Share-Based Compensation

The Company typically grants equity awards annually at its regularly scheduled first quarter meeting of the Compensation Committee of the Board of Directors.

Stock Options

Stock options generally vest ratably over four years. Weighted average option fair values and assumptions for the periods specified are disclosed below. The fair value of each option grant was estimated on the date of the grant using the Binomial lattice option pricing model.



	Three Months Ended March 31,
	2019	2018
Weighted average fair value of grants	$35.17	$37.96
Dividend yield	1.18%	1.07%
Volatility	24.79%	28.49%
Risk-free interest rate	2.53% - 3.05%	2.01% - 3.17%
Expected life (in years)	5.87	5.78

Total compensation cost for stock options is as follows:



	Three Months Ended March 31,
	2019			2018
Cost of goods sold	$	192		$	206
Selling, general and administrative expenses	2,540			2,524
Total expense before income taxes	2,732			2,730
Income tax benefit	(368		)	(470		)
Total expense after income taxes	$	2,364		$	2,260

A summary of the Company’s stock option activity as of March 31, 2019, and changes during the three months ended March 31, 2019, are presented in the following table:



Stock Options	Shares		Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2019	1,714,003		$	85.08	6.70	$	74,191,783
Granted	332,625		144.83
Exercised	(131,565	)	67.42
Forfeited	(44,168	)	108.13
Outstanding at March 31, 2019	1,870,895		$	96.40	7.12	$	103,532,580
Vested and expected to vest as of March 31, 2019	1,747,058		$	94.14	6.99	$	100,638,073
Exercisable at March 31, 2019	1,023,778		$	75.01	5.74	$	78,549,384

Restricted Stock

Restricted stock awards generally cliff vest after three years for employees and non-employee directors. Unvested restricted stock carries dividend and voting rights and the sale of the shares is restricted prior to the date of vesting. A summary of the Company’s restricted stock activity as of March 31, 2019, and changes during the three months ended March 31, 2019, are presented as follows:



Restricted Stock	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2019	148,041		$	101.50
Granted	32,945		144.25
Vested	(34,952	)	74.72
Forfeited	(3,165	)	128.71
Unvested at March 31, 2019	142,869		$	117.30

Dividends are paid on restricted stock awards whose fair value is equal to the market price of the Company’s stock at the date of the grant.

Total compensation cost for restricted shares is as follows:



	Three Months Ended March 31,
	2019			2018
Cost of goods sold	$	138		$	156
Selling, general and administrative expenses	1,288			1,289
Total expense before income taxes	1,426			1,445
Income tax benefit	(275		)	(257		)
Total expense after income taxes	$	1,151		$	1,188

Cash-Settled Restricted Stock

The Company also maintains a cash-settled share based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. A summary of the Company’s unvested cash-settled restricted stock activity as of March 31, 2019, and changes during the three months ended March 31, 2019, are presented in the following table:



Cash-Settled Restricted Stock	Shares		Weighted-Average Fair Value
Unvested at January 1, 2019	88,225		$	126.26
Granted	24,305		144.74
Vested	(27,900	)	144.12
Forfeited	(3,625	)	151.74
Unvested at March 31, 2019	81,005		$	151.74

Dividend equivalents are paid on certain cash-settled restricted stock awards. Total compensation cost for cash-settled restricted stock is as follows:



	Three Months Ended March 31,
	2019			2018
Cost of goods sold	$	500		$	413
Selling, general and administrative expenses	1,530			1,204
Total expense before income taxes	2,030			1,617
Income tax benefit	(187		)	(159		)
Total expense after income taxes	$	1,843		$	1,458

Performance Share Units

Weighted average performance share unit fair values and assumptions for the period specified are disclosed below. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.



	Three Months Ended March 31,
	2019	2018
Weighted average fair value of grants	$203.06	$216.59
Dividend yield	—%	—%
Volatility	19.08%	17.42%
Risk-free interest rate	2.53%	2.40%
Expected life (in years)	2.84	2.85

A summary of the Company’s performance share unit activity as of March 31, 2019, and changes during the three months ended March 31, 2019, are presented in the following table:



Performance Share Units	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2019	111,155		$	142.42
Granted	50,255		203.06
Vested	—		—
Forfeited	(8,970	)	162.86
Unvested at March 31, 2019	152,440		$	175.87

On December 31, 2018, 69,995 performance share units vested. Based on the Company’s relative total shareholder return rank during the three year period ended December 31, 2018, the Company achieved a 250% payout factor and issued 174,994 common shares in February 2019.

Total compensation cost for performance share units is as follows:



	Three Months Ended March 31,
	2019			2018
Cost of goods sold	$	—		$	—
Selling, general and administrative expenses	1,372			1,860
Total expense before income taxes	1,372			1,860
Income tax benefit	(48		)	(317		)
Total expense after income taxes	$	1,324		$	1,543

The Company’s policy is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award. Classification of stock compensation cost within the Condensed Consolidated Statements of Operations is consistent with classification of cash compensation for the same employees.

As of March 31, 2019, there was $19.7 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.6 years, $7.5 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.2 years, $5.5 million of total unrecognized compensation cost related to cash-settled restricted shares that is expected to be recognized over a weighted-average period of 1.2 years and $13.5 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.2 years.