic Value | |||||||
Options | Option Price | Term (Yrs) | (in millions) (b) | |||||||
Outstanding at December 31, 2018 |
| 2,593,310 | $ | 21.41 |
| |||||
Granted |
| 112,232 | 44.17 | |||||||
Exercised |
| (626,796) | 19.22 | |||||||
Forfeited/Expired |
| (90,050) | 22.50 | |||||||
Outstanding at December 31, 2019 |
| 1,988,696 | $ | 23.43 | 4.9 | $ | 54.8 | |||
Exercisable at December 31, 2019 |
| 1,537,624 | $ | 20.97 | 4.7 | $ | 46.1 | |||
Exercisable and expected to vest at December 31, 2019 (a) |
| 1,951,167 | $ | 23.27 | 4.9 | $ | 54.1 | |||
| (a) | In addition to the options that are vested at December 31, 2019, the Company expects a portion of the unvested options to vest in the future. Options expected to vest in the future are determined by applying an estimated forfeiture rate to the options that are unvested as of December 31, 2019. |
| (b) | The aggregate intrinsic value is based on the positive difference between the fair value of the Company’s common stock price of $50.97 on December 31, 2019, or the date of exercises, as appropriate, and the exercise price of the underlying stock options. |
The weighted average fair value of options granted was $11.16, $9.50 and $7.61 per share for the years ended December 31, 2019, 2018 and 2017, respectively.
The total intrinsic value of options exercised was $15.2 million, $8.0 million and $16.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Unrecognized pre-tax stock-based compensation expense of $2.9 million related to stock options awarded under the 2010 and 2016 Plans is expected to be recognized over the weighted average remaining service period of 2.3 years for stock options outstanding at December 31, 2019.
Restricted shares of the Company’s common stock are periodically awarded to executive officers, directors and certain key employees of the Company, subject to service restrictions, which vest ratably over periods of to four years. The restricted shares of common stock may not be sold or transferred during the restriction period. Stock-based compensation for restricted stock is recorded based on the stock price on the grant date and charged to expense ratably throughout the restriction period.
The following table summarizes information about restricted stock award activity during the year ended December 31, 2019:
Weighted | |||||
Shares | Average Grant | ||||
Subject to | Date Fair | ||||
| Restriction |
| Value | ||
Outstanding at December 31, 2018 |
| 24,633 | $ | 19.82 | |
Vested |
| (24,633) | 19.82 | ||
Outstanding at December 31, 2019 |
| — | $ | — | |
The total fair value of restricted stock vested was $0.5 million, $1.8 million and $2.3 million for the years ended December 31, 2019, 2018 and 2017, respectively. There are no restricted stock awards outstanding as of December 31, 2019.
Restricted stock units of the Company’s common stock are periodically awarded to executive officers, directors and certain employees of the Company which vest ratably over a service periods of to four years. Stock-based compensation for restricted stock units is recorded based on the stock price on the grant date and charged to expense ratably throughout the vesting period.
The following table summarizes information about restricted stock unit activity for year ended December 31, 2019:
Weighted | |||||
Average Grant | |||||
Shares Subject | Date Fair | ||||
| to Restriction |
| Value | ||
Outstanding at December 31, 2018 | 806,249 | $ | 29.88 | ||
Granted | 366,526 | 41.07 | |||
Vested | (268,014) | 29.47 | |||
Forfeited | (39,660) | 30.12 | |||
Outstanding at December 31, 2019 | 865,101 | $ | 34.73 | ||
The total fair value of restricted stock vested was $7.9 million, $6.9 million, and $2.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Unrecognized pre-tax stock-based compensation expense of $23.0 million related to restricted stock units awarded under the 2016 Plan is expected to be recognized over the weighted average remaining service period of 2.9 years for units outstanding at December 31, 2019.
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.