CANTEL MEDICAL LLC - 10-Q filing on 2020-12-10

Stock-Based Compensation

3 Months Ended

Oct. 31, 2020

Share-based Payment Arrangement [Abstract]

2016 Equity Incentive Plan

At October 31, 2020, 763,315 nonvested restricted stock awards were outstanding under the 2016 plan. No options were outstanding under the 2016 plan. At October 31, 2020, 51,760 shares were collectively available for issuance pursuant to restricted stock and other stock awards, stock options and stock appreciation rights.

The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income:


	Three Months Ended October 31,
	2020		2019
Cost of sales	$	299	$	260
Operating expenses:
Selling	826		536
General and administrative	2,208		1,527
Research and development	89		81
Total operating expenses	3,123		2,144
Stock-based compensation expense	$	3,422	$	2,404

At October 31, 2020, total unrecognized stock-based compensation expense related to total nonvested stock options and restricted stock awards was $36,996 with a remaining weighted average period of 21 months over which such expense is expected to be recognized.

We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions:


	Three Months Ended October 31,
	2020		2019
Volatility of common stock	57.27	%	30.73	%
Average volatility of peer companies	45.37	%	36.28	%
Average correlation coefficient of peer companies	34.81	%	24.63	%
Risk-free interest rate	0.20	%	1.49	%

A summary of nonvested stock award activity for the three months ended October 31, 2020 is as follows:


	Number of Time-based Awards	Number of Performance-based Awards	Number of Market-based Awards	Number of Total Awards	Weighted Average Fair Value
At July 31, 2020	318,702	29,174	63,839	411,715	$	76.29
Granted	388,605	(4,455)	86,915	471,065	$	46.80
Vested(1)	(103,819)	(3,037)	(6,383)	(113,239)	$	82.34
Forfeited	(5,255)	—	(971)	(6,226)	$	74.10
At October 31, 2020	598,233	21,682	143,400	763,315	$	57.53

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(1)The aggregate fair value of all nonvested stock awards which vested was approximately $9,328.

A summary of stock option activity for the three months ended October 31, 2020 is as follows:


	Number of shares	Weighted Average Exercise Price
Outstanding at July 31, 2020	15,000	$	55.36
Expired	(15,000)	$	55.36
Outstanding at October 31, 2020	—	$	—

Excess tax benefits arise when the ultimate tax effect of the deduction for tax purposes is greater than the income tax benefit on stock-based compensation. For the three months ended October 31, 2020, income tax deductions of $1,698 were generated, of which $2,778 was recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax expense of $1,080 was recorded as an increase in income tax expense. For the three months ended October 31, 2019, income tax deductions of $2,022 were generated, of which $2,581 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax expense of $559 was recorded as an increase to income tax expense.