Share-Based Payments and Other Compensation

On June 2, 2011, our stockholders approved the Amended and Restated 1997 Incentive and Capital Accumulation Plan (2011 Restatement) (the "Incentive Plan") to, among other things, increase the aggregate number of shares of our common stock, par value $1.00 per share, authorized for issuance under the Incentive Plan by 700,000 shares from 1,500,000 shares to 2,200,000 shares and extend the term of the Incentive Plan until October 25, 2020. The Incentive Plan provides for the grant of stock options, stock appreciation rights, stock awards, performance awards, and stock units to our officers, employees and directors. The exercise price of stock options may not be less than the stock exchange closing price of our common stock on the date of grant. Stock option awards under the Incentive Plan generally expire 10 years after the date of grant.

As of December 31, 2014, an aggregate of 1,018,980 shares of our common stock, subject to certain adjustments, were reserved for issuance under the Incentive Plan, including an aggregate of 743,047 options, restricted stock units and stock units granted. There were 275,933 shares available for grant at December 31, 2014.

During 2013, we cancelled 114,750 restricted shares granted in 2011 to certain executives and issued additional performance-based restricted shares in exchange. The cancellation and issuance of shares was accounted for as a modification with the future compensation expense computed using the greater of unamortized fair value of the cancelled awards or the incremental fair value as remeasured each reporting period. We also issued performance-based restricted shares to other members of management. Vesting is contingent upon the achievement of certain performance objectives, some of which are subjective in nature. Compensation cost for these awards is recognized over the service period, and variable accounting is applied whereby the fair value of the award is remeasured each reporting period until vesting occurs.

Compensation expense related to the stock option, restricted stock, and restricted stock unit awards during the years ended December 31, 2014, 2013, and 2012 was $2.8 million, $1.6 million, and $3.0 million, respectively. During 2014, we did not grant any stock options. During 2014, we granted 127,518 restricted stock unit awards, which have a weighted average grant date fair value of $13.59 per share.

As of December 31, 2014, there was $1.5 million of unrecognized compensation expense related to unvested restricted stock units. That expense is expected to be recognized over a weighted-average period of 1.61 years.

As of December 31, 2014, there was $3.3 million of unrecognized compensation expense related to unvested stock options. That expense is expected to be recognized over a weighted-average period of 1.7 years.

Under ASC 718 Stock Compensation ("ASC 718"), the fair value of awards of restricted stock and units which do not contain a specified hurdle price condition is based on the market price of our common stock on the date of grant. Under ASC 718, the fair value of restricted stock awards that contain a specified hurdle price condition is estimated on the grant date using the Monte-Carlo option valuation model. Under ASC 718, the fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. The valuation models require assumptions and estimates to determine expected volatility, expected life, expected dividend yield and expected risk-free interest rates. The expected volatility was determined using historical volatility of our stock based on the contractual life of the award. The risk-free interest rate assumption was based on the yield on zero-coupon U.S. Treasury strips at the award grant date. We also used historical data to estimate forfeiture experience.

The significant weighted average assumptions used for the years ended December 31, 2014, 2013 and 2012 were as follows:



	2014			2013			2012
Dividend yield	—		%	—		%	—		%
Volatility rate	42.60%			52.37%-52.49%			47.40%-61.25%
Risk-free interest rate	0.66%			1.66%-1.86%			0.17%-0.43%
Expected life (years)	2.91			6.25			0.50-4.08
Weighted average fair value of units granted	$	9.30		$	8.75		$	7.98

A summary of the status of the stock option activity for the years ended December 31, 2014, 2013 and 2012 is presented below:



	2014				2013				2012
	Stock Options		Weighted Average Exercise Price		Stock Options		Weighted Average Exercise Price		Stock Options	Weighted Average Exercise Price
Outstanding at beginning of year	585,036		$	16.99	110,000		$	25.00	110,000	$	25.00
Granted	—		—		585,036		16.99		—	—
Exercised	—		—		—		—		—	—
Forfeited	(30,000	)	16.80		(110,000	)	—		—	—
Outstanding at end of year	555,036		$	17.00	585,036		$	16.99	110,000	$	25.00
Exercisable at end of year	146,259		$	16.99	—		$	—	110,000	$	25.00

The weighted average remaining contractual life of stock options outstanding as of December 31, 2014 was 8.8 years.

A summary of the restricted stock and stock units activity for the year ended December 31, 2014, is presented below:



	Restricted Stock and Stock Units			Weighted Average Grant Date Fair Value
Outstanding at beginning of year	120,588		(1)	$	19.68
Granted	127,518			13.59
Vested	(72,590	)		16.23
Expired/Forfeited/Cancelled	(30,164	)		14.66
Outstanding at end of year	145,352			$	16.77

(1) Restricted stock shares are considered legally outstanding but are not considered outstanding for accounting purposes until the vesting conditions are satisfied in accordance with authoritative accounting guidance.

Under a deferral program, non-management directors may elect to defer up to 50% of annual retainer fees, committee fees and/or chairperson fees, for which the director is credited with a number of stock units based upon the closing price of our common stock on the due date of each payment. The number of stock units become distributable as shares of common stock upon the earlier of a date designated by the individual director or the date of the individual’s separation from service as a director. No stock units were distributed to non-management directors during the years ended December 31, 2014, 2013 and 2012, respectively. The outstanding balance of stock units as of December 31, 2014, 2013 and 2012 was 42,659, 36,257 and 30,929, respectively.