Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Under the Company’s 2014 Long Term Incentive Plan (the “Incentive Plan”), the Company currently grants RSAs, RSUs (also referred to as “Phantom Stock”) and performance awards to Company employees and non-employee directors. The aggregate maximum number of shares that may be issued or transferred under the Incentive Plan is 1.2 million. The Incentive Plan expires on May 21, 2024. The terms of the awards (including vesting schedules) are established by the Compensation Committee of the Company’s Board of Directors. As of December 31, 2019, there were 0.6 million shares available for issuance under the Incentive Plan.

Restricted Stock Awards

The Company grants RSAs to employees and non-employee directors, at no cost to the recipient. RSAs qualify as participating securities as each award contains non-forfeitable rights to dividends. As such, the two-class method is required for the computation of EPS. RSAs contain voting rights and are accounted for as outstanding when granted. See Note 5 “Earnings Per Share” for further details. RSAs are subject to vesting periods of up to five years and are considered outstanding at the date of grant. Compensation expense for RSAs is calculated based on the market price of the Company’s common stock at the date of grant and recognized over the requisite vesting period on a straight-line basis. Forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. This estimate is adjusted annually based on the extent to which actual or expected forfeitures differ from the previous estimate. The Company issues new shares of common stock or treasury shares, if available, when RSAs vest.

The following table summarizes information about RSAs for 2019:



	Awards		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2019	681,800		$	71.60
Granted	257,199		$	65.92
Vested	(225,753	)	$	69.87
Forfeited	(39,040	)	$	68.72
Nonvested at December 31, 2019	674,206		$	70.19

The total fair value of RSAs which vested during the years ended December 31, 2019, 2018 and 2017, was $15.8 million, $15.2 million and $19.2 million, respectively.

Restricted Stock Units

Under the Incentive Plan, the Company grants to non-employee directors, at their election, RSUs, at no cost to the recipient. RSUs are vested 100% at the time of grant, and settled on the date of the directors “separation of service”, as such term is defined in IRS code §1.409A-1(h), and generally includes departure due to either death, disability, or retirement. RSUs convey no voting rights, and therefore are not considered outstanding when granted. Granted RSUs participate in dividends, however the dividends are not payable until the directors separation of service with the Company. In the event a director terminates his or her directorship with the Company for reasons other than defined above, the RSUs granted and any accrued dividends will be forfeited.

Prior to January 1, 2019, RSUs settled in shares of the Company’s common stock. Effective January 1, 2019, RSUs will settle in a lump sum cash payment equal to the to the average of the Company’s high and low stock price on the separation of service date (no stock is issued) and constitute liability instruments, which require remeasurements to fair value each reporting period. On January 2, 2019, 10,689 cash-settled RSUs were granted with a weighted average grant-date fair value of $53.33 per share. At December 31, 2019, the vested and unpaid cash-settled RSUs were measured at $100.25 per share. The changes in fair value as a result of the changes in the Company’s stock price is recognized though stock-based compensation expense.

Performance Awards

During the year ended December 31, 2019 under the Incentive Plan, the Company granted 30,555 performance awards to certain employees at no cost to the recipient. The weighted average grant date fair value of these awards was $65.83 per share. The performance awards do not qualify as participating securities. The performance awards contain both performance and market conditions to be evaluated over a two-year performance period and are subject to vesting over a three-year service period. Based on the performance criteria, up to 200% of the granted shares may be earned. Compensation expense for the awards with performance conditions is calculated based on the market price of the Company’s common stock at the date of grant and the forecasted achievement of such performance conditions and is recognized over the requisite service period. Compensation expense for the awards with market conditions is calculated based upon the fair value of the award on the date of grant and is recognized over the requisite service period. All performance awards remained unvested as of December 31, 2019.

Employee Stock Purchase Plan

The Employee Stock Purchase Plan (the “Purchase Plan”) authorizes the issuance of up to 4.5 million shares of common stock and provides that no options to purchase shares may be granted under the Purchase Plan after May 19, 2025. The Purchase Plan is available to all employees of the Company and its participating subsidiaries and is a qualified plan as defined by Section 423 of the Internal Revenue Code. At the end of each fiscal quarter (the “Option Period”) during the term of the Purchase Plan, employees can acquire shares of common stock from the Company at 85% of the fair market value of the common stock on the first or the last day of the Option Period, whichever is lower. As of December 31, 2019, there were 848,511 shares available for issuance under the Purchase Plan. During the years ended December 31, 2019, 2018 and 2017, the Company issued 142,576, 148,007, and 123,448 shares, respectively, of common stock to employees participating in the Purchase Plan. With respect to shares issued under the Purchase Plan, the Company’s Board of Directors has authorized specific share repurchases to fund the shares issuable under the Purchase Plan.

The weighted average per share fair value of employee stock purchase rights issued pursuant to the Purchase Plan was $16.00, $15.15, and $16.51 during the years ended December 31, 2019, 2018 and 2017, respectively. The fair value of stock purchase rights is calculated using the grant date stock price, the value of the embedded call option and the value of the embedded put option. Cash received from Purchase Plan purchases was $8.6 million, $7.6 million and $7.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. Employees can contribute a maximum of 10% of their compensation, up to a maximum of $25,000 annually under the Purchase Plan.

Stock-Based Compensation

Total stock-based compensation cost was $19.9 million, $18.7 million, and $18.9 million with an associated tax benefit recognized of $3.5 million, $3.4 million, and $5.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. Stock-based compensation for the year ended December 31, 2019 included $1.1 million related to cash-settled RSUs.

As of December 31, 2019, there was $33.4 million of total unrecognized compensation cost related to stock-based compensation plans which is expected to be recognized over a weighted-average period of 3.3 years.