Share-Based Compensation and Benefit Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement, Noncash Expense [Abstract]

Share-Based Compensation and Benefit Plans

11. Share-based Compensation and Benefit Plans

Incentive Compensation. We currently maintain the 2018 Share Incentive Plan (the “2018 Share Plan”) and the 2011 Share Incentive Plan (the “2011 Share Plan”), although no new awards may be granted under the 2011 Plan. Each of these plans were approved by the Company’s shareholders. The shares available for awards under the 2018 Share Plan are, subject to certain other limits under the plan, generally available for any type of award authorized under the 2018 Share Plan, including stock options, stock appreciation rights, restricted stock awards, stock bonuses and other stock-based awards. Persons eligible to receive awards under the 2018 Share Plan include officers and employees of the Company or any of its subsidiaries, Trust Managers of the Company, and certain consultants and advisors to the Company or any of its subsidiaries. A total of 9.7 million shares (“Share Limit”) was authorized under the 2018 Share Plan. Shares issued or to be issued are counted against the Share Limit as set forth as (1) 3.45 to 1.0 for every share award, excluding stock options and share appreciation rights, granted, and (2) 1.0 to 1.0 for every share of stock option or share appreciation right granted. As of December 31, 2019, there were approximately 7.6 million common shares available under the 2018 Share Plan, which would result in approximately 2.2 million shares which could be granted pursuant to full value awards conversion ratios as defined under the plan.

Total compensation cost for option and share awards charged against income was approximately $16.8 million, $17.8 million, and $18.8 million for 2019, 2018 and 2017, respectively. Total capitalized compensation cost for option and share awards was approximately $3.4 million, $3.0 million, and $3.8 million for the years ended December 31, 2019, 2018, and 2017, respectively.

A summary of activity under our share incentive plans for the year ended December 31, 2019 is shown below:

	Nonvested Share Awards Outstanding		Weighted Average Exercise  / Grant Price
Nonvested share awards outstanding at December 31, 2018	390,681		$	79.82
Granted	199,957		98.84
Exercised/Vested	(308,514	)	82.65
Forfeited	(17,470	)	86.64
Total nonvested share awards outstanding at December 31, 2019	264,654		$	90.44

Options. Stock options other than reload options have a contractual life of ten years and vest over periods up to three years. Reload options vest at the grant date. Reload options are granted for the number of shares tendered as payment for the exercise price upon the exercise of an option with a reload provision. The reload options granted had an exercise price equal to the fair market value of a common share on the date of grant and expired on the same date as the original options which were exercised. None of our current incentive compensation plans carry reload option rights, and all of our obligations relating to reload options have been satisfied as of December 31, 2018. Expense for stock options is based on grant date fair value and recognized on a straight-line method over the vesting period.

We estimate the fair values of each option award on the date of grant using the Black-Scholes option pricing model. There were no options granted in December 31, 2019. The weighted-average fair value of reload stock options granted during the years ended December 31, 2018 and 2017 and the weighted-average assumptions for such grants were as follows:

	Year Ended December 31, 2018	Year Ended December 31, 2017
Weighted average fair value of options granted	$4.11	$5.25
Expected volatility	15.1%	18.9%
Risk-free interest rate	2.0%	1.3%
Expected dividend yield	3.3%	5.5%
Expected life	1 year	2 years

Our computations of expected volatility for 2018 and 2017 were based on the historical volatility of our common shares over a time period equal to the expected life of the option and ending on the grant date, and the interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield on our common shares was based on the historical dividend yield over the expected term of the options granted. Our computation of expected life was based upon historical experience of similar awards, giving consideration to the contractual terms of the share-based awards.

The total intrinsic value of options exercised was approximately $2.0 million and $2.2 million during the years ended December 31, 2018 and 2017, respectively. At December 31, 2019, there was no unrecognized compensation cost related to unvested options and there were no options outstanding.

Share Awards and Vesting. Share awards for employees generally vest over three years and are valued at the market value of the shares on the grant date. In the event the holder of the share awards attains at least age 65, and with respect to employees, also attain at least ten or more years of service ("Retirement Eligibility") before the term in which the awards are scheduled to vest, the value of the share awards is amortized from the date of grant to the individual's Retirement Eligibility date.

At December 31, 2019, 2018 and 2017, the weighted average fair value of share awards granted was $98.84, $82.81 and $83.41, respectively. The total fair value of shares vested during the years ended December 31, 2019, 2018 and 2017 was approximately $25.5 million, $24.0 million, and $23.1 million, respectively. At December 31, 2019, the unamortized value of previously issued unvested share awards was approximately $13.5 million which is expected to be amortized over the next two years.

Employee Share Purchase Plan (“ESPP”). In May 2018, our shareholders approved the 2018 Employee Share Purchase Plan (the "2018 ESPP") which amends and restates our 1999 Employee Share Purchase Plan (the "1999 ESPP") effective with the offering period commencing in June 2018. Under the 2018 ESPP, we may issue up to a total of approximately 500,000 common shares. The 2018 ESPP permits eligible employees to purchase our common shares either through payroll deductions or through semi-annual contributions. Each offering period has a six month duration commencing in June and December for which shares may be purchased at 85% of the market value, as defined on the first or last day of the offering period, whichever price is lower. We currently use treasury shares to satisfy ESPP share requirements. Each participant must hold the shares purchased for nine months in order to receive the discount, and a participant may not purchase more than $25,000 in value of shares during any plan year, as defined. The following table presents information related to our ESPP:

	2019		2018		2017
Shares purchased	22,032		15,330		18,986
Weighted average fair value of shares purchased	$	105.93	$	90.93	$	89.89
Expense recorded (in millions)	$	0.4	$	0.2	$	0.3

Rabbi Trust. We established a rabbi trust for a select group of participants in which share awards granted under the share incentive plan and salary and other cash amounts earned may be deposited. The rabbi trust is only in use for deferrals made prior to 2005, including bonuses related to service in 2004 but paid in 2005. The rabbi trust is an irrevocable trust and no portion of the trust fund may be used for any purpose other than the delivery of those assets to the participants. The assets held in the rabbi trust are subject to the claims of our general creditors in the event of bankruptcy or insolvency.

The value of the assets of the rabbi trust is consolidated into our financial statements. Granted share awards held by the rabbi trust are classified in equity in a manner similar to the manner in which treasury stock is accounted. Subsequent changes in the fair value of the shares are not recognized. The deferred compensation obligation is classified as an equity instrument and changes in the fair value of the amount owed to the participant are not recognized. At December 31, 2019 and 2018, approximately 1.4 million and 1.7 million share awards, respectively were held in the rabbi trust. Additionally, as of December 31, 2019 and 2018, the rabbi trust held trading securities totaling approximately $12.5 million and $14.9 million, respectively, which represents cash deferrals made by plan participants. Market value fluctuations on these trading securities are recognized in income in accordance with GAAP and the liability due to participants is adjusted accordingly.

At December 31, 2019 and 2018, approximately $17.3 million and $21.2 million, respectively, was required to be paid to us by plan participants upon the withdrawal of any assets from the rabbi trust, and is included in “Accounts receivable-affiliates” in our consolidated financial statements.

Non-Qualified Deferred Compensation. In 2004, we established a Non-Qualified Deferred Compensation Plan which is an unfunded arrangement established and maintained primarily for the benefit of a select group of participants. Eligible participants commence participation in this plan on the date the deferral election first becomes effective. We credit to the participant's account an amount equal to the amount designated as the participant's deferral for the plan year as indicated in the participant's deferral election(s). Any modification to or termination of the plan will not reduce a participant's right to any vested amounts already credited to his or her account. Approximately 0.8 million and 0.7 million share awards were held in the plan at December 31, 2019 and 2018, respectively. Additionally, as of December 31, 2019 and 2018, the plan held trading securities totaling approximately $139.3 million and $129.8 million, respectively, which represents cash deferrals made by plan participants and diversification of share awards within the plan to trading securities. Market value fluctuations on these trading securities are recognized in income in accordance with GAAP and the liability due to participants is adjusted accordingly. The assets held in the Non-Qualified Deferred Compensation Plan are subject to the claims of our general creditors in the event of bankruptcy or insolvency.

Balances within temporary equity in our consolidated balance sheets related to fully vested awards and the proportionate share of nonvested awards of participants within our Non-Qualified Deferred Compensation Plan who were permitted to diversify their shares into other equity securities subject to a six-month holding period. In December 2018, the plan was amended and restated and effective January 1, 2019 participants in the Non-Qualified Deferred Compensation Plan were no longer able to diversify their common shares; accordingly, the fully vested share awards and the proportionate share of nonvested share awards previously eligible for diversification were reclassified on the effective date from temporary equity into additional paid-in capital in our consolidated balance sheet.

The following table summarizes the eligible share award activity for the years ended December 31, 2018 and 2017:

(in thousands)	2018			2017
Temporary equity:
Balance at beginning of period	$	77,230		$	77,037
Change in classification	16,407			13,388
Change in redemption value	(669		)	10,038
Diversification of share awards (429 shares during December 31, 2018)	(40,294		)	(23,233		)
Balance at December 31	$	52,674		$	77,230

401(k) Savings Plan. We have a 401(k) savings plan, which is a voluntary defined contribution plan, which provides participating employees the ability to elect to contribute up to 60 percent of eligible compensation, subject to limitations as defined by the federal tax code, with the Company making matching contributions up to a predetermined limit. The matching contributions made for the years ended December 31, 2019, 2018, and 2017 were approximately $3.1 million, $2.9 million, and $2.7 million, respectively. Employees become vested in our matching contributions 33% after one year of service, 67% after two years of service and 100% after three years of service.