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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2018
Share Based Compensation [Abstract] |
Share-Based Compensation |
13. | Share-Based Compensation
The Company has a long-term equity incentive plan, which allows for grants of stock options, stock appreciation rights, restricted stock, and performance awards to directors, officers, and employees, as well as others who engage in services for PCA. The plan, as amended, terminates May 1, 2023, and authorizes 10.6 million shares of common stock for grant over the life of the plan. As of December 31, 2018, 0.7 million shares remained available for future issuance under the plan. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date. Restricted Stock Restricted stock awards granted to officers and employees generally vest at the end of a four-year period, and restricted stock awards granted to directors vest immediately. The fair value of restricted stock is determined based on the closing price of the Company’s stock on the grant date. A summary of the Company’s restricted stock activity follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | Shares |  |  | Weighted Average Grant- Date Fair Value |  |  | Shares |  |  | Weighted Average Grant- Date Fair Value |  |  | Shares |  |  | Weighted Average Grant- Date Fair Value |
Restricted stock at January 1 |  |  | 739,732 |  |  | $ | 77.23 |  |  |  | 786,079 |  |  | $ | 63.44 |  |  |  | 1,007,794 |  |  | $ | 49.47 |
Granted |  |  | 173,144 |  |  |  | 114.63 |  |  |  | 173,199 |  |  |  | 107.57 |  |  |  | 242,835 |  |  |  | 67.48 |
Vested (a) |  |  | (165,547 | ) |  |  | 72.84 |  |  |  | (213,992 | ) |  |  | 51.37 |  |  |  | (443,627 | ) |  |  | 34.11 |
Forfeitures |  |  | (3,738 | ) |  |  | 78.66 |  |  |  | (5,554 | ) |  |  | 69.03 |  |  |  | (20,923 | ) |  |  | 59.63 |
Restricted stock at December 31 |  |  | 743,591 |  |  | $ | 86.90 |  |  |  | 739,732 |  |  | $ | 77.23 |  |  |  | 786,079 |  |  | $ | 63.44 |
(a) | The total fair value of awards upon vesting for the years ended December 31, 2018, 2017, and 2016 was $18.9 million, $23.3 million, and $28.8 million, respectively.
Performance Units Performance unit awards granted to certain key employees are earned based on the achievement of defined performance rankings of Return on Invested Capital (ROIC) or Total Shareholder Return (TSR) compared to ROIC and TSR for peer companies. ROIC performance unit awards vest four years after the grant date, while TSR performance unit awards vest approximately three years after the grant date. Both ROIC and TSR performance units are paid out entirely in shares of the Company’s common stock. The ROIC performance unit awards are valued at the closing price of the Company’s stock on the grant date and expensed over the requisite service period based on the most probable number of awards expected to vest. The TSR performance unit awards are valued using a Monte Carlo simulation, as the TSR component contains a market condition. A summary of the Company’s performance unit activity follows:
|  | 2018 |  |  | 2017 |  |  | 2016 |
|  | Units |  |  | Weighted Average Grant- Date Fair Value |  |  | Units |  |  | Weighted Average Grant- Date Fair Value |  |  | Units |  |  | Weighted Average Grant- Date Fair Value |
Performance units at January 1 |  |  | 226,558 |  |  | $ | 77.07 |  |  |  | 232,088 |  |  | $ | 62.68 |  |  |  | 175,675 |  |  | $ | 59.94 |
Granted |  |  | 83,515 |  |  |  | 115.35 |  |  |  | 53,070 |  |  |  | 108.19 |  |  |  | 77,017 |  |  |  | 67.57 |
Vested (a) |  |  | (43,369 | ) |  |  | 71.19 |  |  |  | (58,600 | ) |  |  | 56.08 |  |  |  | (20,604 | ) |  |  | 57.58 |
Performance units at December 31 |  |  | 266,704 |  |  | $ | 90.01 |  |  |  | 226,558 |  |  | $ | 77.07 |  |  |  | 232,088 |  |  | $ | 62.68 |
(a) | The total fair value of awards upon vesting for the years ended December 31, 2018, 2017, and 2016 was $5.4 million, $7.5 million, and $1.1 million, respectively. Upon vesting of the awards in 2018, 2017, and 2016, PCA issued 46,876 shares, 67,391 shares, and 21,111 shares, respectively. For 2018, 2017, and 2016, these amounts included 3,507 shares, 8,791 shares, and 507 shares, respectively, for dividends accrued during the vesting period.
Compensation Expense Our share-based compensation expense is recorded in “Selling, general, and administrative expenses.” Compensation expense for share-based awards recognized in the Consolidated Statements of Income, net of forfeitures was as follows (dollars in millions):
|  | Year Ended December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Restricted stock |  | $ | 18.6 |  |  | $ | 15.0 |  |  | $ | 15.8 |
Performance units |  |  | 4.9 |  |  |  | 5.6 |  |  |  | 3.9 |
Impact on income before income taxes |  |  | 23.5 |  |  |  | 20.6 |  |  |  | 19.7 |
Income tax benefit |  |  | (5.9 | ) |  |  | (7.9 | ) |  |  | (7.7 | )
Impact on net income |  | $ | 17.6 |  |  | $ | 12.7 |  |  | $ | 12.0 |
The fair value of restricted stock is determined based on the closing price of the Company’s common stock on the grant date. As PCA’s Board of Directors has the ability to accelerate vesting of share-based awards upon an employee’s retirement, the Company accelerates the recognition of compensation expense for certain employees approaching normal retirement age. For performance unit awards made in 2018, 50% used TSR as the performance measure and 50% used ROIC as the performance measure. All units awarded before 2018 used ROIC as the performance measure. The ROIC component of performance unit awards are valued based on the closing price of the stock on the grant date. As the ROIC component contains a performance condition, compensation expense, net of estimated forfeitures, is recorded over the requisite service period based on the most probable number of awards expected to vest. The TSR component of performance unit awards is valued using a Monte Carlo simulation as the TSR component contains a market condition. The Monte Carlo simulation estimates the fair value of the TSR component based on the expected term of the award, a risk-free interest rate, expected dividends, and expected volatility of the Company’s common stock and the common stock of the peer companies. Compensation expense is recorded ratably over the expected term of the award. The unrecognized compensation expense for all share-based awards was as follows (dollars in millions):
|  | December 31, 2018
|  | Unrecognized Compensation Expense |  |  | Remaining Weighted Average Recognition Period (in years)
Restricted stock |  | $ | 31.7 |  |  | 2.4
Performance units |  |  | 14.1 |  |  | 2.6
Total unrecognized share-based compensation expense |  | $ | 45.8 |  |  | 2.5
We evaluate share-based compensation expense on a quarterly basis based on our estimate of expected forfeitures, review of recent forfeiture activity, and expected future turnover. We recognize the effect of adjusting the forfeiture rate for all expense amortization in the period that we change the forfeiture estimate. The effect of forfeiture adjustments was insignificant in all periods presented.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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