Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation Expense

v3.22.1
Stock-Based Compensation Expense
 12 Months Ended
Mar. 31, 2022
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Expense Stock-Based Compensation Expense
The Board of Directors has adopted and the shareholders have approved three stock option award plans. The 2010 Thermon Group Holdings, Inc. Restricted Stock and Stock Option Plans ("2010 Plan") was approved on July 28, 2010. The plan authorized the issuance of 2,767,171 stock options or restricted shares (on a post stock split basis). On April 8, 2011, the Board of Directors approved the Thermon Group Holdings, Inc. 2011 Long-Term Incentive Plan ("2011 LTIP"). The 2011 LTIP made available 2,893,341 shares of the Company's common stock that may be awarded to employees, directors or non-employee contractor's compensation in the form of stock options or restricted stock awards. On May 21, 2020, the Board of Directors approved the Thermon Group Holdings, Inc. 2020 Long-Term Incentive Plan ("2020 LTIP"). The 2020 LTIP made available 1,400,000 shares of the Company's common stock that may be awarded to employees, directors, or non-employee contractor's compensation in the form of stock options or restricted stock awards. Collectively, the 2010 Plan, the 2011 LTIP, and the 2020 LTIP are referred to as the "Stock Plans." The Company does not hold any shares of its own stock as treasury shares. Accordingly, the vesting of restricted stock units and performance stock units and the exercise of stock options result in the issuance of additional new shares of the Company's stock. For fiscal 2022, 2021, and 2020, we recorded stock-based compensation of $3,803, $3,728, and $4,960, respectively.
Unvested options outstanding are scheduled to cliff vest over three years with 100% vesting on the third anniversary date of the grant. Stock options must be exercised within 10 years from date of grant. Stock options were issued with an exercise price which was equal to the market price of our common stock at the grant date. We account for forfeitures as they occur, rather than estimate expected forfeitures.
Stock Options
A summary of stock option activity under our Stock Plans for fiscal 2022, 2021, and 2020 are as follows:
Options Outstanding
Number of Shares Weighted Average Exercise Price
Balance at March 31, 2019 327,439 $ 8.92 
Granted — — 
Exercised (159,062) 6.24 
Forfeited (5,361) 18.69 
Balance at March 31, 2020 163,016 $ 12.25 
Granted 71,780 14.28 
Exercised (97,156) 6.81 
Forfeited (16,171) 14.28 
Expired (10,068) $ 14.73 
Balance at March 31, 2021 111,401 $ 16.53 
Granted — — 
Exercised (8,100) 12.00 
Forfeited (9,742) 14.28 
Expired (4,322) 16.30 
Balance at March 31, 2022 89,237 $ 17.20 
For fiscal 2022, 2021, and 2020 the intrinsic value of stock option exercises was $60, $646, and $3,240, respectively. As of March 31, 2022, there was no unrecognized expense related to unvested stock option awards.
The following table summarizes information about stock options outstanding as of March 31, 2022:
Options Outstanding Options Vested and Exercisable
Exercise Price Number Outstanding Weighted Average Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value at March 31, 2022 Number Vested and Exercisable Weighted Average Contractual Life (Years) Weighted Average Exercise Price Aggregate Intrinsic Value at March 31, 2022
$14.28 45,867 8.2 14.28  $ 88,065  —  8.2 —  — 
$19.64 28,499 4.8 19.64  —  28,499  4.8 19.64  — 
$21.52 14,871 0.3 21.52  —  14,871  0.3 21.52  — 
$14.28 - $21.52 89,237  5.8  $ 17.20  $ 88,065  43,370  5.8  $ 20.28  $ — 
The aggregate intrinsic value in the preceding table represents the total intrinsic value based on our closing stock price of $16.20 as of March 31, 2022, which would have been received by the option holders had all option holders exercised as of that date.
Stock options are valued by using a Black-Scholes-Merton option pricing model. We calculate the value of our stock option awards when they are granted. Accordingly, we update our valuation assumptions for volatility and the risk-free interest rate each quarter that option grants are awarded. Annually, we prepare an analysis of the historical activity within our option plans as well as the demographic characteristics of the grantees of options within our stock option plan to determine the estimated life of the grants and possible ranges of estimated forfeiture. The expected life was determined using the simplified method for estimating expected option life, which qualify as "plain-vanilla" options. The risk-free interest rate is based on the rate of a zero-coupon U.S. Treasury instrument with a remaining term approximately equal to the expected term. We do not expect to pay dividends in the near term and therefore do not incorporate the dividend yield as part of our assumptions.
Restricted Stock Awards and Units
Restricted stock awards have been issued to members of our board of directors and restricted stock units have been issued to certain employees. For restricted stock awards, the actual common shares have been issued with voting rights and are included as part of our total common shares outstanding. The common shares may not be sold or exchanged until the vesting period is completed. For restricted stock units, no common shares are issued until the vesting period is completed. For restricted stock units, the Company allows its employees to withhold a portion of their units upon the vesting dates in order to satisfy their
tax obligation. For both restricted stock awards and units, fair value is determined by the market value of our common stock on the date of the grant.
During fiscal 2015, we established a plan to issue our directors awards of fully vested common stock in lieu of restricted stock awards. During fiscal 2022, 2021, and 2020 we issued 32,136, 52,098 and 26,608 fully vested common shares which had a total fair value of $570, $712, and $660 based on the closing price of our common stock on the date of issuance, respectively. As of March 31, 2022, there were no outstanding restricted stock awards.
The following table summarizes the activity with regard to unvested restricted stock units issued to employees during fiscal 2022, 2021, and 2020.
Restricted Stock Units Number of Shares Weighted Average Grant Fair Value
Balance of unvested units at March 31, 2019 237,025 $ 21.26 
Granted 122,747 22.17 
Released (117,216) 20.39 
Forfeited (5,850) 21.81 
Balance of unvested units at March 31, 2020 236,706  $ 22.14 
Granted 222,679  13.75 
Released (115,504) 21.33 
Forfeited (39,357) 16.95 
Balance of unvested units at March 31, 2021 304,524 $ 12.96 
Granted 139,242 17.62 
Released (125,089) 19.42 
Forfeited (24,524) 14.81 
Balance of unvested units at March 31, 2022 294,153 $ 16.26 
Based on our closing stock price of $16.20, the aggregate intrinsic value of the unvested restricted stock units at March 31, 2022 was $4,765. Total unrecognized expense related to unvested restricted stock awards was approximately $2,905 as of March 31, 2022. We anticipate this expense to be recognized over a weighted average period of approximately 1.6 years.
Performance Stock Units
During fiscal 2022, 2021, and 2020, performance stock unit awards were issued to our executive officers and other members of management and had total estimated grant date fair values of $1,689, $1,947 and $2,285, respectively. For the fiscal 2022 awards, the performance indicator for these awards is a combination of stock price and the Company's Adjusted EBITDA. The target number of shares is 37,738 and 57,330 for the stock price awards and Adjusted EBITDA awards, respectively. For those awards utilizing a stock price indicator, the stock price indicator measures our stock price relative to a predetermined peer group of companies with similar business characteristics as ours. Since the stock price indicator is market-based, we prepared a Monte Carlo valuation model to calculate the probable outcome of the market for our stock to arrive at the fair value. The fair value of the market-based units will be expensed over three years, whether or not the market condition is met. For those awards utilizing an Adjusted EBITDA indicator, the Adjusted EBITDA indicator establishes the target Adjusted EBITDA for each of the three years ending March 31, 2025. Since these are performance-based stock awards, the Company will make estimates of periodic expense until the Adjusted EBITDA target is known and the expense for actual number of shares earned is determinable.
During fiscal 2022 and 2021, certain Adjusted EBITDA-based performance stock awards that were scheduled to vest did not meet the minimum Adjusted EBITDA indicator. Accordingly, 67,220 and 130,835 of previously outstanding performance stock units were forfeited during fiscal 2022 and 2021, respectively. There were no such awards in fiscal 2020.
For performance stock units, the performance period will end on the third fiscal year end subsequent to the award being granted. It will then be determined how many shares of stock will be issued. In each year of the performance period, the possible number of shares will range from zero percent to two hundred percent of the target shares.
The following table summarized the target number of performance stock units outstanding and the minimum and maximum number of shares that can be earned as of March 31, 2022.
Fiscal Year Granted Target Minimum Maximum
Fiscal 2020 92,394 — 184,788
Fiscal 2021 136,350 — 272,700
Fiscal 2022 95,068 — 190,136
    In fiscal 2022, 2021 and 2020, the performance objectives for 91,164, 4,476 and 79,144 awards, respectively, were earned.
    At March 31, 2022, there was $1,783 in stock compensation that remained to be expensed, which will be recognized over a period of 1.3 years.