The Company maintains a stock incentive plan which provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, or other stock-based awards as incentives and rewards to encourage employees, consultants and non-employee directors to participate in the long-term success of the Company. As of December 31, 2021, there were 2,518,888 shares available for grant under the stock incentive plan.

Total stock-based compensation expense was as follows:


	Year Ended December 31,
	2021		2020		2019
	(In thousands)
Employees:
Restricted stock and performance shares	$	23,041	$	21,310	$	20,182
Stock options		2,961		3,100		4,032
		26,002		24,410		24,214
Non-employee directors:
Restricted stock		1,312		1,203		1,080
Total stock-based compensation	$	27,314	$	25,613	$	25,294

The Company records stock-based compensation expense for employees in employee compensation and benefits and for non-employee directors in general and administrative expenses in the Consolidated Statements of Operations.

The exercise price of each option granted is equal to the market price of the Company’s common stock on the date of grant. Generally, option grants have provided for vesting over a three or five-year period. Options generally expire in six or ten years from the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables, including the expected stock price volatility over the term of the awards, the risk-free interest rate, the expected dividend yield rate and the expected term. Expected volatilities are based on historical volatility of the Company’s stock. The risk-free interest rate is based on U.S. Treasury securities with a maturity value approximating the expected term of the option. The dividend yield rate is based on the expected annual dividends to be paid divided by the expected stock price. The expected term represents the period of time that options granted are expected to be outstanding based on actual and projected employee stock option exercise behavior.

The weighted-average fair value for options granted during 2021, 2020 and 2019 was $137.66, $91.43 and $58.37, respectively. The following table represents the assumptions used for the Black-Scholes option-pricing model to determine the per share weighted-average fair value for options granted, excluding the two awards discussed below:


	Year Ended December 31,
	2021			2020			2019
Expected life (years)		5.0			5.0			5.0
Risk-free interest rate		0.4	%		1.6	%		2.6	%
Expected volatility		31.2	%		26.8	%		25.9	%
Expected dividend yield		0.4	%		0.6	%		0.8	%

In addition to the option grants above, 76,868 stock options were granted to the Company’s President and Chief Operating Officer in January 2019 with an aggregate grant date fair value of $2.9 million, as determined by an independent third party using a Monte Carlo simulation model. The exercise price is $272.88 for 35,679 of the stock options and $294.71 for the remaining 41,189 stock options, which is equal to 125% and 135%, respectively, of the fair market value of the Company’s common stock on the grant date. Subject to the grantee’s continued service with the Company, the options will vest and become exercisable on January 22, 2024. The options expire on July 22, 2024. Key assumptions used for the Monte Carlo model included a risk-free interest rate of 2.6%, volatility of 25.8% and a dividend yield of 0.8%.

In November 2018, 148,524 stock options were granted to the Company’s Chief Executive Officer with a grant date fair value of $5.5 million, as determined by an independent third party using a Monte Carlo simulation model. The exercise price is $257.78 for 69,113 of the stock options and $278.40 for the remaining 79,411 stock options, which is equal to 125% and 135%, respectively, of the fair market value of the Company’s stock on the grant date. Subject to the grantee’s continued service with the Company, the options will vest and become exercisable on November 8, 2023. The options expire on May 8, 2024. Key assumptions used for the Monte Carlo model included a risk-free interest rate of 3.1%, volatility of 25.9% and a dividend yield of 0.8%.

The following table reports stock option activity during the three years ended December 31, 2021 and the intrinsic value as of December 31, 2021:


	Number of Shares			Weighted-Average Exercise Price ($)		Remaining Contractual Term		Intrinsic Value ($)
								(In thousands)
Outstanding at December 31, 2018		575,564			132.93
Granted		82,474			279.57
Canceled		(548	)		198.67
Exercised		(106,899	)		28.24
Outstanding at December 31, 2019		550,591			175.16
Granted		13,900			368.10
Canceled		(218	)		307.52
Exercised		(176,901	)		84.07
Outstanding at December 31, 2020		387,372			223.60
Granted		17,897			517.88
Canceled		(616	)		394.77
Exercised		(91,900	)		107.05				32,529
Outstanding at December 31, 2021		312,753			274.35		2.5		44,710
Exercisable at December 31, 2021		59,215			190.13		1.7		13,095

The intrinsic value is the amount by which the closing price of the Company’s common stock on December 31, 2021 of $411.27 or the price on the day of exercise exceeds the exercise price of the stock options multiplied by the number of shares. As of December 31, 2021, there was $5.4 million of total unrecognized compensation cost related to non-vested stock options. That cost is expected to be recognized over a weighted-average period of 1.6 years.

Our annual compensation program includes share-based compensation awards as a component of certain employees’ total compensation. These awards are generally subject to annual vesting requirements over a three-year period beginning at the date of grant, which occurs in the first quarter of each year. Accordingly, the expense is generally amortized over the stated vesting period. In addition, we grant shared-based compensation awards in conjunction with certain new hires and for retention purposes. These awards generally vest over a three-year period and expense is recognized over the requisite service period. We may also issue awards with a five-year period.

The Company grants performance equity awards to certain executives and senior managers of the firm as a component of their total compensation and in conjunction with new hires and for retention purposes. Currently, performance equity awards generally vest over a three-year period and contain both performance- and service-based elements. The Company may also grant awards with a five-year vesting period with performance- and service-based elements. Awards granted beginning in January 2021 are subject to retirement eligibility. The Company's retirement eligibility criteria stipulate that if an employee has at least ten years of continuous service and is at least 58 years of age, the employee is eligible for retirement. Retirement eligibility allows for continued vesting of awards after employees depart from the Company, provided that they give the minimum advance notice of one year.

Prior to 2020, performance share awards were generally granted with a performance period of one year, whereby each performance share award was earned or forfeited based on the level of achievement by the Company of pre-tax operating income, as defined in the year following the grant. The pay-out ranged from zero to 150% of the performance share target. For each performance share earned, a participant was awarded an equal number of shares of restricted stock. Subject to the grantee’s continued service, any restricted stock awarded to a participant vested in two equal installments on each of the second and third anniversaries of the date of grant of the applicable performance share award. Compensation expense for one-year performance shares was measured at the grant date and recognized on a graded basis over the vesting period. The final performance achievement for these awards was certified in January 2020 and the awards are only subject to service requirements thereafter.

In January 2020 and January 2021, annual performance equity awards were granted with three-year performance periods, whereby the final amount that vests will be determined based on the level of achievement by the Company of certain predetermined metrics, including pre-tax adjusted operating income and market share for the following three fiscal years, including the year of grant. The final awarded pay-out will range from zero to 150% for the awards granted in 2020 and from zero to 200% for the awards granted in 2021. Subject to the grantee’s continued service, any performance equity awarded to a participant will vest on the three-year anniversary of the grant date. Compensation expense for the three-year performance shares is measured at the grant date and expensed over the requisite service period with performance target achievement assessed at the end of each reporting period.

In August 2021, the new Chief Financial Officer received a performance equity award of 1,070 target shares. The award is substantially similar to the annual bonus performance equity awards granted in January 2021, except that the performance achievement will be determined using 2022 and 2023 fiscal years only. The award will fully vest on August 1, 2024 after certification of the performance criteria, subject to continued employment by the Chief Financial Officer through such date.

The following table reports the Company's performance payout estimates for three-year performance period awards at December 31, 2021 as well as the target and maximum share payouts for each award date granted:



Award Date	2021 Estimate		Target		Maximum
January 15, 2020		11,684		12,298		18,447
January 15, 2021		9,544		12,185		24,370
August 1, 2021		1,070		1,070		2,140

In addition to the grants above, 18,914 performance shares were granted to the Company’s President and Chief Operating Officer in January 2019 with an aggregate fair value of $2.9 million as determined by an independent third party using a Monte Carlo simulation model. The performance share award provides that the number of shares earned will be based on the Company’s achievement of certain share price levels during the five-year performance period. The performance level is $272.88 for 8,969 of the performance shares and $294.71 for the remaining 9,945 performance shares, which is equal to 125% and 135%, respectively, of the fair market value of the Company’s common stock on the grant date. Each of the performance levels have been achieved. Subject to the grantee’s continued service with the Company, earned shares will vest on January 22, 2024. Key assumptions used for the Monte Carlo simulation included a risk-free interest rate of 2.6%, volatility of 25.9% and a dividend yield of 0.8%.

In November 2018, 37,742 performance shares were granted to the Company’s Chief Executive Officer with a grant date fair value of $5.5 million as determined by an independent third party using a Monte Carlo simulation model. The performance share award provides that the number of shares earned will be based on the Company’s achievement of certain share price levels during the five-year performance period. The performance level is $257.78 for 17,942 of the performance shares and $278.40 for the remaining 19,800 performance shares, which is equal to 125% and 135%, respectively, of the fair market value of the Company’s stock on the grant date. Each of the performance levels have been achieved. Subject to the grantee’s continued service with the Company, earned shares will vest on November 8, 2023. Key assumptions used for the Monte Carlo model included a risk-free interest rate of 3.1%, volatility of 26.1% and a dividend yield of 0.8%.

The following table reports restricted stock and performance share activity during the three years ended December 31, 2021:


	Number of Restricted Shares			Weighted-Average Grant Date Fair Value

Outstanding at December 31, 2018		271,870		$	112.47
Granted		118,632
Performance share pay-out		87,163
Canceled		(2,321	)
Vested		(129,312	)
Outstanding at December 31, 2019		346,032		$	154.27
Granted		38,907
Performance share pay-out		19,401
Canceled		(3,480	)
Vested		(170,213	)
Outstanding at December 31, 2020		230,647		$	224.63
Granted		47,142
Performance share pay-out		—
Canceled		(3,911	)
Vested		(111,268	)
Outstanding at December 31, 2021		162,610		$	316.56

As of December 31, 2021, there was $31.9 million of total unrecognized compensation expense related to non-vested restricted stock and performance shares. That cost is expected to be recognized over a weighted-average period of 1.5 years.

The Company offered a non-qualified employee stock purchase plan for non-executive employees. Under the plan, participants were granted the right to purchase shares of common stock based on the fair market value on the last day of the six-month offering period. On the purchase date, the Company granted to the participants a number of shares of common stock equal to 20% of the aggregate shares purchased by the participant. These matching shares vested over a one-year period. The Company issued 806, 729 and 617 matching shares in connection with the plan for the years ended December 31, 2021, 2020, and 2019, respectively. In January 2022, the Company's Compensation & Talent Committee terminated the employee stock purchase plan with an effective date of February 28, 2022.