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Share-Based Compensation | 9 Months Ended
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Sep. 30, 2023
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation The Company's share-based compensation plans are described in Note 11, Share-Based Compensation, to the consolidated financial statements in Part II, Item 8, filed on the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Share Based Compensation Expense Total share-based compensation expense was as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
| (In thousands)
Stock option expense | $ | 3,560 |  |  | $ | 3,043 |  |  | $ | 10,740 |  |  | $ | 9,866 |
Restricted stock expense | 5,578 |  |  | 4,800 |  |  | 15,875 |  |  | 14,831 |
Performance restricted stock unit expense | 3,775 |  |  | 4,217 |  |  | 9,158 |  |  | 9,890 |
Total pre-tax expense | $ | 12,913 |  |  | $ | 12,060 |  |  | $ | 35,773 |  |  | $ | 34,587 |
Pre-tax share-based compensation expense is included in the consolidated statement of income in either Cost of sales or Selling, general and administrative expenses, depending on where the recipient’s cash compensation is reported. Stock Options The fair value of each stock option grant is estimated on the grant date using a Black-Scholes-Merton option pricing model. The following weighted average assumptions were used in the Black-Scholes-Merton model to estimate the fair values of stock options granted during the periods indicated:
| Nine Months Ended September 30, 2023 |  | Year Ended December 31, 2022
Expected volatility | 26.0 | % |  | 24.5 | %
Expected term (years) | 5.0 |  | 5.0
Risk-free interest rate | 3.54 | % |  | 2.33 | %
Expected dividend yield | 0.72 | % |  | 0.65 | %
Black-Scholes-Merton fair value per stock option granted | $ | 38.11 |  |  | $ | 32.54 |
The following is a summary of the Company’s stock option activity and related information:
| Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Life |  | Aggregate Intrinsic Value
| (In thousands) |  |  |  | (Years) |  | (In millions)
Outstanding at December 31, 2022 | 3,060 |  |  | $ | 79.46 |  |  |  |  |
Granted | 453 |  |  | 138.46 |  |  |  |  |
Exercised | (551) |  |  | 71.78 |  |  |  |  |
Forfeited | (65) |  |  | 124.38 |  |  |  |  |
Outstanding at September 30, 2023 | 2,897 |  |  | $ | 99.97 |  |  | 6.7 |  | $ | 138.4 |
Exercisable at September 30, 2023 | 1,976 |  |  | $ | 83.88 |  |  | 5.7 |  | $ | 126.3 |
The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2023 was $42.5 million. The total fair value of stock options vested during the nine months ended September 30, 2023 was $12.8 million. As of September 30, 2023, there was approximately $21.9 million of expected future pre-tax compensation expense related to the 0.9 million non-vested stock options outstanding, which is expected to be recognized over a weighted average period of approximately two years. Restricted Stock The following is a summary of the Company’s non-vested restricted stock activity and related information:
| Shares |  | Weighted Average Grant Date Fair Value
| (In thousands) |  |
Non-vested restricted stock outstanding at December 31, 2022 | 356 |  |  | $ | 117.18 |
Granted | 154 |  |  | 138.63 |
Vested | (156) |  |  | 104.30 |
Forfeited | (26) |  |  | 127.00 |
Non-vested restricted stock outstanding at September 30, 2023 | 328 |  |  | $ | 132.61 |
The total fair value of restricted stock vested during the nine months ended September 30, 2023 was $16.3 million. As of September 30, 2023, there was approximately $28.8 million of expected future pre-tax compensation expense related to the 0.3 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately two years. Performance Restricted Stock Units In March 2023, the Company granted performance restricted stock units ("PRSU") to officers and certain key management-level employees. The PRSUs vest over a period up to three years from the grant date based on continuous service, with the number of shares earned (0% to 200% of the target award) depending upon the extent to which the Company achieves certain financial and market performance targets measured over the period from January 1 of the year of grant to December 31 of the third year. Half of the PRSUs were valued in a manner similar to restricted stock as the financial targets are based on the Company’s operating results, which represents a performance condition. The grant date fair value of these PRSUs are recognized as compensation expense over the vesting period based on the probable number of awards to vest at each reporting date. The other half of the PRSUs were valued using a Monte Carlo model as the performance target is related to the Company’s total shareholder return compared to a group of peer companies, which represents a market condition. The Company recognizes the grant date fair value of these awards as compensation expense ratably over the vesting period. The following is a summary of the Company’s non-vested performance restricted stock activity and related information:
| Shares |  | Weighted Average Grant Date Fair Value
| (In thousands) |  |
Non-vested performance restricted stock outstanding at December 31, 2022 | 275 |  |  | $ | 101.98 |
Granted | 79 |  |  | 138.46 |
Performance assumption change 1 | 48 |  |  | 63.37 |
Vested | (161) |  |  | 63.37 |
Forfeited | (2) |  |  | 131.76 |
Non-vested performance restricted stock outstanding at September 30, 2023 | 239 |  |  | $ | 131.90 |
_________________________________________ 1 Reflects the number of PRSUs above target levels based on performance metrics. As of September 30, 2023, there was approximately $7.6 million of expected future pre-tax compensation expense related to the 0.2 million non-vested restricted shares outstanding, which is expected to be recognized over a weighted average period of approximately one year.

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