12. Stock-Based Compensation

The Company maintains two equity compensation 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, awards were no longer granted under the 2006 Plan. The LTIP was approved by our stockholders and 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, or (i) any combination of such awards. The LTIP permits the granting of up to 4,000,000 shares to directors, officers and other employees of the Company. Grants of awards to employees are approved by the Compensation Committee of the Board of Directors and grants to independent members of the Board of Directors are approved by the Board of Directors. All awards are made with an exercise price or base price, as the case may be, that is not less than the full fair market value per share on the date of grant. No stock option or stock appreciation right may be exercised more than 10 years from the date of grant.

Shares issued as a result of stock option exercises or stock grants may be made available from authorized unissued shares of common stock or treasury stock. The Company believes that it currently has adequate authorized unissued shares to meet any requirements to issue shares during 2016.

Stock Options

The Company did not award any stock options in 2015 or 2014. Stock options granted prior to 2014 to employees or directors vest ratably over a three- or four-year vesting period and were granted with an exercise price equal to the market price of the Company’s stock on the date of grant. The Company used the Black-Scholes-Merton option-pricing model to estimate the fair value of options as of the date of grant. The resulting compensation costs are amortized on a straight-line basis over the vesting period. The expected term of awards granted under the LTIP was determined using the simplified method as outlined in the applicable guidance because the Company did not have sufficient historical exercise data when the options were granted. The expected volatility was determined based on the historical volatility of the Company’s stock. The risk-free interest rate was based on U.S. Treasury zero-coupon issues with a remaining term commensurate with the expected term of the award. The expected dividend yield was based on the Company’s intent to not issue cash dividends.

The following summarizes the assumptions used in determining the fair value of stock options granted for fixed awards with graded vesting schedules during the year ended December 31, 2013:


	2013
Risk-free interest rate		1.0%
Expected dividend yield		0.0%
Weighted average expected volatility		50%
Expected term		6.0 years
Weighted average grant-date fair value	$	11.74

Following is a summary of stock option activity for the three-year period ending December 31, 2015:


	Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2013		1,432,228		$	10.34
Granted		111,147		$	24.68
Exercised		(390,652	)	$	5.90
Forfeited		(4,003	)	$	20.28
Expired		(1,400	)	$	15.96
Outstanding at December 31, 2013		1,147,320		$	13.21		5.1 years	$	13,623
Exercised		(134,273	)	$	7.93
Forfeited		(2,838	)	$	22.66
Expired		(1,428	)	$	24.26
Outstanding at December 31, 2014		1,008,781		$	13.87		4.2 years	$	13,652
Exercised		(267,440	)	$	7.19
Forfeited		(1,290	)	$	23.14
Expired		(9,446	)	$	5.92
Outstanding at December 31, 2015		730,605		$	16.40		3.6 years	$	3,722
Exercisable at December 31, 2015		698,303		$	16.01		3.4 years	$	3,722

Other data relating to option activity for the years ended December 31 are as follows:


(dollars in thousands)	2015		2014		2013
Intrinsic value of options exercised	$	5,857	$	2,383	$	6,878
Fair value of options vested		948		1,187		1,047

The following table summarizes information with respect to stock options outstanding and exercisable under the Company’s plans at December 31, 2015:


	Options Outstanding						Options Exercisable
Exercise Price	Number Of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Number Of Options		Weighted- Average Exercise Price
$3.65 – $9.00		42,923	$	3.90		0.6 years		42,923	$	3.90
$9.01 – $18.00		497,116	$	14.62		3.2 years		497,116	$	14.62
$18.01 – $24.68		190,566	$	23.85		5.1 years		158,264	$	23.68
		730,605	$	16.40		3.6 years		698,303	$	16.01

Restricted Stock

Restricted stock awards granted to non-employee directors and eligible employees in 2015 vest ratably, on an annual basis, over three years. The grant date fair value of the restricted stock was equal to the closing market price of the Company’s common stock on the date of grant. During the restriction period, the restricted stockholders are entitled to the same rights as a common stockholder with respect to the shares, including the right to vote and receive dividends: however, starting with the 2014 grants, any dividends on restricted stock will be deferred and paid only when the stock vests. Restricted stock awards are also subject to certain claw-back provisions, as defined in the grant agreements.

Following is a summary of restricted stock activity for the three-year period ending December 31, 2015:


	Shares			Per Share Weighted- Average Grant Date Fair Value
Outstanding unvested at January 1, 2013		185,764		$	19.54
Granted		76,590		$	24.48
Vested		(48,513	)	$	19.50
Forfeited		(2,125	)	$	20.03
Outstanding unvested at December 31, 2013		211,716		$	21.33
Granted		82,351		$	24.46
Vested		(64,657	)	$	20.85
Forfeited		(9,073	)	$	21.34
Outstanding unvested at December 31, 2014		220,337		$	22.64
Granted		83,236		$	29.21
Vested		(102,297	)	$	22.42
Forfeited		(3,131	)	$	24.10
Outstanding unvested at December 31, 2015		198,145		$	24.48

Phantom Stock Units

Phantom stock unit awards granted to Canadian non-employee directors in 2015 vest ratably, on an annual basis, over three years and are settled in stock. The phantom stock unit agreements contain tandem dividend provisions which allow grantees to accrue and receive dividends, if any are declared and paid. The grant date fair value of the phantom stock units was equal to the closing market price of the Company’s common stock on the date of grant. A total of 3,804 phantom stock units were issued during 2015, at a grant date fair value of $29.57, and are outstanding as of December 31, 2015.

Performance Awards

The Company has granted performance awards under which shares of the Company’s common stock may be earned based on the Company’s performance compared to certain metrics. The number of shares actually earned under a performance award may vary from zero to 200% of the target shares awarded, based upon the Company’s performance compared to the metrics. The metrics used are determined at grant by the Compensation Committee of the Board of Directors and may be either based on performance compared to an internal measure, such as return on invested capital (“ROIC”) or return on equity (“ROE”), or the metric may be based on market performance, such as total shareholder return (“TSR”). The 2015 performance award grants were allocated evenly between two performance metrics; ROIC and relative TSR.

ROIC is defined by the Company 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 target shares awarded in 2015 were valued at $30.16, which represented the closing price of the Company’s stock on the date of grant and are measured over a three-year performance period ending December 31, 2017.

TSR is defined by the Company as the change in the fair market value, adjusted for dividends, of a company’s stock. The TSR of the Company’s stock will be compared to the TSR of a peer group of companies defined at the time of the grant. For the 2015 grant of TSR-based performance awards, TSR will be calculated using the average stock price of the 20 trading days prior to January 1, 2015 and compared to the average stock price of the 20 trading days prior to December 31, 2017. Because TSR is a market-based performance metric, the Company used a Monte Carlo simulation model to calculate the fair value of the grant made in 2015, which resulted in a fair value of $47.24 per share.

Following is a summary of performance share award activity for the three-year period ending December 31, 2015:


	Shares			Per Share Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2013		74,923		$	20.51
Granted at target		46,106		$	24.68
Earned for performance above target		11,281		$	24.18
Vested		(45,116	)	$	24.18
Outstanding at December 31, 2013		87,194		$	21.29
Granted at target		85,078		$	27.69
Earned for performance above target		25,292		$	17.48
Vested		(65,237	)	$	17.48
Forfeited		(5,524	)	$	24.84
Outstanding at December 31, 2014		126,803		$	26.63
Granted at target		69,978		$	38.70
Forfeited for performance below target		(3,810	)	$	24.68
Vested		(40,474	)	$	24.68
Forfeited		(8,889	)	$	30.87
Outstanding at December 31, 2015		143,608		$	32.68

A total of 40,474 shares, or 91.4% of the target number of shares, were earned by the participants for the performance period ending December 31, 2015. A total of 65,237 shares, or 163.3% of the target number of shares, were earned by the participants for the performance period ending December 31, 2014. A total of 45,116 shares, or 133.3% of the target number of shares, were earned by the participants for the performance period ending December 31, 2013. The 143,608 performance awards outstanding as of December 31, 2015 are split evenly between ROIC performance shares and TSR performance shares.

Stock-based Compensation Expense

The Company recognized stock-based compensation expense of approximately $4.8 million, $4.7 million and $3.5 million for the years ended December 31, 2015, 2014 and 2013, respectively, in selling, general and administrative expenses. As of December 31, 2015, there was approximately $5.7 million of total unrecognized stock-based compensation expense related to awards granted under the LTIP, net of estimated forfeitures. This included $0.1 million of unrecognized compensation cost related to unvested stock options to be recognized over a remaining weighted average vesting period of approximately 0.2 years, $2.9 million of unrecognized compensation cost related to unvested restricted stock expected to be recognized over a remaining weighted average vesting period of approximately 1.6 years and $2.7 million of unrecognized compensation cost related to unvested performance awards, expected to be recognized over a remaining weighted average vesting period of approximately 1.5 years. Award agreements for restricted stock and phantom stock granted to non-employee directors after 2013 contained provisions which call for the vesting of all shares awarded upon change in control or resignation from the board for any reason except breach of fiduciary duty. As a result of these provisions, the fair value of restricted stock granted to the non-employee directors after 2013 was expensed on the date of the grant.