Stock Compensation Plans

The Company established the 2004 Omnibus Stock and Incentive Plan (the "2004 Omnibus Plan") in December 2004 and reserved 3,500,000 shares of $0.01 par value common stock ("Common Stock") for issuance under the Omnibus Plan. Pursuant to the terms of the 2004 Omnibus Plan, the compensation committee of the Company's Board of Directors may grant various types of equity-based compensation awards, including incentive and nonqualified stock options, SARs, restricted stock, RSUs, Performance Units, in addition to certain cash-based awards. All grants under the Omnibus Plan will be made at fair market value and no grant may be repriced. In general, the options expire 10 years from the date of grant and vest over a 3-year service period.

At the 2013 Annual Meeting of Stockholders, the Company's stockholders approved an amendment and restatement of the 2004 Omnibus Plan (as amended and restated the "2013 Omnibus Plan"). The amendment and restatement authorized the Company to reserve an additional 1,577,000 shares of Common Stock for future issuance. As of December 31, 2017, the Company had 680,000 shares of Common Stock reserved for future issuance under the 2013 Omnibus Plan. As of December 31, 2017, the number of shares available for future issuance was reduced by approximately 134,000 shares for outstanding SARs where the closing market price for the Company's common stock was greater than the exercise price of the SAR. The Company accounts for stock-based compensation pursuant to the fair value recognition provisions of ASC Topic 718, Compensation — Stock Compensation ("ASC Topic 718").

Valuation and Expense Information Under ASC Topic 718

Substantially all stock-based compensation expense has been recorded in selling, general and administrative expenses. The following table summarizes stock-based compensation costs and related income tax benefits.



	Year Ended December 31,
	2017			2016			2015
Stock-based compensation expense	$	6.4		$	5.8		$	6.5
Income tax benefit	(2.5		)	(2.2		)	(2.5		)
Stock-based compensation, net of income tax benefit	$	3.9		$	3.6		$	4.0

The following table summarizes total compensation costs related to the Company's equity awards and amounts recognized in the year ended December 31, 2017.



	Stock Options			Performance Shares and RSUs
Unrecognized compensation cost — December 31, 2016	$	0.6		$	1.7
Grant date fair value current year grants	1.9			5.1
Compensation expense recognized	(1.9		)	(4.5		)
Unrecognized compensation cost — December 31, 2017	$	0.6		$	2.3
Expected amortization period (in years)	1.8			1.7

Stock Options/SARs

In August 2014, the Compensation Committee of the Board of Directors approved the conversion of approximately 545,000 outstanding non-qualified stock options held by U.S. employees and U.S. non-employee directors to an equal number of SARs. Upon exercise, the holder of an SAR will receive common shares equal to the number of SARs exercised multiplied by a fraction where the numerator is equal to the market price at the time of exercise minus the exercise price of the SAR and the denominator is equal to the market price at the time of exercise. The SARs can only be settled for shares of Common Stock and the Company will not receive any cash proceeds upon exercise. All other contractual terms of the SARs are unchanged from those of the converted non-qualified stock options. At the date of conversion the fair value of the SARs was equal to the fair value of the stock options exchanged. As a result, the Company did not recognize any additional compensation expense due to the conversion.

The following tables present information regarding stock options awarded during the years ended December 31, 2017, 2016 and 2015.



	2017		2016		2015
Nonqualified stock options granted	144,089		113,935		87,930
Per share weighted-average exercise price	$	82.11	$	58.03	$	59.72
Per share weighted-average grant date fair value	$	13.54	$	13.51	$	16.47

The weighted-average grant date fair value for stock options granted for the years ended December 31, 2017, 2016 and 2015 was estimated using the Black-Scholes option valuation model with the following assumptions:



	2017		2016		2015
Expected term in years	5.8		5.8		5.8
Risk free interest rate	2.1	%	1.8	%	1.4	%
Volatility	22.9	%	32.1	%	34.4	%
Dividend yield	3.0	%	3.0	%	2.0	%

Expected volatility and the expected term were estimated by reference to the historical stock price performance of the Company and historical data for the Company's stock option awards, respectively. The risk-free interest rate was based on the yield on U.S. Treasury bonds with a remaining term approximately equal to the expected term of the stock option awards. Forfeitures were estimated at the date of grant.

The following table summarizes stock option activity under the Omnibus Plan for the year ended December 31, 2017:



	Number of Stock Options	Weighted-Average Exercise Price
Options outstanding — December 31, 2016	530,462	$	38.35
Add: Options granted	144,089	$	82.11
Less: Options exercised	207,973	$	29.88
Less: Options forfeited/cancelled	1,620	$	65.60
Options outstanding — December 31, 2017	464,958	$	55.60

The status of outstanding and exercisable stock options as of December 31, 2017, summarized by exercise price follows:



	Options Vested or Expected to Vest						Options Exercisable

Exercise Price	Number of Options	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Aggregate Intrinsic Value (a)		Number of Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value (a)
$7.41 — $19.25	52,727	1.9	$	13.06	$	4.1	52,727	$	13.06	$	4.1
$21.13 — $31.23	58,490	3.9	$	27.56	3.7		58,490	$	27.56	3.7
$42.82 — $51.99	37,526	6.0	$	43.49	1.8		37,526	$	43.49	1.8
$55.49 — $60.56	172,626	7.5	$	58.68	5.5		76,141	$	58.93	2.4
>$60.56	143,589	8.5	$	82.11	1.2		17,060	$	82.15	0.1
	464,958	6.6	$	55.60	$	16.3	241,944	$	40.59	$	12.1

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(a)	Represents the total pre-tax intrinsic value as of December 31, 2017 that option holders would have received had they exercised their options as of such date. The pre-tax intrinsic value is based on the closing market price for the Company's common stock of $90.65 on December 31, 2017.

The aggregate pre-tax intrinsic value of stock options exercised for the years ended December 31, 2017, 2016 and 2015 was $11.5 million, $4.7 million and $5.5 million, respectively.

The following table summarizes the status of the Company's unvested stock options as of December 31, 2017 and activity for the year then ended:



	Number of Stock Options	Weighted-Average Grant Date Fair Value
Outstanding — December 31, 2016	194,126	$	15.15
Add: Options granted	144,089	$	13.54
Less: Options vested	115,201	$	14.06
Outstanding — December 31, 2017	223,014	$	13.87

As of December 31, 2017, certain participants met age and service requirements that allowed their options to qualify for accelerated vesting upon retirement. As of December 31, 2017, there were approximately 155,000 stock options subject to accelerated vesting that such participants would have been eligible to exercise if they had retired as of such date. The aggregate grant date fair value of options subject to accelerated vesting was $2.1 million. For the year ended December 31, 2017, stock-based compensation expense for such options was $1.2 million. For the year ended December 31, 2017, the aggregate grant date fair value of options vested, including options subject to accelerated vesting, was $1.9 million. Stock options that reflect accelerated vesting for expense recognition become exercisable according to the contract terms of the stock option grant.

PSUs/RSUs

For the year ended December 31, 2017, the Company granted target awards of 41,883 PSUs. The measurement period for three fourths of the PSUs is January 1, 2017 through December 31, 2017, and for the remaining fourth of the PSUs is January 1, 2017 through December 31, 2019. The PSUs vest on December 31, 2019. Common Stock equal to not less than 40 percent and not more than 200 percent of the PSUs target will be awarded based on the Company’s return on invested capital, consolidated revenue growth, EPS and total return to shareholders relative to the companies in the Russell 2000® Value small cap index. The Company’s return on invested capital, consolidated revenue growth and EPS are adjusted for certain items as further described in the Performance Share Award Agreement.

As of December 31, 2017, the Company expects that Common Stock equal to approximately 101 percent of the PSU targets will be earned. The market price on the date of grant for the PSUs was $82.12 per share. At the end of the measurement period, the PSUs convert into RSUs, at the determined rate mentioned above, that are entitled to dividends but do not have voting rights. The Company is recognizing stock-based compensation expense pro-rata over the vesting term of the PSUs/RSUs. For further discussion on participating securities refer to Note 3. "Earnings Per Share".

For the year ended December 31, 2017, the Company awarded 9,226 RSUs to non-employee members of the Board of Directors and 866 RSUs to employees. The weighted-average grant date fair value of such awards was $76.78 per share and the awards vest one year from the date of grant for the Board of Directors grants and three years from the date of grant for the employee grants. During the vesting period, the holders of the RSUs are entitled to dividends, but the RSUs do not have voting rights and are forfeited in the event the holder is no longer an employee or member of the Board of Directors on the vesting date.

The following table summarizes the activity of the Company's unvested stock-based awards (other than stock options) for the years ended December 31, 2017, 2016 and 2015:



	RSUs		Weighted-Average Grant Date Fair Value		PSUs		Weighted-Average Grant Date Fair Value
Outstanding — December 31, 2014	105,294		$	31.15	58,270		$	74.79
Shares granted (a)	13,415		$	61.41	45,060		$	78.32
Shares vested	(105,564	)	$	32.12	(810	)	$	78.32
Performance Shares vested	107,219		$	40.65	(58,270	)	$	74.79
Shares expired or cancelled	(1,526	)	$	51.14	(1,200	)	$	78.32
Outstanding — December 31, 2015	118,838		$	43.29	43,050		$	78.32
Shares granted (a)	10,047		$	68.25	54,364		$	73.82
Shares vested	(110,749	)	$	42.96	—		$	—
Performance Shares vested	62,874		$	53.63	(43,050	)	$	78.32
Shares expired or cancelled	(291	)	$	40.65	(858	)	$	75.98
Outstanding — December 31, 2016	80,719		$	54.91	53,506		$	73.79
Shares granted (a)	10,318		$	76.84	41,883		$	81.85
Shares vested	(72,451	)	$	55.26	—		$	—
Performance Shares vested	73,838		$	52.11	(53,506	)	$	73.79
Shares expired or cancelled	(3,625	)	$	50.48	(506	)	$	81.85
Outstanding — December 31, 2017 (b)	88,799		$	53.33	41,377		$	81.85

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(a)	For the years ended December 31, 2017, 2016 and 2015, includes 226 RSUs, 312 RSUs and 495 RSUs, respectively, that were granted in lieu of cash dividends. Such dividends-in-kind vest concurrently with the underlying RSUs.


(b)	The aggregate pre-tax intrinsic value of outstanding RSUs as of December 31, 2017 was $8.0 million.

The aggregate pre-tax intrinsic value of restricted stock and RSUs that vested for the years ended December 31, 2017, 2016 and 2015 was $6.3 million, $9.3 million and $6.6 million, respectively.

Excess Tax Benefits

Excess tax benefits represent the difference between the tax deduction the Company will receive on its tax return for compensation recognized by employees upon the vesting or exercise of stock-based awards and the tax benefit recognized for the grant date fair value of such awards. For the years ended December 31, 2017, 2016 and 2015, the Company recognized excess tax benefits related to the exercise or vesting of stock-based awards of $4.5 million, $3.1 million and $2.6 million, respectively.