Deferred Compensation

12 Months Ended

Dec. 31, 2017

Compensation Related Costs [Abstract]

Deferred Compensation

12. Deferred Compensation

The Company sponsors deferred compensation plans that allow management employees to defer receipt of their annual bonuses and outside directors to defer receipt of their fees until retirement, departure from the Company or as otherwise elected. Compensation expense and the related deferred compensation obligation are recorded when the underlying compensation is earned. Over time, the deferred obligation may increase or decrease based on the performance results of investment options chosen by the plan participants. The investment options include Company common stock and a limited selection of mutual funds.  The Company maintains sufficient shares of treasury stock to cover the equivalent number of shares that result from participants elections of the Company common stock investment option.  As a result, the Company must periodically purchase its common shares in the open market or in private transactions. The Company purchases shares of the applicable mutual funds to fund the portion of its deferred compensation liabilities tied to such investments.

Some plan distributions may be made in cash or Company common stock at the option of the participant.  Other plan distributions can only be made in Company common stock. For deferred compensation obligations that may be settled in cash or Company common stock at the option of the participant, the Company must record appreciation in the market values of the investment choices made by participants as additional compensation expense.  Conversely, declines in the market values of the investment choices reduce compensation expense.  Increases and decreases of compensation expense that result from fluctuations in the underlying investments are recorded as part of operating expenses in the consolidated statements of income. The additional compensation expense resulting from the changes in the market values and earnings of the selected investment options was $4,857,000  $16,805,000 and $6,500,000 expense in 2017, 2016 and 2015, respectively. The decrease in expense between 2017 and 2016 was attributable to a decrease in the market value of the Company’s common stock and an increase in income from investments other than in Company’s common stock. Between 2016 and 2015, the price of the Company’s common stock significantly increased resulting in higher deferred compensation.  The obligations that must be settled only in Company common stock are treated as equity instruments; therefore, fluctuations in the market price of the underlying Company stock do not affect earnings. The Company’s deferred compensation liability was $58,915,000 and $60,328,000 at December 31, 2017 and 2016, respectively.