Stock-Based Compensation

Stock Incentive Compensation Plans

We have two stock incentive plans: the 2007 Stock Incentive Plan (the “2007 Plan”), as amended effective March 20, 2007, and the 2013 Stock Incentive Plan (the “2013 Plan”), collectively referred to as (the “Stock Incentive Plans”). The Stock Incentive Plans permit awards of stock options, restricted stock units, performance stock units and other stock-based awards to our officers, key employees and non-employee directors on terms determined by the Compensation Committee of the Board of Directors (the “Committee”). The aggregate number of shares available for issuance under the 2007 Plan and 2013 Plan is 1,200,000 and 1,040,000, respectively. Under the 2007 Plan, no more than an aggregate of 400,000 shares are available for issue of stock-based awards other than stock options and stock appreciation rights. As of December 31, 2016, shares available for future grant under the 2007 Plan and 2013 Plan are 78,417 and 320,172, respectively. Prior the adoption of the 2007 Plan, we granted stock-based awards to purchase shares of our common stock to officers, key employees and non-employee directors under certain predecessor plans. No further awards can be granted under these predecessor plans.

Stock Options

In the years ended December 31, 2016, 2015, and 2014, we granted stock options to our officers, key employees and non-employee directors of 123,500, 73,000, and 71,000, respectively, with weighted-average grant date fair values of $6.53, $10.63, and $12.62, respectively. Stock options have been granted with an exercise price equal to the fair market value of our stock on the date of grant and expire not more than seven years from the date of grant. The stock options typically vest over a period of four years from the date of grant. The option price and number of shares are subject to adjustment under certain dilutive circumstances. If an employee terminates employment, the non-vested portion of the stock options will not vest and all rights to the non-vested portion will terminate completely.

Stock option activity for the year ended December 31, 2016 were as follows:



	Number of Stock Options		Weighted- Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2016	483,491		$	20.08
Granted	123,500		$	15.92
Exercised	(132,325	)	$	16.04
Expired	(19,516	)	$	22.66
Forfeited	(15,600	)	$	18.54
Outstanding at December 31, 2016	439,550		$	20.07	4.4	$	2,414
Exerciseable at December 31, 2016	214,375		$	20.24	3.3	$	1,141

Changes in nonvested stock options for the year ended December 31, 2016 were as follows:



	Number of Stock Options		Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2016	231,600		$	10.03
Granted	123,500		$	6.53
Vested	(114,325	)	$	7.95
Forfeited	(15,600	)	$	8.08
Nonvested at December 31, 2016	225,175		$	8.77

The aggregate intrinsic value of stock options represents the amount by which the market price of our common stock exceeds the exercise price of the stock option. The aggregate intrinsic value of stock options exercised for the years ended December 31, 2016, 2015 and 2014 was $1.3 million, $2.3 million, and $1.0 million, respectively. Cash received from stock options exercised for the years ended December 31, 2016, 2015 and 2014 was $2.1 million, $3.1 million, and $2.3 million, respectively, with related tax benefits of $0.5 million, $0.9 million, and $0.4 million, respectively. The total amount of stock options vested and expected to vest in the future is 439,550 shares with a weighted-average exercise price of $20.07 and an aggregate intrinsic value of $2.4 million. These stock options have a weighted-average remaining contractual term of 4.4 years.

The share-based compensation cost expensed for stock options for the years ended December 31, 2016, 2015, and 2014 (before tax benefits) was $0.8 million, $1.2 million, and $1.5 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2016, total unrecognized compensation cost (before tax benefits) related to stock options of $1.3 million is expected to be recognized over a weighted-average period of 2.3 years. The total fair value of stock options vested during the years ended December 31, 2016, 2015, and 2014 was $0.9 million, $1.3 million, and $1.3 million, respectively.

We apply fair value accounting for stock-based compensation based on the grant date fair value estimated using a Black-Scholes-Merton (“Black-Scholes”) valuation model. The assumptions used to compute the fair value of stock option grants under the Stock Incentive Plans for years ended December 31, 2016, 2015, and 2014 were as follows:



	Years Ended December 31,
	2016		2015		2014
Risk-free interest rate	1.20	%	1.13	%	1.67	%
Expected volatility	51.79	%	53.72	%	55.27	%
Expected dividends	—		—		—
Expected term (in months)	48		47		66

We recognize compensation expense, net of an estimated forfeiture rate, on a straight-line basis over the requisite service period of the award. We have one award population with an option vesting term of four years. We estimate the forfeiture rate based on our historic experience, attempting to determine any discernible activity patterns. The expected life computation is based on historic exercise patterns and post-vesting termination behavior. The risk-free interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is derived from historical volatility of our common stock. We suspended payments of dividends after the first quarter of 2011.

Restricted Stock Units

We granted restricted stock units (“RSUs”) to certain officers, key employees and non-employee directors of 139,450, 108,500, and 86,300 RSUs during the years ended December 31, 2016, 2015, and 2014, respectively, with weighted-average grant date fair values (equal to the fair market value of our stock on the date of grant) of $15.97, $25.15, and $24.74 per share, respectively. RSUs represent a right to receive a share of stock at future vesting dates with no cash payment required from the holder. The RSUs have a three year vesting term of 33%, 33% and 34% on the first, second and third anniversaries of the date of grant, respectively. If an employee terminates employment, their non-vested portion of the RSUs will not vest and all rights to the non-vested portion will terminate.

Restricted stock unit activity for the year ended December 31, 2016 was as follows:



	Number of Restricted Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2016	155,191		$	24.24
Granted	139,450		15.97
Vested	(84,107	)	23.34
Forfeited	(17,152	)	21.76
Outstanding at December 31, 2016	193,382		$	18.88

The share-based compensation cost expensed for RSUs for the years ended December 31, 2016, 2015, and 2014 (before tax benefits) was $1.8 million, $1.8 million, and $1.3 million respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2016, total unrecognized compensation cost (before tax benefits) related to RSUs of $2.2 million is expected to be recognized over a weighted average period of 1.7 years. The total fair value of RSUs vested for the years ended December 31, 2016, 2015, and 2014 was $1.3 million, $1.8 million, and $1.3 million, respectively. The tax benefit realized from vested RSUs for the years ended December 31, 2016, 2015, and 2014 was $0.7 million, $0.7 million, and $0.5 million, respectively.

Performance Stock Units

We granted performance stock awards (“PSUs”) to certain key employees of 62,500, 64,000, and 67,500 PSUs during the years ended December 31, 2016, 2015, and 2014, respectively, with weighted-average grant date fair values of $15.92, $25.51, and $24.90 per share, respectively. PSU awards are subject to the attainment of performance goals established by the Committee, the periods during which performance is to be measured, and all other limitations and conditions applicable to the awarded shares. Performance goals are based on a pre-established objective formula that specifies the manner of determining the number of performance stock awards that will be granted if performance goals are attained. If an employee terminates employment, their non-vested portion of the PSUs will not vest and all rights to the non-vested portion will terminate.

Performance stock activity for the year ended December 31, 2016 was as follows:



	Number of Performance Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at January 1, 2016	133,497		$	22.86
Granted	62,500		15.92
Vested	(44,979	)	18.36
Forfeited	(29,381	)	25.22
Outstanding at December 31, 2016	121,637		$	20.39

The share-based compensation cost expensed for PSUs for the years ended December 31, 2016, 2015, and 2014 (before tax benefits) was $0.4 million, $0.5 million and $1.0 million, respectively, and is included in selling, general and administrative expenses on the consolidated income statements. At December 31, 2016, total unrecognized compensation cost (before tax benefits) related to PSUs of $1.1 million is expected to be recognized over a weighted-average period of 1.3 years. The total fair value of PSUs vested during the years ended December 31, 2016, 2015, and 2014, was $1.1 million, $0.9 million, and zero, respectively. The tax benefit realized from PSUs for the years ended December 31, 2016, 2015, and 2014 were $0.2 million, 0.3 million, and zero, respectively.