Annual report pursuant to Section 13 and 15(d)

Shareholder's Equity, Stock Options and Net Income per Share (Notes)

v3.19.3.a.u2
Shareholder's Equity, Stock Options and Net Income per Share (Notes)
 12 Months Ended
Dec. 31, 2019
Shareholders’ Equity, Stock Options and Net Income per Share [Abstract]  
Stockholders' Equity Note Disclosure [Text Block] Shareholders' Equity, Stock Options and Net Income per Share
 
Preferred Stock

There are 5,000 shares of preferred stock with a par value of $0.01 authorized, but no shares have been issued to date.    

Cash Dividends

During each quarter of 2019 and the fourth quarter of 2018, the Company’s Board of Directors declared a cash dividend of $0.18 per share of Common Stock. During the first, second and third quarters of 2018 and each quarter of 2017, the Company's Board of Directors declared a cash dividend of $0.15 per share of Common Stock. On February 4, 2020, the Company’s Board of Directors declared a $0.18 per share dividend that will be paid in the first quarter of 2020. The Company expects to continue to pay regular quarterly cash dividends, though each subsequent quarterly dividend is subject to review and approval by the Board of Directors.

Repurchase of Common Stock
On July 21, 2016, the Company's Board of Directors approved a stock repurchase authorization for up to 3,000 shares of the Company’s common stock (the "2016 Repurchase Plan"). On February 5, 2019, our Board of Directors canceled the Company’s 2016 Repurchase Plan and approved a new stock repurchase plan authorizing up to 5,000 shares of the Company’s
common stock (the “2019 Repurchase Plan”) that shall remain in effect until such time as the shares authorized for repurchase are exhausted or the plan is canceled.

The Company is not obligated to repurchase any specific number of shares and may suspend or cancel the plan at any time. The amount and timing of any repurchases under the Company’s new repurchase authorization will be at such prices as determined by management of the Company. Repurchases of common stock may also be made under a Rule 10b5-1 plan, which would permit common stock to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. Stock repurchases may be commenced or suspended from time to time for any reason.

Under these plans, during the year ended December 31, 2019, we repurchased 913 shares of Common Stock for $56,204, or $61.59 per share. As of December 31, 2019, 4,155 shares remain that may be repurchased.

Share-Based Compensation

In May 2016, with the approval of shareholders, the Company adopted the 2016 Omnibus Incentive Compensation Plan (the “Omnibus Plan”) to reserve for issuance 2,000 common shares. Options issued under these plans have seven year terms and vest over a two to three-year period. With the adoption of the Omnibus Plan, no further awards will be issued under the 1999 Amended Plan. As of December 31, 2019, there were approximately 1,141 shares remaining available for grant under the Omnibus Plan.

Employee Activity - Stock Options

Stock option grants to employees generally expire seven years from the grant date and typically vest ratably over a three-year period. All forfeitures were recognized as they occurred. The Company historically used the Black-Scholes option-pricing model to estimate the grant-date fair value of options granted. The Company did not make any stock option grants during the year ended December 31, 2019.

The following table contains the weighted-average assumptions used to estimate the fair value of options granted during the years ended December 31, 2018 and 2017 .  These assumptions are subjective and changes in these assumptions can materially affect the fair value estimate.

December 31,
2018

December 31,
2017
Expected dividend yield
1.1
%

1.3
%
Expected stock price volatility
24.4
%

28.5
%
Weighted average risk-free interest rate
2.7
%

2.0
%
Expected life of options (years)
6.1


5.9


    
The following table summarizes the Company’s employee stock options outstanding as of December 31, 2019:








Outstanding



Exercisable






Weighted-

Weighted-



Weighted-
Range of

Number

Average

Average

Number

Average
Exercise

Outstanding

Remaining

Exercise

Exercisable

Exercise
Price

(000)

Contractual Life

Price

(000)

Price
42.48

-
44.90


93


2.8

43.63


93


43.63

45.34

-
48.32


100


4.0

47.73


69


47.69

50.71

-
53.73


49


2.4

51.16


47


51.07

57.18

-
60.42


88


5.1

58.80


29


58.68

64.26

-
64.26


100


5.7

64.26


33


64.26

$
42.48

-
64.26


430


4.2

$
53.33


271


$
50.08


The following tables summarize the Company’s employee stock option activity and related information for the years ended December 31, 2019, 2018 and 2017. The Company did not make any stock option grants during the year ended December 31, 2019.

 
Year ended
 
December 31, 2019
 
December 31, 2018
 
December 31, 2017
 
 
 
Weighted-
 
 
 
Weighted-
 
 
 
Weighted-
 
 
 
Average
 
 
 
Average
 
 
 
Average
 
Options
 
Exercise
 
Options
 
Exercise
 
Options
 
Exercise
 
(000)
 
Price
 
(000)
 
Price
 
(000)
 
Price
Outstanding at beginning of year
538

 
$
51

 
440

 
$
45

 
564

 
$
41

Granted
—

 
—

 
193

 
62

 
128

 
48

Exercised
(99
)
 
43

 
(95
)
 
41

 
(206
)
 
35

Forfeited
(8
)
 
54

 
—

 
—

 
(46
)
 
46

Outstanding at end of year
431

 
$
53

 
538

 
$
51

 
440

 
$
45

Exercisable at end of year
272

 
$
50

 
230

 
$
45

 
226

 
$
42

Weighted-average fair value of options granted during the year
$
—

 
 
 
$
16

 
 
 
$
13

 
 
Aggregate intrinsic value for options exercised
$
2,388

 
 
 
$
1,992

 
 
 
$
3,569

 
 
Average aggregate intrinsic value for options outstanding
$
4,147

 
 
 
 
 
 
 
 
 
 
Average aggregate intrinsic value for exercisable options
$
3,497

 
 
 
 
 
 
 
 
 
 

    
Year ended

December 31,
2019

December 31,
2018

December 31,
2017
Shared-based compensation for options
$
1,597


$
1,578


$
1,313

Tax benefit for option compensation
$
403


$
398


$
466

Unrecognized compensation cost for options
$
1,490






Weighted average period over which unrecognized compensation will be recognized (years)
1.4

 
 
 
 



Employee Activity – Non-vested Shares
 
The fair value of non-vested shares issued was estimated using the closing market prices for the business day of the grant. The share-based compensation for the non-vested shares is recognized ratably over the requisite service period or vesting period. All forfeitures were recognized as they occurred.

Non-vested share grants to employees vest ratably over a three-year period. The following tables summarize the Company's employee non-vested share activity and related information:

Year ended

December 31, 2019

December 31, 2018

December 31, 2017



Weighted-



Weighted-



Weighted-

Non-vested

Average

Non-vested

Average

Non-vested

Average

Shares

Grant Date

Shares

Grant Date

Shares

Grant Date

(000)

Fair Value

(000)

Fair Value

(000)

Fair Value












Outstanding and non-vested at beginning of year
315


$
55


227


$
47


222


$
45

Granted
117


59


202


60


126


48

Vested
(131
)

61


(107
)

56


(105
)

45

Forfeited
(24
)

57


(7
)

52


(16
)

47

Outstanding and non-vested at end of year
277


$
58


315


$
55


227


$
47

Aggregate grant date fair value
$
16,181




$
17,295




$
10,618



Total fair value of shares vested during the year
$
7,954




$
6,040




$
5,040





Year ended

December 31,
2019

December 31,
2018

December 31,
2017
Shared-based compensation for non-vested shares
$
8,001


$
6,874


$
5,045

Tax benefit for non-vested share compensation
$
2,016


$
1,732


$
1,791

Unrecognized compensation cost for non-vested shares
$
8,654






Weighted average period over which unrecognized compensation will be recognized (years)
1.7

 
 
 
 


Employee Activity – Performance Shares

The Company annually grants performance shares to key employees. Under the terms of the performance share agreements, following the end of a three-year performance period, the Company will issue to these employees a calculated number of common stock shares based on meeting certain performance targets. For shares granted during the year ended December 31, 2019, 50% of the performance share issuances will be based on meeting earnings before interest, taxes, depreciation and amortization ("EBITDA") per share targets and the remaining 50% of the performance share issuances will be based on the three-year performance of the Company’s total shareholder return ("TSR") as compared to the TSR of a selected peer group. All performance shares granted during the years ended December 31, 2018 and 2017 were based on achieving total shareholder return targets. All forfeitures were recognized as they occurred.

Depending upon the EBITDA per share targets met, 0% to 200% of the granted shares may ultimately be issued. For shares granted based on total shareholder return, 0% of the shares will be issued if the Company's total shareholder return
outperforms 25% or less of the peer group, but 200% of the shares will be issued if the Company's total shareholder return performs better than 90% of the peer group.

The fair value of the performance shares granted based on the three year performance of the Company’s total shareholder return was estimated using a Monte Carlo simulation. The following table contains the weighted-average assumptions used to estimate the fair value of performance shares granted using the Monte Carlo simulation.  These assumptions are subjective and changes in these assumptions can materially affect the fair value estimate.
 
 
Year ended
 
 

December 31,
2019
 
December 31,
2018

December 31,
2017
Expected stock price volatility
23.4
%
 
24.3
%

24.7
%
Weighted average risk-free interest rate
2.5
%
 
2.2
%

1.4
%
    
The following tables summarize the Company's employee performance share activity, assuming median share awards, and related information:
Year ended

December 31,
2019
 
December 31,
2018
 
December 31,
2017



Weighted-



Weighted-



Weighted-

Non-vested

Average

Non-vested

Average

Non-vested

Average

Shares

Grant Date

Shares

Grant Date

Shares

Grant Date

(000)

Fair Value

(000)

Fair Value

(000)

Fair Value












Outstanding and non-vested at beginning of year
65


$
58


69


$
58


80


$
55

Granted
30


61


18


72


27


56

Additional shares awarded based on performance
—


—


—


—


—


—

Vested
(23
)

64


—


—


—


—

Forfeited
(10
)

63


(22
)

67


(38
)

51

Outstanding and non-vested at end of year
62


$
62


65


$
58


69


$
58

Aggregate grant date fair value
$
3,870




$
3,795




$
3,980




Year ended

December 31,
2019

December 31,
2018

December 31,
2017
Shared-based compensation for performance shares
$
1,176


$
1,263


$
1,045

Tax benefit for performance share compensation
$
296


$
318


$
371

Unrecognized compensation cost for performance shares
$
1,529







Weighted average period over which unrecognized compensation will be recognized (years)
1.8

 
 
 
 


Employee Activity – Employee Stock Purchase Plan

Under the 2005 Employee Stock Purchase Plan (the "ESPP"), which has been approved by shareholders, the Company is authorized to issue up to a remaining 350 shares of common stock to employees of the Company. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six-month purchase period. Common
stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions. The following table summarizes the Company's employee stock purchase activity and related information:


Year ended
 
 

December 31,

December 31,
 
December 31,

2019

2018
 
2017
Shares purchased by participants under plan
12


9

 
10

Average purchase price
$
51


$
51

 
$
46

Weighted-average fair value of each purchase right under the ESPP granted 1
$
14


$
6

 
$
9

Share-based compensation for ESPP shares
$
163


$
59

 
$
92

 
 
 
 
 
 
1 Equal to the discount from the market value of the common stock at the end of each six month purchase period

    
Non-employee Director Activity – Non-vested Shares
 
In May 2006, the Company’s shareholders approved the Company’s 2006 Non-Employee Director Stock Plan (the “2006 Plan”).  The Company’s shareholders then approved the Company’s Amended and Restated Non-Employee Director Stock Plan (the “Amended Plan”) on May 22, 2007.  The Amended Plan was then further amended and restated on December 17, 2008.  Under the Amended Plan, on the first business day after each Annual Meeting of Shareholders, each non-employee director will automatically be granted an award (the “Annual Grant”), in such form and size as the Board determines from year to year.  Unless otherwise determined by the Board, Annual Grants will become vested and nonforfeitable on the earlier of (a) the day immediately prior to the first Annual Meeting that occurs after the Grant Date or (b) the first anniversary of the Grant Date so long as the non-employee director’s service with the Company does not earlier terminate.  Each director may elect to defer receipt of the shares under a non-vested share award until the director terminates service on the Board of Directors.  If a director elects to defer receipt, the Company will issue deferred stock units to the director, which do not represent actual ownership in shares and the director will not have voting rights or other incidents of ownership until the shares are issued.  However, the Company will credit the director with dividend equivalent payments in the form of additional deferred stock units for each cash dividend payment made by the Company. All forfeitures were recognized as they occurred.

In May 2016, with the approval of shareholders, the Company further amended the Amended Plan to reserve for issuance an additional 160 common shares, increasing the total number of reserved common shares under the Amended Plan to 360. As of December 31, 2019, there were approximately 116 shares remaining available for grant.
  
    
The following tables summarize the Company's non-employee non-vested share activity and related information:
Year ended

December 31,
2019
 
December 31,
2018
 
December 31,
2017

Non-vested



Non-vested



Non-vested



Shares and

Weighted-

Shares and

Weighted-

Shares and

Weighted-

Deferred

Average

Deferred

Average

Deferred

Average

Stock Units

Grant Date

Stock Units

Grant Date

Stock Units

Grant Date

(000)

Fair Value

(000)

Fair Value

(000)

Fair Value












Outstanding and non-vested at beginning of year
15


$
59


11


$
52


16


$
44

Granted
16


62


16


59


14


52

Vested
(15
)

64


(12
)

52


(16
)

44

Forfeited
—


—


—


—


(3
)

49

Outstanding and non-vested at end of year
16


$
62


15


$
59


11


$
52

Aggregate grant date fair value
$
990




$
920




$
742



Total fair value of shares vested during the year
$
970




$
615




$
809




Year ended

December 31,
2019

December 31,
2018

December 31,
2017
Shared-based compensation for non-vested shares
$
970


$
775


$
608

Tax benefit for non-vested share compensation
$
244


$
195


$
216

Unrecognized compensation cost for non-vested shares
$
368






Weighted average period over which unrecognized compensation will be recognized (years)
0.4

 
 
 
 



Net Income per Share

The following table sets forth the computation of basic and diluted net income per share:
 
2019
 
2018
 
2017
Numerator:
 
 
 
 
 
Net income and comprehensive income
$
87,099

 
$
92,051

 
$
87,255

Income allocated to participating securities
(945
)
 
(881
)
 
(700
)
Numerator for basic and diluted income per share - net income
86,154

 
91,170

 
86,555


 
 
 
 
 
Denominator:
 
 
 
 
 
Denominator for basic net income per share - weighted-average shares (in thousands)
28,195

 
29,076

 
29,867

Effect of dilutive stock options (in thousands)
82

 
80

 
64

Effect of dilutive performance shares (in thousands)
31

 
34

 
33

Denominator for diluted net income per share - adjusted weighted-average shares (in thousands)
28,308

 
29,190

 
29,964

Basic net income per share
$
3.06

 
$
3.14

 
$
2.90

Diluted net income per share
$
3.04

 
$
3.12

 
$
2.89



The number of instruments that could potentially dilute net income per basic share in the future, but that were not included in the computation of net income per diluted share because to do so would have been anti-dilutive for the periods presented, are as follows:
 
2019
 
2018
 
2017
Anti-dilutive stock options (in thousands)
183

 
126

 
172

Anti-dilutive performance shares (in thousands)
—

 
16

 
—

Anti-dilutive non-vested shares and deferred stock units (in thousands)
—

 
9

 
—

Total anti-dilutive shares (in thousands)
183

 
151

 
172