Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

The Company's 2009 Plan includes an authorization to issue shares of the Company's common stock, par value $0.01 per share. At December 31, 2022, the Company had 5,787,169 shares remaining available to issue under the 2009 Plan, exclusive of shares that may be issued to satisfy currently outstanding awards such as stock options or performance awards. The 2009 Plan provides for various types of equity awards to associates, officers, non-employee directors and other key personnel of the Company and its subsidiaries. The types of awards that may be granted under the 2009 Plan include restricted stock, restricted stock units, stock options that qualify as incentive stock options (“ISOs”) under Section 422 of the Code, non-qualified stock options, stock appreciation rights and performance awards, among others. No grants of stock options and other awards will be made after May 15, 2027, and no grants of incentive stock options will be made after February 16, 2027.

The Company's current share-based compensation framework is composed of annual restricted stock awards for which one third of the award vests annually over a three-year period and multi-year long term incentive performance awards (the "Performance Awards"). For annual restricted stock awards, in lieu of time-vesting restricted stock, the recipient may elect to receive up to 100% of the award value, in increments of 25%, in the form of stock options, for which one third of the award vests annually over a three-year period. Under the Company's multi-year long term incentive compensation framework, the Company grants a target number of performance awards, with the ultimate award determined by the total shareholder return of the Company's common stock and/or operating performance metrics, measured in each case over a measurement period of up to three years. Performance units granted in 2018 and later years that are earned at the end of the measurement period are settled in fully vested shares of common stock and an amount of cash equal to the dividends that would have been payable, while the performance award was outstanding, on a number of shares equal to the number of units earned. The Company granted supplemental stock options in February 2021, that have a ten-year term and cliff vest on March 1, 2023. The options were granted at an exercise price that equaled the closing stock price on the grant date with recipients having 12 months to exercise the option if terminated without cause, and will have until the expiration date to exercise the options if they retire after the cliff vesting date.

For Performance Awards, after the first year of the performance period, if an employee's employment terminates on account of death, disability, retirement, or termination without cause, the employee vests in a pro rata portion of the award (based on the employee's service time during the performance period), with the vested portion to be earned and converted into shares and the cash amount for the dividends described above at the end of the performance period based on actual achievement under the performance award. For other terminating events, performance awards are generally forfeited.

Information with respect to stock options granted under the 2009 Plan is as follows:


	2009 Plan options	Weighted average exercise price per option
Options Outstanding, December 31, 2019	14,408	$	124.05
Exercised	(1,902)	89.17
Granted	—	—
Forfeited	—	—
Options Outstanding, December 31, 2020	12,506	$	129.35
Exercised	(2,759)	124.34
Granted (1)	294,115	180.32
Forfeited	(4,713)	180.32
Options Outstanding, December 31, 2021	299,149	$	178.71
Exercised	(8,670)	135.78
Granted (2)	9,793	236.14
Forfeited	(6,459)	180.32
Options Outstanding, December 31, 2022	293,813	$	181.85
Options Exercisable:
December 31, 2020	12,506	$	129.35
December 31, 2021	9,747	$	130.77
December 31, 2022	6,533	$	165.51

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

(2)All options are from recipient elections to receive a portion of earned restricted stock awards in the form of stock options.

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


	2022
Dividend yield	3.0	%
Estimated volatility	27.2	%
Risk free rate	1.85	%
Expected life of options	5 years
Estimated fair value	$44.22

The following summarizes the exercise prices and contractual lives of options outstanding as of December 31, 2022:


2009 Plan Number of Options	Exercise Price	Weighted Average Remaining Contractual Term (in years)
1,932	$130.23	0.1
282,088	$180.32	8.2
9,793	$236.14	9.1
293,813

Options outstanding and exercisable at December 31, 2022 had an intrinsic value of $60,000. Options exercisable had a weighted average contractual life of 0.1 years. The intrinsic value of options exercised under the 2009 Plan during 2022, 2021 and 2020 was $602,000, $186,000 and $251,000, respectively.

Information with respect to performance awards granted is as follows:


	Performance awards	Weighted average grant date fair value per award
Outstanding at December 31, 2019	253,432	$	176.27
Granted (1)	77,182	238.03
Change in awards based on performance (2)	18,112	177.26
Converted to restricted stock	(96,317)	177.26
Forfeited	(10,488)	188.52
Outstanding at December 31, 2020	241,921	$	195.13
Granted (3)	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 December 31, 2021	284,522	$	214.73
Granted (4)	72,783	254.75
Change in awards based on performance (2)	(20,356)	200.92
Converted to shares of common stock	(54,053)	217.33
Forfeited	(3,829)	230.36
Outstanding at December 31, 2022	279,067	$	225.46

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(1) The shares of common stock earned was based on the total shareholder return metrics for the Company’s common stock for 38,823 performance awards and financial metrics related to operating performance, net asset value and leverage metrics of the Company for 38,359 performance awards.

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

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

(4) The shares of common stock that may be earned is based on the total shareholder return metrics for the Company’s common stock for 39,972 performance awards and financial metrics related to operating performance and leverage metrics of the Company for 32,811 performance awards.

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


	2022	2021	2020
Dividend yield	2.7%	3.5%	2.8%
Estimated volatility over the life of the plan (1)	16.1% - 36.8%	22.0% - 49.0%	11.1% - 15.5%
Risk free rate	0.72% - 1.68%	0.06% - 0.38%	1.45% - 1.62%
Estimated performance award value based on total shareholder return measure	$271.98	$213.16	$254.72

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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 for which achievement will be determined by using financial metrics, the compensation cost was based on an average grant date value of $233.94, $178.38 and $224.64, for the years ended December 31, 2022, 2021 and 2020, respectively, 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, 2019	148,326	$	181.29	163,111
Granted - restricted stock shares	69,228	221.08		96,317
Vested - restricted stock shares	(79,931)	178.41		(111,325)
Forfeited	(5,899)	196.22		(1,784)
Outstanding at December 31, 2020	131,724	$	203.28	146,319
Granted - restricted stock shares	99,291	178.84		—
Vested - restricted stock shares	(69,840)	192.32		(71,692)
Forfeited	(4,109)	195.77		—
Outstanding at December 31, 2021	157,066	$	192.90	74,627
Granted - restricted stock shares	86,475	231.93		—
Vested - restricted stock shares	(78,212)	197.51		(48,171)
Forfeited	(3,615)	218.19		(86)
Outstanding at December 31, 2022	161,714	$	210.97	26,370

Total employee stock-based compensation cost recognized in income was $34,131,000, $25,100,000 and $21,110,000 for the years ended December 31, 2022, 2021 and 2020, respectively, and total capitalized stock-based compensation cost was $10,431,000, $9,472,000 and $9,974,000 for the years ended December 31, 2022, 2021 and 2020, respectively. At December 31, 2022, there was a total unrecognized compensation cost of $31,571,000 for unvested restricted stock, stock options and performance awards, which is expected to be recognized over a weighted average period of 1.7 years. Forfeitures are included in compensation cost as they occur.

Employee Stock Purchase Plan

In October 1996, the Company adopted the 1996 Non-Qualified Employee Stock Purchase Plan (as amended, the “ESPP”). Initially, 1,000,000 shares of common stock were reserved for issuance, and as of December 31, 2022, there are 592,075 shares remaining available for issuance under the ESPP. Employees of the Company generally are eligible to participate in the ESPP if, as of the last day of the applicable purchase period, they have been employed by the Company for at least one calendar month. Under the ESPP, eligible employees can acquire shares of the Company's common stock through payroll deductions, subject to maximum purchase limitations, during two purchase periods. The first purchase period begins January 1 and ends June 10, and the second purchase period begins July 1 and ends December 10. The purchase price for common stock under the plan is 85% of the lesser of the fair market value of the Company's common stock on the first or the last day of the applicable purchase period. The offering dates, purchase dates and duration of purchase periods may be changed if the change is announced prior to the beginning of the affected date or purchase period. The Company issued 20,837, 21,362 and 20,161 shares and recognized compensation expense of $564,000, $1,609,000 and $537,000 under the ESPP for the years ended December 31, 2022, 2021 and 2020, respectively. The Company accounts for transactions under the ESPP using the fair value method prescribed by accounting guidance applicable to entities that use employee share purchase plans.