Share-Based Compensation

A summary of stock-based compensation expense and related tax benefits for the years ended December 31, 2016, 2015 and 2014 is as follows:



	Year Ended December 31,
	2016		2015		2014
	(in thousands)
Stock options	$	3,193	$	2,781	$	2,596
Restricted stock	550		252		109
Employee Stock Purchase Plan ("ESPP")	509		508		375
Total pre-tax stock-based compensation expense charged against income ⁽¹⁾	$	4,252	$	3,541	$	3,080

Total recognized tax benefit related to stock-based compensation	$	2,773	$	1,873	$	2,626


⁽¹⁾	Stock-based compensation expense is recorded in the selling, general and administrative caption in our consolidated statements of comprehensive income.

At December 31, 2016, the unrecognized compensation cost related to unvested stock options and awards was $8.5 million. The weighted average period over which these awards will vest is approximately 2.7 years.

2012 Equity Incentive Plan

The Company’s 2012 Equity Incentive Plan (the “Plan”) provides that current or prospective officers, employees, non-employee directors and advisors can receive share-based awards such as stock options, restricted stock and other stock awards. The Plan seeks to promote the highest level of performance by providing an economic interest in the long-term success of the Company.

As of December 31, 2016, 3.9 million shares of common stock were reserved for issuance under the Plan, including 1.3 million shares available for future grant. No stock award will have a term in excess of ten years. All awards granted under the Plan become vested and exercisable ratably over a five year period on each yearly anniversary of the grant date.

The Nominating, Compensation and Stock Option Committee of the Board of Directors is responsible for determining the individuals who will be granted stock awards, the number of stock awards each individual will receive and the terms of the grants in accordance with the Plan.

Stock Options

A summary of our stock options outstanding under the Plan as of December 31, 2016 and changes during 2016 is as follows:



	Number of Shares		Weighted Average Exercise Price
	(in thousands)
Outstanding at December 31, 2015	2,461		$	22.16
Granted	569		$	34.14
Exercised	(294	)	$	20.46
Forfeited	(116	)	$	29.80
Expired	(5	)	$	23.82
Outstanding at December 31, 2016	2,615		$	24.61

The weighted average grant-date fair values and intrinsic values of options vested during 2016, 2015 and 2014 are as follows:



	Year Ended December 31,
	2016		2015		2014
	(in thousands, except per share data)
Weighted average grant-date fair value of options granted	$	7.46	$	6.64	$	8.24
Total intrinsic value of options exercised	$	4,886	$	6,497	$	9,303

During 2016, the Company received $6.0 million in cash and realized $1.2 million in tax benefits from the exercise of stock options.

The fair values of the stock option awards granted during 2016, 2015 and 2014 were estimated on the dates of grant using the Black-Scholes option valuation model and the following assumptions:



	Year Ended December 31,
	2016		2015		2014
Risk-free interest rate	2.0	%	1.9	%	1.9	%
Weighted average expected life (years)	5.8 years		5.8 years		5.9 years
Expected volatility	26.0	%	27.2	%	36.9	%
Dividend yield	2.0	%	2.2	%	2.4	%

The following table summarizes other information about our stock options at December 31, 2016:



	December 31, 2016
	(in thousands, except per share data)
Outstanding:
Number of options	2,615
Weighted average exercise price	$	24.61
Aggregate intrinsic value	$	38,072
Weighted average remaining contractual life (years)	6.2 years
Exercisable:
Number of options	1,172
Weighted average exercise price	$	18.39
Aggregate intrinsic value	$	24,350
Weighted average remaining contractual life (years)	4.4 years

Restricted Stock

A summary of our restricted stock outstanding under the Plan as of December 31, 2016 and changes during 2016 is as follows:



	Number of Restricted Shares		Weighted Average Grant-Date Fair Value
	(in thousands)
Unvested at December 31, 2015	40		$	29.10
Granted	44		$	34.14
Vested	(9	)	$	28.76
Forfeited ⁽¹⁾	—		$	34.14
Unvested at December 31, 2016	74		$	32.09


⁽¹⁾	Number of restricted shares rounds to less than a thousand.

The weighted average grant-date fair values and total fair values of restricted stock vested during 2016, 2015 and 2014 are as follows:



	Year Ended December 31,
	2016		2015		2014
	(in thousands, except per share data)
Weighted average grant-date fair value of restricted stock granted	$	34.14	$	30.30	$	28.02
Total fair value of restricted stock vested	$	311	$	123	$	34

Fair value is determined based on the market price of the shares on the date of grant. The weighted average remaining vesting period for the unvested restricted stock is 3.4 years.

Employee Stock Purchase Plan

The Company offers an Employee Stock Purchase Plan (“ESPP”) to all eligible employees. All full-time and certain part-time employees who have completed two years of continuous service with us are eligible to participate. The ESPP was scheduled to expire after 2016, however the Board of Directors extended the ESPP for an additional five offerings through 2021. Annual offerings commence and terminate on the respective year’s first and last calendar day.

Under the ESPP, the Company is authorized to issue up to 4.1 million shares of our common stock to our employees. Pursuant to such authorization, we have 2.3 million shares available for future grant at December 31, 2016 (after deducting the 2016 funding of the 53 thousand shares delivered in 2017). Under the terms of the ESPP, participants may contribute through payroll deductions up to $21,250 (85% of IRS limitation) of their compensation toward the purchase of the Company’s common stock. No employee may purchase common stock which exceeds $25,000 in fair market value (determined on the option date) for each calendar year. The option price per share is equal to the lower of 85% of the fair market price on the first day of the offering period, or 85% of the fair market price on the last day of the offering period.

The following table summarizes information about our ESPP annual offerings for the years ended December 31, 2016, 2015 and 2014:



	Year Ended December 31,
	2016		2015		2014
	(in thousands, except per share data)
Common shares purchased	53		59		55
Per common share purchase price	$	29.64	$	26.29	$	24.11

Deferred Compensation Plan

The Company offers a Supplemental Executive Retirement Plan (“SERP”) for certain key executives and employees. The SERP is not qualified under Section 401 of the Internal Revenue Code. The SERP allows participants to defer up to 25% of their earned income on a pre-tax basis and as of the last day of each plan year, each participant will be credited with a 25% match of up to 15% of their deferral in the form of our Common Stock based on the then-current market value. SERP participants fully vest in our matching contribution three years from the first day of the initial year of participation. The income deferred and our matching contributions are unsecured and subject to the claims of our general creditors.

Under the SERP, we are authorized to issue up to 1.0 million shares of our common stock to our employees. Pursuant to such authorization, we have 0.4 million shares available for future grant at December 31, 2016 (after deducting the 2016 funding of 13 thousand shares delivered in 2017). At the time of issuance, such shares were accounted for at cost as treasury stock. At December 31, 2016, approximately 0.3 million such shares are vested and remain in the respective active participants’ accounts with the trustee.

The following table summarizes information about our SERP for the plan years ended December 31, 2016, 2015 and 2014:



	Year Ended December 31,
	2016		2015			2014
	(in thousands)
Supplemental Executive Retirement Plan ("SERP") expense⁽¹⁾	$	511	$	538		$	497
Treasury shares issued to fund SERP expense⁽²⁾	13		15			16
SERP trust account balance at December 31 ⁽³⁾	$	34,599	$	37,765		$	35,310
Unrealized gain (loss) recorded in SERP liability account	$	1,495	$	(62	)	$	1,211


⁽¹⁾	Both the SERP match and the deferrals are included in the selling, general and administrative caption in our consolidated statements of comprehensive income.


⁽²⁾	Shares related to the SERP match for each year are funded at the beginning of the subsequent year.

⁽³⁾

SERP trust account investments are recorded at their fair value which is based on quoted market prices. Differences between such amounts in the table above and the deferred compensation funding asset reported on our Consolidated Balance Sheets represent the value of our Common Stock held in the Plan participants’ trust accounts and reported by us as treasury stock in our Consolidated Balance Sheets.