Stock-Based Compensation

3 Months Ended

Mar. 31, 2019

Note 4 – Stock-Based Compensation

The Company’s 2010 Omnibus Incentive Compensation Plan (the 2010 Plan) authorizes the Company, upon approval of the Compensation Committee of the Board of Directors, to grant a variety of awards, including stock options, restricted shares and restricted stock units (both time-based and performance-based) and other forms of equity awards, or any combination thereof, to any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of the Company. Stock options (which have not been awarded since 2015) are granted to employees with an exercise price equal to the market price of the Company’s common stock on the date of grant, generally vest over a four-year period from the date of grant and have a term of 10 years. Time-based restricted stock units granted to employees generally vest over a four-year period from the date of grant, subject to the continued employment of the employee by the Company. Performance-based restricted stock units generally vest over a three-year performance cycle, which includes the year of the grant, and are based upon the Company’s achievement of specified performance metrics. Awards under the 2010 Plan to non-employee directors have been in the form of restricted stock units, which vest in equal quarterly installments over a one-year period, starting on the grant date.

As of March 31, 2019, 1.5 million additional common shares were available for issuance under the Company’s 2010 Plan.

All share-based payments to employees, including grants of employee stock options, are recognized in the financial statements based on their grant date fair values. The total compensation cost recognized for stock-based awards was $2.8 million and $2.9 million for the three months ended March 31, 2019 and 2018, respectively. The total income tax benefit recognized in the condensed consolidated income statement for stock-based awards was $0.7 million for each of the three months ended March 31, 2019 and 2018. Awards of restricted stock units and performance-based restricted stock units are valued at the closing market price of the Company’s common stock on the date of grant. For performance-based restricted stock units, compensation expense is based on the probability that the performance goals will be achieved, which is monitored by management throughout the requisite service period. When it becomes probable, based on the Company’s expectation of performance during the measurement period, that more or less than the previous estimate of the awarded shares will vest, an adjustment to stock-based compensation expense is recognized as a change in accounting estimate.

As of March 31, 2019, the unrecognized compensation cost and remaining weighted-average amortization period related to stock-based awards were as follows:

		Performance-
	Time-based	based
	Restricted	Restricted
	Stock	Stock
(in thousands, except remaining period data)	Units	Units⁽¹⁾
Unrecognized compensation cost	$ 25,211	$ 6,964
Remaining weighted-average
amortization period	3.2 years	2.1 years

⁽¹⁾ Based on the probable achievement of the performance goals identified in each award.

The total cash received by the Company as a result of stock option exercises for the three months ended March 31, 2019 and 2018 was approximately $0.3 million and $3.1 million, respectively. The actual tax benefit realized as a result of stock option exercises and the vesting of other share-based awards during the three months ended March 31, 2019 and 2018 was $1.4 million and $1.8 million, respectively. For the three months ended March 31, 2019 and 2018, the total intrinsic value of stock options exercised was $0.1 million and $2.0 million, respectively.

The Company awarded performance-based restricted stock units to employees during the three months ended March 31, 2019 and 2018. The number of performance-based restricted stock units that will ultimately be earned will not be determined until the end of the corresponding performance periods, and may vary from as low as zero to as high as 2.5 times the target number depending on the level of achievement of certain performance goals. The level of achievement of these goals is based upon the financial results of the Company for the last full calendar year within the performance period. The performance goals consist of certain levels of achievement using the following financial metrics: revenue growth, operating margin expansion, and return on invested capital. If the performance goals are not met based on the Company’s financial results, the applicable performance-based restricted stock units will not vest and will be forfeited. Shares subject to forfeited performance-based restricted stock units will be available for issuance under the Company’s 2010 Plan.

The following table summarizes activities relating to the Company’s stock options:

			Weighted-
		Weighted-	Average	Aggregate
	Number of	Average	Remaining	Intrinsic
	Options	Exercise	Contractual	Value
	(in thousands)	Price	Term (Years)	(in thousands)
Outstanding as of December 31, 2018	374	$20.35
Exercised	(13)	21.82
Outstanding as of March 31, 2019	361	$20.29	4.10	$ 2,150
Exercisable as of March 31, 2019	361	$20.29	4.10	$ 2,150

The aggregate intrinsic value in the table above is before income taxes and is calculated as the difference between the exercise price of the underlying options and the Company’s closing stock price as of the last business day of the period ended March 31, 2019 for options that had exercise prices that were below the closing price.

As of March 31, 2019 and December 31, 2018, the Company had no restricted shares outstanding. Restricted stock units, time-based and performance-based, remain outstanding as detailed below.

The following table summarizes the activities related to the Company’s time-based restricted stock units:

		Weighted-
	Number of	Average
	Units	Grant Date
	(in thousands)	Fair Value
Non-vested awards outstanding as of December 31, 2018	595	$28.93
Granted	537	27.63
Vested	(170)	27.70
Forfeited	(18)	30.42
Non-vested awards outstanding as of March 31, 2019	944	$28.38

The following table summarizes the activities related to the Company’s performance-based restricted stock units:

		Weighted-
	Number of	Average
	Units	Grant Date
	(in thousands)	Fair Value
Non-vested awards outstanding as of December 31, 2018	319	$29.19
Granted ⁽¹⁾	188	27.51
Vested	(57)	31.40
Forfeited	(74)	21.01
Non-vested awards outstanding as of March 31, 2019	376	$28.96

⁽¹⁾Represents target number of units that can vest based on the achievement of the performance goals.