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OPTIONS AND AWARDS | 3 Months Ended
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Mar. 31, 2024
Share-Based Payment Arrangement [Abstract] |
OPTIONS AND AWARDS | OPTIONS AND AWARDS Stock-based compensation expense consists of stock-based payment awards made to employees and directors, including employee stock options and restricted stock awards, based on estimated fair values. As stock-based compensation expense recognized in the Company’s condensed consolidated statements of income for the three months ended March 31, 2024 and 2023 was based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. The Company estimates forfeitures at the time of grant and, if necessary, revises the estimate in subsequent periods if actual forfeitures differ. 2022 Omnibus Incentive Plan (2022 Plan) — The Company has one active stock incentive plan, the 2022 Omnibus Incentive Plan (the 2022 Plan). Including the shares rolled over from the 2017 Omnibus Incentive Plan, the 2022 Plan provides for the issuance of 3,452 shares of common stock. The number of shares available to be issued under the 2022 Plan will be reduced by (i) one share for each share that relates to an option or stock appreciation right award and (ii) two shares for each share which relates to an award other than a stock option or stock appreciation right award (a full-value award). Non-employee director options, to the extent granted, will vest and become exercisable in three equal annual installments, or the length of the term if less than three years, on the completion of each year of service measured from the grant date. All other options generally vest over five years at 20% per year on the anniversary of the grant date. Options expire ten years from the date of grant. At March 31, 2024, the total number of shares available for issuance under the 2022 Plan was 1,106. The Company uses the Black-Scholes option-pricing model to recognize the value of stock-based compensation expense for stock option awards. Determining the appropriate fair-value model and calculating the fair value of stock option awards at the grant date requires judgment, including estimating stock price volatility, expected option life, and forfeiture rates. The fair-value of the restricted stock awards at the grant date is based on the market price on the grant date, adjusted for forfeiture rates. The Company develops estimates based on historical data and market information, which can change significantly over time. Stock Options The Company used the following assumptions for stock options granted during the three months ended March 31, 2024 and 2023:
Grant Year |  | Options Granted |  | Weighted Average Risk-Free Rate |  | Expected Life |  | Weighted Average Volatility |  |  |  | Weighted Average Dividend Yield |  |
2024 |  | 181 |  | 4.3% |  | 6.1 years |  | 40.9% |  |  |  | 0.2% |  |
2023 |  | 222 |  | 4.1% |  | 6.3 years |  | 41.6% |  |  |  | 0.2% |  |
For the three months ended March 31, 2024 and 2023, the following represents the exercise price and fair value displayed at grant date for stock option grants:
Grant Year |  | Granted |  | Weighted Average Exercise Price |  | Weighted Average Fair Value of Options
2024 |  | 181 |  | $ | 122.69 |  |  | $ | 56.23 |
2023 |  | 222 |  | $ | 89.84 |  |  | $ | 41.60 |
The weighted average exercise price equaled the weighted average fair value of common stock on the grant date for all options granted during the three months ended March 31, 2024 and 2023 and therefore, the intrinsic value was $0 at the date of grant. The following table represents the employee stock option activity during the three months ended March 31, 2024:
| Number of Options Outstanding |  | Weighted Average Exercise Price |  | Number of Options Vested |  | Weighted Average Exercise Price of Options Vested
January 1, 2024 | 3,991 |  |  | $ | 62.65 |  |  | 1,887 |  |  | $ | 39.58 |
Granted | 181 |  |  | 122.69 |  |  |  |  |
Forfeited | (25) |  |  | 83.01 |  |  |  |  |
Exercised | (219) |  |  | 28.48 |  |  |  |  |
March 31, 2024 | 3,928 |  |  | $ | 67.19 |  |  | 1,808 |  |  | $ | 43.49 |
The aggregate intrinsic value of options outstanding, vested, expected to vest and exercised as of March 31, 2024 and December 31, 2023 is as follows:
Options |  | March 31, 2024 |  | December 31, 2023 |  |
Outstanding |  | $ | 224,818 |  |  | $ | 197,819 |  |  |
Vested |  | 146,313 |  |  | 137,048 |  |  |
Expected to vest |  | 73,361 |  |  | 56,759 |  |  |
The intrinsic value is calculated as the difference between the market value of the underlying common stock and the exercise price of the options. The aggregate intrinsic value of options that vested during the three months ended March 31, 2024 and 2023 was $7,382 and $5,337, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2024 and 2023 was $19,959 and $10,950, respectively. Restricted Stock Awards The Company granted 95 and 105 restricted stock awards during the three months ended March 31, 2024 and 2023, respectively. All awards were granted at an issue price of $0 and generally vest over five years. The fair value per share of restricted awards granted during the three months ended March 31, 2024 and 2023 ranged from $116.65 to $122.69 and $89.83 to $94.63, respectively. The fair value per share includes quarterly stock awards to non-employee directors. A summary of the status of the Company's non-vested restricted stock awards as of March 31, 2024 and changes during the three months ended March 31, 2024 is presented below:
| Non-Vested Restricted Awards |  | Weighted Average Grant Date Fair Value
Nonvested at January 1, 2024 | 431 |  |  | $ | 78.91 |
Granted | 95 |  |  | 119.57 |
Vested | (89) |  |  | 101.18 |
Forfeited | (7) |  |  | 81.64 |
Nonvested at March 31, 2024 | 430 |  |  | $ | 83.28 |
During the three months ended March 31, 2024, the Company granted 4 automatic quarterly stock awards to non-employee directors for their service on the Company's board of directors. The fair value per share of these stock awards was $116.65 based on the market price on the grant date. Long-Term Incentive Plan On August 27, 2019, the Board approved the Long-Term Incentive Plan (the 2019 LTI Plan). The 2019 LTI Plan provides that certain employees of the Company who assisted in the consummation of the spin-off of The Pennant Group, Inc. (Pennant) from the Company in 2019 (spin-off) were granted shares of restricted stock upon successful completion of the spin-off. The 2019 LTI Plan provides for the issuance of 500 shares of Pennant restricted stock. The shares are vested over five years at 20% per year on the anniversary of the grant date. If a recipient is terminated or voluntarily leaves the Company, all shares subject to restriction or not yet vested are entirely forfeited. The total stock-based compensation related to the 2019 LTI Plan was approximately $206 and $191 for the three months ended March 31, 2024 and 2023, respectively. Stock-based compensation expense Stock-based compensation expense recognized for the Company's equity incentive plans and long-term incentive plan for the three months ended March 31, 2024 and 2023 was as follows:
| Three Months Ended March 31, |  |
| 2024 |  | 2023 |  |  |  |  |  |
Stock-based compensation expense related to stock options | $ | 4,988 |  |  | $ | 3,425 |  |  |  |  |  |  |
Stock-based compensation expense related to restricted stock awards | 2,727 |  |  | 2,728 |  |  |  |  |  |  |
Stock-based compensation expense related to restricted stock awards to non-employee directors | 516 |  |  | 420 |  |  |  |  |  |  |
TOTAL | $ | 8,231 |  |  | $ | 6,573 |  |  |  |  |  |  |
In future periods, the Company expects to recognize approximately $72,032 and $30,655 in stock-based compensation expense for unvested options and unvested restricted stock awards, respectively, that were outstanding as of March 31, 2024. Future stock-based compensation expense will be recognized over 3.9 and 3.5 weighted average years for unvested options and restricted stock awards, respectively. There were 2,120 unvested and outstanding options as of March 31, 2024, of which 1,952 shares are expected to vest. The weighted average contractual life for options outstanding, vested and expected to vest as of March 31, 2024 was 6.8 years.

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