Stock-Based Compensation Plans

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

As part of its long-term compensation plans, the Company has granted stock options, performance awards and restricted stock. Details of the outstanding awards and activity are presented below.

Information with respect to stock options granted under the Company's Second Amended and Restated 2009 Equity Incentive Plan (the "2009 Plan") for the three and nine months ended September 30, 2021, is as follows:


	2009 Plan shares	Weighted average exercise price per share
Options Outstanding, December 31, 2020	12,506	$	129.35
Exercised	(2,126)	121.78
Granted (1)	294,115	180.32
Forfeited	(4,713)	180.32
Options Outstanding, September 30, 2021	299,782	$	178.61
Options Exercisable, September 30, 2021	10,380	$	130.90

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(1)Includes 4,847 options resulting from recipient elections to receive a portion of earned restricted stock awards in the form of stock options.

The Company granted stock options in 2021 with the exercise price equal to the closing stock price on the date of grant. The stock options awarded in 2021 will cliff vest in two years on March 1, 2023 and they have a ten-year term. The Company used the Black-Scholes Option Pricing model to determine the grant date fair value of options. The assumptions used are as follows:


						2021
Dividend yield						3.5%
Estimated volatility						27.1%
Risk free rate						0.81%
Expected life of options						5 years
Estimated fair value						$28.64

Information with respect to performance awards granted is as follows:


	Performance awards	Weighted average grant date fair value per award
Outstanding at December 31, 2020	241,921	$	195.13
Granted (1)	138,033	191.12
Change in awards based on performance (2)	(37,469)	156.00
Converted to shares of common stock	(56,545)	156.00
Forfeited	(1,418)	207.65
Outstanding at September 30, 2021	284,522	$	206.05

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(1)The amount of shares of common stock that ultimately may be earned is based on the total shareholder return metrics related to the Company's common stock for 69,064 performance awards and financial metrics related to operating performance, net asset value and leverage metrics of the Company for 68,969 performance awards.

(2)Represents the change in the number of performance awards earned based on performance achievement for the performance period.

The Company used a Monte Carlo model to assess the compensation cost associated with the portion of the performance awards granted in 2021 for which achievement will be determined by using total shareholder return measures. The assumptions used are as follows:


						2021
Dividend yield						3.5%
Estimated volatility over the life of the plan (1)						22.0% - 49.0%
Risk free rate						0.06% - 0.38%
Estimated performance award value based on total shareholder return measure						$213.16

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

For the portion of the performance awards granted in 2021 for which achievement will be determined by using financial metrics, the compensation cost was based on a weighted average grant date value of $178.38, and the Company's estimate of corporate achievement for the financial metrics.

Information with respect to restricted stock granted is as follows:


	Restricted stock shares	Restricted stock shares weighted average grant date fair value per share		Restricted stock shares converted from performance awards
Outstanding at December 31, 2020	131,724	$	203.28	146,319
Granted - restricted stock shares	96,834	177.49		—
Vested - restricted stock shares	(68,702)	192.07		(71,692)
Forfeited	(3,077)	193.47		—
Outstanding at September 30, 2021	156,779	$	192.45	74,627

Total employee stock-based compensation cost recognized in income was $19,965,000 and $17,385,000 for the nine months ended September 30, 2021 and 2020, respectively, and total capitalized stock-based compensation cost was $6,899,000 and $8,291,000 for the nine months ended September 30, 2021 and 2020, respectively. At September 30, 2021, there was a total unrecognized compensation cost of $46,683,000 for unvested restricted stock, stock options and performance awards, which does not include forfeitures, and is expected to be recognized over a weighted average period of 1.9 years. Forfeitures are included in compensation cost as they occur.