10. Stock Compensation Plans

In 2008, the Company adopted an equity incentive plan for eligible employees, service providers, and non-employee directors of the Company and its subsidiaries. In 2014, the Company amended and restated the 2008 Equity Incentive Plan to increase the aggregate number of shares available for issuance from 2,000,000 to 5,000,000, and to extend the term for a period of ten years. The plan includes a 1,500,000 share fixed sub-limit for the granting of incentive stock options. The awards may be stock options, restricted stock units, performance units or other stock-based awards. Stock options may be non-statutory or incentive. The exercise price for options and stock appreciation rights shall not be less than the fair market value on the date of grant, except if an incentive stock option is granted to a “10% employee,” as defined by the plan, then the option price may not be less than 110% of such fair market value. Options and stock appreciation rights may be exercisable commencing with the grant date, and are no longer exercisable after the expiration of seven or ten years from the grant date.

The former Employee Stock Option Plan and the Non-Employee Directors’ Stock Option Plan (Prior Plans) were terminated and superseded by the 2008 Equity Incentive Plan. The Prior Plans both had stock-based awards outstanding as of December 31, 2016 and 2015. The Prior Plans granted stock options and restricted stock to officers, directors and other key employees of the Company. The stock options were granted at the fair market value on the grant date, became exercisable no less than six months after granted, and, in general, expire ten years after the date of grant.

Stock Options

The following tables show a summary of the status and activity of stock options for the year ended December 31, 2016:


				Weighted-
		Weighted-		Average
		Average		Remaining
		Exercise Price		Contractual Term	Aggregate
Employee stock options:	Shares	(per share)		(in years)	Intrinsic Value
Outstanding as of January 1, 2016	1,252,136	$	19.08	5.01	$	645
Granted	508,999		14.06
Exercised	(13,574)		9.10
Forfeited	(17,907)		17.91
Expired	(62,852)		18.33
Outstanding as of December 31, 2016	1,666,802	$	17.67	4.69	$	1,993
Vested and expected to vest as of December 31, 2016	1,666,802	$	17.67	4.69	$	1,993
Exercisable as of December 31, 2016	974,977	$	18.87	3.85	$	476


				Weighted-
		Weighted-		Average
		Average		Remaining
		Exercise Price		Contractual Term	Aggregate
Non-employee director stock options:	Shares	(per share)		(in years)	Intrinsic Value
Outstanding as of January 1, 2016	39,885	$	6.99	0.81	$	379
Granted	—		—
Exercised	(22,320)		5.90
Forfeited	—		—
Expired	—		—
Outstanding as of December 31, 2016	17,565	$	8.37	0.42	$	154
Vested as of December 31, 2016	17,565	$	8.37	0.42	$	154
Exercisable as of December 31, 2016	17,565	$	8.37	0.42	$	154

The following assumptions were used to calculate the fair values of employee stock option grants in each year:


	Year Ended December 31
	2016			2015			2014
Weighted-average grant date fair value per stock option	$	3.11		$	3.30		$	4.48
Expected dividend yield		1.10	%		0.96	%		0.00	%
Expected volatility		29	%		19	%		21 - 22	%
Risk-free interest rates		1.04	%		1.48	%		1.51 - 1.73	%
Expected lives of options		4	years		4	years		4	years

The expected dividend yield is based on the latest annualized dividend rate and the current market price of the underlying common stock at the date of grant. The expected volatility is based on the historical volatility of the Company’s stock and the implied volatility calculated from traded options on the Company’s stock. The risk-free interest rates are based on the U.S. Treasury strip rate for the expected life of the option. For the 2011 through 2016 grants of stock options, the Company used the simplified method for determining the expected life. This method was used since the Company granted stock options to a different population of its employees, and decreased the term from 10 to 7 years. As a result of these changes, the Company does not believe that the historical stock option exercise data provides a reasonable basis upon which to estimate the expected life for the 2011 through 2016 grants.

The total grant date fair value of options vested during the years ended December 31, 2016, 2015, and 2014 was $3.75 per share, $4.49 per share, and $4.80 per share, or $1.5 million, $1.5 million, and $1.3 million, respectively.

During the years ended December 31, 2016, 2015 and 2014, the total intrinsic value of stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee or non-employee directors to exercise the option) was $0.2 million, $0.4 million, and $1.0 million, respectively. The total amount of cash received from the exercise of options was $0.3 million, $1.1 million, and $2.2 million, for the years ended December 31, 2016, 2015, and 2014, respectively.

Restricted and Performance Based Stock Awards

The grant date fair value of time vested restricted stock awards is the market price of the underlying common stock and is expensed over the vesting period of three years.

Performance stock awards, based on Return on Capital (ROC), vest subject to the satisfaction of this performance condition, at the end of a three-year performance period. The Company’s actual ROC for the performance period is compared to the target set, and the actual award payout is interpolated. The ROC award can vest at between zero and 200 percent of the target award. The grant date fair value of the ROC performance stock is the market price of the underlying common stock. The fair value is expensed on a straight-line basis over the performance period when it is probable that the performance condition will be achieved. No expense was recognized for these awards in 2016, 2015, or 2014 as it was not considered probable that the performance condition would be achieved.

Performance stock awards, based on Total Stockholder Return (TSR), vest subject to the satisfaction of this market condition, at the end of a three-year performance period. The Company’s actual TSR for the performance period is compared to the results of its peer companies for the same period with the Company’s relative position in the group determined by percentile rank. The actual award payout is determined by multiplying the target award by the performance factor percentage based upon the Company’s percentile ranking and can vest at between zero and 200 percent of the target award. The initial grant date fair value of the TSR performance stock is determined using a Monte Carlo simulation model. The grant date fair value is expensed on a straight-line basis over the three-year performance period.

The following table shows a summary of the status and activity of employee and non-employee directors’ non-vested stock awards for the year ended December 31, 2016:


		Weighted-			Weighted-			Weighted-
		Average		ROC	Average		TSR	Average
	Restricted	Grant Date		Performance	Grant Date		Performance	Grant Date
	Stock	Fair Value		Stock	Fair Value		Stock	Fair Value
	Awards	(per share)		Awards (a)	(per share)		Awards (a)	(per share)
Nonvested as of January 1, 2016	204,689	$	20.28	76,942	$	19.33	68,505	$	21.74
Granted	159,938		14.65	35,719		13.76	50,880		9.66
Vested	(103,152)		19.56	—		—	(22,248)		21.92
Forfeited	(10,935)		19.43	(32,713)		17.56	(4,093)		21.79
Nonvested as of December 31, 2016	250,540	$	17.02	79,948	$	17.56	93,044	$	15.09

(a)

The number of shares shown for the performance stock awards is based on the target number of share awards.

The weighted-average grant date fair value of restricted stock awards granted during the years ended December 31, 2016, 2015, and 2014 was $14.65 per share, $21.06 per share, and $20.83 per share or $2.3 million, $2.4 million, and $2.1 million, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2016, 2015, and 2014 was $2.0 million, $2.0 million, and $1.5 million, respectively.

The weighted-average grant date fair value of ROC performance stock awards granted during the years ended December 31, 2016, 2015, and 2014 was $13.76 per share, $20.74 per share, and $20.54 per share or $0.5 million, $0.5 million and $0.6 million, respectively. There were no ROC performance stock awards that vested during the years ended December 31, 2016, 2015, and 2014.

The weighted-average grant date fair value of TSR performance stock awards granted during the years ended December 31, 2016, 2015, and 2014, was $9.66 per share, $21.96 per share, and $21.39 per share, or $0.5 million, $0.5 million, and $0.6 million, respectively. The total fair value of TSR performance stock awards vested during the years ended December 31, 2016, 2015, and 2014 was $0.5 million, $0.2 million and $0.1 million, respectively.

The following significant assumptions were used for the TSR performance stock awards:


	Year Ended December 31
	2016		2015		2014
Dividend yield	1.10	%	0.96	%	0.00	%
Expected volatility	26.8	%	25.9	%	31.5	%
Risk-free interest rates	0.83	%	0.93	%	0.68	%
Performance period	3	years	3	years	3	years

Total Stock-Based Compensation

Compensation expense related to all stock-based compensation totaled $4.1 million, $3.8 million, and $3.7 million for the years ended December 31, 2016, 2015, and 2014, respectively, and was recognized as a component of selling, general and administrative expense. The related income tax benefit was $1.3 million, $1.2 million, and $1.2 million for the years ended December 31, 2016, 2015, and 2014, respectively.

As of December 31, 2016, there was $4.1 million of total future compensation cost related to non-vested share-based compensation arrangements and the weighted-average period over which this cost is expected to be recognized is approximately 1.6 years.