Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

Note 6. Stock-Based Compensation

The Company’s 2015 Stock Award and Incentive Plan provides for grants of incentive and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, stock awards and performance unit awards (the 2015 Stock Award and Incentive Plan, as amended, referred to herein as the “Plan” and together with its predecessor for awards granted prior to May 2015, the 2001 Stock Award and Incentive Plan, as amended and restated, the “Plans”). At the Company's 2024 Annual Meeting of Stockholders, the Company's stockholders ratified the adoption of an amendment and restatement of the Plan, which increased the number of shares available for issuance pursuant to the Plan by 889,000 shares and removed certain individual award limits in light of recent tax law changes. The Plans are administered by the Compensation Committee of the Board of Directors. Stock options granted under the Plans generally have a ten year term. The exercise price for stock options are at prices at or above the fair market value of the common stock on the date of the grant, and each award of stock options will vest ratably over a specified period, generally three years.

Stock-based compensation expense is recognized in the consolidated financial statements for stock options based on the grant date fair value.

Net income for the years ended 2024, 2023 and 2022 include $5.4 million, $5.2 million and $4.8 million pre-tax compensation costs, respectively, related to stock option expense as a component of marketing and administrative expenses. All stock option expense is recognized in the consolidated statements of operations. The related tax benefit included in the statement of income on the non-qualified stock options was $1.4 million, $1.4 million and $1.3 million for 2024, 2023 and 2022, respectively.

Stock Options

The fair value of options granted is estimated on the date of grant using the Black-Scholes valuation model. Compensation expense is recognized only for those options expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. The forfeiture rate assumption used for the periods ended December 31, 2024, 2023 and 2022 was 7.69%, 7.91% and 8.09%, respectively.

The weighted average grant date fair value for stock options granted during the years ended December 31, 2024, 2023 and 2022 was $25.33, $25.11 and $24.26, respectively. The weighted average grant date fair value for stock options vested during 2024, 2023 and 2022 was $23.75, $21.56 and $19.82, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2024, 2023 and 2022 was $7.0 million, $1.0 million and $2.0 million, respectively.

The fair value for stock awards was estimated at the date of grant using the Black-Scholes option valuation model with the following weighted average assumptions for the years ended December 31, 2024, 2023 and 2022:

	Year Ended December 31,
	2024			2023			2022
Expected life (in years)		6.5			6.4			6.7
Interest rate		4.06	%		3.51	%		1.70	%
Volatility		31.93	%		32.05	%		31.92	%
Expected dividend yield		0.61	%		0.30	%		0.28	%

The expected term of the options represents the estimated period of time until exercised and is based on historical experience of similar awards, based upon contractual terms, vesting schedules, and expectations of future employee behavior. The expected stock-price volatility is based upon the historical and implied volatility of the Company’s stock. The interest rate is based upon the implied yield on U.S. Treasury bills with an equivalent remaining term. Estimated dividend yield is based upon historical dividends paid by the Company.

The following table summarizes stock option activity for the year ended December 31, 2024:

	Awards			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value (Millions)
Awards outstanding at December 31, 2023		1,514,462		$	63.15
Granted		196,471			66.72
Exercised		(279,810	)		55.85
Canceled		(5,487	)		66.76
Expired		—			—
Awards outstanding at December 31, 2024		1,425,636		$	65.06		5.88		$	16.1
Awards exercisable at December 31, 2024		997,406		$	64.24		4.82		$	12.1

The aggregate intrinsic value above is calculated before applicable income taxes, based on the Company’s closing stock price of $76.21 as of the last business day of the period ended December 31, 2024 had all options been exercised on that date. The weighted average intrinsic value of the options exercised during 2024, 2023 and 2022 was $24.85, $7.78 and $16.34 per share, respectively. As of December 31, 2024, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $5.1 million, which is expected to be recognized over a weighted average period of approximately three years.

The Company issues new shares of common stock upon the exercise of stock options.

Non-vested stock option activity for the year ended December 31, 2024 is as follows:

	Awards			Weighted Average Grant Date Fair Value per Share
Nonvested awards outstanding at December 31, 2023		460,141		$	67.18
Granted		196,471			66.72
Vested		(222,895	)		67.21
Canceled		(5,487	)		66.76
Nonvested awards outstanding at December 31, 2024		428,230		$	66.96

Deferred Restricted Stock Units

The Company has granted key employees units consisting of rights to receive shares of the Company’s common stock pursuant to the Plans. The rights will be deferred for a specified number of years of service, subject to restrictions on transfer and other conditions. Compensation expense for these shares is recognized over the vesting period. The Company granted units consisting of rights to receive 103,169 shares, 102,843 shares and 98,464 shares during the periods ended December 31, 2024, 2023 and 2022, respectively. The fair value was determined based on the market value of unrestricted shares. As of December 31, 2024, there was unrecognized stock-based compensation related to deferred restricted stock units of $7.2 million, which will be recognized over approximately the next three years. The compensation expense amortized with respect to all units was approximately $6.5 million, $6.0 million and $5.7 million for the periods ended December 31, 2024, 2023 and 2022, respectively. In addition, the Company recorded reversals of $2.8 million, $2.7 million and $2.7 million for periods ended December 31, 2024, 2023 and 2022, respectively, related mostly to the conversion of units for tax withholding purposes. Such costs and reversals are included in marketing and administrative expenses.

The following table summarizes the deferred restricted stock unit activity for the Plan:

	Awards			Weighted Average Grant Date Fair Value per Share
Unvested balance at December 31, 2023		187,350		$	67.15
Granted		103,169			66.79
Vested		(47,876	)		67.19
Canceled		(43,849	)		67.21
Unvested balance at December 31, 2024		198,794		$	66.94