STOCK PLANS

Share-based Compensation

The Company accounts for share-based compensation utilizing fair value, which is determined on the date of grant for all instruments. The Consolidated Statement of Income for the years ended December 31, 2015, 2014, and 2013, reflects share-based compensation expense of $29 million, $21 million, and $18 million, respectively. The total tax benefit recognized in earnings from share-based compensation arrangements for the years ended December 31, 2015, 2014, and 2013, was not material. As of December 31, 2015, there was $34 million of total unrecognized compensation cost related to share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.9 years. The Company expects substantially all unvested awards to vest.

Restricted Stock Units and Stock Grants

Under the Company’s Amended and Restated 2007 Equity Incentive Plan (“2007 Equity Plan”), it granted restricted stock units (“RSUs”) to certain Employees during 2013, 2014, and 2015 and performance-based restricted stock units (“PBRSUs”) to certain Employees during 2014 and 2015. Outstanding RSUs vest over three years, subject generally to the individual’s continued employment or service. The Company recognizes all expense on a straight-line basis over the vesting period, with any changes in expense due to the number of PBRSUs expected to vest being modified on a prospective basis. The PBRSUs granted in May 2014 and February 2015 are subject to the Company’s performance with respect to a three-year simple average of Return on Invested Capital, before taxes and excluding special items ("ROIC"), for the defined performance period and the individual’s continued employment or service. The number of PBRSUs vesting on the vesting date will be interpolated based on the Company's ROIC performance and ranges from zero PBRSUs to 200 percent of granted PBRSUs.

Aggregated information regarding the Company’s RSUs and PBRSUs is summarized below:



	All Restricted Stock Units
	Units (000)			Wtd. Average Fair Value (per share)
Outstanding December 31, 2012, Unvested	2,876			$	9.57
Granted	1,139			14.34
Vested	(1,263	)		10.24
Surrendered	(168	)		9.11
Outstanding December 31, 2013	2,584			11.38
Granted	834		(a)	24.93
Vested	(1,239	)		11.05
Surrendered	(102	)		13.18
Outstanding December 31, 2014	2,077			16.92
Granted	561		(b)	45.80
Vested	(1,095	)		13.33
Surrendered	(58	)		25.49
Outstanding December 31, 2015, Unvested	1,485			$	30.17

(a) Includes 198 thousand shares of PBRSUs

(b) Includes 183 thousand shares of PBRSUs

In addition, the Company granted approximately 28 thousand shares of unrestricted stock at a weighted average grant price of $41.27 in 2015, approximately 36 thousand shares at a weighted average grant price of $24.91 in 2014, and approximately 63 thousand shares at a weighted average grant price of $14.34 in 2013, to members of its Board of Directors.

A remaining balance of up to 23 million shares of the Company’s common stock may be issued pursuant to grants under the 2007 Equity Plan.

Stock Options

The Company has stock options outstanding, which were granted prior to 2013, with an exercise price equal to the fair value of the Company’s common stock on the date of grant. The Company determined fair value of stock options using the Black-Scholes option valuation model. As of December 31, 2015, there were 822 thousand outstanding stock option awards, all of which are vested and exercisable, with a weighted average exercise price of $13.44.

Employee Stock Purchase Plan

Under the amended 1991 Employee Stock Purchase Plan (ESPP), which has been approved by Shareholders, the Company is authorized to issue up to a remaining balance of 10 million shares of the Company’s common stock to Employees of the Company. These shares may be issued at a price equal to 90 percent of the market value at the end of each monthly purchase period. Common stock purchases are paid for through periodic payroll deductions. For the years ended December 31, 2015, 2014, and 2013, participants under the plan purchased 597 thousand shares, 792 thousand shares, and 1.5 million shares at average prices of $36.40, $23.17, and $12.03, respectively. The weighted-average fair value of each purchase right under the ESPP granted for the years ended December 31, 2015, 2014, and 2013, which is equal to the ten percent discount from the market value of the Common Stock at the end of each monthly purchase period, was $4.04, $2.68, and $1.34, respectively.

Taxes

A portion of the Company’s granted options qualify as incentive stock options for income tax purposes. As such, a tax benefit is not recorded at the time the compensation cost related to the options is recorded for book purposes due to the fact that an incentive stock option does not ordinarily result in a tax benefit unless there is a disqualifying disposition. Grants of non-qualified stock options result in the creation of a deferred tax asset, which is a temporary difference, until the time that the option is exercised. Due to the treatment of incentive stock options for tax purposes, the Company’s effective tax rate from year to year is subject to variability.