Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

6. Stock-Based Compensation

The Company maintains two award plans under which stock-based compensation has been granted, the 2006 Stock Option Plan (the “2006 Plan”) and the 2007 Long-Term Incentive Plan (Amended and Restated as of May 1, 2014) (the “LTIP”). Upon the adoption of the LTIP in 2007, awards were no longer granted under the 2006 Plan. The LTIP provides for grants of (a) incentive stock options qualified as such under U.S. federal income tax laws, (b) stock options that do not qualify as incentive stock options, (c) stock appreciation rights, (d) restricted stock awards, (e) performance awards, (f) phantom stock, (g) stock bonuses, (h) dividend equivalents, and (i) any combination of such awards.

All awards were made with an exercise price or base price, as the case may be, that was not less than the fair market value per share on the grant date. The grant date fair value of restricted stock awards and performance share awards with performance conditions was equal to the closing market price of the Company’s common stock on the date of grant. The grant date fair value of performance share awards with market conditions was measured using a Monte Carlo simulation model.

Stock Options

The following summarizes the stock option activity for the three months ended March 31, 2014:

	Options		Weighted-Average Exercise Price

Outstanding at January 1, 2014	1,147,320		$	13.21
Forfeited	(154	)	$	24.45
Outstanding at March 31, 2014	1,147,166		$	13.20

Restricted Stock

The following summarizes restricted stock activity for the three months ended March 31, 2014:

	Shares		Weighted-Average Grant Date Fair Value

Outstanding at January 1, 2014	211,716		$	21.33
Granted	64,487		$	24.72
Vested	(62,082	)	$	20.91
Forfeited	(202	)	$	24.68
Outstanding at March 31, 2014	213,919		$	22.47

The shares of restricted stock that vested became taxable to the individual holders of the awards upon vesting. The Company received 17,961 of those shares as payment for withholding taxes due by holders of the restricted stock awards. The withheld shares were returned to authorized but unissued stock.

Performance Awards

The following summarizes the performance shares awarded at target and outstanding for the three months ended March 31, 2014:

	Shares	Weighted-Average Grant Date Fair Value

Outstanding at January 1, 2014	87,194	$	21.29
Granted at target	85,078	$	27.69
Outstanding at March 31, 2014	172,272	$	24.45

The performance shares granted in the first three months of 2014 were allocated evenly between two performance measures, return-on-invested-capital (“ROIC”) and relative total-shareholder-return (“TSR”). ROIC is defined as net income, less any dividends, divided by stockholders’ equity plus net debt (total debt less cash and marketable securities) at the beginning of the performance period. The ROIC-based performance shares awarded were valued at $24.72, which represented the Company’s closing stock price on the date of the grant, and ROIC is measured over a three-year performance period ending December 31, 2016. TSR is defined as the change in the fair market value, adjusted for dividends, of the Company’s stock relative to a peer group of companies defined at the time of the grant. The performance period for the TSR-based performance shares is the average of the 20 trading days prior to January 1, 2014 compared to the average of the 20 trading days prior to December 31, 2016. The Company used a Monte Carlo simulation model to value the TSR shares, which resulted in a fair value of $30.66 per share. Performance shares granted prior to 2014 were subject to the return-on-equity (“ROE”) performance measure. ROE is defined as net income divided by stockholders’ equity at the beginning of the period.

The following summarizes the performance shares awarded at target and outstanding by performance measure as of March 31, 2014.

		Performance
		Shares
Shares with ROE measures		87,194
Shares with ROIC measures		42,539
Shares with TSR measures		42,539
		172,272

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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