Share-based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Compensation [Abstract]

Share-based Compensation

4. SHARE-BASED COMPENSATION

Stock Options

The Company has issued non-qualified and incentive stock options to employees and nonemployee directors. The fair value of these options are estimated on the date of grant using the Black-Scholes option pricing model, which requires estimates of the expected term of the option, the risk-free interest rate, the expected volatility of the price of the Company’s common stock, and dividend yield. Options outstanding as of March 31, 2020 generally vest over a period of three years and expire ten years from the date of grant. The exercise price of these options ranges from $26.52 to $171.68. Due to the Company’s lack of option exercise history, the expected term is calculated using the simplified method defined as the midpoint between the vesting period and the contractual term of each option. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant that most closely corresponds to the expected term of the option. The expected volatility is based on the historical volatility of the Company’s common stock over the period of time equivalent to the expected term for each award. For the three months ended March 31, 2020 and 2019, the Company did not grant stock options.

The following table is a summary of our stock option activity:

	Three months ended March 31,
	2020			2019
	Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price
(awards in thousands)
Outstanding at beginning of period	97	$	52.51	107	$	49.26
Exercised	-		-	(10)		27.86
Outstanding at end of the period	97	$	52.51	97	$	52.51
Exercisable at end of the period	72	$	46.86	53	$	40.97

As of March 31, 2020, the weighted-average remaining contractual life for outstanding stock options was 6.86 years with an aggregate intrinsic value of $1.3 million and the weighted-average remaining contractual life for exercisable stock options was 6.50 years with an aggregate intrinsic value of $1.3 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of March 31, 2020 was $0.4 million and is expected to be recognized over a weighted average period of 2.56 years. For the three months ended March 31, 2020,

there was no exercise activity of stock options. For the three months ended March 31, 2019, the Company received $0.3 million in cash proceeds from the exercise of stock options. Upon exercising of stock options, the Company withheld 1 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations for the three months ended March 31, 2019. The total intrinsic value for stock options exercised during the three months ended March 31, 2019 was $1.0 million.

Restricted Stock

The Company has issued restricted stock to employees and nonemployee directors generally with vesting terms up to five years after the date of grant. The fair value of the restricted stock is equal to the market price of the Company’s common stock on the date of grant. Expense for restricted stock is amortized ratably over the vesting period. The following table summarizes our restricted stock activity:

	Three months ended March 31,
	2020			2019
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
(shares in thousands)
Outstanding at beginning of period	46	$	98.28	57	$	50.55
Granted	29		100.68	27		130.59
Vested	(21)		66.73	(21)		33.92
Forfeited	(3)		105.29	-		-
Outstanding at end of the period	51	$	112.43	63	$	90.60

The Company withheld 5 thousand and 1 thousand shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the three months ended March 31, 2020 and March 31, 2019, respectively. The total fair value of restricted stock awards vested during the three months ended March 31, 2020 and 2019 was $2.2 million and $2.8 million, respectively.

The total share-based compensation charged against income was $1.0 million during the three months ended March 31, 2020 and 2019, respectively. The total costs of the options and restricted stock awards charged against income was $0.7 million during the three months ended March 31, 2020 and 2019, respectively. Included for the three months ended March 31, 2020 and 2019 was $0.2 million and $0.1 million, respectively, for 16,637 and 19,244 performance-based contingent shares for certain key executives granted in 2019, respectively. Also included for the three months ended March 31, 2020 was $0.1 million for 25,738 performance-based contingent shares for certain key executives granted in 2020. Additionally, included for the three months ended March 31, 2019 was $0.1 million for 63,300 performance-based deferred shares in expense for certain key executives, and $0.2 million in expense for 210,000 performance-based contingent shares granted to our Chief Executive Officer (“CEO”), respectively. These 273,300 performance-based shares were fully vested on December 31, 2019.

The total income tax benefit recognized in the Condensed Consolidated Statements of Income for restricted stock awards was $0.2 million and $0.8 million for the three months ended March 31, 2020 and 2019, respectively.

There was $4.7 million of total unrecognized compensation cost related to restricted stock awards as of March 31, 2020, which is expected to be recognized over a weighted-average period of 2.41 years. There was $3.8 million of unrecognized compensation cost related to the 42,375 performance-based shares discussed above as of March 31, 2020, which is expected to be recognized over 2.40 years.