Share-Based Compensation

Our non-employee directors and key employees are granted share-based awards through our SICP. We record these share-based awards as compensation costs over the respective service period for which services are received in exchange for an award of equity or equity-based compensation. The compensation cost is based primarily on the fair value of the shares awarded, using the estimated fair value of each share on the date it was granted and the number of shares to be issued at the end of the service period.

The table below presents the amounts included in net income related to share-based compensation expense for the three months ended March 31, 2019 and 2018:



	Three Months Ended
	March 31,
	2019			2018
(in thousands)
Awards to non-employee directors	$	149		$	135
Awards to key employees	338			1,385
Total compensation expense	487			1,520
Less: tax benefit	(127		)	(416		)
Share-based compensation amounts included in net income	$	360		$	1,104

Non-employee Directors

Shares granted to non-employee directors are issued in advance of the directors’ service periods and are fully vested as of the date of the grant. We record a prepaid expense equal to the fair value of the shares issued and amortize the expense equally over a service period of one year. In May 2018, each of our non-employee directors received an annual retainer of 792 shares of common stock under the SICP for service as a director through the 2019 Annual Meeting of Stockholders. Our former President and Chief Executive Officer, Michael P. McMasters, retired on December 31, 2018 and continued as a member of the Board of Directors beginning January 1, 2019. Mr. McMasters received a pro-rated grant of 276 shares of common stock under the SICP for service as a non-employee director from January 1, 2019 through the 2019 Annual Meeting of Stockholders. These shares were issued and vested in January 2019 at a weighted average fair value of $75.70.

At March 31, 2019, there was approximately $52,000 of unrecognized compensation expense related to shares granted to non-employee directors. This expense will be recognized over the remaining service period ending April 30, 2019. See Note 1, Summary of Accounting Policies, for additional information regarding ASU 2018-07 and its impact on the accounting for non-employee share-based payments.

Key Employees

The table below presents the summary of the stock activity for awards to key employees for the three months ended March 31, 2019:



	Number of Shares		Weighted Average Fair Value
Outstanding—December 31, 2018	131,741		$	67.24
Granted	45,016		$	91.19
Vested	(25,831	)	$	67.08
Expired	(15,086	)	$	69.28
Outstanding—March 31, 2019	135,840		$	74.05

In February 2019, our Board of Directors granted awards of 45,016 shares of common stock to key employees under the SICP. The shares granted are multi-year awards that will vest at the end of the three-year service period ending December 31, 2021. All of these stock awards are earned based upon the successful achievement of long-term financial results, which comprise market-based and performance-based conditions or targets. The fair value of each performance-based condition or target is equal to the market price of our common stock on the grant date of each award. For the market-based conditions, we used the Black-Scholes pricing model to estimate the fair value of each market-based award granted.

In March 2019, upon the election of certain of our executive officers, we withheld shares with a value at least equivalent to each such executive officer’s minimum statutory obligation for applicable income and other employment taxes related to shares that we awarded in February 2019 for the performance period ended December 31, 2018, remitted the cash to the appropriate taxing authorities, and paid the balance of such awarded shares to each such executive officer. We withheld 7,635 shares, based on the value of the shares on their award date, determined by the average of the high and low prices of our common stock. Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $692,000.

At March 31, 2019, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $12.4 million. At March 31, 2019, there was approximately $4.3 million of unrecognized compensation cost related to these awards, which is expected to be recognized as expense from 2019 through 2021.

Stock Options

We did not have any stock options outstanding at March 31, 2019 or 2018, nor were any stock options issued during these periods.