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Share-based Compensation

6 Months Ended

Jun. 30, 2021

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 June 30, 2021, 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 $66.68. Due to the Company’s lack of option exercise history on the date of grant, 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. The dividend yield is computed as the annualized dividend rate at the grant date divided by the strike price of the stock option. For the six months ended June 30, 2021 and 2020, the Company did not grant stock options.

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


	Six months ended June 30,
	2021			2020
	Awards	Weighted-Average Exercise Price		Awards	Weighted-Average Exercise Price
(awards in thousands)
Outstanding at beginning of period	61	$	48.19	97	$	52.53
Exercised	(14)		50.58	(21)		57.91
Forfeited	-		-	(6)		68.84
Outstanding at end of the period	47	$	47.51	70	$	49.36
Exercisable at end of the period	38	$	42.18	51	$	42.15

As of June 30, 2021, the weighted-average remaining contractual life for outstanding stock options was 5.3 years with an aggregate intrinsic value of $11.4 million and the weighted-average remaining contractual life for exercisable stock options was 4.9 years with an aggregate intrinsic value of $9.1 million. The unrecognized compensation expense calculated under the fair value method for stock options expected to vest as of June 30, 2021 was $0.2 million and is expected to be recognized over a weighted average period of 1.6 years. For the six months ended June 30, 2021, the Company received $0.7 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the six months ended June 30, 2021 was $2.9 million. For the six months ended June 30, 2020, the Company received $1.3 million in cash proceeds from the exercise of stock options. The total intrinsic value for stock options exercised during the six months ended June 30, 2020 was $0.9 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:


	Six months ended June 30,
	2021			2020
	Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value
(shares in thousands)
Outstanding at beginning of period	50	$	116.06	46	$	98.28
Granted	21		267.15	41		111.94
Vested	(25)		113.91	(29)		82.99
Forfeited	(2)		154.91	(4)		107.50
Outstanding at end of the period	44	$	182.96	54	$	116.00

The Company withheld 6,927 and 5,208 shares of the Company’s common stock to cover minimum tax liability withholding obligations upon the vesting of shares of restricted stock for the six months ended June 30, 2021 and 2020, respectively. The total fair value of restricted stock awards vested during the six months ended June 30, 2021 and 2020 was $6.7 million and $3.2 million, respectively.

The total share-based compensation charged against income was $2.1 million and $1.1 million during the three months ended June 30, 2021 and 2020, respectively, and $4.3 million and $2.1 million during the six months ended June 30, 2021 and 2020, respectively. The total costs of the options and restricted stock awards charged against income was $1.1 million and $0.7 million during the three months ended June 30, 2021 and 2020, respectively, and $2.1 million and $1.5 million during the six months ended June 30, 2021 and 2020. Included for the three and six months ended June 30, 2021 was $0.4 million and $1.1 million, respectively, for 15,834 performance-based contingent shares and for the three and six months ended June 30, 2020 was $0.2 million and $0.3 million, respectively, for 16,637 performance-based contingent shares for certain key executives granted in 2019. Also included for the three and six months ended June 30, 2021 was $0.4 million and $0.8 million, respectively, for 25,999 performance-based contingent shares and for the three and six months ended June 30, 2020 was $0.2 million and $0.3 million, respectively, for 25,738 performance-based contingent shares for certain key executives granted in 2020. Additionally, included for the three and six months ended June 30, 2021 was $0.2 million and $0.3 million, respectively, for 13,512 performance-based contingent shares for certain key executives granted in 2021.

The total income tax benefit recognized in the Condensed Consolidated Statements of Income for restricted stock awards was $0.9 million and $0.5 million for the three months ended June 30, 2021 and 2020, respectively, and was $2.1 million and $0.7 million for the six months ended June 30, 2021 and 2020, respectively.

There was $7.0 million of total unrecognized compensation cost related to restricted stock awards as of June 30, 2021, which is expected to be recognized over a weighted-average period of 2.0 years. There was $6.8 million of unrecognized compensation cost related to the 55,345 performance-based shares discussed above as of June 30, 2021, which is expected to be recognized over 1.9 years.