NOTE 13: STOCK-BASED COMPENSATION

On May 5, 2016, the 2016 Incentive Compensation Plan (the “Incentive Compensation Plan”) was approved by the Company’s shareholders for the purpose of granting stock awards to officers and employees of the Company and its subsidiaries. There are 5,100,000 shares of Class A Common Stock authorized for issuance under the Incentive Compensation Plan, of which 4,451,948 shares were available for grant as of September 30, 2016. On May 5, 2016, the Stock Compensation Plan for Non-Employee Directors (the “Directors Plan” and, together with the Incentive Compensation Plan, “2016 Equity Plans”) was approved by the Company’s shareholders for the purpose of granting stock awards to the Company’s Board members. There are 200,000 shares of Class A Common Stock authorized for issuance under the Directors Plan, of which 200,000 shares were available for grant as of September 30, 2016.

On March 1, 2013, the Compensation Committee of the Board adopted the 2013 Equity Incentive Plan (the “Equity Incentive Plan”) for the purpose of granting stock awards to directors, officers and employees of the Company and its subsidiaries. Stock awarded pursuant to the Equity Incentive Plan was limited to five percent of the outstanding Common Stock on a fully diluted basis as of the Effective Date. There were 5,263,000 shares of Common Stock authorized for issuance under the Equity Incentive Plan. Prior to the adoption of the 2016 Equity Plans, the Company had 616,332 shares of Class A Common Stock available for grant under the Equity Incentive Plan. Subsequent to the approval of the 2016 Equity Plans by the Company’s shareholders, no additional awards will be granted under the Equity Incentive Plan.

The Incentive Compensation Plan provides for the granting of non-qualified stock options (“NSOs”), incentive stock options (“ISOs”), stock appreciation rights (“SARs”), restricted stock units (“RSUs”), performance share units (“PSUs”), restricted stock awards and other stock-based awards (collectively “Equity Awards”). The Directors Plan provides for the granting of shares, stock options and other stock-based awards (collectively “Director Equity Awards”). Pursuant to ASC Topic 718, “Compensation-Stock Compensation,” the Company measures stock-based compensation costs on the grant date based on the estimated fair value of the award and recognizes compensation costs on a straight-line basis over the requisite service period for the entire award. The Company’s equity plans allow employees and directors to surrender to the Company shares of vested common stock upon vesting of their stock awards or at the time they exercise their NSOs in lieu of their payment of the required withholdings for employee taxes. The Company does not withhold taxes on Equity Awards in excess of minimum required statutory requirements.

Holders of RSUs and PSUs also receive DEUs until the RSUs or PSUs vest. See Note 12 for further information. The number of DEUs granted for each RSU or PSU is calculated based on the value of the dividends per share paid on the Company’s Common Stock and the closing price of the Company’s Common Stock on the dividend payment date. The DEUs vest with the underlying RSU or PSU.

NSO and RSU awards generally vest 25% on each anniversary of the date of the grant. Under the 2016 Equity Plans, the exercise price of an NSO award cannot be less than the market price of the Class A Common Stock at the time the NSO award is granted and has a maximum contractual term of 10 years.

PSU awards generally cliff vest at the end of the three-year performance periods, depending on the period specified in each respective PSU agreement. The number of PSUs that ultimately vest depends on the Company’s performance relative to specified financial targets for fiscal years 2016, 2017 and 2018. In the second quarter of 2016, the Company granted 214,416 supplemental PSU awards (“Supplemental PSUs”) to certain executive officers. A portion of the Supplemental PSUs will be eligible to vest until March 1, 2018 if a closing stock price of the Company’s Class A Common Stock is maintained for 10 consecutive trading days that equals or exceeds $44 and each increment of $2 thereafter, up to a maximum of $64, as adjusted for dividends declared (each such increment, a “Stock Price Hurdle”). No Stock Price Hurdle will be counted twice, and none of the Supplemental PSUs will vest unless the minimum $44 Stock Price Hurdle is achieved by March 1, 2018.

Unrestricted stock awards have been issued to certain members of the Board as compensation for retainer fees and long-term awards. The Company intends to facilitate settlement of all vested awards in common stock, with the exception of certain RSUs granted to non-US based employees which the Company expects to settle in cash.

The Company estimates the fair value of NSO awards using the Black-Scholes option-pricing model, which incorporates various assumptions including the expected term of the awards, volatility of the stock price, risk-free rates of return and dividend yield. The Company determines the fair value of PSU, RSU and unrestricted and restricted stock awards by reference to the quoted market price of the Class A Common Stock on the date of the grant. The Company determined the fair value of Supplemental PSUs using a Monte Carlo simulation model.

Stock-based compensation for the three months ended September 30, 2016 and September 30, 2015 totaled $10 million and $7 million, respectively. Stock-based compensation expense for the nine months ended September 30, 2016 and September 30, 2015 totaled $28 million and $24 million, respectively.

A summary of activity and weighted average exercise prices related to the NSOs is reflected in the table below.



	Nine Months Ended September 30, 2016
	Shares		Weighted Avg. Exercise Price
Outstanding, beginning of period	1,374,456		$	60.62
Granted	1,359,033		30.41
Forfeited	(220,601	)	40.28
Cancelled	(54,018	)	60.65
Outstanding, end of period	2,458,870		$	45.74
Vested and exercisable, end of period	575,682		$	61.10

A summary of activity and weighted average fair values related to the RSUs is reflected in the table below.



	Nine Months Ended September 30, 2016
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	839,789		$	58.39
Granted	819,301		29.91
Dividend equivalent units granted	25,208		38.17
Vested	(306,564	)	58.43
Dividend equivalent units vested	(5,732	)	41.33
Forfeited	(123,695	)	42.60
Dividend equivalent units forfeited	(2,489	)	39.12
Outstanding and nonvested, end of period (1)	1,245,818		$	40.01

(1) Includes 22,309 RSUs which were granted to foreign employees and which the Company expects to settle in cash. The fair value of these RSUs at September 30, 2016 was not material. These RSUs generally vest over a four year period.

A summary of activity and weighted average fair values related to the unrestricted stock awards is as follows:



	Nine Months Ended September 30, 2016
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	—		$	—
Granted	16,898		33.73
Vested	(16,898	)	33.73
Outstanding and nonvested, end of period	—		$	—

A summary of activity and weighted average fair values related to the PSUs and Supplemental PSUs is reflected in the table below.



	Nine Months Ended September 30, 2016
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	106,964		$	65.50
Granted (1)	295,390		21.26
Dividend equivalent units granted	6,417		39.05
Vested	(55,720	)	65.06
Dividend equivalent units vested	(1,009	)	41.64
Forfeited	(8,096	)	49.85
Dividend equivalent units forfeited	(199	)	39.79
Outstanding and nonvested, end of period	343,747		$	27.66

(1) Represents shares of PSUs for which performance targets have been established and which are deemed granted under U.S. GAAP. Includes 214,416 Supplemental PSUs with an average fair value of $16.13 which was determined using a Monte Carlo simulation model, as further described above.

As of September 30, 2016, the Company had not yet recognized compensation cost on nonvested awards as follows (dollars in thousands):



	Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period
Nonvested awards	$	63,589	2.6