Share-Based Compensation

The Company’s long-term incentive plans allow for the grant of various types of share-based awards to key employees and directors of the Company and its affiliates. The Company generally awards grants on an annual basis. There are 2,300,000 shares of common stock authorized for awards granted under the current plan. Under previous plans, a total of 5,873,103 shares were authorized for awards. The plans provide for the grant of stock options, stock appreciation rights, shares of common stock, restricted stock, restricted stock units (“RSUs”), performance-vested restricted stock units (“PUs”), incentive awards and certain other types of awards to key employees and directors of the Company and its affiliates.

The Company measures share-based compensation expense at fair value and recognizes such expense on a straight-line basis over the vesting period of the share-based employee awards. The compensation expense related to stock options, restricted stock and performance units granted to key employees and directors of the Company, which is quantified below, does not represent payments actually made to these employees. Rather, the amounts represent the non-cash compensation expense recognized by the Company in connection with these awards for financial reporting purposes. The actual value of these awards to the recipients will depend on the trading price of the Company’s stock when the awards vest. In accordance with the Company’s long-term incentive plans, share-based compensation awards that settle in shares of Company stock may be delivered on a gross settlement basis or a net settlement basis, as determined by the recipient.

In the second quarter of 2016, the Company early adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, in which the provisions related to forfeitures were adopted on a modified retrospective basis to record actual forfeitures as they occur in the consolidated financial statements.

Share-based compensation expense was as follows:



	Year Ended December 31,
	2017		2016		2015
PUs	$	12,145	$	12,485	$	4,899
RSUs	9,183		7,846		6,032
Stock options	3,635		3,701		3,024
Total	$	24,963	$	24,032	$	13,955

Stock Options

Stock option awards are granted at the fair market value of the Company’s stock price at the date of the grant and have a 7 or 10 year term. The stock option grants vest over three, four or five years from the date of grant.

Stock option transactions and related information for the year ended December 31, 2017 was as follows:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2017	748,371		$	53.24
Granted	109,431		$	107.49
Exercised	(273,026	)	$	46.46
Forfeited	(15,920	)	$	72.85
Outstanding as of December 31, 2017	568,856		$	67.14	7.6	$	31,490
Exercisable as of December 31, 2017	316,295		$	55.20	5.9	$	21,287

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2017, 2016 and 2015 was $33.33, $20.26 and $17.28, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 was $21,194, $31,153 and $2,307, respectively.

As of December 31, 2017, unrecognized compensation expense for stock options amounted to $3,702. Such cost is expected to be recognized over a weighted average period of approximately 1.4 years.

The fair value of the options was estimated at the date of the grant using the Black-Scholes option pricing model. Expected volatility was based on the historical volatility of the Company’s common stock. The expected option life was calculated using the simplified method. The risk-free rate is based on the U.S. Treasury zero-coupon issues with a term equal to the expected option life on the date the stock options were granted. The fair value of each option was estimated using the following assumptions:



	2017		2016		2015
Expected volatility	27.38% - 27.47%		27.58% - 27.70%		27.95% - 28.00%
Dividend yield	0.00	%	0.00	%	0.00	%
Expected option life - years	6.0		6.0		6.0
Risk-free rate	1.9% - 2.1%		1.1% - 1.4%		1.5% - 1.7%

Restricted Stock and Restricted Stock Units

The fair value of the restricted stock and restricted stock units is determined based on the closing price of the common stock on the date of grant. The restricted stock and restricted stock units vest over one, three or four years.

Restricted stock and restricted stock units transactions and related information for the year ended December 31, 2017 was as follows:



	Restricted Stock and Restricted Units		Weighted Average Grant Date Fair Value
Non-vested as of January 1, 2017	371,559		$	63.98
Granted	118,562		$	107.57
Vested	(104,608	)	$	67.01
Forfeited	(31,466	)	$	71.29
Non-vested as of December 31, 2017	354,047		$	77.03

The weighted-average grant date fair value of restricted stock and restricted stock units granted during the years ended December 31, 2017, 2016 and 2015 was $107.57, $70.09 and $56.85, respectively. The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2017, 2016 and 2015 was $7,112, $5,923 and $4,146, respectively.

As of December 31, 2017, unrecognized compensation expense for restricted stock and restricted stock units amounted to $12,301. Such cost is expected to be recognized over a weighted-average period of approximately 1.8 years.

Performance-Vested Restricted Stock Units

The actual number of performance units that will vest depends on the Company’s achievement of target performance goals related to the Company’s return on invested capital (“ROIC”) over a three-year period, which may range from 0% to 200% of the target award amount. PUs that are expected to be settled in shares of the Company’s common stock are accounted for as equity awards, and the fair value is determined based on the closing price of the common stock on the date of grant. PUs that are expected to be settled in cash are accounted for as liability awards.

A summary of activity for performance-vested restricted stock units transactions and related information for the year ended December 31, 2017 was as follows:



	Performance Units		Weighted Average Grant Date Fair Value
Non-vested as of January 1, 2017	247,967		$	63.53
Granted	66,514		$	107.49
Vested	(60,286	)	$	66.32
Forfeited	(24,302	)	$	69.44
Non-vested as of December 31, 2017	229,893		$	74.90

The weighted-average grant date fair value of performance units granted during the years ended December 31, 2017, 2016 and 2015 was $107.49, $68.71 and $56.74, respectively. The total fair value of PUs vested during the year ended December 31, 2017 was $5,641. Cash paid to settle PUs during the year ended December 31, 2017 was $4,296. No performance units vested during the years ended December 31, 2016 and 2015.

As of December 31, 2017, unrecognized compensation expense for the performance units was $6,014. Such cost is expected to be recognized over a weighted-average period of approximately 1.3 years.

TSR Awards

In 2016, the Company granted performance awards to certain of the Company’s executive officers. These grants are settled in shares of the Company’s stock and vest over a three-year performance period. The payout of these awards is based on the Company’s relative total shareholder return (“TSR”) compared to a pre-established comparator group during the performance period.

The fair value of the TSR-based performance units is estimated using the Monte Carlo simulation. Expected volatility was calculated based on a rolling average of the daily stock closing prices of the comparator group at the beginning of the performance period. The risk-free rate was based on the U.S. Treasury yield curve, generally represented by U.S. Treasury securities, with a term equal to the expected life of the TSR-based performance units. The dividend yield was assumed to be zero based on Company’s historical patterns and future expectation.

Assumptions used to estimate the fair value of the TSR-based performance grant were as follows:



	Year Ended December 31,
	2017		2016
Expected volatility	26.00	%	27.60	%
Dividend yield	0.00	%	0.00	%
Expected life - years	1.57		3.00
Risk-free rate	1.83	%	0.87	%

As of December 31, 2017, unrecognized compensation expense for the TSR awards was $1,357. There were no TSR-based performance units granted during the years ended December 31, 2017 and 2015.