(12) Share-Based Compensation

We have historically awarded stock options and restricted stock awards for employees and non-employee directors as a means of attracting and retaining quality personnel and to align employee performance with stockholder value. Share-based compensation plans are approved by our stockholders and administered by the stock compensation committee of the Company’s Board of Directors (the “Board”). The current plan allows for a variety of equity programs designed to provide flexibility in implementing equity and cash awards, including incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance stock, performance units and other stock-based awards. Participants may be granted any one of the equity awards or any combination. We do not award stock options with an exercise price below the market price of the underlying securities on the date of grant. As of March 31, 2018, 1.6 million shares are available for future grants, assuming performance-based options vest at their target amount. Generally, stock options have contractual terms of ten years.

Share-based compensation expense was $2.2 million and $1.3 million for the three-month periods ended March 31, 2018 and 2017, respectively. This expense was recorded in rental, selling and general expenses for each quarter. As of March 31, 2018, total unrecognized compensation cost related to stock option awards was approximately $1.4 million and the related weighted-average period over which it is expected to be recognized is approximately 1.2 years. As of March 31, 2018, the unrecognized compensation cost related to restricted stock awards was approximately $11.4 million, which is expected to be recognized over a weighted-average period of approximately 2.4 years.

Stock Options. The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes-Merton option pricing model which requires the input of assumptions. We estimate the risk-free interest rate based on the U.S. Treasury security rate in effect at the time of the grant. The expected life of the options, volatility and dividend rates are estimated based on our historical data. No new stock options were issued in 2018. The following are the key assumptions used for three-month period ended March 31, 2017:

Risk-free interest rate		1.9%
Expected life of the options (years)		5
Expected stock price volatility		35.4%
Expected dividend rate		2.8%

The following table summarizes stock option activity for the three months ended March 31, 2018:

	Number of Shares			Weighted Average Exercise Price
	(In thousands)
Options outstanding, beginning of period		3,169		$	32.49
Additional options granted based upon achievement of specified performance criteria		81			32.42
Canceled/Expired		(168	)		27.24
Exercised		(55	)		27.17
Options outstanding, end of period		3,027			32.74

The beginning balance of options outstanding in the table above includes approximately 0.7 million unvested performance-based stock options granted in 2017 and 2016, for which the targets were set at the time of the grant. For options granted in both 2017 and 2016, vesting conditions were related to the Company’s return on capital employed.

Certain options granted in 2017 vested contingent upon 2017 performance targets. Actual performance exceeded targets for these shares. As a result, in the first quarter of 2018, in addition to the target options included in the beginning balance, additional shares were vested. Certain options granted in 2016 also vested contingent upon 2017 performance targets. Actual performance did not achieve the minimum vesting requirements for these shares. As a result, shares totaling 0.1 million are included in the canceled/expired shares in the above table.

Included in the options outstanding at the end of the period are approximately 0.6 million of unvested performance-based stock options granted in 2017 and 2016 for which the performance criteria relates to fiscal 2018 and 2019. These stock options are included in the table at the target amount; however, the terms of these awards provide that the number of options that ultimately vest may vary between 50% and 200% of the target award, or may be zero.

A summary of stock options outstanding as of March 31, 2018 is as follows:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Terms		Aggregate Intrinsic Value
	(In thousands)				(In years)		(In thousands)
Outstanding		3,027	$	32.74		5.84	$	33,168
Exercisable		2,639		33.06		5.44		28,147

The aggregate intrinsic value of options exercised during the three months ended March 31, 2018 was approximately $0.8 million.

Restricted Stock Awards. The fair value of restricted stock awards is estimated as the closing price of our common stock on the date of grant. A summary of restricted stock award activity is as follows:

	Shares			Weighted Average Grant Date Fair Value
	(In thousands)
Restricted stock awards at beginning of period		234		$	31.42
Awarded		201			37.85
Released		(69	)		32.00
Forfeited		(6	)		35.72
Restricted stock awards at end of period		360			34.84

Included in the restricted stock awarded in 2018 are 0.1 million shares that vest based upon the achievement of specified performance criteria related to fiscal 2018, 2019 and 2020. Such awards have been granted assuming a target number of shares. However, the terms of these awards provide that the number of shares that ultimately vest may vary between 50% and 200% of the target award, or may be zero. The table presents the awards at their target amount.

The restricted stock awards that vested during the three months ended March 31, 2018 had an aggregate grant date fair value of $2.2 million and an aggregate vesting date fair value of $2.6 million.