Enerpac Tool Group Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stock Plans

Stock Plans

12 Months Ended

Aug. 31, 2022

Share-Based Payment Arrangement [Abstract]

Note 15. Stock Plans

Share based awards may be granted to key employees and directors under the Enerpac Tool Group Corp. 2017 Omnibus Incentive Plan (as amended and restated November 9, 2020) (the “Plan”). At August 31, 2022, 7,825,000 shares of Class A common stock were authorized for issuance under the Plan (including 3,500,000 shares that were authorized for issuance at the January 2021 annual meeting) plus an additional 1,800,000 shares being registered to cover shares, if any, that become issuable, pursuant to the terms of the Plan, upon the expiration, cancellation or forfeiture of existing awards under our previously registered stock plans. At August 31, 2022, 3,569,579 shares were available for future award grants. The Plan permits the Company to grant share-based awards, including stock options, restricted stock, restricted stock units and performance shares (the "Performance Shares") to employees and directors. Options generally have a maximum term of ten years, an exercise price equal to 100% of the fair market value of the Company’s common stock at the date of grant and generally vest 50% after three years and 100% after five years. The Company’s restricted stock grants prior to 2017 generally have similar vesting provisions as options, while grants thereafter generally vest in equal installments over a three-year period. The Performance Shares include a three-year performance period. For Performance Shares issued prior to the year ended August 31, 2021, the awards were based 50% on achievement of an absolute free cash flow conversion target and 50% on the Company’s total shareholder return ("TSR") relative to the S&P 600 SmallCap Industrial index. For the year ended August 31, 2021, all Performance Shares issued were based on the relative TSR metric. For the year ended August 31, 2022, the awards were based 50% on the relative TSR metric and 50% on the Company's three-year average return on invested capital. The provisions of share-based awards may vary by individual grant with respect to vesting period, dividend and voting rights, performance conditions and forfeitures.

A summary of restricted stock units and performance shares activity during fiscal 2022 is as follows:


	Number of Shares	Weighted-Average Fair Value at Grant Date (Per Share)
Outstanding on August 31, 2021	1,017,658	$23.27
Granted	896,217	19.39
Forfeited	(263,234)	22.09
Vested	(552,615)	22.34
Outstanding on August 31, 2022	1,098,026	$20.73

A summary of stock option activity during fiscal 2022 is as follows:


	Shares	Weighted-Average Exercise Price (Per Share)		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding on September 1, 2021	989,468	$	26.69
Granted	—	—
Exercised	—	—
Forfeited	—	—
Expired	(41,661)	22.90
Outstanding on August 31, 2022	947,807	$	26.85	2.3	$	—
Exercisable on August 31, 2022	947,807	$	26.85	2.3	$	—

Intrinsic value is the difference between the market value of the stock at August 31, 2022 and the exercise price which is aggregated for all options outstanding and exercisable. A summary of the total intrinsic value of options exercised and cash receipts from options exercised is summarized below (in thousands, except per share amounts):


	Year Ended August 31,
	2022		2021		2020
Intrinsic value of options exercised	$	—	$	587	$	803
Cash receipts from exercise of options	—		2,208		2,631

The Company generally records compensation expense over the vesting period for restricted stock unit awards based on the market value of the Company's Class A common stock on the grant date and utilized an expected forfeiture rate of 12% for both the years ended for the years ended August 31, 2022 and 2021 and 8% for the year ended August 31, 2020. The fair value of Performance Shares with market vesting conditions is determined utilizing a Monte Carlo simulation model.

As of August 31, 2022, there was $10.6 million of total unrecognized compensation cost related to share-based awards, including stock options, restricted stock, restricted stock units and performance shares, which will be recognized over a weighted average period of 1.9 years. The total fair value of share-based awards that vested during the fiscal years ended August 31, 2022 and 2021 was $11.8 million and $9.7 million, respectively.