SHARE-BASED AWARDS

2012 Incentive Compensation Plan (“2012 Plan”): The 2012 Incentive Compensation Plan allows for the granting of stock options, restricted stock units and common stock. Under the 2012 Plan, 4.3 million shares of common stock were initially reserved for issuance, and as of December 31, 2014, 1.4 million shares of the Company’s common stock remained available for future issuance, which is reflective of a 2.7 million share reduction for outstanding equity awards replaced when the Company separated from Matson. The shares of common stock authorized to be issued under the 2012 Plan may be drawn from the shares of the Company’s authorized but unissued common stock or from shares of its common stock that the Company acquires, including shares purchased on the open market or private transactions.

The 2012 Plan consists of four separate incentive compensation programs: (i) the discretionary grant program, (ii) the stock issuance program, (iii) the incentive bonus program and (iv) the automatic grant program for the non-employee members of the Company’s Board of Directors. Share-based compensation is generally awarded under three of the four programs, as more fully described below.

Discretionary Grant Program: Under the Discretionary Grant Program, stock options may be granted with an exercise price no less than 100 percent of the fair market value (defined as the closing market price) of the Company’s common stock on the date of the grant. Options generally become exercisable ratably over three years and have a maximum contractual term of 10 years.

Stock Issuance Program: Under the Stock Issuance Program, shares of common stock or restricted stock units may be granted. Equity awards granted may be designated as time-based or performance-based.

Automatic Grant Program: At each annual shareholder meeting, non-employee directors will receive an award of restricted stock units that entitle the holder to an equivalent number of shares of common stock upon vesting. Awards of restricted stock units granted under the program generally vest ratably over three years.

There were no option grants in 2014 and 2013, and the Company currently does not expect to issue options in the future. Activity in the Company’s stock option plans in 2014 was as follows (in thousands, except weighted average exercise price and weighted average contractual life):



	2012 Plan		Weighted Average Exercise Price	Weighted Average Contractual Life	Aggregate Intrinsic Value
Outstanding, January 1, 2014	1,337.3		$19.21
Exercised	(212.7	)	$21.13
Forfeited and expired	—		$—
Outstanding, December 31, 2014	1,124.6		$18.84	4.5	$23,478

Vested or expected to vest	1,113.4		$18.84	4.5	$23,243
Exercisable, December 31, 2014	1,075.0		$18.67	4.4	$22,627

The following table summarizes 2014 non-vested restricted stock unit activity (in thousands, except weighted average grant-date fair value amounts):



	2012 Plan Restricted Stock Units		Weighted Average Grant-Date Fair Value
Outstanding, January 1, 2014	242.3		$27.92
Granted	123.0		$39.38
Vested	(86.3	)	$25.37
Canceled	—		$—
Outstanding, December 31, 2014	279.0		$33.76

A portion of the restricted stock unit awards are time-based awards that vest ratably over three years. The remaining portion of the awards represents performance-based awards that cliff vest after two years, provided that the total shareholder return of the Company’s common stock over the 2-year measurement period meets or exceeds pre-defined levels of relative total shareholder returns of the Standard & Poor’s MidCap 400 Index. The fair value of the Company’s time-based awards is determined using the Company’s stock price on the date of grant. The fair value of the Company’s performance-based awards that are contingent upon meeting a market condition is estimated using the Company’s stock price on the date of grant and the probability of vesting using a Monte Carlo simulation with the following assumptions:



	2014		2013
Volatility of A&B common stock	25.4	%	31.8	%
Average volatility of peer companies	27.3	%	35.7	%
Risk-free interest rate	0.37	%	0.29	%

The weighted average fair value of the time-based restricted stock units and performance share units was $39.38 in 2014 and $34.12 in 2013. No compensation cost is recognized for estimated or actual forfeitures of time-based or performance-based awards if an employee is terminated prior to rendering the requisite service period.

A summary of compensation cost related to share-based payments is as follows (in millions):



	2014			2013			2012
Share-based expense (net of estimated forfeitures):
Stock options	$	0.3		$	0.7		$	1.1
Incremental share-based compensation cost related to separation	0.2			0.5			1.2
Non-vested stock & restricted stock units	4.4			3.0			3.1
Total share-based expense	4.9			4.2			5.4
Total recognized tax benefit	(1.5		)	(1.3		)	(1.8		)
Share-based expense (net of tax)	$	3.4		$	2.9		$	3.6

Cash received upon option exercise	$	4.5		$	7.6		$	20.9
Intrinsic value of options exercised	$	5.4		$	6.7		$	13.4
Tax benefit realized upon option exercise	$	2.0		$	2.5		$	2.3
Fair value of stock vested	$	2.6		$	5.2		$	4.2