Stock Plans

The 2008 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible key employees through May 2018. Management stock-based compensation includes stock options, restricted stock and performance stock units. The 2008 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2018. Stock options are granted at market prices and expire after ten years. Stock options are exercisable beginning three years after the grant date. Restricted stock is granted without payment to the company and generally vests three years after the grant date. Restricted stock is valued at the market value of the stock on the grant date. Performance stock units with a market condition are valued at an estimated fair value using the Monte Carlo model. The final number of shares to be issued for performance stock units may range from zero to 200% of the target award based on achieving the specified performance targets over the performance period. In general, unvested stock options, restricted stock and performance stock units are forfeited if the participant’s employment with the company terminates for any reason other than retirement, death or disability. We issue Treasury shares for stock option exercises and grants of restricted stock and performance stock. Please refer to Note 6 for further information regarding stock compensation share issuance. As of December 31, 2014, there were 1,441,276 and 170,766 shares, respectively, reserved for future grants under the management and non-employee directors’ equity incentive plans.

Stock-based compensation expense was as follows:



(In thousands)	2014		2013		2012
Restricted stock	$	4,026	$	4,129	$	4,744
Stock options	2,355		2,825		2,435
Performance stock	2,672		3,383		2,831
Total compensation expense before income taxes	9,053		10,337		10,010
Income tax benefit	3,293		3,810		3,700
Total compensation expense, net of income tax benefit	5,760		6,527		6,310

We did not capitalize any stock-based compensation expense in 2014, 2013, or 2012.

Stock option expense is based on the fair value of stock option grants estimated on the grant dates using the Black-Scholes option pricing model and the following weighted average assumptions for options granted in 2014, 2013 and 2012.



	2014			2013			2012
Fair value per option	$	17.26		$	14.17		$	10.77
Risk-free interest rate	2.1		%	1.2		%	1.2		%
Expected dividend yield	2.4		%	2.8		%	3.1		%
Expected volatility	41		%	39		%	41		%
Expected life (years)	6.6			6.1			6.1

The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the 1 year average closing share price. Expected volatility is based on the ten year historical volatility using daily stock prices. Expected life is based on historical stock option exercise data.

A summary of option activity follows:



	Shares		Weighted Average Exercise Price		Exercisable at Year-end
Outstanding January 1, 2012	1,818,640		$	30.94
Granted	196,469		37.33
Exercised	(223,022	)	18.93
Expired	(5,093	)	43.33
Forfeited	(2,334	)	36.69
Outstanding December 31, 2012	1,784,660		33.05		1,100,300
Granted	188,407		49.03
Exercised	(277,687	)	34.72
Outstanding December 31, 2013	1,695,380		34.55		1,178,657
Granted	138,519		51.69
Exercised	(190,743	)	36.31
Expired	(1,071	)	45.68
Forfeited	(23,524	)	38.82
Outstanding December 31, 2014	1,618,561		35.74		1,147,712

For various exercise price ranges, characteristics of outstanding and exercisable stock options at December 31, 2014 were as follows:



	Stock Options Outstanding
Range of Exercise Prices	Shares	Weighted-Average
Range of Exercise Prices	Shares	Exercise Price		Remaining Life
$17.83 – $29.33	541,669	$	21.71	4.6 years
$33.55 – $40.88	507,688	37.14		4.7
$41.26 – $51.69	569,204	47.83		6.1
$17.83 – $51.69	1,618,561	35.74		5.2



	Stock Options Exercisable
Range of Exercise Prices	Shares	Weighted-Average
Range of Exercise Prices	Shares	Exercise Price		Remaining Life
$17.83 – $29.33	541,669	$	21.71	4.6 years
$33.55 – $40.88	360,801	37.33		3.7
$41.26 – $48.95	245,242	45.17		3.0
$17.83 – $48.95	1,147,712	31.63		4.0

Cash received from the exercise of stock options was $6.9 million, $9.6 million and $4.3 million for the years ended December 31, 2014, 2013 and 2012, respectively. The tax benefit we realized from these exercises was $1.0 million, $0.5 million and $1.6 million for the years ended December 31, 2014, 2013 and 2012, respectively.

The aggregate intrinsic value of stock options exercisable at December 31, 2014 was $25.0 million. The aggregate intrinsic value of all stock options outstanding at December 31, 2014 was $28.1 million.

A summary of restricted stock activity follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2012	512,254		$	25.66
Granted	130,985		37.61
Vested	(209,897	)	20.44
Forfeited	(15,499	)	28.37
Unvested at December 31, 2012	417,843		31.92
Granted	92,448		48.98
Vested	(197,465	)	27.42
Forfeited	(9,407	)	40.23
Unvested at December 31, 2013	303,419		39.79
Granted	83,543		51.91
Vested	(108,245	)	34.94
Forfeited	(9,974	)	44.42
Unvested at December 31, 2014	268,743		45.34

A summary of performance stock unit activity follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2012	125,443		$	25.27
Granted	54,928		41.33
Vested	(47,706	)	18.23
Performance adjustments	5,679		26.39
Forfeited	(672	)	41.45
Unvested at December 31, 2012	137,672		35.85
Granted	53,357		57.58
Vested	(45,809	)	26.08
Performance adjustments	4,169		25.84
Unvested at December 31, 2013	149,389		46.32
Granted	46,242		57.42
Vested	(91,696	)	39.19
Performance adjustments	41,428		39.42
Forfeited	(1,402	)	48.85
Unvested at December 31, 2014	143,961		52.42

The 2014 performance adjustments above relate to the final number of shares issued for the 2011 Management Performance Units, which were 200% of the target award based on Total Shareholder Return during the three year performance period, and vested in the first quarter of 2014.

During the years ended December 31, 2014, 2013 and 2012, the total intrinsic value of stock options exercised (the difference between the market price on the date of exercise and the option price paid to exercise the option) was $3.7 million, $4.0 million and $4.4 million, respectively. The fair values of restricted stock vested during the years ended December 31, 2014, 2013 and 2012 were $5.8 million, $9.7 million and $8.0 million, respectively. The fair value of performance stock units vested during the year ended December 31, 2014 was $4.7 million.

On December 31, 2014, there was $5.2 million of unrecognized stock-based compensation expense. The weighted average period over which this expense is expected to be recognized was approximately one year.