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Note 12 - Equity Compensation Plans

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Text Block]

All of our outstanding stock options, restricted stock awards, deferred stock units, and PSUs are covered under our 2013 Incentive Plan or 2009 Incentive Plan. Awards under our 2013 Incentive Plan may include one or more of the following types: (i) stock options (both nonqualified and incentive stock options), (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units, (v) performance awards, (vi) other share-based awards, and (vii) cash. Employees, directors and consultants are eligible for awards under our 2013 Incentive Plan. We transferred common stock under these plans from our treasury shares. As of March 31, 2021, there were 1,937,143 shares of common stock reserved and available for future issuance under our 2013 Incentive Plan. Cash received from stock option exercises for the three months ended March 31, 2021 and 2020 was $7.6 million and $19.2 million, respectively.

We grant equity awards to our key employees. The nonqualified stock options have an exercise price equal to the adjusted closing price of our common stock on the grant date, with a ten-year contractual term. The fair value of the restricted stock is determined using the closing price of our common stock on the grant date. The restricted stock is not assignable or transferable until it becomes vested. PSUs vest at the end of a three-year performance period, subject to the recipient’s continued service. Each PSU represents the right to receive one share of our common stock and the ultimate realization is based on our achievement of certain market performance criteria and may range from 0% to 200% of the recipient’s target levels of 100% established on the grant date. The fair value of PSUs is determined on the grant date using the Monte Carlo Simulation model. We recognize the expense of the equity awards ratably over the vesting period, which could be up to four years.

On January 15, 2021, we granted 706,507 stock options, 134,777 shares of restricted stock, and 59,144 performance share units to key employees. The stock options and restricted stock have a graded service vesting period of four years, and the performance share units have a three-year performance period, subject to the recipients' continued service.

A summary of the status of the stock options, restricted stock, and PSUs awarded under our 2013 Incentive Plan as of December 31, 2020 and March 31, 2021 and changes during the interim period are presented below:

	Stock Option							Restricted Stock					PSU
	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Number of Shares			Weighted Average Grant Date Fair Value Per Share		Number of Shares			Weighted Average Grant Date Fair Value Per Share
						(in millions)
Outstanding at December 31, 2020		5,611,777		$	98.28	$	613.4		390,054		$	131.63		145,609		$	170.75
Granted		709,811		$	190.10				135,380		$	190.10		59,144		$	210.07
Dividend reinvestment		—		$	—				—		$	—		269			N/A
Exercised or lapsed		(115,284	)	$	64.73	$	13.5		(36,637	)	$	158.23		(42,610	)	$	140.70
Canceled, expired or forfeited		(20,245	)	$	136.35				(3,216	)	$	141.28		—
Outstanding at March 31, 2021		6,186,059		$	109.31	$	416.8		485,581		$	145.47		162,412		$	192.99
Exercisable at March 31, 2021		3,588,921		$	82.06	$	339.6
Exercisable at December 31, 2020		3,494,164		$	76.84	$	456.9
Nonvested at March 31, 2021		2,597,138							485,581					162,412
Expected to vest at March 31, 2021		2,296,123							432,880					115,599	⁽¹⁾

⁽¹⁾	Includes estimated performance achievement

The fair value of the stock options granted was estimated using a Black-Scholes valuation model that uses the weighted average assumptions noted in the following table for the three months ended March 31, 2021 and 2020:

	*2021*			*2020*
Option pricing model		Black-Scholes			Black-Scholes
Expected volatility		23.60	%		18.17	%
Risk-free interest rate		0.37	%		1.59	%
Expected term in years		4.3			4.3
Dividend yield		0.63	%		0.71	%
Weighted average grant date fair value per stock option	$	36.09		$	25.49

The expected term for the stock options granted was estimated based on studies of historical experience and projected exercise behavior. However, for certain awards granted, for which no historical exercise pattern exists, the expected term was estimated using the simplified method. The risk-free interest rate is based on the yield of U.S. Treasury zero coupon securities with a maturity equal to the expected term of the equity award. The volatility factor is calculated using historical daily closing prices over the most recent period that commensurate with the expected term of the stock option awards. The expected dividend yield was based on our expected annual dividend rate on the date of grant.

Intrinsic value for stock options is calculated based on the exercise price of the underlying awards and the adjusted closing price of our common stock as of the reporting date. Excess tax benefits from exercised stock options were recorded as income tax benefit in our condensed consolidated statements of operations. This tax benefit is calculated as the excess of the intrinsic value of options exercised and restricted stock lapsed in excess of compensation recognized for financial reporting purposes. The weighted average remaining contractual terms were 6.3 years and 4.8 years for the outstanding and exercisable stock options, respectively, as of March 31, 2021.

For the three months ended March 31, 2021, there was $128.3 million of total unrecognized compensation costs, exclusive of the impact of vesting upon retirement eligibility, related to nonvested stock-based compensation arrangements granted under our 2013 Incentive Plan. That cost is expected to be recognized over a weighted average period of 2.8 years. The total grant date fair value of options vested was $6.2 million and $5.6 million during the three months ended March 31, 2021 and 2020, respectively. The total grant date fair value of restricted stock vested during the three months ended March 31, 2021 and 2020 was $6.8 million and $6.1 million, respectively. The total grant date fair value of PSUs vested during the three months ended March 31, 2021 and 2020 was $3.1 million and $2.1 million, respectively.

Our UK Sharesave Plan offers qualifying employees in the United Kingdom the opportunity to own shares of our common stock. Employees who elect to participate are granted stock options, of which the exercise price is equal to the adjusted closing price of our common stock on the grant date discounted by 5%, and enter into a savings contract, the proceeds of which are then used to exercise the options upon the three-year maturity of the savings contract. During the three months ended March 31, 2021 and 2020, we granted no stock options under our UK Sharesave Plan. As of March 31, 2021, there were 454,205 shares of common stock reserved and available for future issuance under our UK Sharesave Plan.

Our ESPP offers eligible employees the opportunity to purchase shares of our common stock at a discount of its fair market value at the time of purchase. During the three months ended March 31, 2021 and 2020, we issued 10,137 and 9,451 shares of common stock at a weighted discounted price of $167.84 and $132.41 for the ESPP, respectively. As of March 31, 2021, there were 1,250,129 shares of common stock reserved and available for future issuance under our ESPP.