Shareholders' Equity

12 Months Ended

Dec. 31, 2017

Stockholders' Equity Note [Abstract]

Shareholders’ Equity

Stock-Based Compensation

The Company's active equity compensation plan, the 2014 Omnibus Equity Compensation Plan (the 2014 Plan), is the successor plan to the 2007 Equity Compensation Plan (the 2007 Plan) which was merged with and into the 2014 Plan in May 2014. The 2014 Plan provides for the grant of stock options, stock units, stock awards, stock appreciation rights, dividend equivalents and other stock-based awards.

Outstanding grants under the 2007 Plan will continue according to the terms in effect before the plan merger, but the outstanding shares will be issued or transferred under the 2014 Plan. Permitted grantees under the 2014 Plan include employees, non-employee directors and consultants who perform services for the Company. The plan is administered by the Compensation Committee of the Board of Directors of the Company. The Company has only non-qualified stock options outstanding under the 2014 Plan.

All outstanding stock options have performance-based vesting provisions that tie the vesting of stock options to the Company’s financial performance. The Company’s stock options vest at a rate of 50 percent when a specified diluted earnings per share target is achieved, and the remaining 50 percent when a second, higher-specified diluted earnings per share target is achieved. Options do not vest due to the passage of time but as a result of achievement of the financial vesting targets. Options granted in December 2017 include a service condition which requires a minimum two or four year waiting period from the grant date along with the attainment of the applicable financial vesting target. Earnings per share targets exclude the impact of stock-based compensation and are established at time of grant. The targets are measured annually on December 31. The amount of stock-based compensation expense recognized in the period is based upon management’s estimate of when the earnings per share targets may be achieved. Any change in management’s estimate could result in the remaining amount of stock-based compensation expense to be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense in future periods and could materially affect the Company’s earnings.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock options on the date of grant using an option-pricing model is affected by the price of the Company’s common stock as well as other variables. These variables include expected stock price volatility over the term of the awards, actual and projected employee stock exercise behaviors, risk-free interest rate and expected dividends. The

Company primarily uses historical data to estimate the variables used in the option-pricing model except expected volatility. The Company uses a combination of historical and implied volatility.

The weighted average fair value of the Company’s stock options granted during 2017, 2016 and 2015 were $16.78, $12.43 and $12.16, respectively, using the following assumptions:



	2017		2016		2015
Expected term (in years)	6.00		6.00		5.58
Expected volatility	22.58	%	25.44	%	23.86	%
Expected dividend yield	0.82	%	1.10	%	1.00	%
Risk-free interest rate	2.29	%	2.18	%	1.90	%

The Company recognized stock-based compensation expense in its Consolidated Financial Statements in 2017, 2016 and 2015 as follows:



	2017			2016			2015
Stock-based compensation expense	$	36,366		$	16,017		$	17,312
Less: Deferred tax benefit	(7,891		)	(5,612		)	(6,107		)
Stock-based compensation expense, net of tax	$	28,475		$	10,405		$	11,205

During 2017, 2016 and 2015, the Company revised its estimates of when some vesting targets are expected to be achieved. The change in management’s estimate during 2017 resulted in an increase of $11,206 in stock-based compensation expense in 2017. The changes in management’s estimates during 2016 or 2015 were not material.

As of December 31, 2017, there was approximately 6,088,000 unvested employee stock options with an unrecognized compensation cost of $62,070 that the Company expects will vest and be expensed through 2022 with a weighted average period of 2.3 years.

This table presents certain information relating to the Company’s stock option plans for 2017, 2016 and 2015:



	Number of Shares		Weighted Avg. Price
Balance as of December 31, 2014	20,461,000		$	25.26
Granted	2,005,000		53.34
Exercised	(2,927,000	)	21.44
Expired or canceled	(302,000	)	28.97
Balance as of December 31, 2015	19,237,000		$	28.71
Granted	2,310,000		49.57
Exercised	(1,809,000	)	24.82
Expired or canceled	(1,669,000	)	30.86
Balance as of December 31, 2016	18,069,000		$	31.57
Granted	2,057,000		69.87
Exercised	(2,370,000	)	21.22
Expired or canceled	(1,044,000	)	33.42
Balance as of December 31, 2017	16,712,000		$	37.63

Exercisable as of December 31, 2017	10,624,000		$	28.99
Available for future grant as of December 31, 2017	24,108,000

As of December 31, 2016 and 2015, there were 6,692,000 and 8,508,000 shares exercisable, respectively. The expiration dates for options outstanding at December 31, 2017 range from December 16, 2018 to December 12, 2027 with a weighted average remaining contractual life of 6.3 years.

Upon exercise of stock options, the Company will issue new shares of its common shares. The Company does not hold any shares in treasury. The total intrinsic value of options exercised during 2017 and 2016 was $83,628 and $41,607, respectively. The total options exercisable as of December 31, 2017 had an intrinsic value of $455,528. The total options outstanding as of December 31, 2017 had an intrinsic value of $572,024. The total intrinsic value for options outstanding and options exercisable is calculated as the difference between the market value of the Company’s common stock as of

December 31, 2017 and the exercise price of the shares. The market value of the Company’s common stock as of December 31, 2017 was $71.86 as reported by the Nasdaq Stock Market, LLC.

This table summarizes information relating to all options outstanding and exercisable at December 31, 2017:



				Options Outstanding at December 31, 2017				Options Exercisable at December 31, 2017
Range of Exercise Prices (Per Share)				Number of Shares	Weighted Average Exercise Price (Per Share)		Weighted Average Remaining Contractual Life (Years)	Number of Shares	Weighted Average Exercise Price (Per Share)		Weighted Average Remaining Contractual Life (Years)
$	14.62	-	15.77	2,178,000	$	15.45	3.16	2,178,000	$	15.45	3.16
17.65		-	21.05	1,174,000	17.67		2.01	1,174,000	17.67		2.01
22.45		-	23.86	3,432,000	23.19		3.95	3,422,000	23.19		3.96
27.03		-	39.15	1,815,000	33.65		6.09	747,000	33.58		6.09
40.64		-	53.16	4,190,000	45.49		8.54	2,095,000	45.49		8.08
53.34		-	71.12	3,923,000	62.01		9.05	1,008,000	53.39		8.14
				16,712,000				10,624,000

Employee Stock Purchase Plan

The Company has an employee stock purchase plan that provides for offerings of common stock to eligible employees at a price equal to 85 percent of the fair market value of the stock at the end of the stock purchase period, as defined. The Company has reserved 15,600,000 shares for issuance under this plan. At December 31, 2017, 11,962,000 cumulative shares have been issued. There were no material costs incurred by the Company related to the employee stock purchase plan in 2017, 2016 and 2015.

Common Stock Buyback

The Board of Directors, under multiple authorizations, has authorized the purchase of the Company’s common stock on the open market or through private transactions. As of December 31, 2017, the Company had approximately $170,638 of authorization remaining for the purchase of common stock. The following table provides the total number of shares repurchased and the related total costs in 2017, 2016 and 2015:



Year	Total Number of Shares Repurchased	Total Cost
2017	4,403,000	$	248,114
2016	6,600,000	294,374
2015	5,951,000	289,587

The Company immediately retires its common stock when purchased. Upon retirement, the Company reduces Capital in excess of par value for the average capital per share outstanding and the remainder is charged against Retained earnings. If the Company reduces its Retained earnings to zero, any subsequent purchases of common stock will be charged entirely to Capital in excess of par value.

Rights Agreement

In December 2008, the Company’s Board of Directors declared a dividend distribution pursuant to a Rights Agreement (the Rights Agreement) which became effective on January 6, 2009. The purpose of the Rights Agreement is to deter coercive or unfair takeover tactics and to prevent a person or group (an Acquiring Person) from acquiring control of the Company without offering a fair price to all shareholders. Under the Rights Agreement, all common shareholders receive one Right for each common share outstanding. Each Right entitles the registered holder to purchase from the Company a unit consisting of one twenty-thousandths of a share of Series A Junior Participating Preferred Shares, $0.05 par value per share, or a combination of securities and assets of equivalent value, at a purchase price of $150.00 per unit, subject to adjustment. The Rights will become exercisable and trade separately from the common stock ten days following a public announcement that an Acquiring Person has beneficial ownership of more than 20 percent of the outstanding common stock of the Company or the commencement of a tender or exchange offer that would result in an Acquiring Person owning 20 percent or more of the outstanding common stock of the Company. Upon exercise, holders, other than an Acquiring Person, will have the right to purchase the common stock of the Company equal to twice the value of the exercise price of the Rights. In lieu of requiring payment of the purchase price upon exercise of the Rights following certain events, the Company may permit the holders simply to surrender the Rights, in which event they will be entitled to receive common shares and other property, as the case may be, with a value of 50 percent of what could be purchased by payment of the full purchase price. The Rights, which do not

have voting rights, will expire on January 6, 2019, and may be redeemed by the Company any time until ten days following the announcement of an Acquiring Person at a price of $0.01 per Right.

Cash Dividends

On May 24, 2017, the Board of Directors declared a cash dividend of $0.28 per share on the Company’s common stock, which was paid on June 16, 2017, to shareholders of record on June 7, 2017. On December 12, 2017, the Board of Directors declared a cash dividend of $0.30 per share on the Company’s common stock, which was paid on January 8, 2018, to shareholders of record on December 27, 2017.

The cash dividends declared in 2017, 2016 and 2015 were $91,444, $86,657 and $82,478, respectively. The Board of Directors has indicated its intention to declare future cash dividends on a semiannual basis.