Note 15 — Stock-based compensation

At the 2013 Annual Meeting of Shareholders on February 26, 2013, our shareholders approved the 2012 Stock Incentive and Award Plan (the “2012 Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted stock, performance shares, stock purchase rights, stock equivalent units, cash awards and other stock or performance-based incentives. A maximum of 2,900 common shares is available for grant under the Plan, inclusive of shares available to be granted under the 2008 Plan immediately prior to shareholder approval of the 2012 Plan.

Stock options — Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon the occurrence of events that involve or may result in a change of control. Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized compensation expense of $4,906, $3,789 and $2,906 for 2013, 2012 and 2011, respectively.

Following is a summary of stock options for 2013:


	Number of Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted- Average Remaining Term
Outstanding at October 31, 2012		1,764		$	28.35
Granted		283		$	61.61
Exercised		(283	)	$	21.72
Forfeited or expired		(15	)	$	48.38

Outstanding at October 31, 2013		1,749		$	34.63	$	65,492		6.1 years

Vested at October 31, 2013 or expected to vest		1,699		$	34.22	$	64,348		6.1 years
Exercisable at October 31, 2013		942		$	25.07	$	44,276		4.7 years

Summarized information on currently outstanding options follows:


	Range of Exercise Price
	$14 — $20		$21 — $31		$32 — $63
Number outstanding		452		500		797
Weighted-average remaining contractual life, in years		3.8		5.0		8.1
Weighted-average exercise price	$	16.15	$	27.15	$	49.82
Number exercisable		401		391		150
Weighted-average exercise price	$	16.37	$	26.96	$	43.47

As of October 31, 2013, there was $9,631 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.7 years.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:


	2013	2012	2011
Expected volatility	45.3%-46.9%	45.4%-46.9%	43.1%-45.1%
Expected dividend yield	0.97%-1.01%	1.20%	1.28%
Risk-free interest rate	0.75%-0.90%	1.03%-1.23%	1.89%-2.25%
Expected life of the option (in years)	5.4-6.1	5.4-6.1	5.4-6.3

The weighted-average expected volatility used to value options granted in 2013, 2012 and 2011 was 46.3 percent, 46.2 percent and 44.3 percent, respectively.

Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of United States Treasury issues with terms equal to the expected life of the option being valued.

The weighted average grant date fair value of stock options granted during 2013, 2012 and 2011 was $24.12, $17.03 and $16.80, respectively.

The total intrinsic value of options exercised during 2013, 2012 and 2011 was $12,892, $13,329 and $23,076, respectively. Cash received from the exercise of stock options for 2013, 2012 and 2011 was $6,018, $4,934 and $9,652, respectively. The tax benefit realized from tax deductions from exercises for 2013, 2012 and 2011 was $5,531, $4,792 and $6,924, respectively.

Restricted stock — We may grant restricted shares to our employees and directors. These shares may not be transferred for a designated period of time (generally one to three years) defined at the date of grant.

For employee recipients, in the event of termination of employment due to early retirement, restricted shares granted within 12 months prior to termination are forfeited, and other restricted shares are forfeited on a pro-rata basis. In the event of termination of employment due to retirement at normal retirement age (age 65) restricted shares granted within 12 months prior to termination are forfeited, and, for other restricted shares, the restriction period will terminate and the shares will vest and be transferable. Restrictions lapse in the event of a recipient’s disability or death. Termination for any other reason prior to the lapse of any restrictions results in forfeiture of the shares.

For non-employee directors, all restrictions lapse in the event of disability or death of the non-employee director. Termination of service as a director for any other reason within one year of date of grant results in a pro-rata forfeiture of shares.

As shares are issued, deferred stock-based compensation equivalent to the fair market value on the date of grant is charged to shareholders’ equity and subsequently amortized over the vesting period. Tax benefits arising from the lapse of restrictions on the stock are recognized when realized and credited to capital in excess of stated value.

The following table summarizes 2013 activity related to restricted stock:


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Restricted at October 31, 2012		100		$	40.58
Granted		36		$	62.08
Vested		(51	)	$	35.85
Forfeited		(3	)	$	48.18

Restricted at October 31, 2013		82		$	52.67

As of October 31, 2013, there was $1,827 of unrecognized compensation cost related to restricted stock. The cost is expected to be amortized over a weighted average period of 1.7 years. The amount charged to expense related to restricted stock was $2,464, $1,724 and $1,278 in 2013, 2012 and 2011, respectively.

Deferred directors’ compensation — Non-employee directors may defer all or part of their compensation until retirement. Compensation may be deferred as cash or as stock equivalent units. Deferred cash amounts are recorded as liabilities. Additional stock equivalent units are earned when common stock dividends are declared.

The following table summarizes activity related to director deferred compensation share equivalent units during 2013:


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Outstanding at October 31, 2012		200		$	19.44
Deferrals		1		$	69.39
Restricted stock units vested		11		$	45.20
Dividend equivalents		1		$	68.03
Distributions		(65	)	$	17.03

Outstanding at October 31, 2013		148		$	23.22

The amount charged to expense related to this plan was $183, $265 and $265 in 2013, 2012 and 2011, respectively.

Long-term incentive plan — Under the long-term incentive plan, executive officers and selected other key employees receive common stock unit awards based on corporate performance measures over three-year performance periods. Awards vary based on the degree to which corporate performance exceeds predetermined threshold, target and maximum performance levels at the end of a performance period. No award will occur unless certain threshold performance objectives are exceeded.

The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of common stock at the grant date, adjusted for dividends not to be paid. This value was $59.59 per share for 2013, $42.12 per share for 2012 and $42.02 per share for 2011. The cumulative amounts recorded in shareholders’ equity at October 31, 2013, 2012 and 2011 were $8,083, $8,707 and $6,081, respectively. The amounts charged to expense for executive officers and selected other key employees in 2013, 2012 and 2011 were $3,588, $4,235 and $4,067, respectively.

Shares reserved for future issuance — At October 31, 2013, there were 2,657 of common shares reserved for future issuance through the exercise of outstanding options or rights.