STOCK-BASED COMPENSATION

The Company’s stock compensation plans, approved by the Company’s shareholders and administered by the Compensation and Benefits Committee of the Board of Directors of the Company, provide for the grant of incentive and non-incentive stock options, restricted stock, and other stock-based awards or units to key employees and directors. The plans, as amended, authorize the grant of up to 7.8 million shares or units through April 2020. These share or unit amounts exclude amounts that were issued under predecessor plans.

Stock options vest equally over the three years from the date of the grant. The cost of stock options, based on their fair value at the date of grant, is charged to expense over the respective vesting periods. Stock options normally become exercisable at a rate of one-third annually and in full on the third anniversary date. Under the plans, all options and rights must be exercised within ten years from date of grant. At the Company’s discretion, vested stock option holders are permitted to elect an alternative settlement method in lieu of purchasing common stock at the option price. The alternative settlement method permits the employee to receive, without payment to the Company, cash, shares of common stock, or a combination thereof equal to the excess of market value of common stock over the option purchase price. The Company has historically settled all such options in common stock and intends to continue to do so.

The weighted average fair value of options granted during 2013, 2012, and 2011 was $4.56, $2.73, and $3.12, respectively.

The fair value of each option grant was estimated using the Black-Scholes option pricing model with the following weighted average assumptions:



	2013		2012		2011
Dividend yield	—	%	0.7	%	0.6	%
Expected volatility	59	%	59	%	52	%
Risk free interest rate	1.0	%	0.9	%	2.2	%
Weighted average expected option life in years	5.8		5.6		5.9

The expected life of options represents the weighted average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of the options. Expected volatility is based on historical volatility of the Company’s common stock. Dividend yields are based on historical dividend payments.

The following summarizes stock option activity in each of the three years in the period ended December 31, 2013:



	Option Shares						Weighted Average Exercise Price
(in millions)	2013		2012		2011		2013		2012		2011
Outstanding, at beginning of year	2.3		2.0		1.9		$	8.93	$	10.16	$	12.61
Granted	0.5		0.6		0.7		8.50		5.52		6.50
Exercised	(0.3	)	—		—		7.47		—		—
Canceled or expired	(0.4	)	(0.3	)	(0.6	)	10.94		9.88		14.02
Outstanding, at end of year	2.1		2.3		2.0		$	8.63	$	8.93	$	10.16
Exercisable, at end of year	1.2		1.3		1.0		$	9.85	$	11.22	$	13.12

The following table summarizes information for stock options outstanding as of December 31, 2013 under all plans:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Shares	Weighted Average Remaining Life	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
	(in millions)	(in years)			(in millions)
$0.00 — $5.00	—	7.3	$	4.47	—	$	4.47
5.01 — 10.00	1.5	8.0	6.72		0.6	6.21
10.01 — 15.00	0.3	4.6	11.01		0.3	10.96
15.01 — 20.00	0.3	1.7	17.17		0.3	17.17
	2.1	6.8	$	8.63	1.2	$	9.85

The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2013 was $6.1 million.

Restricted stock awards are granted to employees at no cost. Awards primarily cliff vest at the third anniversary from the date of award, provided the recipient is still employed by the Company on the vesting date. The cost of restricted stock awards, based on the fair market value of the underlying shares at the date of grant, is charged to expense over the respective vesting periods.

The following table summarizes restricted stock activity for the year ended December 31, 2013:



	Number of Restricted Shares		Weighted Average Price per Share
	(in millions)
Outstanding and non-vested, at December 31, 2012	0.3		$	7.38
Granted	0.1		8.39
Vested	(0.2	)	8.72
Outstanding and non-vested, at December 31, 2013	0.2		$	6.85

The total compensation expense related to all stock option and stock award compensation plans was $2.6 million, $2.0 million, and $1.8 million for the years ended December 31, 2013, 2012, and 2011, respectively. Also, as of December 31, 2013, there was $1.9 million and $0.6 million of total unrecognized compensation cost related to stock options and stock awards, respectively, that is expected to be recognized over the weighted-average period of approximately 2.0 and 2.0 years, respectively.

Performance Awards

In each of the three years in the period ended December 31, 2013, the Company granted performance-based restricted stock unit awards (“PSUs”) to certain executives and other non-executive officers. The PSUs granted have a one-year performance period ending December 31 of each year, in which the Company must achieve certain earnings per share (“EPS”) from continuing operations, which is a performance condition per ASC 718, followed by a two-year service requirement (i.e., if earned, these shares would vest in full on December 31, 2013, 2014, or 2015, respectively).

The EPS threshold for the 2011 award was not met. Accordingly, the 2011 PSUs were not earned, and no compensation expense was recorded relating to the 2011 performance share grants. The EPS threshold for 2012 and 2013 were achieved at the maximum level, and 200% of the target shares were earned. Compensation expense included in the consolidated statement of operations for the PSUs in the years ended December 31, 2013 and 2012 was $1.4 million and $0.6 million, respectively. The total compensation expense for these performance share units is being amortized through the end of the vesting period, which is December 31, 2014 for the 2012 grants and December 31, 2015 for the 2013 grants.

As of December 31, 2013 and 2012, there was $3.2 million and $1.8 million of total unrecognized compensation cost related to PSUs, respectively, that is expected to be recognized over the weighted-average period of 1.8 years and 2.0 years, respectively.

The following table summarizes PSU activity for the year ended December 31, 2013:



	Number of PSUs		Weighted Average Price per Share
	(in millions)
Outstanding and non-vested, at December 31, 2012	0.3		$	5.50
Granted	0.3		8.57
Forfeited	(0.1	)	6.04
Outstanding and non-vested, at December 31, 2013	0.5		$	7.05