Stock Plans

The 2016 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible key employees through May 2026. Management stock-based compensation includes stock options, restricted stock, restricted stock units and performance stock units. The 2008 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2018. Stock options are granted at market prices and expire after ten years. Stock options are exercisable beginning three years after the grant date. Restricted stock and restricted stock units are granted without payment to the Company and generally vest three years after the grant date. Restricted stock and restricted stock units are valued at the market value of the stock on the grant date. Performance stock units with a market condition are valued at an estimated fair value using the Monte Carlo model. The final number of shares to be issued for performance stock units may range from zero to 200% of the target award based on achieving the specified performance targets over the performance period. In general, unvested stock options, restricted stock and performance stock units are forfeited if the participant’s employment with the Company terminates for any reason other than retirement, death or disability. We issue Treasury shares for stock option exercises and grants of restricted stock and performance stock. Please refer to Note 6 for further information regarding stock compensation share issuance. As of December 31, 2016, there were 1,368,638 and 139,657 shares, respectively, reserved for future grants under the management and non-employee directors’ equity incentive plans.

Stock-based compensation expense was as follows:



(In thousands)	2016		2015		2014
Restricted stock	$	3,456	$	3,035	$	4,026
Stock options	2,459		2,454		2,355
Performance stock	3,296		2,110		2,672
Total compensation expense before income taxes	9,211		7,599		9,053
Income tax benefit	3,375		2,896		3,293
Total compensation expense, net of income tax benefit	$	5,836	$	4,703	$	5,760

We did not capitalize any stock-based compensation expense, and all expense is recorded in SG&A expense in 2016, 2015, or 2014.

Stock option expense is based on the fair value of stock option grants estimated on the grant dates using the Black-Scholes option pricing model and the following weighted average assumptions for options granted in 2016, 2015 and 2014.



	2016			2015			2014
Fair value per option	$	11.69		$	15.63		$	17.26
Risk-free interest rate	1.6		%	1.8		%	2.1		%
Expected dividend yield	2.8		%	2.3		%	2.4		%
Expected volatility	34		%	39		%	41		%
Expected life (years)	7.0			6.7			6.6

The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the one year average closing share price. Expected volatility is based on the ten year historical volatility using daily stock prices. Expected life is based on historical stock option exercise data.

A summary of option activity follows:



	Shares		Weighted Average Exercise Price		Exercisable at Year-end
Outstanding January 1, 2014	1,695,380		$	34.55
Granted	138,519		51.69
Exercised	(190,743	)	36.31
Expired	(1,071	)	45.68
Forfeited	(23,524	)	38.82
Outstanding December 31, 2014	1,618,561		35.74		1,147,712
Granted	170,683		48.64
Exercised	(64,752	)	38.59
Expired	(1,109	)	44.36
Forfeited	(28,708	)	49.71
Outstanding December 31, 2015	1,694,675		36.69		1,280,665
Granted	235,233		44.50
Exercised	(341,063	)	37.34
Forfeited	(12,753	)	46.11
Outstanding December 31, 2016	1,576,092		$	37.63	1,098,615

For various exercise price ranges, characteristics of outstanding and exercisable stock options at December 31, 2016 were as follows:



	Stock Options Outstanding
Range of Exercise Prices	Shares	Weighted-Average
Range of Exercise Prices	Shares	Exercise Price		Remaining Life
$17.83 – $33.00	456,938	$	21.66	2.64
$33.01 – $45.00	566,173	39.60		6.06
$45.01 – $51.69	552,981	48.82		5.69
$17.83 – $51.69	1,576,092	$	37.63	4.94



	Stock Options Exercisable
Range of Exercise Prices	Shares	Weighted-Average
Range of Exercise Prices	Shares	Exercise Price		Remaining Life
$17.83 – $33.00	456,938	$	21.66	2.64
$33.01 – $45.00	346,157	36.49		4.09
$45.01 – $51.69	295,520	47.84		3.91
$17.83 – $51.69	1,098,615	$	33.37	3.44

Cash received from the exercise of stock options was $12.5 million, $1.9 million and $6.9 million for the years ended December 31, 2016, 2015 and 2014, respectively. The tax benefit (provision) we realized from these exercises was $0.6 million, $(0.1) million and $1.0 million for the years ended December 31, 2016, 2015 and 2014, respectively.

Stock options become exercisable when they are vested. The aggregate intrinsic value of stock options exercisable at December 31, 2016 was $39.5 million. The aggregate intrinsic value of all stock options outstanding at December 31, 2016 was $50.0 million.

A summary of restricted stock and unit activity follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2014	303,419		$	39.79
Granted	83,543		51.91
Vested	(108,245	)	34.94
Forfeited	(9,974	)	44.42
Unvested at December 31, 2014	268,743		45.34
Granted	83,725		48.06
Vested	(111,834	)	39.01
Forfeited	(22,925	)	45.84
Unvested at December 31, 2015	217,709		49.70
Granted	107,465		50.65
Vested	(76,568	)	49.12
Forfeited	(14,014	)	48.23
Unvested at December 31, 2016	234,592		$	49.76

A summary of performance stock unit activity follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1, 2014	149,389		$	46.32
Granted	46,242		57.42
Vested	(91,696	)	39.19
Performance adjustments	41,428		39.42
Forfeited	(1,402	)	48.85
Unvested at December 31, 2014	143,961		52.42
Granted	87,256		41.99
Vested	(66,200	)	41.75
Performance adjustments	16,447		41.45
Forfeited	(9,820	)	51.51
Unvested at December 31, 2015	171,644		50.24
Granted	65,355		44.28
Vested	(31,181	)	58.54
Performance adjustments	(15,594	)	58.54
Forfeited	(3,603	)	44.47
Unvested at December 31, 2016	186,621		$	46.18

The 2016 performance adjustments above relate to the final number of shares issued for the 2013 Management Performance Units, which were 66.6% of the target award based on Total Shareholder Return during the three year performance period, and vested in the first quarter of 2016.

During the years ended December 31, 2016, 2015 and 2014, the total intrinsic value of stock options exercised (the difference between the market price on the date of exercise and the option price paid to exercise the option) was $6.4 million, $0.5 million and $3.7 million, respectively. The fair values of restricted stock vested during the years ended December 31, 2016, 2015 and 2014 were $3.7 million, $5.3 million and $5.8 million, respectively. The fair value of performance stock units vested during the year ended December 31, 2016 was $1.8 million.

On December 31, 2016, there was $6.7 million of unrecognized stock-based compensation expense. The weighted average period over which this expense is expected to be recognized was approximately two years.