STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Summary of Stock-Based Compensation Plans—The Company maintains equity incentive plans that provide for the grant of stock-based awards to its directors, officers and employees. The 2007 Equity Incentive Plan, as amended (the “2007 Plan”), provides for the grant of non-qualified and incentive stock options, as well as restricted stock units, restricted stock and other stock-based awards. Exercise prices for non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant. Equity awards typically vest ratably, generally over four years for RSUs and stock options and three years for PSUs. Stock options generally expire 10 years from the date of grant. As of December 31, 2019, the Company had the ability to grant stock-based awards with respect to an aggregate of 7.0 million shares of common stock under the 2007 Plan. In addition, the Company maintains an employee stock purchase plan (the “ESPP”) pursuant to which eligible employees may purchase shares of the Company’s common stock on the last day of each bi-annual offering period at a 15% discount from the lower of the closing market value on the first or last day of such offering period. The offering periods run from June 1 through November 30 and from December 1 through May 31 of each year.

During the years ended December 31, 2019, 2018 and 2017, the Company recorded and capitalized the following stock-based compensation expenses:



	2019		2018		2017
Stock-based compensation expense - Property	$	1.8	$	2.4	$	2.1
Stock-based compensation expense - Services	1.0		0.9		0.8
Stock-based compensation expense - SG&A	108.6		134.2		105.6
Total stock-based compensation expense	$	111.4	$	137.5	$	108.5

Stock-based compensation expense capitalized as property and equipment	$	1.6	$	2.0	$	1.6

Stock Options—The fair value of each option granted during the period was estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. The expected life of stock options (estimated period of time outstanding) was estimated using the vesting term and historical exercise behavior of the Company’s employees. The risk-free interest rate was based on the U.S. Treasury yield with a term that approximated the estimated life in effect at the accounting measurement date. The expected volatility of the underlying stock price was based on historical volatility for a period equal to the expected life of the stock options. The expected annual dividend yield was the Company’s best estimate of expected future dividend yield.

There were no options granted during the years ended December 31, 2019 and December 31, 2018. Key assumptions used to apply the Black-Scholes option pricing model were as follows (percentages and years disclosed in full amounts):



		2017
Range of risk-free interest rate		1.88% - 1.94%
Weighted average risk-free interest rate		1.89%
Range of expected life of stock options		5.2 years
Range of expected volatility of the underlying stock price		18.95% - 19.45%
Weighted average expected volatility of underlying stock price		19.05%
Range of expected annual dividend yield		2.40%

The weighted average grant date fair value per share during the year ended December 31, 2017 was $16.84. The intrinsic value of stock options exercised during the years ended December 31, 2019, 2018 and 2017 was $145.5 million, $98.8 million and $100.3 million, respectively. As of December 31, 2019, total unrecognized compensation expense related to unvested stock options was $0.7 million and is expected to be recognized over a weighted average period of less than one year. The amount of cash received from the exercise of stock options was $94.2 million during the year ended December 31, 2019.

The Company’s option activity for the year ended December 31, 2019 was as follows (share and per share data disclosed in full amounts):



	Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Years)	Aggregate Intrinsic Value
Outstanding as of January 1, 2019	4,257,470			$84.03
Granted	—		—
Exercised	(1,190,017	)	79.15
Forfeited	(7,211	)	94.71
Expired	—		—
Outstanding as of December 31, 2019	3,060,242			$85.90	4.30		$440.4
Exercisable as of December 31, 2019	2,822,938			$85.09	4.14		$408.6
Vested or expected to vest as of December 31, 2019	3,060,242			$85.90	4.30		$440.4

The following table sets forth information regarding options outstanding at December 31, 2019 (share and per share data disclosed in full amounts):



Options Outstanding					Options Exercisable
Range of Exercise Price Per Share	Outstanding Number of Options	Weighted Average Exercise Price Per Share		Weighted Average Remaining Life (Years)	Options Exercisable	Weighted Average Exercise Price Per Share
$43.11 - $74.06	201,845	$	58.21	1.87	201,845	$	58.21
$76.90 - $77.75	505,525	76.91		2.98	505,525	76.91
$81.18 - $94.23	834,335	81.58		3.94	834,335	81.58
$94.57 - $94.71	1,488,529	94.62		5.23	1,262,051	94.60
$96.70 - $121.15	30,008	111.31		6.52	19,182	109.92
$43.11 - $121.15	3,060,242	$	85.90	4.30	2,822,938	$	85.09

Restricted Stock Units and Performance-Based Restricted Stock Units—The Company’s RSU and PSU activity for the year ended December 31, 2019 was as follows (share and per share data disclosed in full amounts):



	RSUs		Weighted Average Grant Date Fair Value		PSUs		Weighted Average Grant Date Fair Value
Outstanding as of January 1, 2019 (1)	1,649,973		$	121.23	624,511		$	109.97
Granted (2)	551,860		185.41		243,077		147.39
Vested and Released (3)	(671,598	)	114.49		(338,680	)	94.71
Forfeited	(75,885	)	140.81		—		—
Outstanding as of December 31, 2019	1,454,350		$	147.67	528,908		$	136.94
Expected to vest as of December 31, 2019	1,454,350		$	147.67	528,908		$	136.94
Vested and deferred as of December 31, 2019 (4)	19,810		$	124.03	—		$	—

_______________

(1)

PSUs consist of the target number of shares issuable at the end of the three-year performance period for the 2018 PSUs and the 2017 PSUs (each as defined below), or 131,311 and 154,520 shares, respectively, and the shares issuable at the end of the three-year vesting period for the PSUs granted in 2016 (the “2016 PSUs”), based on achievement against the performance metrics for the three-year performance period, or 338,680 shares.


(2)	PSUs represent the shares above target that are issuable for the 2017 PSUs at the end of the three-year performance cycle based on exceeding the performance metric for the three-year performance period, or 128,254 shares, and the target number of shares issuable at the end of the three-year performance period for the 2019 PSUs, or 114,823 shares.


(3)	This includes 32,596 and 46,500 of previously vested and deferred RSUs and PSUs, respectively. PSUs consist of shares vested pursuant to the 2016 PSUs. There are no additional shares to be earned related to the 2016 PSUs.


(4)	Vested and deferred RSUs are related to deferred compensation for certain former employees.

The total fair value of RSUs and PSUs that vested during the year ended December 31, 2019 was $185.3 million.

Restricted Stock Units—As of December 31, 2019, total unrecognized compensation expense related to unvested RSUs granted under the 2007 Plan was $120.4 million and is expected to be recognized over a weighted average period of approximately

two years. Vesting of RSUs is subject generally to the employee’s continued employment or death, disability or qualified retirement (each as defined in the applicable RSU award agreement).

Performance-Based Restricted Stock Units—During the years ended December 31, 2019, 2018 and 2017, the Company’s Compensation Committee granted an aggregate of 114,823 PSUs (the “2019 PSUs”), 131,311 PSUs (the “2018 PSUs”) and 154,520 PSUs (the “2017 PSUs”), respectively, to its executive officers and established the performance metrics for these awards. Threshold, target and maximum parameters were established for the metrics for a three-year performance period with respect to each of the 2019 PSUs, the 2018 PSUs and the 2017 PSUs and will be used to calculate the number of shares that will be issuable when each award vests, which may range from zero to 200% of the target amounts. At the end of each three-year performance period, the number of shares that vest will depend on the degree of achievement against the pre-established performance goals. PSUs will be paid out in common stock at the end of each performance period, subject generally to the executive’s continued employment or death, disability or qualified retirement (each as defined in the applicable PSU award agreement). PSUs will accrue dividend equivalents prior to vesting, which will be paid out only in respect of shares that actually vest.

During the year ended December 31, 2019, the Company recorded $23.9 million in stock-based compensation expense for equity awards in which the performance goals have been established and were probable of being achieved. The remaining unrecognized compensation expense related to these awards at December 31, 2019 was $12.4 million based on the Company’s current assessment of the probability of achieving the performance goals. The weighted-average period over which the cost will be recognized is approximately two years.