Share-Based Payments

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

The Company's stockholders approved an Incentive Plan in 2016 which provides for the grant of any or all of the following types of awards to eligible employees: (1) stock options, including incentive stock options and nonqualified stock options; (2) stock appreciation rights ("SARs"), in tandem with stock options or freestanding; (3) restricted stock or restricted stock units; and (4) performance awards. The number of shares of Class A Common Stock, $0.01 par value, allowed to be issued under the Incentive Plan, cannot exceed 300,000. The Incentive Plan includes additional provisions, most notably regarding the definition of performance objectives which can be used in the issuance of the fourth type of award noted above (performance awards). The term of the Incentive Plan is for ten years from the date of stockholder approval.

All of the employees of the Company and its subsidiaries are eligible to participate in the Incentive Plan. In addition, directors of the Company are eligible to receive the same types of awards as employees except that they are not eligible to receive incentive stock options. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options. SARs granted prior to 2016 vest 20% annually following three years of service following the grant date. Employee SARs granted 2016 and thereafter vest 33.3% annually following one year of service from the date of the grant. Directors' SARs grants vest 20% annually following one year of service from the date of grant.

The Incentive Plan allows for certain other share or unit awards which are solely paid out in cash based on the value of the Company's shares, or changes therein, as well as the financial performance of the Company under pre-determined target performance metrics. Certain awards, such as restricted stock units ("RSUs") provide solely for cash settlement based upon the market price of the Company's Class A Common Stock, often referred to as "phantom stock-based awards" in equity compensation plans. Unlike share-settled awards, which have a fixed grant-date fair value, the fair value of unsettled or unvested liability awards is remeasured at the end of each reporting period based on the change in fair value of a share. The liability and corresponding expense are adjusted accordingly until the award is settled. For employees, the vesting period for RSUs is 100% at the end of three years from the grant date. RSUs granted prior to 2019 were paid in cash at the vesting date equal to the closing price of the Company's Class A Common Stock on the three year anniversary date. RSUs granted in 2019 and after are payable in cash at the three year vesting date equal to the 20-day moving average closing price of the Company’s Class A Common Stock at that time.

Other awards may involve performance share units ("PSUs") which are units granted at a specified dollar amount per unit, typically linked to the share price of the Class A Common Stock, that are subsequently multiplied by an attained performance factor to derive the number of PSUs to be paid as cash compensation at the vesting date. PSUs also vest three years from the date of grant. For PSUs, the performance period begins the first day of the calendar year for which the PSUs are granted and runs three calendar years. At that time, the three-year performance outcome is measured against the pre-defined target amounts to determine the number of PSUs earned as compensation. PSUs granted prior to 2019 were paid at the closing price of the Class A Common Stock on the vesting date. PSUs granted in 2019 and forward are payable at the 20-day moving average closing price of the Class A Common Stock at the vesting date.

PSU awards covering the three year measurement period ended December 31, 2022 were paid out in the first four months of 2023. The performance factor during the measurement period used to determine compensation payouts was 74.54% of the pre-defined metric target.

PSU awards covering the three year measurement period ended December 31, 2021 were paid out in the first quarter of 2022. The performance factor during the measurement period used to determine compensation payouts was 110.19% of the pre-defined metric target.

Directors of the Company are eligible to receive RSUs under the Incentive Plan. Unlike RSUs granted to officers, the RSUs granted to directors vest one year from the date of grant and are payable in cash at the vesting date equal to the 20-day moving average closing price of the Class A Common Stock at that time.

The following table shows all grants issued to officers and directors during the three and six months ended June 30, 2023 and 2022. These grants were made based upon the 20-day moving average closing market price of the Company's Class A common share at the grant date.


	Three Months Ended
	June 30, 2023		June 30, 2022
	Officers	Directors	Officers	Directors

SARs	—	—	—	—
RSUs	—	2,170	—	3,710
PSUs	—	—	—	—


	Six Months Ended
	June 30, 2023		June 30, 2022
	Officers	Directors	Officers	Directors

SARs	—	—	—	—
RSUs	—	2,170	—	3,710
PSUs	—	—	—	—

The Company uses the current fair value method to measure compensation costs for awards granted under the share-based plans. As of June 30, 2023 and December 31, 2022, the liability balance was $50.3 million and $20.5 million, respectively. A summary of awards by type and related activity is detailed below.


		Options Outstanding
	Shares Available for Issuance Pursuant to Grants	Shares	Weighted- Average Exercise Price

Stock Options:
Balance at January 1, 2023	291,000	—	$	—
Exercised	—	—	$	—
Forfeited	—	—	$	—
Expired	—	—	$	—
Stock options granted	—	—	$	—

Balance at June 30, 2023	291,000	—	$	—


	Liability Awards
	SARs	RSUs	PSUs

Other Share/Unit Awards:
Balance at January 1, 2023	286,589	21,861	24,845
Exercised	(1,908)	(3,710)	(6,066)
Forfeited	(2,861)	(248)	(335)
Granted	—	2,170	—

Balance at June 30, 2023	281,820	20,073	18,444

SARs, RSUs, and PSUs shown as forfeited in the above tables represent vested and unvested awards not exercised by plan participants upon their termination from the Company in accordance with the expiration provisions of the awards. Furthermore, under the terms of all outstanding SARs, RSUs and PSUs, all such awards may be settled only in cash. Accordingly, no shares of Class A Common Stock are issuable under the terms of such awards.

The total intrinsic value of share-based compensation exercised and paid was $1.6 million and $1.1 million for the six months ended June 30, 2023 and 2022, respectively. The total fair value of SARs, RSUs, and PSUs vested during the six months ended June 30, 2023 and 2022 was $1.4 million and $0.1 million, respectively. No cash amounts were received from the exercise of stock options under the Plans during the periods reported on.

The following table summarizes information about SARs outstanding at June 30, 2023.


	SARs Outstanding
	Number Outstanding		Weighted- Average Remaining Contractual Life	Number Exercisable

Exercise prices:
$210.22	21,750		0.4 years	21,750
$216.48	10,342		2.6 years	10,342
$311.16	7,881		3.6 years	7,881
$334.34	7,443		4.5 years	7,443
$303.77	9,357		5.5 years	9,357
$252.91	16,958		6.5 years	16,958
$192.10	36,503		7.4 years	24,327
$218.44	59,802		8.5 years	19,923
$220.61	111,784		9.5 years	—

Totals	281,820			117,981

Aggregate intrinsic value (in thousands)	$	53,494		$	21,120

The aggregate intrinsic value in the table above is based on the closing Class A Common Stock price of $415.56 per share on June 30, 2023.

The SARs shown above with an exercise price of $210.22 have a remaining contractual life of less than one year. The holders for this grant have until December 11, 2023, the end of the contractual term of the award grant, to exercise these holdings or otherwise forfeit the SAR grants held.

In estimating the fair value of the SARs outstanding at June 30, 2023 and December 31, 2022, the Company employed the Black-Scholes option pricing model with assumptions detailed below.


	June 30, 2023		December 31, 2022

Expected term	0.4 to 9.5 years		0.9 to 10.0 years
Expected volatility weighted-average	39.94	%	36.18	%
Expected dividend yield	0.09	%	0.13	%
Risk-free rate weighted-average	4.48	%	4.19	%

The Company reviewed the contractual term relative to the SARs as well as perceived future behavior patterns of exercise. Volatility is based on the Company’s historical volatility over the expected term of the SARs by expected exercise date.

The pre-tax compensation cost/(benefit) recognized in the Condensed Consolidated Financial Statements related to these plans was $34.6 million and $32.3 million for the three and six months ended June 30, 2023, and $1.0 million and $2.5 million for the three and six months ended June 30, 2022, respectively. The related tax expense/(benefit) recognized was $(7.3) million and $(6.8) million for the three and six months ended June 30, 2023 and $(0.2) million and $(0.5) million for the three and six months ended June 30, 2022, respectively. Compensation expense for the three and six months ended June 30, 2023 is indicative of the Class A Common Stock price increasing from $281.00 per share at December 31, 2022 and $242.62 per share at March 31, 2023 to $415.56 per share at June 30, 2023.

As of June 30, 2023, the total pre-tax compensation expense related to non-vested share-based awards not yet recognized was $34.2 million. This amount is expected to be recognized over a weighted-average period of 1.2 years. The Company recognizes compensation cost over the graded vesting periods.