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Share-Based Compensation Plans | 12 Months Ended
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Dec. 31, 2019
Share-based Payment Arrangement [Abstract] |
SHARE-BASED COMPENSATION PLANS | SHARE-BASED COMPENSATION PLANS The following table provides information on share-based compensation expense and related income tax benefits recognized in 2019, 2018 and 2017:
|  | Years ended December 31,
|  | 2019 |  | 2018 |  | 2017
|  | (In thousands)
Stock option and stock purchase plans |  | $ | 6,575 |  |  | $ | 7,703 |  |  | $ | 7,869 |
Unvested stock awards |  | 19,253 |  |  | 17,249 |  |  | 11,098 |
Share-based compensation expense |  | 25,828 |  |  | 24,952 |  |  | 18,967 |
Income tax benefit |  | (4,667 | ) |  | (4,615 | ) |  | (6,628 | )
Share-based compensation expense, net of tax |  | $ | 21,161 |  |  | $ | 20,337 |  |  | $ | 12,339 |
Total unrecognized pre-tax compensation expense related to share-based compensation arrangements as of December 31, 2019 was $31 million and is expected to be recognized over a weighted-average period of approximately 1.8 years. The total fair value of equity awards vested during 2019, 2018 and 2017 was $20 million, $18 million and $22 million, respectively. Share-Based Incentive Awards Share-based incentive awards are provided to employees under the terms of various share-based compensation plans (collectively, the Plans). The Plans are administered by the Compensation Committee of the Board of Directors. Awards under the Plans principally include at-the-money stock options and unvested stock. Unvested stock awards include grants of market-based, performance-based, and time-vested restricted stock rights. Under the terms of our Plans, dividends on unvested stock are not paid unless the award vests. Upon vesting, the amount of the dividends paid is equal to the aggregate dividends declared on common shares during the period from the date of grant of the award until the date the shares underlying the award are delivered. As of December 31, 2019, there are 4.3 million shares authorized for issuance under the Plans and 4.2 million shares remaining available for future issuance. Stock options are awards that allow employees to purchase shares of our stock at a fixed price in the future. Stock option awards are granted at an exercise price equal to the market price of our stock at the time of grant. These awards, which generally vest one-third each year, are fully vested three years from the grant date. Stock options granted since 2013 have contractual terms of ten years. Restricted stock awards are unvested stock rights that are granted to employees and entitle the holder to shares of common stock as the award vests. Time-vested restricted stock rights typically vest ratably over three years regardless of company performance. The fair value of the time-vested awards is determined and fixed based on Ryder’s stock price on the date of grant. Performance-based restricted stock awards (PBRSRs) include a performance-based vesting condition. PBRSRs are awarded based on our one-year adjusted return on capital (ROC). Beginning in 2018, PBRSRs are also awarded based on the spread between ROC and the cost of capital (COC) and strategic revenue growth (SRG). Awards with a ROC performance-based vesting condition are segmented into three one-year performance periods. For these awards, up to 150% of the awards may be earned based on ROC measured against an annual ROC target. If earned, employees will receive the grant of stock three years after the grant date, provided they continue to be employed with Ryder, subject to Compensation Committee approval. For accounting purposes, the awards are not considered granted until the Compensation Committee approves the annual ROC target. During 2019, 2018 and 2017, 79,000, 98,000 and 79,000 PBRSRs, respectively, were considered granted for accounting purposes. The fair value of the PBRSRs is determined and fixed on the grant date based on our stock price on the date of grant. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. Awards with a performance-based vesting condition measured by the spread between ROC and COC (ROC/COC) have a three-year performance period. For these awards, up to 200% of the awards may be earned based on ROC/COC measured against a three-year ROC/COC target. The majority of these awards include a total shareholder return (TSR) modifier. Our TSR will be compared against the TSR of each of the companies in a custom peer group to determine our TSR percentile rank versus this custom peer group. The number of ROC/COC PBRSRs will then be adjusted based on this rank. During 2019 and 2018, approximately 74,000 and 51,000 PBRSRs, respectively, with the ROC/COC condition were awarded under the Plans. The fair value of these PBRSRs is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. Awards with a SRG performance-based condition have a three-year performance period. For these awards, up to 200% of the awards may be earned based on SRG measured against a three-year SRG target. The majority of these awards include a TSR modifier consistent with the discussion above. During 2019 and 2018, approximately 74,000 and 51,000 PBRSRs, respectively, with the SRG condition were awarded under the Plans. The fair value of these PBRSRs is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. Market-based restricted stock awards include a market-based vesting provision. The awards, which are no longer granted since 2017, are segmented into three performance periods of one, two and three years. At the end of each performance period, up to 150% of the award may be earned based on our TSR compared to the target TSR of a peer group over the applicable performance period. If earned, employees will receive the grant of stock at the end of the relevant three-year performance period provided they continue to be employed with Ryder, subject to Compensation Committee approval. The fair value of the market-based awards was determined on the date of grant using a Monte-Carlo valuation model. Share-based compensation expense is recognized on a straight-line basis over the vesting period and is recognized regardless of whether the awards vest. We also grant stock awards to non-management members of the Board of Directors. Equity awards to new board members do not vest until the director has served a minimum of one year. Prior to 2018, board members received the awards upon separation from the Board. Beginning in 2018, each director may elect to receive his or her equity award in the form of either (i) shares that are distributed at the time of grant or (ii) restricted stock units (RSUs) which will entitle the director to receive one share of Ryder stock for each RSU granted and are distributed upon or after separation from service on the board. The fair value of the awards is determined and fixed based on Ryder’s stock price on the date of grant. Share-based compensation expense is recognized for RSUs in the year the RSUs are granted. Ryder shares delivered upon grant have standard voting rights and rights to dividend payments. RSUs that are distributed upon or after separation from service on the board are eligible for non-forfeitable dividend equivalents until distribution but such RSUs have no voting rights. Option Awards The following is a summary of option activity under our stock option plans as of and for the year ended December 31, 2019:
|  | Shares |  | Weighted- Average Exercise Price |  | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value
|  | (In thousands) |  |  |  | (In years) |  | (In thousands)
Options outstanding at January 1 |  | 1,862 |  |  | $ | 72.28 |  |  |  |  |
Granted |  | 220 |  |  | 59.09 |  |  |  |  |
Exercised |  | (7 | ) |  | 55.32 |  |  |  |  |
Forfeited or expired |  | (85 | ) |  | 71.45 |  |  |  |  |
Options outstanding at December 31 |  | 1,990 |  |  | $ | 70.92 |  |  | 6.1 |  | $ | — |
Vested and expected to vest at December 31 |  | 1,896 |  |  | $ | 70.71 |  |  | 5.2 |  | $ | — |
Exercisable at December 31 |  | 1,480 |  |  | $ | 71.53 |  |  | 5.3 |  | $ | — |
The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the close price of our stock on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders if all options were exercised at year-end. This amount fluctuates based on the fair market value of our stock. All options were "out-of-the-money" as of December 31, 2019. Restricted Stock Awards The following is a summary of activity for unvested restricted stock awards as of and for the year ended December 31, 2019:
|  | Time-Vested |  | Market-Based |  | Performance-Based
|  | Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value |  | Shares |  | Weighted- Average Grant Date Fair Value
|  | (In thousands) |  |  |  | (In thousands) |  |  |  | (In thousands) |  |
Unvested stock outstanding at January 1 |  | 488 |  | $ | 66.11 |  |  | 68 |  | $ | 64.26 |  |  | 229 |  | $ | 73.41 |
Granted |  | 416 |  | 59.48 |  |  | — |  | — |  |  | 227 |  | 59.51 |
Vested (1) |  | (145) |  | 61.97 |  |  | (21) |  | 54.10 |  |  | (36) |  | 55.32 |
Forfeited (2) |  | (29) |  | 64.68 |  |  | (29) |  | 67.80 |  |  | (46) |  | 67.78 |
Unvested stock outstanding at December 31 |  | 730 |  | $ | 63.21 |  |  | 18 |  | $ | 76.49 |  |  | 374 |  | $ | 67.14 |
_________________ (1) Includes awards attained above target. (2) Includes awards canceled due to employee terminations or performance and market conditions not being achieved. Stock Purchase Plan We maintain an Employee Stock Purchase Plan (ESPP) that enables eligible participants in the U.S. and Canada to purchase full or fractional shares of Ryder common stock through payroll deductions of up to 15% of eligible compensation. The ESPP provides for quarterly offering periods during which shares may be purchased at 85% of the fair market value of our stock. The exercise price is based on the fair market value of the stock on the last trading day of the quarter. Stock purchased under the ESPP must be held for 90 days or one year for officers. There were 5.5 million shares authorized for issuance under the existing ESPP as of December 31, 2019. There were 0.4 million shares remaining available to be purchased in the future under the ESPP as of December 31, 2019. The following table presents the weighted-average exercise price for shares granted and exercised under the ESPP:
|  | Years ended December 31,
|  | 2019 |  | 2018 |  | 2017
Shares granted and exercised |  | 228,000 |  |  | 199,000 |  |  | 160,000 |
Weighted average exercise price |  | $ | 47.97 |  |  | $ | 54.89 |  |  | $ | 66.72 |
Share-Based Compensation Fair Value Assumptions The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing valuation model that uses the weighted-average assumptions noted in the table below. Expected volatility is based on historical volatility of our stock and implied volatility from traded options on our stock. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award. We use historical data to estimate stock option exercises and forfeitures within the valuation model. The expected term of stock option awards granted is derived from historical exercise experience under the share-based employee compensation arrangements and represents the period of time that stock option awards granted are expected to be outstanding. The fair value of market-based restricted stock awards is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. The following table presents the weighted-average assumptions used for options granted:
|  | Years ended December 31,
|  | 2019 |  | 2018 |  | 2017
Expected dividends |  | 3.7% |  | 2.8% |  | 2.3%
Expected volatility |  | 31.4% |  | 29.4% |  | 28.5%
Risk-free rate |  | 2.4% |  | 2.7% |  | 1.9%
Expected term in years |  | 4.4 years |  | 4.4 years |  | 4.4 years
Grant-date fair value |  | $ | 11.74 |  |  | $ | 15.89 |  |  | $ | 15.71 |
Exercise of Employee Stock Options and Purchase Plans The total intrinsic value of options exercised during 2019 was no t material. The total intrinsic value of options exercised during 2018 and 2017 was $3 million and $5 million, respectively. The total cash received from employees under all share-based employee compensation arrangements for 2019, 2018 and 2017 was $8 million, $17 million and $21 million, respectively. In connection with these exercises, the tax benefits generated from share-based employee compensation arrangements were not material for 2019, 2018 and 2017.

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