16. Share-based payments

Share-based payments consist of the following compensation costs:



Three months ended March 31,		2019		2018
Stock option compensation expense:
SG&A expenses	$	1,539		2,148
Acquisition-related costs		-		195
Share unit expense:
Equity-classified share units		2,368		3,035
Liability-classified share units		150		1,599
Employee share purchase plan -
employer contributions		553		537
	$	4,610	$	7,514

Share unit expense and employer contributions to the employee share purchase plan are recognized in SG&A expenses.

Stock option plans

Stock option activity for the three months ended March 31, 2019 is presented below:



					WA
	Common			WA	remaining			Aggregate
	shares under			exercise	contractual			intrinsic
	option	price			life (in years)	value
Outstanding, December 31, 2018	4,013,863		$	26.41	7.2		$	25,374
Granted	862,198			33.79
Exercised	(82,926)			19.61				1,302
Forfeited	(15,405)			15.83
Outstanding, March 31, 2019	4,777,730			27.89	7.5			29,190
Exercisable, March 31, 2019	2,820,624		$	25.51	6.5		$	23,943

The significant assumptions used to estimate the fair value of stock options granted during the three months ended March 31, 2019 and 2018 are presented in the following table on a weighted average basis:



Three months ended March 31,	2019	2018
Risk free interest rate	2.5%	2.7%
Expected dividend yield	2.06%	2.11%
Expected lives of the stock options	5 years	5 years
Expected volatility	26.8%	28.1%

As at March 31, 2019, the unrecognized stock-based compensation cost related to the non-vested stock options was $9,530,000, which is expected to be recognized over a weighted average period of 2.6 years.

16. Share-based payments (continued)

Share unit plans

Share unit activity for the three months ended March 31, 2019 is presented below:



	Equity-classified awards						Liability-classified awards
	PSUs			RSUs			DSUs
		WA grant			WA grant			WA grant
			date fair			date fair			date fair
	Number		value	Number		value	Number		value
Outstanding, December 31, 2018	670,288	$	31.46	207,986	$	28.99	113,435	$	28.16
Granted	155,803		36.41	25,726		36.44	6,522		36.54
Vested and settled	(231,873)		30.41	(260)		31.98	-		-
Forfeited	(1,123)		31.63	(530)		32.08	-		-
Outstanding, March 31, 2019	593,095	$	33.17	232,922	$	29.81	119,957	$	28.62

Senior executive and employee PSU plans

The Company grants PSUs under a senior executive PSU plan and an employee PSU plan (the “PSU Plans”). Under the PSU Plans, the number of PSUs that vest is conditional upon specified market, service, or performance vesting conditions being met. The PSU Plans allow the Company to choose whether to settle the awards in cash or in shares. The Company intends to settle in shares. With respect to settling in shares, the Company has the option to either (i) arrange for the purchase shares on the open market on the employee’s behalf based on the cash value that otherwise would be delivered, or (ii) to issue a number of shares equal to the number of units that vest.

The fair value of the equity-classified PSUs awarded in 2018 is estimated on modification date and on the date of grant using a Monte-Carlo simulation model as these awards are subject to market vesting conditions. The significant assumptions used to estimate the fair value of the equity-classified PSUs awarded during the three months ended March 31, 2018 are presented in the following table on a weighted average basis:



Three months ended March 31,			2018
Risk free interest rate			1.9%
Expected dividend yield			2.09%
Expected lives of the PSUs			3 years
Expected volatility			31.1%
Average expected volatility of comparable companies			34.1%

The fair value of the equity-classified PSUs awarded in 2019 is estimated based on the Company’s common share price at grant date, as these awards are not subject to market vesting conditions.

As at March 31, 2019, the unrecognized share unit expense related to equity-classified PSUs was $11,688,000, which is expected to be recognized over a weighted average period of 2.2 years.

RSUs

The Company has RSU plans that are equity-settled and not subject to market vesting conditions.

As at March 31, 2019, the unrecognized share unit expense related to equity-classified RSUs was $4,386,000, which is expected to be recognized over a weighted average period of 1.8 years.

16. Share-based payments (continued)

Share unit plans (continued)

DSUs

The Company has DSU plans that are cash-settled and not subject to market vesting conditions.

Fair values of DSUs are estimated on grant date and at each reporting date. DSUs are granted under the DSU plan to members of the Board of Directors. There is no unrecognized share unit expense related to liability-classified DSUs as they vest immediately and are expensed upon grant.

As at March 31, 2019, the Company had a total share unit liability of $4,068,000 (December 31, 2018: $3,714,000) in respect of share units under the DSU plans.

Employee share purchase plan

The Company has an employee share purchase plan that allows all employees that have completed two months of service to contribute funds to purchase common shares at the current market value at the time of share purchase. Employees may contribute up to 4% of their salary. The Company will match between 50% and 100% of the employee‘s contributions, depending on the employee‘s length of service with the Company.