Note

– Stock-Based Compensation

Under the Company’s

2012

Long-Term Incentive Plan, as amended (the

2012

Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the

2012

Plan have a maximum term of

ten

years from the date of grant. The compensation committee

may

provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the

2012

Plan generally

may

not

be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

The Company’s

2012

Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of the Company’s common stock each offering period at a discount through payroll deductions of up to

percent of their eligible compensation, subject to plan limitations. The ESPP provides for

six

-month offering periods with a single purchase period ending

May

and

November

15,

respectively. At the end of each offering period, employees are able to purchase shares at

percent of the lower of the fair market value of the Company’s common stock on the

first

trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation expense was

$3.0

million and

$2.3

million for the

three

months ended

March 31, 2019

and

2018,

respectively.

Stock Options

The following table summarizes stock option activity during the

three

months ended

March 31, 2019:


				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2018		252,616		$	64.71
Granted		30,046			104.99
Exercised		(3,010	)		57.85
Forfeited		(680	)		96.20
Options outstanding at March 31, 2019		278,972		$	69.04

Exercisable at March 31, 2019		157,602		$	56.70

The outstanding options generally have a term of

ten

years. For employees, options granted become exercisable ratably over the vesting period, which is generally a period from

four

five

years, beginning on the

first

anniversary of the grant date, subject to the employee’s continuing service to the Company. For directors, options generally become exercisable in full on the

first

anniversary of the grant date.

The weighted-average grant date fair value of options that were granted during the

three

months ended

March 31, 2019

was

$47.76.

The following table provides the assumptions used in the Black-Scholes pricing model valuation of options during the

three

months ended

March 31, 2019

and

2018:


	Three Months Ended March 31,
	2019			2018
Risk-free interest rate		2.58	%		2.52	%
Expected life (years)		6.25			6.25
Expected volatility		42.74	%		42.22	%
Expected dividend yield		0	%		0	%

As of

March 31, 2019,

there was

$4.3

million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of

3.0

years.

Restricted Stock

Restricted stock awards are share-settled awards and restrictions lapse ratably over the vesting period, which is generally a period from

four

five

years, beginning on the

first

anniversary of the grant date, subject to the employee's continuing service to the Company. For directors, restrictions generally lapse in full on the

first

anniversary of the grant date.

The following table summarizes restricted stock activity during the

three

months ended

March 31, 2019:


				Weighted-
				Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Restricted stock at December 31, 2018		323,921		$	79.85
Granted		27,476			105.03
Restrictions lapsed		(22,420	)		71.40
Forfeited		(3,692	)		108.51
Restricted stock at March 31, 2019		325,285		$	82.35

As of

March 31, 2019,

there was

$21.3

million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of

3.0

years.

Performance Stock

Performance stock units (PSUs) are expressed in terms of a target number of PSUs, with anywhere between

percent and

150

percent of that target number capable of being earned and vesting at the end of a

three

-year performance period depending on the Company’s performance in the final year of the performance period and the award recipient’s continued employment.

The following table summarizes performance stock activity during the

three

months ended

March 31, 2019:


			Weighted-
			Average
			Grant Date
	Performance		Fair Value
	Stock		Per Share
Performance stock at December 31, 2018		52,140	$	76.54
Granted		21,434		104.99
Restrictions lapsed		-		-
Performance change		-		-
Forfeited		-		-
Performance stock at March 31, 2019		73,574	$	84.83

As of

March 31, 2019,

there was

$4.0

million of unrecognized compensation expense related to non-vested performance stock, which is expected to be recognized over a weighted-average period of

2.3

years.

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the

three

months ended

March 31, 2019

and

2018:


	Three Months Ended March 31,
	2019			2018
Risk-free interest rate		2.33	%		1.48	%
Expected life (months)		6.00			6.00
Expected volatility		37.36	%		24.49	%
Expected dividend yield		0	%		0	%