Share-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-Based Compensation

Share-Based Compensation

Note 11 — Share-Based Compensation

Our 2004, 2012 and 2019 share-based compensation plans are long-term retention plans intended to attract, retain, and provide incentives for key employees and non-employee directors in the form of incentive and non-qualified stock options, restricted stock, and restricted stock units (“RSUs”).

Stock Options

With the exception of non-qualified stock options granted to directors under the 2004 and 2012 plans, which in some cases may be exercised at any time prior to expiration and in some other cases may be exercised at intervals less than a year following the grant date, incentive stock options granted under our 2004, 2012 and 2019 plans may not be exercised in whole or in part within a year following the date of the grant, as these incentive stock options become exercisable in 25% increments pro ratably over the four-year period following the grant date. The options are granted at an exercise price at least equal to the fair value of the common stock at the date of grant and expire ten years from the date of grant. No options were granted under the 2004 plan after January 26, 2012, and the 2004 plan is closed other than for any options still unexercised and outstanding. No options were granted under the 2012 plan after February 1, 2019, and the 2012 plan is closed other than for any options still unexercised and outstanding. The 2019 plan is the only plan from which new share-based compensation grants may be issued. It is our policy to grant options out of the 1,000,000 shares registered under the 2019 plan.

Activity in our stock option plans for 2004 and 2012 is summarized in the following table. Our 2019 plan was adopted by our shareholders at our annual meeting on April 25, 2019. All information has been retroactively adjusted for stock dividends and stock splits.

				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
	Shares	Price		(Yrs.)	(000's)
Outstanding at January 1, 2019	213,866	$	61.28
Granted	—		—
Exercised	(36,978)		33.26
Outstanding at September 30, 2019	176,888		67.14	5.60	$	2,428
Exercisable at September 30, 2019	131,216		60.12	4.86	$	2,354
Weighted-average fair value of options granted during the year	$0.00

The fair value of options is estimated at the date of grant using the Black-Scholes option pricing model and expensed over the options’ vesting periods. The following weighted-average assumptions were used in valuing options issued (There have been no stock options issued in 2019):

	Nine months ended September 30,
	2019		2018
Dividend yield	—	%	1.46	%
Expected life	—	years	8.5	years
Expected volatility	—	%	28.0	%
Risk-free interest rate	—	%	2.54	%

As of September 30, 2019, there was $880,000 of total unrecognized compensation cost related to nonvested stock option grants under the plans. The cost is expected to be recognized over a weighted-average period of 1.01 years as of September 30, 2019.  The total fair value of shares vested during the nine months ended September 30, 2019 was $799,000.

Restricted Stock

We from time-to-time also grants shares of restricted stock to key employees and non-employee directors. These awards help align the interests of these employees and directors with the interests of our shareholders by providing economic value directly related to increases in the value of our stock. The value of the stock awarded is established as the fair market value of the stock at the time of the grant. We recognize expenses, equal to the total value of such awards, ratably over the vesting period of the stock grants. Restricted stock grants to employees typically “cliff vest” after four years. Grants to non-employee directors typically vest within a 12-month period.

All restricted stock agreements are conditioned upon continued employment and service in the case of directors. Termination of employment prior to a vesting date, as described below, would terminate any interest in non-vested shares. Prior to vesting of the shares, as long as employed by the Company, the key employees and non-employee directors will have the right to vote such shares and to receive dividends paid with respect to such shares. All restricted shares will fully vest in the event of change in control of the Company or upon the death of the recipient.

Nonvested restricted stock for the nine months ended September 30, 2019 is summarized in the following table. All information has been retroactively adjusted for stock dividends and stock splits.

		Weighted-
		Average
		Grant-Date
Restricted Stock	Shares	Fair Value
Nonvested at January 1, 2019	104,419	$	62.45
Granted	8,934		73.34
Vested	(33,509)		73.78
Forfeited	(2,332)		73.89
Nonvested at September 30, 2019	77,512		58.47

As of September 30, 2019, there was $1.5 million of total unrecognized compensation cost related to nonvested restricted stock granted under the plans. This cost is expected to be recognized over a weighted-average period of 1.37

years as of September 30, 2019. The total fair value of shares vested during the nine months ended September 30, 2019 was $2.6 million.

Restricted Stock Units

We from time-to-time also grants performance RSUs to key employees. These awards help align the interests of these employees with the interests of our shareholders by providing economic value directly related to our performance. Some performance RSU grants contain a three-year performance period while others contain a one-year performance period and a time vested requirement (generally four years from grant date). We communicate threshold, target, and maximum performance RSU awards and performance targets to the applicable key employees at the beginning of a performance period. Dividends are not paid in respect to the awards during the performance period. The value of the RSUs awarded is established as the fair market value of the stock at the time of the grant. We recognize expenses on a straight-line basis typically over the performance and vesting periods based upon the probable performance target that will be met. For the nine months ended September 30, 2019, we accrued for 83.3% of the RSUs granted, based on the Company’s expectations of performance.

Nonvested RSUs for the nine months ended September 30, 2019 is summarized in the following table.

		Weighted-
		Average
		Grant-Date
Restricted Stock Units	Shares	Fair Value
Nonvested at January 1, 2019	200,540	$	85.10
Granted	153,060		67.86
Forfeited	(2,154)		87.36
Nonvested at September 30, 2019	351,446		77.58

As of September 30, 2019, there was $11.8 million of total unrecognized compensation cost related to nonvested RSUs granted under the plan. This cost is expected to be recognized over a weighted-average period of 1.83 years as of September 30, 2019. The total fair value of RSUs vested during the nine months ended September 30, 2019 was $2.9 million. During the nine months ended September 30, 2019, 44,599 vested restricted stock units were issued to the participants in the 2016 Long-Term Incentive Plan.