SHARE-BASED COMPENSATION AND BENEFIT PLANS

6 Months Ended

Jun. 30, 2025

Share-Based Compensation and Benefit Plans

Share-based compensation and benefit plans

NOTE 12 – SHARE-BASED COMPENSATION AND BENEFIT PLANS

The Company recognizes share-based compensation expense based on the fair value of the grants, awards, or shares at the time of the grant, award, or issuance.  Share-based compensation includes stock option awards, restricted stock awards, and stock appreciation rights issued under the Company’s incentive plans and stock issued through the Company’s employee stock purchase plan.

Stock Options:

The Company’s incentive plans provide for the granting of stock options for the purchase of common stock of the Company to certain key employees of the Company.  Employee stock options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant.  Employee stock options granted under the plans expire after 10 years and typically

vest 25% per year, over four years.  The Company records compensation expense for the grant date fair value of the option awards evenly over the vesting period or minimum required service period.

The table below identifies stock option activity under these plans during the six months ended June 30, 2025 (in thousands, except per share data):

	Shares	Weighted- Average
	(in thousands)	Exercise Price
Outstanding at December 31, 2024	9,422	$	36.59
Granted	751		87.95
Exercised	(1,421)		25.24
Forfeited or expired	(32)		55.55
Outstanding at June 30, 2025	8,720	$	42.80
Exercisable at June 30, 2025	5,962	$	31.21

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the risk-free rate, expected life, expected volatility, and expected dividend yield.

● Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected life.

● Expected life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted.

● Expected volatility – Measure of the amount, by which the Company’s stock price is expected to fluctuate, based on a historical trend.

● Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.

The table below identifies the weighted-average assumptions used for grants awarded during the six months ended June 30, 2025 and 2024:

	June 30,
	2025		2024
Risk free interest rate	4.24	%	4.18	%
Expected life	6.7	Years	6.5	Years
Expected volatility	26.9	%	28.2	%
Expected dividend yield	—	%	—	%

The following table summarizes activity related to stock options awarded by the Company for the three and six months ended June 30, 2025 and 2024 (in thousands, except per share data):

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
	2025		2024		2025		2024
Compensation expense for stock options awarded	$	8,732	$	5,742	$	15,630	$	11,337
Income tax benefit from compensation expense related to stock options		2,170		1,475		3,884		2,913

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2025, was $33.31, compared to $27.16 for the six months ended June 30, 2024.  The remaining unrecognized compensation expense related to unvested stock option awards at June 30, 2025, was $53.2 million, and the weighted-average period of time over which this cost will be recognized is 2.8 years.

Other Share-Based Compensation Plans:

The Company sponsors other share-based compensation plans:  incentive plans that provide for the awarding of shares of restricted stock and stock appreciation rights and an employee stock purchase plan (the “ESPP”), which permits eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value.  The Company recorded compensation expense for these other share-based compensation plans in the amount of $0.3 million and $1.5 million for the three months ended June 30, 2025 and 2024, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.  The Company recorded compensation expense for these other share-based compensation plans in

the amount of $4.5 million and $4.6 million for the six months ended June 30, 2025 and 2024, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.

Benefit Plans:

The Company sponsors a contributory profit sharing and savings plan (the “401(k) Plan”) that covers substantially all employees who are at least 21 years of age and a nonqualified deferred compensation plan (the “Deferred Compensation Plan”) for highly compensated employees whose contributions to the 401(k) Plan are limited due to the application of the annual limitations under the Internal Revenue Code.  The Company expensed matching contributions under these plans in the amount of $14.3 million and $12.8 million for the three months ended June 30, 2025 and 2024, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.  The Company expensed matching contributions under these plans in the amount of $28.3 million and $26.7 million for the six months ended June 30, 2025 and 2024, respectively, which were primarily included in “Selling, general and administrative expenses” on the accompanying Condensed Consolidated Statements of Income.  See Note 4 for further information concerning the Company’s marketable securities held to fulfill our future unsecured obligations under the Deferred Compensation Plan.