Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2019

SHARE-BASED COMPENSATION PLANS

Our non-employee directors and key employees have been 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. We have 449,868 shares of common stock reserved for issuance under the SICP.

The table below presents the amounts included in net income related to share-based compensation expense for the awards granted under the SICP for the years ended December 31, 2019, 2018 and 2017:



	For the Year Ended December 31,
	2019			2018			2017
(in thousands)
Awards to non-employee directors	$	620		$	539		$	540
Awards to key employees	3,659			2,871			1,950
Total compensation expense	4,279			3,410			2,490
Less: tax benefit	(1,117		)	(934		)	(1,003		)
Share-based compensation amounts included in net income	$	3,162		$	2,476		$	1,487

Stock Options

There were no stock options outstanding or issued during the years 2017 through 2019.

Non-employee Directors

Shares granted to non-employee directors are issued in advance of these 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 board service through the 2019 Annual Meeting of Stockholders; accordingly, 7,128 shares, with a weighted average fair value of $75.70 per share, were issued and vested in 2018. In May 2019, each of our non-employee directors received an annual retainer of 751 shares of common stock under the SICP for service as a director through the 2020 Annual Meeting of Stockholders; accordingly, 6,759 shares, with a weighted average fair value of $93.14 per share, were issued and vested in 2019.

In January 2020, a newly appointed member of the Board of Directors received a pro-rated retainer of 254 shares of common stock under the SICP to serve as a non-employee director through the 2020 Annual Meeting of Stockholders. The shares awarded to the non-employee director immediately vested upon issuance in January 2020, had a weighted average fair value of $95.83 per share, and the expense will be recognized over the remaining service period ending on the 2020 Annual Meeting of Stockholders.

At December 31, 2019, there was $0.2 million of unrecognized compensation expense related to shares granted to non-employee directors. This expense will be recognized over the remaining service period ending on the 2020 Annual Meeting of Stockholders.

Our former President and Chief Executive Officer, Michael P. McMasters, retired as an executive officer on December 31, 2018 but continued as a member of the Board of Directors until the 2019 Annual Meeting of Stockholders. 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 May 8, 2019. The shares awarded to Mr. McMasters vested immediately upon issuance in January 2019, had a weighted average fair value of $81.30 per share, and were fully expensed as of the 2019 Annual Meeting of Stockholders.

Key Employees

Our Compensation Committee is authorized to grant our key employees the right to receive awards of shares of our common stock, contingent upon the achievement of established performance goals and subject to SEC transfer restrictions once awarded.

We currently have several outstanding multi-year performance plans, which are based upon the successful achievement of long-term goals, growth and financial results and comprise both market-based and performance-based conditions or targets. The fair value per share, tied to a performance-based condition or target, is equal to the market price per share on the grant date. For the market-based conditions, we used the Black-Scholes pricing model to estimate the fair value of each share granted.

The table below presents the summary of the stock activity for awards to key employees:



	Number of Shares		Weighted Average Fair Value
Outstanding — December 31, 2017	132,642		$	59.31
Granted	49,494		67.76
Vested	(29,786	)	47.39
Vested - Accelerated pursuant to separation agreement	(16,676	)	75.78
Expired	(3,933	)	49.66
Outstanding — December 31, 2018	131,741		67.24
Granted ⁽¹⁾	88,048		92.74
Vested	(25,831	)	67.08
Expired	(15,086	)	69.28
Forfeited ⁽²⁾	(21,055	)	71.67
Outstanding — December 31, 2019	157,817		$	80.28

⁽¹⁾ Includes 43,032 shares that were granted to certain key employees in December 2019 associated with their promotion.

⁽²⁾ In conjunction with the retirement of two key employees during 2019, these shares were forfeited for the remainder of the service periods associated with awards granted during their employment with the Company.

The intrinsic value of these awards was $15.1 million, $10.7 million and $10.4 million in 2019, 2018 and 2017, respectively. At December 31, 2019, there was $4.3 million of unrecognized compensation cost related to these awards, which is expected to be recognized through 2021.

In June 2018, we entered into a separation agreement and release (the "Separation Agreement") with a former executive officer. Pursuant to the Separation Agreement, three awards, representing a total of 14,107 shares of common stock previously granted to the executive officer under the SICP, immediately vested at the time of separation; 2,569 shares were forfeited, and we recognized $1.1 million as share-based compensation expense.

In 2019, 2018 and 2017, we withheld shares with a value at least equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities with the executives electing to receive the net shares. The below table presents the number of shares withheld, amounts remitted to taxing authorities and the tax benefits associated with these obligations:



	For the Year Ended December 31,
	2019		2018		2017
(amounts except shares, in thousands)
Shares withheld to satisfy tax obligations	7,635		16,918		10,269
Amounts remitted to tax authorities to satisfy obligations	$	692	$	1,210	$	692
Tax benefit associated with settlement of share based payments	$	—	$	—	$	349