2. Stock-based Compensation

The Company uses share-based payments to compensate employees and non-employee directors. The Company recognizes the cost of share-based payments under the fair-value-based method. Share-based awards consist of equity instruments in the form of stock options, restricted stock or restricted stock units and have included service and, in certain cases, performance conditions. The Company’s share-based awards also included share-settled performance unit awards. Share-settled performance unit awards are accounted for as equity awards. The Company issues shares of common stock when vested stock options are exercised, when restricted stock is granted and when restricted stock units and share-settled performance unit awards vest.

Stock Options — The Company estimates the grant date fair values of stock options using the Black-Scholes-Merton valuation model. Volatility assumptions are based on the historic volatility of the Company’s common stock over the most recent period equal to the expected term of the options as of the date the options are granted. The expected term assumptions are based on the Company’s experience with respect to employee stock option activity. Dividend yield assumptions are based on the expected dividends at the time the options are granted. The risk-free interest rate assumptions are determined by reference to United States Treasury yields. Weighted-average assumptions used to estimate the grant date fair values for stock options granted for the three month periods ended March 31, 2015 and 2014 follow:

	Three Months Ended
	March 31,
	2015			2014
Volatility		38.47	%		35.91	%
Expected term (in years)		5.00			5.00
Dividend yield		2.41	%		0.79	%
Risk-free interest rate		1.65	%		1.75	%

Stock option activity from January 1, 2015 to March 31, 2015 follows:

			Weighted
			Average
	Underlying		Exercise
	Shares		Price
Outstanding at January 1, 2015		6,086,250	$	22.32
Granted		60,000	$	16.59
Exercised		—		—
Cancelled		—		—
Expired		—		—
Outstanding at March 31, 2015		6,146,250	$	22.26
Exercisable at March 31, 2015		5,390,683	$	21.44

Restricted Stock — For all restricted stock awards to date, shares of common stock were issued when the awards were made. Non-vested shares are subject to forfeiture for failure to fulfill service conditions and, in certain cases, performance conditions. Non-forfeitable dividends are paid on non-vested shares of restricted stock. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period.

Restricted stock activity from January 1, 2015 to March 31, 2015 follows:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Non-vested restricted stock outstanding at January 1, 2015		1,493,059		$	26.93
Granted		18,000		$	16.59
Vested		(57,356	)	$	21.65
Forfeited		(15,590	)	$	28.08
Non-vested restricted stock outstanding March 31, 2015		1,438,113		$	27.00

Restricted Stock Units — For all restricted stock unit awards made to date, shares of common stock are not issued until the units vest. Restricted stock units are subject to forfeiture for failure to fulfill service conditions. Non-forfeitable cash dividend equivalents are paid on certain non-vested restricted stock units. The Company uses the straight-line method to recognize periodic compensation cost over the vesting period.

Restricted stock unit activity from January 1, 2015 to March 31, 2015 follows:

			Weighted
			Average
			Grant Date
	Shares		Fair Value
Non-vested restricted stock units outstanding at January 1, 2015		34,085	$	30.20
Granted		—	$	—
Vested		—	$	—
Forfeited		—	$	—
Non-vested restricted stock units outstanding March 31, 2015		34,085	$	30.20

Performance Unit Awards — In 2011, 2012, 2013 and 2014, the Company granted stock-settled performance unit awards to certain executive officers (the “Stock-Settled Performance Units”). The Stock-Settled Performance Units provide for the recipients to receive a grant of shares of stock upon the achievement of certain performance goals established by the Compensation Committee during the performance period. The performance units will only have a payout if total shareholder return is positive for the performance period and, when compared to the peer group, is at or above the 25th percentile. The performance period for the Stock-Settled Performance Units is the three year period commencing on April 1 of the year of grant. For the 2012 and 2013 Stock-Settled Performance Units, the performance period can extend for an additional two years in certain circumstances. The performance goals for the Stock-Settled Performance Units are tied to the Company’s total shareholder return for the performance period as compared to total shareholder return for a peer group determined by the Compensation Committee. These goals are considered to be market conditions under the relevant accounting standards and the market conditions were factored into the determination of the fair value of the performance units. Generally, the recipients will receive a target number of shares if the Company’s total shareholder return is positive and, when compared to the peer group, is at the 50^th percentile and two times the target if at the 75^th percentile or higher. If the Company’s total shareholder return is positive, and, when compared to the peer group, is at the 25^th percentile, the recipients will only receive one-half of the target number of shares. The grant of shares when achievement is between the 25^th and 75^th percentile will be determined on a pro-rata basis. The target number of shares with respect to the 2012 Stock-Settled Performance Units was 192,000. The performance period for the 2012 Stock-Settled Performance Units ended on March 31, 2015, and the Company’s total shareholder return was at the 87^th percentile. In April 2015, 384,000 shares were issued to settle the 2012 Stock-Settled Performance Units.

The total target number of shares with respect to the Stock-Settled Performance Units is set forth below:

	2014		2013		2012		2011
	Performance		Performance		Performance		Performance
	Unit Awards		Unit Awards		Unit Awards		Unit Awards
Target number of shares		154,000		236,500		192,000		144,375

Because the performance units are stock-settled awards, they are accounted for as equity awards and measured at fair value on the date of grant using a Monte Carlo simulation model. The fair value of the Stock-Settled Performance Units is set forth below (in thousands):

	2014		2013		2012		2011
	Performance		Performance		Performance		Performance
	Unit Awards		Unit Awards		Unit Awards		Unit Awards
Fair value at date of grant	$	5,388	$	5,564	$	3,065	$	5,569

These fair value amounts are charged to expense on a straight-line basis over the performance period. Compensation expense associated with the Stock-Settled Performance Units is shown below (in thousands):

	2014		2013		2012		2011
	Performance		Performance		Performance		Performance
	Unit Awards		Unit Awards		Unit Awards		Unit Awards
Three months ended March 31, 2015	$	449	$	464	$	255	NA
Three months ended March 31, 2014	NA		$	464	$	255	$	464