STOCK-BASED COMPENSATION

Available Shares

In March 2013, our board of directors approved the Republic Services, Inc. Amended and Restated 2007 Stock Incentive Plan (the Plan), and in May 2013 our shareholders ratified the Plan. We currently have approximately 14.9 million shares of common stock reserved for future grants under the Plan.

Stock Options

The following table summarizes stock option activity for the nine months ended September 30, 2016:



	Number of Shares (in millions)		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2015	5.0		$	30.08
Granted	—		—
Exercised	(1.2	)	29.49			$	22.6
Forfeited or expired	(0.1	)	31.60
Outstanding as of September 30, 2016	3.7		$	30.23	2.5	$	73.7
Exercisable as of September 30, 2016	2.9		$	29.88	2.2	$	61.5

During the nine months ended September 30, 2016 and 2015, compensation expense for stock options was $0.4 million and $2.1 million, respectively.

As of September 30, 2016, total unrecognized compensation expense related to outstanding stock options was $0.3 million, which will be recognized over a weighted average period of 1.0 year. The total fair value of stock options that vested during the nine months ended September 30, 2016 was $5.6 million.

Restricted Stock Units

The following table summarizes restricted stock unit (RSU) activity for the nine months ended September 30, 2016:



	Number of RSUs (in thousands)		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2015	1,727.3		$	34.15
Granted	623.0		45.09
Vested and issued	(342.5	)	30.21
Forfeited	(162.1	)	38.61
Outstanding as of September 30, 2016	1,845.7		$	37.38	1.0	$	93.1
Vested and unissued as of September 30, 2016	624.3		$	31.25

During the nine months ended September 30, 2016, we awarded our non-employee directors 49,566 RSUs, which vested immediately. During the nine months ended September 30, 2016, we awarded 538,369 RSUs to executives and employees that vest in four equal annual installments beginning on the anniversary date of the original grant or cliff vest after four years. In addition, 35,064 RSUs were earned as dividend equivalents. The RSUs do not carry any voting or dividend rights, except the right to receive additional RSUs in lieu of dividends.

The fair value of RSUs is based on the closing market price on the date of the grant. The compensation expense related to RSUs is amortized ratably over the vesting period, or to the employee's retirement eligible date, if earlier.

During the nine months ended September 30, 2016 and 2015, compensation expense related to RSUs totaled $13.5 million and $12.4 million, respectively. As of September 30, 2016, total unrecognized compensation expense related to outstanding RSUs was $36.2 million, which will be recognized over a weighted average period of 2.8 years.

Performance Shares

During the nine months ended September 30, 2016, we awarded 168,786 performance shares (PSUs) to our named executive officers. These awards are performance-based as the number of shares ultimately earned depends on performance against pre-determined targets for return on invested capital (ROIC), cash flow value creation (CFVC), and total shareholder return relative to the S&P 500 index (RTSR). The PSUs are payable 50% in shares of common stock and 50% in cash after the end of a three-year performance period, when our financial performance for the entire performance period is reported, typically in February of the succeeding year. At the end of the performance period, the number of PSUs awarded can range from 0% to 150% of the targeted amount, depending on the performance against the pre-determined targets.

During the nine months ended September 30, 2016, we awarded 217,790 PSUs to our employees other than our named executive officers. The PSUs are payable 100% in shares of common stock after the end of a three-year performance period, when the Company's financial performance for the entire performance period is reported, typically in February of the succeeding year. At the end of the performance period, the number of PSUs awarded can range from 0% to 150% of the targeted amount, depending on the performance against the pre-determined targets.

The following table summarizes PSU activity for the nine months ended September 30, 2016:



	Number of PSUs (in thousands)		Weighted Average Grant Date Fair Value per Share
Outstanding as of December 31, 2015	143.4		$	38.69
Granted	393.8		46.22
Vested and issued	—		—
Forfeited	(38.9	)	43.50
Outstanding as of September 30, 2016	498.3		$	44.40

During the nine months ended September 30, 2016, 7,251 PSUs accumulated as dividend equivalents. The PSUs do not carry any voting or dividend rights, except the right to accumulate additional PSUs in lieu of dividends.

For the stock-settled portion of the awards that vest based on future ROIC and CFVC performance, compensation expense is measured using the fair value of our common stock at the grant date. For the cash-settled portion of the awards that vest based on future ROIC and CFVC performance, compensation expense is recorded based on the fair value of our common stock at the end of each reporting period. Compensation expense is recognized ratably over the performance period based on our estimated achievement of the established performance criteria. Compensation expense is only recognized for the portion of the award that we expect to vest, which we estimate based on an assessment of the probability that the performance criteria will be achieved.

For the stock-settled portion of the awards that vest based on RTSR, the grant date fair value is based on a Monte Carlo valuation and compensation expense is recognized on a straight-line basis over the vesting period. For the cash-settled portion of the awards that vest based on RTSR, compensation expense also incorporates the fair value of our PSUs at the end of each reporting period. Compensation expense is recognized for the RTSR portion of the award whether or not the market conditions are achieved.

During the nine months ended September 30, 2016 and 2015, compensation expense related to PSUs totaled $5.9 million and $1.2 million, respectively. As of September 30, 2016, total unrecognized compensation expense related to outstanding PSUs was $15.5 million which we expect to be recognized over a weighted average period of 2.0 years.