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Stockholders' Equity | 12 Months Ended
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Dec. 31, 2016
Equity [Abstract] |
Stockholders' Equity | Note 18 Stockholders’ Equity Repurchase of Common Stock On July 9, 2015, our Board of Directors authorized a repurchase program of up to $1.5 billion of the Company’s common stock, reflecting its commitment to return value to shareholders. The repurchase program has no expiration date and replaced the previously authorized program, which was terminated. This program replaced our prior share repurchase program, approved by our Board of Directors in August 2007, authorizing us to repurchase in the aggregate up to 20 million shares of our outstanding common stock. During the year ended December 31, 2016, we repurchased 4,680,313 shares, for approximately $217.0 million with an average share price of $46.36 per share. During the year ended December 31, 2015, we repurchased 9,804,934 shares, for approximately $478.1 million with an average share price of $48.76 per share. These repurchases were made under privately negotiated or open market transactions in accordance with Rule 10b5-1 of the Securities Act of 1933, as amended, and pursuant to the share repurchase program previously approved by our Board of Directors. In March 2015, the Company entered into an accelerated share repurchase agreement with a third-party financial institution to repurchase $25.0 million of the Company’s common stock. Upon completion of the transaction, the Company received a total of 546,574 shares with an average price of $45.74 per share Additionally, on August 5, 2015, the Company entered into an accelerated share repurchase agreement (the “August ASR”) with a third-party financial institution to repurchase up to $300 million of the Company’s common stock. Upon completion of the transaction in September 2015, the Company received a total of 5,771,603 shares with an average price of $51.76 per share for a total cost of $298.7 million. These repurchases were made under the July 2015 share repurchase program approved by our Board of Directors referenced above. The Company’s decision to pursue the separation of New Diversey through either a tax-free spin-off or other strategic alternatives restricts the ability to repurchase shares under the current share buyback program. Once the separation process is concluded, the Company currently intends to resume share repurchases. Dividends The following table shows our total cash dividends paid in the years ended December 31:
|  |  |  |  |  | Total Cash Dividends |
(In millions, except per share amounts) |  | Total Cash Dividends Paid |  |  | Paid Per Common Share |
2014 |  | $ | 110.9 |  |  | $ | 0.52 |
2015 |  |  | 106.8 |  |  |  | 0.52 |
2016 |  |  | 121.6 |  |  |  | 0.61 |
Total |  | $ | 339.3 |  |  |  |  |
On February 15, 2017, our Board of Directors declared a quarterly cash dividend of $0.16 per common share payable on March 17, 2017 to stockholders of record at the close of business on March 3, 2017. The estimated amount of this dividend payment is $31.0 million based on 193 million shares of our common stock issued and outstanding as of January 31, 2017. The dividend payments discussed above are recorded as reductions to cash and cash equivalents and retained earnings on our Consolidated Balance Sheet. Our credit facility and our notes contain covenants that restrict our ability to declare or pay dividends. However, we do not believe these covenants are likely to materially limit the future payment of quarterly cash dividends on our common stock. From time to time, we may consider other means of returning value to our stockholders based on our consolidated financial condition and results of operations. There is no guarantee that our Board of Directors will declare any further dividends. Common Stock The following is a summary of changes during the years ended December 31, in shares of our common stock and common stock in treasury:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Changes in common stock: |  |  |  |  |  |  |  |  |  |  |  |
Number of shares, beginning of year |  |  | 225,625,636 |  |  |  | 224,683,653 |  |  |  | 205,707,580 |
Shares issued for Grace Settlement |  |  | — |  |  |  | — |  |  |  | 18,000,000 |
Restricted stock shares issued for new awards under the Omnibus Incentive Plan and 2005 Contingent Stock Plan |  |  | 481,834 |  |  |  | 419,844 |  |  |  | 572,089 |
Restricted stock shares, forfeited |  |  | (89,699 | ) |  |  | (185,056 | ) |  |  | — |
Shares issued for vested restricted stock units |  |  | 179,826 |  |  |  | 172,071 |  |  |  | 136,197 |
Shares issued for 2012 President and Chief Operating Officer (COO) Four-Year Award |  |  | 325,000 |  |  |  | — |  |  |  | — |
Shares issued for 2013 Three-Year PSU Awards |  |  | 1,074,017 |  |  |  | — |  |  |  | — |
Shares issued for 2012 Three-Year PSU Awards |  |  | — |  |  |  | 442,985 |  |  |  | — |
Shares issued for 2011 Three-Year PSU Awards |  |  | — |  |  |  | — |  |  |  | 145,597 |
Shares issued for SLO Awards |  |  | 20,587 |  |  |  | 71,893 |  |  |  | 101,062 |
Shares granted and issued under the Omnibus Incentive Plan and Directors Stock Plan to Directors |  |  | 21,537 |  |  |  | 20,246 |  |  |  | 21,128 |
Number of shares issued, end of year |  |  | 227,638,738 |  |  |  | 225,625,636 |  |  |  | 224,683,653 |
Changes in common stock in treasury: |  |  |  |  |  |  |  |  |  |  |  |
Number of shares held, beginning of year |  |  | 29,612,337 |  |  |  | 14,151,759 |  |  |  | 9,508,908 |
Repurchase of common stock |  |  | 4,680,313 |  |  |  | 16,123,111 |  |  |  | 5,427,432 |
Profit sharing contribution paid in stock |  |  | (830,613 | ) |  |  | (787,463 | ) |  |  | (965,238 | )
Restricted stock shares forfeitures transferred to Omnibus Incentive Plan Reserve |  |  | — |  |  |  | (75,638 | ) |  |  | — |
Restricted stock shares, forfeited |  |  | (1,813 | ) |  |  | — |  |  |  | 106,220 |
Shares withheld for taxes |  |  | 696,131 |  |  |  | 200,568 |  |  |  | 74,437 |
Number of shares held, end of year |  |  | 34,156,355 |  |  |  | 29,612,337 |  |  |  | 14,151,759 |
Number of common stock outstanding, end of year |  |  | 193,482,383 |  |  |  | 196,013,299 |  |  |  | 210,531,894 |
Share-Based Compensation In 2014, the Board of Directors adopted, and its stockholders approved, the 2014 Omnibus Incentive Plan (“Omnibus Incentive Plan”). Under the Omnibus Incentive Plan, the maximum number of shares of Common Stock authorized was 4,250,000, plus total shares available to be issued as of May 22, 2014 under the 2002 Directors Stock Plan and the 2005 Contingent Stock Plan (collectively, the “Predecessor Plans”). The Omnibus Incentive Plan replaced the Predecessor Plans and no further awards were granted under the Predecessor Plans. The Omnibus Incentive Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance share units known as PSU awards, other stock awards and cash awards to officers, non-employee directors, key employees, consultants and advisors. Prior to the Omnibus Incentive Plan, the 2005 Contingent Stock Plan represented our sole long-term equity compensation program for officers and employees. The 2005 Contingent Stock Plan provided for awards of equity-based compensation, including restricted stock, restricted stock units, PSU awards and cash awards measured by share price, to our executive officers and other key employees, as well as U.S.-based key consultants. Prior to the Omnibus Incentive Plan, the 2002 Directors Stock Plan provided for annual grants of shares to non-employee directors, and interim grants of shares to eligible directors elected at times other than at an annual meeting, as all or part of the annual or interim retainer fees for non-employee directors. During 2002, we adopted a plan that permitted non-employee directors to elect to defer all or part of their annual retainer until the non-employee director retires from the Board of Directors. The non-employee director could elect to defer the portion of the annual retainer payable in shares of stock, as well as the portion, if any, payable in cash. Cash dividends on deferred shares are reinvested into additional deferred units in each non-employee director’s account. A summary of the changes in common shares available for awards under the Omnibus Incentive Plan and Predecessor Plans follows:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Number of shares available, beginning of year |  |  | 7,694,739 |  |  |  | 8,775,994 |  |  |  | 5,676,699 |
Newly registered shares under Omnibus Incentive Plan |  |  | — |  |  |  | — |  |  |  | 4,250,000 |
Restricted stock shares issued for new awards under the Omnibus Incentive Plan and 2005 Contingent Stock Plan |  |  | (481,834 | ) |  |  | (419,844 | ) |  |  | (572,089 | )
Restricted stock shares forfeited |  |  | 87,886 |  |  |  | 185,056 |  |  |  | 106,220 |
Restricted stock units awarded |  |  | (428,595 | ) |  |  | (300,085 | ) |  |  | (431,987 | )
Restricted stock units forfeited |  |  | 29,774 |  |  |  | 38,100 |  |  |  | 9,800 |
Shares issued for 2012 President and COO Four-Year Award |  |  | (325,000 | ) |  |  | — |  |  |  | — |
Shares issued for 2013 Three-Year PSU Awards |  |  | (1,074,017 | ) |  |  | — |  |  |  | — |
Shares issued for 2012 Three-year PSU Awards |  |  | — |  |  |  | (442,985 | ) |  |  | — |
Shares issued for 2011 Three-year PSU Awards |  |  | — |  |  |  | — |  |  |  | (145,597 | )
Restricted stock shares issued for SLO Awards |  |  | — |  |  |  | — |  |  |  | (96,773 | )
Restricted stock units awarded for SLO Awards |  |  | (81,614 | ) |  |  | (134,078 | ) |  |  | (48,528 | )
SLO units forfeited |  |  | — |  |  |  | 13,752 |  |  |  | — |
Director shares granted and issued |  |  | (18,022 | ) |  |  | (20,246 | ) |  |  | (21,128 | )
Director units granted and deferred(1) |  |  | (17,447 | ) |  |  | (925 | ) |  |  | (20,444 | )
Shares withheld for taxes(2) |  |  | 696,131 |  |  |  | — |  |  |  | 69,821 |
Number of shares available, end of year (3) |  |  | 6,082,001 |  |  |  | 7,694,739 |  |  |  | 8,775,994 |
(1) | Director units granted and deferred include the impact of share-settled dividends earned and deferred on deferred shares.
(2) | The Omnibus Incentive Plan and 2005 Contingent Stock Plan permit “minimum” withholding of taxes and other charges that may be required by law to be paid attributable to awards by withholding a portion of the shares attributable to such awards.
(3) | The above table excludes approximately 3.3 million of contingently issuable shares under the PSU awards and SLO awards, which represents the maximum number of shares that could be issued under those plans as of December 31, 2016.
We record share-based incentive compensation expense in selling, general and administrative expenses and cost of sales on our Consolidated Statements of Operations for both equity-classified awards and liability-classified awards. We record corresponding credit to additional paid-in capital within stockholders’ equity for equity-classified awards, and to either current or non-current liability for liability-classified awards based on the fair value of the share-based incentive compensation awards at the date of grant. Total expense for the liability-classified awards continues to be remeasured to fair value at the end of each reporting period. We recognize an expense or credit reflecting the straight-line recognition, net of estimated forfeitures, of the expected cost of the program. The number of PSUs earned may equal, exceed or be less than the targeted number of shares depending on whether the performance criteria are met, surpassed or not met. The following table summarizes the Company’s pre-tax share-based incentive compensation expense and related income tax benefit for the years ended December 31, 2016, 2015 and 2014 related to the Company’s PSU awards, SLO awards and restricted stock awards.
(in millions) |  | 2016 |  |  | 2015 |  |  | 2014 |
2016 Three-year PSU Awards |  | $ | 6.3 |  |  | $ | — |  |  | $ | — |
2016 President & CEO Inducement Award |  |  | 0.5 |  |  |  | — |  |  |  | — |
2015 Three-year PSU Awards |  |  | 3.5 |  |  |  | 4.7 |  |  |  | — |
2014 Special PSU Awards(1) |  |  | 8.8 |  |  |  | 15.7 |  |  |  | 11.8 |
2014 Three-year PSU Awards |  |  | 4.9 |  |  |  | 7.0 |  |  |  | 6.8 |
2013 Three-year PSU Awards |  |  | — |  |  |  | 4.7 |  |  |  | 8.2 |
2012 Three-year PSU Awards |  |  | — |  |  |  | — |  |  |  | 1.8 |
2013 WVH Incentive Compensation(2) |  |  | — |  |  |  | — |  |  |  | 1.3 |
2012 President & COO Four-year Incentive Compensation(3) |  |  | 0.2 |  |  |  | 0.3 |  |  |  | 0.4 |
SLO Awards |  |  | 2.5 |  |  |  | 3.7 |  |  |  | 4.6 |
Other long-term share-based incentive compensation programs(4) |  |  | 36.2 |  |  |  | 25.1 |  |  |  | 19.2 |
Total share-based incentive compensation expense(5) |  | $ | 62.9 |  |  | $ | 61.2 |  |  | $ | 54.1 |
Associated tax benefits recognized |  | $ | 19.7 |  |  | $ | 18.6 |  |  | $ | 15.7 |
(1) | The amount does not include expense related to the 2014 Special PSU awards that will be settled in cash of $1.6 million in the year ended December 31, 2016.
(2) | On February 28, 2013, the Organization and Compensation Committee of our Board of Directors (“O&C Committee”) approved a change in the vesting policy regarding the existing 2011 Three-year PSU Awards, and the newly granted 2013 three-year PSU Awards, for William V. Hickey, our former Chairman and Chief Executive Officer. The approved change will result in the full vesting of the awards, rather than a pro-rata portion vesting as of the date of his retirement (May 16, 2013). Mr. Hickey’s awards will still be subject to the performance metrics stipulated in the plan documents, and will be paid-out in accordance with the original planned timing. As a result of these approved changes, the expense related to these awards was accelerated and recognized over the applicable service period up until the date of his retirement.
(3) | The amount includes only the two initial performance-based equity awards. See below for further detail.
(4) | The amount includes the expenses associated with the restricted stock awards consisting of restricted stock shares, restricted stock units and cash-settled restricted stock unit awards.
(5) | The amounts do not include the expense related to our U.S. profit sharing contributions made in the form of our common stock as these contributions are not considered share-based incentive compensation.
Restricted Stock, Restricted Stock Units and Cash-Settled Restricted Stock Unit Awards Restricted stock, restricted stock unit and cash-settled restricted stock unit awards (cash payment in an amount equal to the value of the shares on the vesting date) provide for a vesting period. Awards vest earlier in the event of the participant’s death or disability. If a participant terminates employment prior to vesting, then the award of restricted stock, restricted stock units or cash-settled restricted stock unit awards is forfeited, except for certain circumstances following a change in control. The Compensation Committee may waive the forfeiture of all or a portion of an award. During the vesting period, holders of unvested shares of restricted stock (but not holders of unvested shares of restricted stock units or cash-settled restricted stock unit awards) are entitled to receive dividends on the same basis as dividends are paid to other stockholders and are entitled to vote the unvested shares. The following table summarizes activity for unvested restricted stock and restricted stock units for 2016:
|  | Restricted stock shares |  |  | Restricted stock units |
|  | Shares |  |  | Weighted-Average per Share Fair Value on Grant Date |  |  | Aggregate Intrinsic Value (in millions) |  |  | Shares |  |  | Weighted-Average per Share Fair Value on Grant Date |  |  | Aggregate Intrinsic Value (in millions) |
Non-vested at December 31, 2015 |  |  | 1,269,775 |  |  | $ | 35.09 |  |  |  |  |  |  |  | 882,449 |  |  | $ | 35.93 |  |  |  |  |
Granted |  |  | 481,834 |  |  | $ | 44.16 |  |  |  |  |  |  |  | 428,595 |  |  | $ | 43.37 |  |  |  |  |
Vested |  |  | (351,235 | ) |  | $ | 28.38 |  |  | $ | 16.3 |  |  |  | (179,826 | ) |  | $ | 28.97 |  |  | $ | 8.3 |
Forfeited or expired |  |  | (87,886 | ) |  | $ | 36.43 |  |  |  |  |  |  |  | (29,774 | ) |  | $ | 30.56 |  |  |  |  |
Non-vested at December 31, 2016 |  |  | 1,312,488 |  |  | $ | 40.13 |  |  |  |  |  |  |  | 1,101,444 |  |  | $ | 40.11 |  |  |  |  |
A summary of the Company’s fair values of its vested restricted stock shares and restricted stock units are shown in the following table:
(In millions) |  | 2016 |  |  | 2015 |  |  | 2014 |
Fair value of restricted stock shares vested |  | $ | 10.0 |  |  | $ | 10.2 |  |  | $ | 7.6 |
Fair value of restricted stock units vested |  | $ | 5.2 |  |  | $ | 3.0 |  |  | $ | 3.2 |
A summary of the Company’s unrecognized compensation cost and weighted average periods over which the compensation cost is expected to be recognized for its non-vested restricted stock shares and restricted stock units are shown in the following table:
(In millions) |  | Unrecognized Compensation Costs |  |  | Weighted Average to be recognized (in years) |
Restricted Stock shares |  | $ | 22.9 |  |  |  | 1.2 |
Restricted Stock units |  | $ | 18.8 |  |  |  | 1.1 |
The non-vested cash awards excluded from table above had $4.3 million unrecognized compensation costs and weighted-average remaining contractual life of approximately 1.0 years. Current liability recognized for these cash awards was $2.5 million and $4.9 million in other non-current liabilities on our Consolidated Balance Sheet. PSU Awards Three-year PSU awards for 2014, 2015 and 2016 (Excluding the 2014 Special PSU Award) During the first 90 days of each year, the O&C Committee of our Board of Directors approves PSU awards for our executive officers and other selected key executives, which include for each officer or executive a target number of shares of common stock and performance goals and measures that will determine the percentage of the target award that is earned following the end of the three-year performance period. Following the end of the performance period, in addition to shares, participants will also receive a cash payment in the amount of the dividends (without interest) that would have been paid during the performance period on the number of shares that they have earned. Each PSU is subject to forfeiture if the recipient terminates employment with the Company prior to the end of the three-year award performance period for any reason other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such participant’s number of full months of service during the award performance period, further adjusted based on the achievement of the performance goals during the award performance period. All of these PSUs are classified as equity in the Consolidated Balance Sheet. The Compensation Committee established principal performance goals, which are (i) total shareholder return for three-year performance period weighted at 35% for the 2014 and 2015 awards and 50% for the 2016 awards, and (ii) three year consolidated Adjusted EBITDA margin weighted at 65% for the 2014 and 2015 awards and 50% for the 2016 awards. The total number of shares to be issued for these awards can range from zero to 200% of the target number of shares. PSUs – Adjusted EBITDA. The PSUs granted based on Adjusted EBITDA are contingently awarded and will be payable in shares of the Company’s common stock based on the Company’s Adjusted EBITDA over a three-year award performance period compared to a target set at the time of the grant by the Compensation Committee. The fair value of the PSUs based on Adjusted EBITDA is based on grant date fair value which is equivalent to the closing price of one share of the Company’s common stock on the date of grant. The number of PSUs based on Adjusted EBITDA varies based on the probable outcome of the performance condition. The Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable. The number of PSUs granted based on Adjusted EBITDA and the grant date fair value are shown in the following table:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Number of units granted |  |  | 165,391 |  |  |  | 158,964 |  |  |  | 239,851 |
Weighted average fair value on grant date |  | $ | 43.10 |  |  | $ | 46.05 |  |  | $ | 32.72 |
PSUs – Total Shareholder Return. The PSUs granted based on total shareholder return are contingently awarded and will be payable in shares of the Company’s common stock subject to the condition that the number of PSUs, if any, earned by the employees upon the expiration of a three-year award performance period is dependent on the Company’s total shareholder return ranking relative to a peer group of companies. The fair value of the PSUs based on total shareholder return was estimated on the grant date using a Monte Carlo Simulation model that incorporates predictive modeling techniques using Geometric Brownian Motion and Crystal Ball’s random number generation. Other assumptions include the expected volatility of all companies included in the total shareholder return, the historical share price returns analysis of all companies included in the total shareholder return and assumes dividends are reinvested. The expected volatility was based on the historical volatility for a period of time that approximates the duration between the valuation date and the end of the performance period. The risk-free interest rate is based on the Zero-Coupon Treasury STRIP yield curve matching the term from the valuation date to the end of the performance period. Compensation expense for the PSUs based on total shareholder return (which is considered a market condition) is a fixed amount determined at the grant date fair value and is recognized 100% over the three-year award performance period regardless of whether PSUs are awarded at the end of the award performance period. The number of PSUs granted based on total shareholder return and the assumptions used to calculate the grant date fair value of the PSUs based on total shareholder return are shown in the following table:
|  | 2016 |  |  | 2015 |  |  | 2014 |
Number of units granted |  |  | 124,755 |  |  |  | 65,796 |  |  |  | 129,150 |
Weighted average fair value on grant date |  | $ | 57.14 |  |  | $ | 59.91 |  |  | $ | 43.13 |
Expected Price volatility |  |  | 26.50 | % |  |  | 29.90 | % |  |  | 32.90 | %
Risk-free interest rate |  |  | 0.98 | % |  |  | 1.05 | % |  |  | 0.63 | %
The following table includes additional information related to estimated earned payout based on the probable outcome of the performance condition and market condition as of December 31, 2016:
|  | Estimated Payout % |  |
|  | Adjusted EBITDA |  |  | TSR |  |  | Combined |  |
2016 Three-year PSU Awards |  |  | 100 | % |  |  | 100 | % |  |  | 100 | % |
2015 Three-year PSU Awards |  |  | 100 | % |  |  | 168 | % |  |  | 124 | % |
2014 Three-year PSU Awards |  |  | 200 | % |  |  | 188 | % |  |  | 196 | % |
The following table summarizes activity for outstanding Three-year PSU awards (excluding 2014 Special PSU Award) for 2016:
|  | Shares |  |  | Aggregate Intrinsic Value (in millions) (2) |  |
Outstanding at December 31, 2015 |  |  | 1,081,445 |  |  |  |  |  |
Granted(1) |  |  | 290,146 |  |  |  |  |  |
Converted |  |  | (537,009 | ) |  | $ | 46.6 |  |
Forfeited or expired |  |  | (6,870 | ) |  |  |  |  |
Outstanding at December 31, 2016 |  |  | 827,712 |  |  |  |  |  |
Fully vested at December 31, 2016 |  |  | 374,267 |  |  | $ | 17.0 |  |
(1) | This represents the target number of performance units granted. Actual number of PSUs earned, if any, is dependent upon performance and may range from 0% to 200% percent of the target.
(2) | The aggregate intrinsic value is based on the actual number of PSUs earned and vested at December 31, 2015 which were issued in February 2016.
The following table summarizes activity for non-vested Three-year PSU awards (excluding 2014 Special PSU Award) for 2016:
|  | Shares |  |  | Weighted-Average per Share Fair Value on Grant Date |
Non-vested at December 31, 2015 |  |  | 550,005 |  |  | $ | 41.99 |
Granted |  |  | 290,146 |  |  | $ | 49.14 |
Vested |  |  | (374,267 | ) |  | $ | 38.13 |
Forfeited or expired |  |  | (6,870 | ) |  | $ | 49.14 |
Non-vested at December 31, 2016 |  |  | 459,014 |  |  | $ | 49.55 |
A summary of the Company’s fair value for its vested three-year PSU awards is shown in the following table:
(In millions) |  | 2016 |  |  | 2015 |  |  | 2014 |
Fair value of three-year PSU awards vested |  | $ | 14.3 |  |  | $ | 20.1 |  |  | $ | 5.9 |
A summary of the Company’s unrecognized compensation cost for three-year PSU awards at the current estimated earned payout based on the probable outcome of the performance condition and weighted average periods over which the compensation cost is expected to be recognized as shown in the following table:
(In millions) |  | Unrecognized Compensation Costs |  |  | Weighted Average to be recognized (in years) |
2016 Three-year PSU Awards |  | $ | 7.7 |  |  |  | 2.0 |
2015 Three-year PSU Awards |  | $ | 3.0 |  |  |  | 1.0 |
2014 Three-year PSU Awards |  | $ | — |  |  |  | — |
President and Chief Executive Officer (CEO) 2016 Inducement Awards On January 15, 2016, Mr. Peribere, entered into a letter agreement (the “Amendment Letter”) amending the terms of his employment letter with the Company dated August 28, 2012 to extend the term of Mr. Peribere’s employment and make certain compensation adjustments. The Amendment Letter also provides Mr. Peribere with two additional awards of restricted stock units under the Company’s 2014 Omnibus Incentive Plan (the “Inducement Awards”), one that is time-vesting and the other that is performance-vesting. The time-vesting Inducement Award, for 75,000 shares, requires Mr. Peribere to remain in service with the Company through December 31, 2017. The grant date fair value for this award was $39.95. The performance-vesting Inducement Award, also for 75,000 shares, in addition to the time-vesting requirement noted above, requires that either (i) the Company’s cumulative total stockholder return (“TSR”) for 2016-2017 be in the top 25% of its peers (using the same peers and methodology under the Company’s performance stock unit (PSU) awards) and the Company’s stock price as of December 31, 2017 equals at least $43.70/share, or (ii) the Company’s stock price as of December 31, 2017 equals at least $55.00/share. The Amendment Letter provides that the stock price as of December 31, 2017 for this purpose will be determined using a 30-day arithmetic mean of closing prices. Since the award includes a market condition, compensation expense will be recognized regardless of whether the market condition is satisfied provided that the requisite service has been provided. The grant date fair value for this award was determined using a Monte Carlo Simulation model that incorporates predictive modeling techniques using Geometric Brownian Motion and Crystal Ball’s random number generation. Other assumptions include the expected volatility of all companies included in the total shareholder return, valuation modeling of vesting payoff determination featuring both performance goals as noted above, the historical share price returns analysis of all companies included in the total shareholder return and assumes dividends are reinvested. The expected volatility was based on the historical volatility for a period of time that approximates the duration between the valuation date and the end of the performance period. The risk-free interest rate is based on the Zero-Coupon Treasury STRIP yield curve matching the term from the valuation date to the end of the performance period Compensation expense for the performance-vesting Inducement Award is a fixed amount determined at the grant date fair value and is recognized 100% over the two-year award performance period regardless of whether shares are awarded at the end of the award performance period. The assumptions used to calculate the grant date fair value of the performance-vesting Inducement Award are shown in the following table:
|  | 2016 Performance-vesting Inducement Award |
Fair value on grant date |  | $ | 12.55 |
Expected price volatility |  |  | 24.60 | %
Risk-free interest rate |  |  | 0.92 | %
The awards are described in further detail in Mr. Peribere’s Amendment Letter filed with the SEC as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 20, 2016. 2012 President and COO Four-year Incentive Compensation On September 1, 2012, Jerome A. Peribere started with the Company as President and Chief Operating Officer. Under the terms of his agreement, he was granted equity awards which included the following: (i) initial equity awards under the Company’s 2005 Contingent Stock Plan, which included two awards of performance share units under which he could earn up to 350,000 shares of common stock based on the Company’s performance, (ii) restricted stock under the Company’s 2005 Contingent Stock Plan of which 50,000 shares were issued on his start date and 25,000 shares to be issued on the first anniversary of his start date and (iii) an award under the Company’s 2012 Three-year PSU Award with a target award of 140,155 units. The awards are described in further detail in Mr. Peribere’s employment agreement filed with the SEC as an exhibit with the Company’s Current Report on Form 8-K dated August 27, 2012. The performance period for the initial equity awards ,which included two awards of performance share units ended on August 31, 2016. The fair value of these awards at grant date was $1.6 million. Based on the performance conditions met, Mr. Peribere was issued 325,000 shares on October 6, 2016, certified by the Organization and Compensation Committee of the Board of Directors. The issued shares had an intrinsic value of $14.7 million on the day of vesting. 2014 Special PSU Award During March 2014, the Compensation Committee approved a special PSU award to the named executive officers and a broader group of other employees. The special PSU awards are earned principally based on achievement of specified levels of free cash flow, above targets established in the Company’s three-year strategic plan, over the three-year performance period of 2014-2016. In addition, no portion of an award is earned unless we achieve a minimum specified level of adjusted earnings per share for 2016, in order to balance the free cash flow goal with an appropriate focus on generating earnings. To further balance the incentives, the award earned based on free cash flow performance will be reduced by 25% if our relative TSR for the performance period is below the 50th percentile of an approved peer group of companies. Any PSUs earned will be paid out in equal installments over two years, in early 2017 and, subject to an additional 2017 performance requirement, in early 2018. This award includes both equity-classified awards which do not get remeasured and liability-classified awards which get remeasured each reporting period. For equity-classified awards, 641,480 PSUs were granted based on performance conditions and the weighted average grant date fair value was $32.10. For equity-classified awards, 213,827 of PSUs were granted based on TSR and the weighted average grant date fair value was $13.73. The expected price volatility and risk-free interest rate were 32.90% and 0.68%, respectively. At December 31, 2016, 376,047 PSUs remain unvested. The unrecognized compensation expense for equity-classified awards and liability-classified awards combined was $6.0 million and weighted-average remaining contractual life of approximately 1.0 year. We record expense associated with the liability-classified awards in selling, general and administrative expenses and cost of sales. The liability recognized for liability-classified awards was $6.6 million Stock Leverage Opportunity Awards Before the start of each performance year, each of our executive officers and other selected key executives is eligible to elect to receive all or a portion of his or her annual cash bonus for that year, in increments of 25% of the annual bonus, as an award of restricted stock or restricted stock units under the Omnibus Incentive Plan in lieu of cash. The portion provided as an equity award may be given a premium to be determined by the Compensation Committee each year and will be rounded up to the nearest whole share. The stock price used in the calculation of the number of shares will be the closing sale price of our common stock on the New York Stock Exchange on the first trading day of the performance year. The award will be granted following the end of the performance year and after determination by the Compensation Committee of the amount of the annual bonus award for each executive officer and other selected key executive who has elected to take all or a portion of his or her annual bonus as an equity award, but no later than the March 15 following the end of the performance year. The equity award will be made in the form of an award of restricted stock units that will vest on the second anniversary of the grant date or earlier in the event of death, disability or retirement from employment with the Company, and the shares subject to the award will not be transferable by the recipient until the later of vesting or the second anniversary of the grant date. Termination treatment for the 2014 SLO awards and later years has been changed from past grant practices. For the “principal portion” of the award that would have otherwise been paid in cash, the award vests upon any termination of employment, other than for cause. For the “premium portion” of the award equal to the additional 25%, the award vests only in case of death, disability or retirement from the Company. Retirement for the purpose of SLO awards and the PSU awards described below means termination of employment after five or more years of employment and with years of employment plus age equal to 70 or more, except termination for cause. Except as described above, if the recipient ceases to be employed by the Company prior to vesting, then the award is forfeited, except for certain circumstances following a change in control. SLO awards in the form of restricted stock units have no voting rights until shares are issued to them but do receive a cash payment in the amount of the dividends (without interest) on the shares they have earned at about the same time that shares are issued to them following the period of restriction. As of December 31, 2016, the amount of dividends earned on SLO awards was immaterial. The 2016 SLO awards comprise an aggregate of 49,071 restricted stock units as of December 31, 2016. The final number of units issued will be determined based on Annual Incentive Plan payout percentage and the stock price on the day of the grant. During 2016, 81,614 restricted units were issued for the 2015 annual incentive plan. We recorded $2.5 million, $3.7 million and $4.6 million in expense related to the SLO program in the years ended December 31, 2016, December 31, 2015 and December 31, 2014, respectively. We record compensation expense for these awards in selling, general and administrative expenses on the Consolidated Statements of Operations with a corresponding credit to additional paid-in capital within stockholders’ equity, based on the fair value of the awards at the end of each reporting period, which reflects the effects of stock price changes. The expense is recognized over a fifteen month period on a straight-line basis. Stock Appreciation Rights (“SARs”) In connection with the acquisition of Diversey, Sealed Air exchanged Diversey’s cash-settled stock appreciation rights and stock options that were unvested as of May 31, 2011 and unexercised at October 3, 2011 into cash-settled stock appreciation rights based on Sealed Air common stock. Since these SARs are settled in cash, the amount of the related future expense will fluctuate based on the forfeiture activity and the changes in the assumptions used in a Black-Scholes valuation model which include Sealed Air’s stock price, risk-free interest rates, expected volatility and a dividend yield. In addition, once vested, the related expense will continue to fluctuate due to the changes in the assumptions used in the Black-Scholes Option Pricing Model for any SARs that are not exercised until their respective expiration dates, the last of which is currently in February 2020. We recognized SARs (income)/expense of $(0.1) million, $3.9 million and $8.1 million in 2016, 2015, and 2014 respectively. Cash payments due to the exercise of these SARs were $1.9 million, $20.7 million and $21.1 million in 2016, 2015, and 2014 respectively. As of December 31, 2016, all of the outstanding SARs were fully vested. The remaining liability for these SARs was $2.0 million and is included in other current liabilities on our Consolidated Balance Sheet. Other Common Stock Issuances We have historically issued shares of our common stock under our 2005 Contingent Stock Plan to selected U.S.-based consultants as compensation under consulting agreements primarily for research and development projects. We record the cost associated with these issuances on a straight-line basis based on each of the issuances’ vesting schedule. Current liability and unrecognized deferred compensation expense for these awards are not material as of December 31, 2016.

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