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. Compensation payable under these plans is intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code. 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.

Share-Based Incentive Compensation

A summary of recent share-based compensation expense is as follows:



Period	Share-Based Compensation Expense		Tax Benefit
2012	$	25.4	$	9.6
2013	27.5		10.6
2014	29.3		11.3

The cash received for options exercised was $48.2 million and $41.4 million during the years ended December 31, 2013 and 2014, respectively. The actual tax benefit recognized from share-based incentive plans and the excess tax benefit classified as a financing cash flow were $20.7 million and $17.3 million and $60.2 million and $61.5 million during the years ended December 31, 2013 and 2014, respectively.

There was $79.3 million and $56.8 million of unrecognized compensation expense related to share-based compensation arrangements as of December 31, 2013 and 2014, respectively. The unrecognized compensation expense at December 31, 2014 will be recognized over a weighted average period of approximately three years (assuming no forfeitures).

Stock Options

The Company granted stock options with fair values of $2.5 million, $1.0 million, and $0.6 million in 2012, 2013 and 2014, respectively. Stock options generally vest over a period of three to five years and expire seven to ten years after the grant date. All options have been granted with exercise prices equal to the fair market value of the Company's common stock on the date of grant.

The following table summarizes the transactions of the Company's stock options:



	Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)
Unexercised options outstanding—January 1, 2014	3.0		$	77.71
Options granted	0.0		204.99
Options exercised	(0.7	)	60.47
Options forfeited	(0.0	)	81.50
Unexercised options outstanding—December 31, 2014	2.3		83.42		2.7
Exercisable at December 31, 2014	2.1		80.92		2.6

For the period January 1 through February 18, 2015, 0.5 million outstanding options have been exercised.

The fair value of options granted is estimated using the Black-Scholes option pricing model. The weighted average fair value of options granted during the years ended December 31, 2012, 2013 and 2014 was $40.43, $61.82 and $60.20 per option, respectively, based on the weighted-average grant date assumptions stated below.



	For the Years Ended December 31,
	2012		2013		2014
Dividend yield	0.0	%	0.0	%	0.0	%
Expected volatility⁽¹⁾	36.8	%	34.4	%	29.7	%
Risk-free interest rate⁽²⁾	0.7	%	1.5	%	1.8	%
Expected life of options (in years)⁽³⁾	5.0		5.0		5.0
Forfeiture rate⁽³⁾	1.4	%	0.0	%	0.0	%

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(1)	Based on historical and implied volatility.


(2)	Based on the U.S. Treasury yield curve in effect at the date of grant.


(3)	Based on the Company's historical data and expected exercise behavior.

The Company generally uses treasury stock to settle stock option exercises. The total intrinsic value of options exercised during the years ended December 31, 2012, 2013 and 2014 was $86.8 million, $77.4 million and $92.6 million, respectively. As of December 31, 2014, the intrinsic value of exercisable options outstanding was $272.9 million and 3.5 million options are available for future grant under the Company's option plans.

Restricted Stock

The Company has granted service-based awards with fair values of $18.1 million, $34.1 million, and $8.0 million in 2012, 2013 and 2014, respectively. These awards were valued based on the closing price of the Company's common stock on the date of grant and contain vesting conditions requiring service over a period of three to eight years. In certain circumstances, the Company may elect to settle the awards in shares of the Company's common stock or cash.

In 2013, the Company granted awards that vest when a required service period has been completed and if certain market conditions are satisfied. The market conditions require separate 15%, 25% and 35% increases in the price of the Company’s common stock to be achieved during the six-year term of the awards; however, shares underlying the awards are eligible to be delivered, assuming the service conditions have been satisfied, only on the fourth, fifth and sixth anniversaries of the grant date if the 15% market condition has been maintained. The awards were valued using a Monte Carlo simulation with grant date assumptions for expected volatility (31.6%), risk-free interest rate (2.0%) and dividend yield (0.0%). The fair value of the awards was $19.4 million and will be recognized as compensation over a service period of 4 years, which is the longer of the explicit service period or the period the market condition is expected to be met.

As of December 31, 2014, the Company has 1.7 million shares available for grant under its plans.

The following table summarizes the transactions of the Company's restricted stock:



	Restricted Stock		Weighted Average Grant Date Value
Unvested units—January 1, 2014	0.5		$	176.38
Units granted	0.0		190.42
Units vested	(0.1	)	131.42
Units forfeited	(0.0	)	173.77
Unvested units—December 31, 2014	0.4		182.83