Share-Based Compensation

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

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 and nine months ended September 30, 2021 and 2020:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
(in thousands)
Awards to non-employee directors	$	201	$	188	$	581	$	545
Awards to key employees	1,105		1,144		4,039		3,109
Total compensation expense	1,306		1,332		4,620		3,654
Less: tax benefit	(339)		(348)		(1,200)		(955)
Share-based compensation amounts included in net income	$	967	$	984	$	3,420	$	2,699

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 grant date. We record a deferred expense equal to the fair value of the shares issued and amortize the expense equally over a service period of one year. In May 2021, after the most recent election of directors, each of our non-employee directors received an annual retainer of 683 shares of common stock under the SICP for service as a director through the 2022 Annual Meeting of Stockholders; accordingly, 6,830 shares, with a weighted average fair value of $117.11 per share, were issued and vested in 2021. At September 30, 2021, there was approximately $0.5 million of unrecognized compensation expense related to shares granted to non-employee directors. This expense will be recognized over the remaining service period ending in May of 2022.

On October 15, 2021, a newly appointed member of the Board of Directors received a pro-rated retainer of 342 shares of common stock under the SICP to serve as a non-employee director through the 2022 Annual Meeting of Stockholders. The shares awarded to the non-employee director immediately vested upon issuance in October 2021, had a weighted average fair value of $129.09 per share, and will be expensed over the remaining service period ending on the date of the 2022 Annual Meeting of Stockholders.

Key Employees

The table below presents the summary of the stock activity for awards to key employees for the nine months ended September 30, 2021:


	Number of Shares	Weighted Average Fair Value
Outstanding—December 31, 2020	186,878	$	87.06
Granted	68,562	$	102.73
Vested	(53,147)	$	76.31
Expired	(852)	$	74.85
Forfeited	(5,384)	$	93.39
Outstanding—September 30, 2021	196,057	$	94.15

During the nine months ended September 30, 2021, we granted awards of 68,562 shares of common stock to key employees under the SICP, including awards granted in February 2021 and to key employees appointed in officer positions. The shares granted are multi-year awards that will vest no later than the three-year service period ending December 31, 2023. All of these stock awards are earned based upon the successful achievement of long-term financial results, which are comprised of 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 Monte Carlo valuation to estimate the fair value of each market-based award granted.

In March 2021, 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 vested and were paid in February 2021 for the performance period ended December 31, 2020, remitted the cash to the appropriate taxing authorities, and paid the balance of such awarded shares to each such executive officer. We withheld 14,020 shares, based on the value of the shares on their award date. Total combined payments for the employees’ tax obligations to the taxing authorities were approximately $1.5 million.

At September 30, 2021, the aggregate intrinsic value of the SICP awards granted to key employees was approximately $23.5 million. At September 30, 2021, there was approximately $5.6 million of unrecognized compensation cost related to these awards, which will be recognized through 2023.

Stock Options

There were no stock options outstanding or issued during the nine months ended September 30, 2021 and 2020.