Share-Based Compensation and Capital Stock

9 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation and Capital Stock

The components of the Company’s pretax share-based compensation activity and associated income tax benefit are as follows for the three and nine months ended September 30, 2020 and 2019:



	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2020		2019		2020			2019
Stock options	$	497	$	541	$	1,478		$	1,667
Restricted stock	2,206		1,954		6,249			6,100
Performance vested restricted stock units	675		1,510		(4,836		)	3,998
Total share-based compensation expense	$	3,378	$	4,005	$	2,891		$	11,765
Income tax benefit	$	805	$	964	$	689		$	2,831

Refer to the discussion of Performance Vested Restricted Stock Units (“PVRSUs”) leveraging for unvested grants below.

A summary of stock-based award activity as of and changes during the nine months ended September 30, 2020 are presented below:



	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2020	873,895		$	61.69		312,097		$	75.23	330,716		$	70.03
Granted	158,620		91.28			155,269		89.91		170,471		134.26
Performance-Based Leveraging⁽¹⁾	—		—			—		—		30,116		61.31
Exercised/Vested	(131,800	)	50.82			(120,052	)	69.40		(176,471	)	58.68
Expired	—		—			—		—		(16,117	)	60.50
Forfeited	(3,696	)	91.28			(36,860	)	81.98		(16,963	)	82.25
Outstanding at September 30, 2020	897,019		$	68.40	2.5 years	310,454		$	84.03	321,752		$	109.25
Options exercisable at September 30, 2020	557,664		$	58.71	2.5 years

⁽¹⁾PVRSUs outstanding have been increased by 30,116 units due to the Company exceeding the targeted performance conditions contained in PVRSUs granted in prior periods which vested in the nine months ended September 30, 2020.

The stock options granted by the Company had an exercise price equal to the market price of the Company's common stock on the date of grant. The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:



	2020 Grants
Risk-free interest rate	0.99		%
Expected volatility	20.88		%
Expected life of stock option	5.9 years
Dividend yield	0.99		%
Requisite service period	4 years
Contractual life	10 years
Weighted average fair value of options granted (per option)	$	17.25

The fair value of restricted stock grants is measured by the market price of the Company's common stock on the date of grant. Restricted stock awards generally vest ratably over the service period beginning with the first anniversary of the grant date. Vesting service period of shares granted during the nine months ended September 30, 2020 range from 12 to 48 months.

The Company grants two types of PVRSU awards: PVRSUs with performance conditions based on internal performance metrics and PVRSUs with market conditions based on the Company's total shareholder return ("TSR") relative to a predetermined peer group. The vesting of PVRSU stock awards is contingent upon the Company achieving internal performance or TSR targets over a specified period and the employees' continued employment for a service period. These performance and market conditions affect the number of shares that will ultimately vest. During the three months ended September 30, 2020, PVRSU awards granted had a service period of 31 months with award vesting ranges between 0% and 200% of the initial units granted.

The fair value of PVRSUs based on internal performance metrics is measured by the market price of the Company's common stock on the date of award grant. Compensation expense is recognized ratably over the requisite service period based on the Company's estimate of the achievement of the performance conditions. Management monitors current results and forecasts of the relevant internal performance metrics and, as necessary, adjusts the performance-based leveraging of unvested PVRSUs. During the nine months ended September 30, 2020, the Company reduced the leveraging factor for 230,647 unvested PVRSUs granted in the current and prior periods to 0%, based on management's estimate of achievement of performance targets with contemplation to impacts from the COVID-19 pandemic.

The fair value of TSR PVRSUs are estimated using a Monte Carlo simulation method as of the date of award grant. Compensation expense is recognized ratably over the requisite service period, regardless of whether the market conditions are achieved and the awards ultimately vest.

Share Repurchases and Redemptions

There were no purchases of common stock under the share repurchase program during the three months ended September 30, 2020. The Company purchased 548,031 shares of common stock under the share repurchase program at a total cost of $43.3 million during the nine months ended September 30, 2020. During the three and nine months ended September 30, 2020, the Company redeemed 7,504 and 123,029 shares of common stock at a total cost of approximately $0.7 million and $11.9 million, respectively, from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants. These redemptions were outside the share repurchase program.

In light of uncertainty resulting from the COVID-19 pandemic, the Company has temporarily suspended activity under the share repurchase program. Refer to the Liquidity and Capital Resources header of "Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information.