Note 14 — Stock-based compensation

During the 2013 Annual Meeting of Shareholders, 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.

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. For grants made prior to November 2012, vesting ceases upon retirement, death and disability, and unvested shares are forfeited. For grants made in or after November 2012, in the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other unvested options granted. In the event of disability or death, all unvested stock options fully vest. Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances. The amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date. Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized compensation expense related to stock options of $10,251, $4,906 and $3,789 for 2014, 2013 and 2012, respectively. The increase in the 2014 expense was primarily related to accelerated amortization of the cost of options.

The following table summarizes activity related to stock options during 2014:


	Number of Options			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted- Average Remaining Term
Outstanding at October 31, 2013		1,749		$	34.63
Granted		277		$	71.75
Exercised		(314	)	$	22.35
Forfeited or expired		(26	)	$	51.57

Outstanding at October 31, 2014		1,686		$	42.77	$	56,957		6.0 years

Vested at October 31, 2014 or expected to vest		1,673		$	42.58	$	56,841		6.0 years
Exercisable at October 31, 2014		955		$	30.86	$	43,626		4.6 years

Summarized information on currently outstanding options follows:


	Range of Exercise Price
	$14 — $28		$29 — $44		$45 — $73
Number outstanding		610		543		533
Weighted-average remaining contractual life, in years		3.5		6.4		8.6
Weighted-average exercise price	$	22.54	$	41.90	$	66.78
Number exercisable		578		318		59
Weighted-average exercise price	$	22.28	$	40.71	$	61.62

As of October 31, 2014, there was $6,741 of total unrecognized compensation cost related to nonvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.4 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:


	2014	2013	2012
Expected volatility	40.1%-44.7%	45.3%-46.9%	45.4%-46.9%
Expected dividend yield	0.98%-1.03%	0.97%-1.01%	1.20%
Risk-free interest rate	1.51%-1.79%	0.75%-0.90%	1.03%-1.23%
Expected life of the option (in years)	5.4-6.1	5.4-6.1	5.4-6.1

The weighted-average expected volatility used to value options granted in 2014, 2013 and 2012 was 44.5 percent, 46.3 percent and 46.2 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 2014, 2013 and 2012 was $27.92, $24.12 and $17.03, respectively.

The total intrinsic value of options exercised during 2014, 2013 and 2012 was $17,223, $12,892 and $13,329, respectively.

Cash received from the exercise of stock options for 2014, 2013 and 2012 was $7,013, $6,018 and $4,934, respectively. The tax benefit realized from tax deductions from exercises for 2014, 2013 and 2012 was $6,385, $5,531 and $4,792, respectively.

Restricted shares and restricted share units — We may grant restricted shares and/or restricted share units to our employees and directors. These shares or units 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 vest on a pro-rata basis. In the event of termination of employment due to retirement at normal retirement age, 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 vesting of shares or units.

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

The following table summarizes activity related to restricted shares during 2014:


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Restricted at October 31, 2013		82		$	52.67
Granted		28		$	73.56
Vested		(39	)	$	48.13

Restricted at October 31, 2014		71		$	63.53

As of October 31, 2014, there was $2,074 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 1.7 years. The amount charged to expense related to restricted shares was $1,784, $2,464 and $1,724 in 2014, 2013 and 2012, respectively. These amounts included common share dividends $52, 57, and $53 in 2014, 2013 and 2012, respectively.

The following table summarizes activity related to restricted share units in 2014:


	Number of Units			Weighted-Average Grant Date Fair Value
Restricted share units at October 31, 2013		12		$	51.79
Granted		12		$	71.82
Vested		(19	)	$	62.07

Restricted share units at October 31, 2014		5		$	61.59

As of October 31, 2014, there was no remaining expense to be recognized related to outstanding restricted share units. The amount charged to expense related to restricted share units during 2014, 2013 and 2012 was $890, $598 and $370, respectively.

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

The following table summarizes activity related to director deferred compensation share equivalent units during 2014:


	Number of Shares			Weighted-Average Grant Date Fair Value Per Share
Outstanding at October 31, 2013		148		$	23.22
Restricted stock units vested		13		$	57.43
Dividend equivalents		1		$	76.49
Distributions		(52	)	$	19.20

Outstanding at October 31, 2014		110		$	29.74

The amount charged to expense related to director deferred compensation was $101, $183 and $265 in 2014, 2013 and 2012, respectively.

Performance share incentive awards — Executive officers and selected other key employees are eligible to receive common share-based incentive awards. Payouts, in the form of unrestricted common shares, vary based on the degree to which corporate financial performance exceeds predetermined threshold, target and maximum performance levels over three-year performance periods. No payout will occur unless certain threshold performance measures 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 our common shares at the grant date, reduced by the implied value of dividends not to be paid. This value was $69.25 per share for 2014, $59.59 per share for 2013 and $42.12 per share for 2012. The amounts charged to expense for executive officers and selected other key employees in 2014, 2013 and 2012 were $4,304, $3,588 and $4,235, respectively. The cumulative amount recorded in shareholders’ equity at October 31, 2014, and 2013 was $7,570 and $8,083, respectively.

Deferred compensation — Our executive officers and other highly compensated employees may elect to defer up to 100 percent of their base pay and cash incentive compensation and, for executive officers, up to 90 percent of their performance share-based incentive payout each year. Additional share units are credited for quarterly dividends paid on our common shares. Expense related to dividends paid under this plan was $129, $79 and $35 for 2014, 2013 and 2012, respectively.

Shares reserved for future issuance — At October 31, 2014, there were 2,430 of common shares reserved for future issuance through the exercise of outstanding options or rights.