Share-Based Compensation

Share-Based Incentive Plans

The Company has established various plans under which it is authorized to grant restricted stock, restricted stock units, stock options and stock appreciation rights. The Company may also grant cash awards that can be notionally invested in one or more specified measurement funds, including the Company’s common stock. Awards granted under the Company’s share-based incentive plans typically participate in any dividends declared, but such amounts are deferred until delivery of the shares and are forfeitable if the requisite service is not satisfied. Dividends may be paid in cash or may be reinvested in the Company’s common stock.

The total fair value of share-based compensation awards that vested was $20.7 million, $59.4 million and $5.9 million during the years ended December 31, 2016, 2017 and 2018, respectively.

Share-Based Incentive Compensation

The following is a summary of share-based compensation expense:



Year	Share-Based Compensation Expense		Tax Benefit
2016	$	39.2	$	15.1
2017	40.4		13.6
2018	44.7		11.2

The excess tax benefit recognized from share-based incentive plans was $10.9 million and $0.7 million during the years ended December 31, 2017 and 2018, respectively, and classified as an operating cash flow.

As of December 31, 2017, the Company had $63.5 million of unrecognized share-based compensation expense. As of December 31, 2018, the Company had $54.1 million of unrecognized share-based compensation, which will be recognized over a weighted average period of approximately two years (assuming no forfeitures).

Stock Options

The following table summarizes the transactions in the Company’s stock options:



	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Unexercised options outstanding—December 31, 2017	0.6		$	122.04
Options granted	0.0		179.54
Options exercised	(0.1	)	99.57
Options forfeited	(0.0	)	122.40
Unexercised options outstanding—December 31, 2018	0.5		130.81		3.7
Exercisable at December 31, 2018	0.1		138.97		2.3

The Company granted stock options with fair values of $16.4 million, $0.8 million and $1.0 million for the years ended December 31, 2016, 2017 and 2018, respectively. Stock options generally vest over a period of three to four years and expire seven years after the grant date. All options have been granted with exercise prices equal to the closing price of the Company’s common stock on the grant date. In certain circumstances, option awards also require certain performance conditions to be satisfied in order for the options to be exercised.

The Company generally uses treasury stock to settle stock option exercises. The total intrinsic value of options exercised during the years ended December 31, 2016, 2017 and 2018 was $27.7 million, $50.8 million and $8.2 million, respectively. The cash received for options exercised was $25.6 million, $41.9 million and $9.7 million during the years ended December 31, 2016, 2017 and 2018, respectively. As of December 31, 2018, the intrinsic value of exercisable options outstanding was $0.3 million, and 3.1 million options were available for grant under the Company’s option plans.

The fair value of options granted was estimated using the Black-Scholes option pricing model and were $39.02, $48.05 and $48.64, per option, for the years ended December 31, 2016, 2017 and 2018, respectively. The weighted average grant date assumptions used to estimate the fair value of options granted were as follows:



	For the Years Ended December 31,
	2016		2017		2018
Dividend yield	0.0	%	0.5	%	0.8	%
Expected volatility⁽¹⁾	30.7	%	28.0	%	25.5	%
Risk-free interest rate⁽²⁾	1.6	%	2.1	%	2.8	%
Expected life of options (in years)⁽³⁾	5.7		5.7		5.7
Forfeiture rate	0.0	%	0.0	%	0.0	%

__________________________


⁽¹⁾	Expected volatility is based on historical and implied volatility.


⁽²⁾	Risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant.


⁽³⁾	Expected life of options (in years) is based on the Company’s historical and expected exercise behavior.

Restricted Stock

The following table summarizes the transactions in the Company’s restricted stock units:



	Restricted Stock		Weighted Average Grant Date Value
Unvested units—December 31, 2017	0.4		$	162.32
Units granted	0.2		201.75
Units vested	(0.0	)	188.93
Units forfeited	(0.0	)	154.92
Unvested units—December 31, 2018	0.6		172.74

The Company granted awards with fair values of $28.0 million, $36.9 million and $37.7 million for the years ended December 31, 2016, 2017 and 2018, respectively. These awards were valued based on the closing price of the Company’s common stock on the grant date and the number of awards expected to be delivered. Awards containing vesting conditions generally require service over a period of three to four years and may also require the satisfaction of certain performance conditions. In certain cases, awards with performance conditions may use structures whereby the number of shares of the Company’s common stock that an employee ultimately receives at vesting will be equal to the base number of restricted stock units granted, multiplied by a predetermined percentage determined in accordance with the level of attainment of Company performance measures during the performance period and could be higher or lower than the original restricted stock unit grant. During the years ended December 31, 2017 and 2018, there were no changes in the Company’s estimate of the number of shares expected to be delivered.

As of December 31, 2018, the Company had 0.9 million shares available for grant under its plans.