Stock Incentive Plans

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

In March 2022, our Board of Directors approved the 2022 Long-Term Plan ("2022 Plan"), which authorizes up to 10,000,000 shares of common stock to be issued at the discretion of the Compensation Committee of the Board of Directors. Awards granted after March 28, 2022 will be issued out of the 2022 Plan. The awards granted under the 2016 Long-Term Incentive Plan continue to vest and options expire ten years from the date of grant. Our non-employee directors, officers and key employees are eligible to participate in the 2022 Plan. The 2022 Plan allows for the issuance of, among other things, stock options, stock appreciation rights, restricted stock, deferred stock units, performance units, and dividend equivalent rights. Vesting periods for options, deferred stock units and restricted shares generally range from three to five years. Options expire ten years from the date of grant.

Under our long-term incentive plan, certain restricted stock awards are market, performance and time-based. For market and performance based awards, we will grant a target number of restricted stock units, with the ultimate award determined by the total shareholder return and operating performance metrics, measured in each case over a measurement period of three to four years. Performance based awards vest after the end of the performance periods. The expected term represents the period from the grant date to the end of the performance period. Compensation expense for performance based awards is measured based on the probability of achievement of certain performance goals and is recognized over the performance period. For the portion of the grant for which the award is determined by the operating performance metrics, the compensation cost is based on the grant date closing price and management’s estimate of corporate achievement of the financial metrics. If the estimated number of performance based restricted stock to be earned changes, an adjustment will be recorded to recognize the accumulated difference between the revised and previous estimates. For the portion of the grant determined by the total shareholder return ("TSR"), management used a Monte Carlo model to assess the fair value and compensation cost. For time based awards, the fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant and is amortized over the vesting periods. For purposes of measuring stock-based compensation expense, we consider whether an adjustment to the observable market price is necessary to reflect material nonpublic information that is known to us at the time the award is granted. No adjustments were deemed necessary for the years ended December 31, 2022, 2021, or 2020. Forfeitures are accounted for as they occur.

The following table summarizes compensation expense recognized for the periods presented (in thousands):


	Year Ended December 31,
	2022		2021		2020
Stock options	$	2,378	$	1,088	$	—
Restricted stock	23,771		16,724		28,318
Total compensation expense	$	26,149	$	17,812	$	28,318

Stock Options

The following is a summary of time-based stock option activity in 2022:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Intrinsic Value ($000's)
Outstanding as of December 31, 2021	311,306	$	67.17
Options granted	256,716	86.23
Options exercised	(2,433)	67.17
Options forfeited	(14,074)	76.02
Options expired	—	—
Outstanding as of December 31, 2022	551,515	$	75.82	8.76	$	—

Exercisable as of December 31, 2022	75,383	$	67.17	8.50	$	—

The Company used the Black-Scholes Option Pricing model to determine the grant date fair value of time-based options. The weighted-average assumptions used are as follows:


			2022
Dividend yield			2.83%
Estimated volatility(1)			32.84%
Risk free rate			1.61%
Expected life of options			6 years
Estimated fair value			$21.15

(1) Estimated volatility is using 50% historical volatility and 50% implied volatility.

As of December 31, 2022, there was $6,269,000 of total unrecognized compensation expense related to unvested time-based stock options that is expected to be recognized over a weighted-average period of three years.

During December 2021, we granted 832,356 performance-based stock options at a weighted average exercise price of $83.44. During the year ended December 31, 2022, 7,140 options were forfeited resulting in 825,216 outstanding and non-vested options at December 31, 2022. The grant date fair value of $20.31 was estimated on the date of grant using the Black-Scholes option pricing model. These options have a performance condition based on a Funds From Operations goal measured over the performance period of January 1, 2022 to December 31, 2024. These awards vest over two years after the end of the performance period, with a portion vesting immediately at the end of the performance period. Compensation expense is measured based on the probability of achievement of the performance goal and is recognized over both the performance period and vesting period. At December 31, 2022, the performance goal is not probable of being achieved.

Restricted Stock

During January 2022, we granted 936,915 performance-based restricted stock awards under the terms of an Out Performance Program ("OPP"), all of which were outstanding and non-vested at December 31, 2022. The grant date fair value of $27.60 was estimated on the date of grant using a Monte Carlo model. These awards have performance conditions based on a Funds From Operations goal and absolute and relative TSR goals measured over the performance period of January 1, 2022 to December 31, 2025. These awards vest after the end of the performance period. Compensation expense is measured based on the probability of achievement of the performance goals and is recognized over the performance period. At December 31, 2022, the performance goals are not probable of being achieved.

The following is a summary of the status of our non-vested restricted stock (including market, performance, and time-based awards, and excluding OPP awards) as of December 31, 2022, and changes during the year ended December 31, 2022:


	Restricted Stock
	Number of Shares	Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2021	566,227	$	76.28
Vested	(168,275)	82.78
Granted	303,566	98.49
Change in awards based on performance(1)	120,959	82.42
Forfeited or expired	(19,150)	83.56
Non-vested at December 31, 2022	803,327	$	84.78

(1) Represents the change in number of market and performance based awards earned based on performance achievement.

We used a Monte Carlo model to assess the compensation cost associated with the portion of the market awards granted for which achievement will be determined using total shareholder return measures. The model also considers a post-vesting holding period. The weighted-average assumptions used are as follows:


						2022
Dividend yield						2.83%
Estimated volatility over the life of the plan(1)						26.31% - 56.62%
Risk free rate						0.08% - 1.20%
Estimated market based performance award value based on total shareholder return measure						$111.27

(1) Estimated volatility over the life of the plan is using 50% historical volatility and 50% implied volatility.

As of December 31, 2022, there was $27,943,000 of total unrecognized compensation expense related to unvested restricted stock that is expected to be recognized over a weighted-average period of two years.

Defined Contribution Plan

We sponsor a 401(k) plan which is available to substantially all U.S. employees. We match a percentage of employee contributions up to 5% of an employee's wages and provide a discretionary profit sharing contribution calculated as a percentage of eligible compensation. We recognized expense of $3,984,000, $3,477,000 and $3,323,000 during the years ended December 31, 2022, 2021 and 2020, respectively, related to this plan.