Common Stock and Stock-based Compensation

A reconciliation of the changes in the number of common shares issued is as follows:



(Thousands)		Number of Shares
Issued as of January 1, 2012		27,024
Exercise of stock options and stock appreciation rights (SARs)		26
Issued as of December 31, 2012		27,050
Exercise of stock options and SARs		114
Issued as of December 31, 2013		27,164
Exercise of stock options and SARs		62
Issued as of December 31, 2014		27,226

Stock incentive plans (the 2006 Stock Incentive Plan and the 2006 Non-employee Director Equity Plan) were approved at the May 2, 2006 annual meeting of shareholders. These plans authorize the granting of option rights, stock appreciation rights, performance-restricted shares, performance shares, performance units, and restricted shares and replaced the 1995 Stock Incentive Plan and the 1997 Stock Incentive Plan for Non-employee Directors. The 2006 Stock Incentive Plan and the 2006 Non-employee Director Equity Plan were amended to, among other things, add additional shares to the plans. These amendments were approved by shareholders at the May 2014 annual meeting.

Stock Options

Stock options may be granted to employees or non-employee directors of the Company. Option rights entitle the optionee to purchase common shares at a price equal to or greater than the market value on the date of grant. Option rights granted to employees generally become exercisable (i.e. vest) over a four-year period and expire ten years from the date of the grant. Options granted to employees may also be issued with shorter vesting periods. Options granted to non-employee directors vest in six months and expire ten years from the date of the grant. The number of options available to be issued is established in plans approved by shareholders. The exercise of options is generally satisfied by the issuance of new shares.

The following table summarizes the Company’s stock option activity during 2014:



(Shares in thousands)	Number of Options		Weighted- average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted- average Remaining Term (Years)
Outstanding at December 31, 2013	21		$	17.29	$	—	—
Exercised	(20	)	17.29		—		—
Canceled	(1	)	17.08		—		—
Outstanding at December 31, 2014	—				—		—
Vested and expected to vest as of December 31, 2014	—				—		—
Exercisable at December 31, 2014	—				—		—

Cash received from the exercise of stock options totaled $0.4 million in 2014, $1.2 million in 2013, and $0.2 million in 2012. The tax benefit realized from tax deductions from exercises was $0.1 million in 2014, $0.5 million in 2013, and $0.1 million in 2012. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013, and 2012, was $0.3 million, $1.0 million, and $0.3 million, respectively.

Restricted Stock

The Company may grant restricted stock to employees and non-employee directors of the Company. These shares are restricted and vest over a designated period of time as defined at the date of the grant and are forfeited should the holder’s employment terminate during the restriction period. The fair market value of the restricted shares is determined on the date of the grant and is amortized over the restriction period. The restriction period is typically three years.

The fair value of the restricted stock is based on the closing stock price on the date of grant. The weighted-average grant date fair value for 2014, 2013, and 2012 was $33.29, $27.35, and $27.87, respectively.

Compensation cost was $2.2 million in 2014, $2.5 million in 2013, and $2.7 million in 2012. The unamortized compensation cost on the outstanding restricted stock was $1.8 million as of December 31, 2014 and is expected to be amortized over a weighted-average period of 20 months. The income tax expense recognized from the vesting of restricted stock totaled $0.1 million in 2014, as compared to the tax benefit realized from the vesting of restricted stock of $0.2 million in 2013 and $0.7 million in 2012.

The following table summarizes the restricted stock activity during 2014:



(Shares in thousands)	Number of Shares		Weighted- average Grant Date Fair Value
Outstanding at December 31, 2013	200		$	32.71
Granted	60		33.29
Vested	(81	)	33.21
Forfeited	(27	)	33.21
Outstanding at December 31, 2014	152		$	30.76

Long-term Incentive Plans

Under long-term incentive compensation plans, executive officers and selected other employees receive cash or stock awards based upon the Company’s performance over the defined period, typically three years. Awards may vary based upon the degree to which actual performance exceeds the pre-determined threshold, target, and maximum performance levels at the end of the performance periods. Payouts may be subjected to attainment of threshold performance objectives.

Compensation expense is based upon the performance projections for the three-year plan period, the percentage of requisite service rendered, and the fair market value of the Company’s common shares on the date of grant. The offset to the compensation expense for the portion of the award to be settled in shares is recorded within shareholders’ equity and was $1.0 million for 2014, $0.8 million for 2013, and $0.4 million for 2012.

Directors Deferred Compensation

Non-employee directors may defer all or part of their fees into the Company’s common shares. The fair value of the deferred shares is determined at the share acquisition date and is recorded within shareholders’ equity. Subsequent changes in the fair value of the Company’s common shares do not impact the recorded values of the shares.

The following table summarizes the stock activity for the directors' deferred compensation plan during 2014:



(Shares in thousands)	Number of Shares	Weighted- average Grant Date Fair Value
Outstanding at December 31, 2013	101	$	23.74
Granted	19	33.46
Outstanding at December 31, 2014	120	$	25.33

During the years ended December 31, 2014, 2013 and 2012, the weighted-average grant date fair value of shares granted was $33.46, $26.99, and $23.10, respectively.

Stock Appreciation Rights

The Company may grant SARs to certain employees and non-employee directors. Upon exercise of vested SARs, the participant will receive a number of shares of common stock equal to the spread (the difference between the market price of the Company’s common shares at the time of the exercise and the strike price established in the SARs agreement) divided by the common share price. The strike price of the SARs is equal to or greater than the market value of the Company’s common shares on the day of the grant. The number of SARs available to be issued is established by plans approved by the shareholders. The vesting period and the life of the SARs are established in the SARs agreement at the time of the grant. The exercise of the SARs is satisfied by the issuance of treasury shares. The SARs vest three years from the date of grant. SARs granted prior to 2011 expire in ten years, while the SARs granted in 2011 and later expire in seven years.

The following table summarizes the Company's SARs activity during 2014:



(Shares in thousands)	Number of SARs		Weighted- average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted- average Remaining Term (Years)
Outstanding at December 31, 2013	984		$	26.34	$	—	—
Granted	143		33.29		—		—
Exercised	(154	)	20.15		—		—
Cancelled	(5	)	33.30		—		—
Outstanding at December 31, 2014	968		28.32		7,633,000		4.4
Vested and expected to vest as of December 31, 2014	968		28.32		7,633,000		4.4
Exercisable at December 31, 2014	504		26.51		5,334,000		3.6

The weighted-average fair value of the SARs granted in 2014 was $33.29. The fair value will be amortized to compensation cost on a straight-line basis over the three-year vesting period. Compensation cost was $2.2 million, $2.4 million and $2.8 million in 2014, 2013, and 2012, respectively, and was included in selling, general, and administrative expense. The unamortized compensation cost balance was $2.2 million as of December 31, 2014.

Summarized information on SARs outstanding as of December 31, 2014 follows:



SARs Prices	Number Outstanding (Thousands)	Weighted- average Remaining Life (Years)	Weighted- average Exercise Price
$15.01	162	3.7	$	15.01
$21.24-$24.03	140	4.4	21.40
$27.78-$29.45	337	4.5	28.90
$33.30-$34.70	146	6.3	33.32
$39.30-$44.72	183	3.1	40.41
	968	4.4	$	28.32

The SARs granted at $15.01, $21.24, $24.03, $27.78, $34.70, $39.30, and $44.72 are exercisable.

The fair value of the SARs was estimated on the grant date using the Black-Scholes pricing model with the following assumptions:



	2014		2013		2012
Risk-free interest rate	1.64	%	0.70	%	0.89	%
Dividend yield	1.0	%	1.1	%	—	%
Volatility	45.5	%	56.6	%	50.0	%
Expected lives (in years)	5.0		5.0		5.0

The risk-free rate of return was based on the five-year Treasury note rate at the time the SARs were granted. The Company initiated a dividend in May of 2012, subsequent to the 2012 grant date. The share price volatility was calculated based on the actual closing prices of the Company's common shares at month end over a period of approximately ten years prior to the granting of the SARs. This approach to measuring volatility is consistent with the approach used to calculate the volatility assumption in the valuation of stock options. The Company's current SARs program has been in place since 2006. The expected life assumption was based upon prior analyses.

Serial Preferred Stock

The Company has five million shares of Serial Preferred Stock authorized (no par value), none of which have been issued. Certain terms of the Serial Preferred Stock, including dividends, redemption, and conversion, will be determined by the Board of Directors prior to issuance.