Stock-Based Compensation

The following table reflects the stock-based compensation expense and the related deferred income tax benefit recognized in income for the years ended December 31:



(Millions)	2014		2013		2012
Stock options	$	2.7	$	1.8	$	2.0
Performance stock rights	16.8		2.7		5.0
Restricted share units	9.9		8.6		8.1
Nonemployee director deferred stock units	0.8		0.9		1.0
Total stock-based compensation expense	$	30.2	$	14.0	$	16.1
Deferred income tax benefit	$	12.1	$	5.6	$	6.4

No stock-based compensation cost was capitalized during 2014, 2013, and 2012.

Stock Options

The following table shows the weighted-average fair values per stock option granted along with the assumptions incorporated into the binomial lattice valuation models:



	2014 Grant	2013 Grant	2012 Grant
Weighted-average fair value per stock option	6.70	6.03	6.30
Expected term	8 years	5 years	5 years
Risk-free interest rate	0.12% – 2.88%	0.18% – 2.11%	0.17% – 2.18%
Expected dividend yield	5.28%	5.33%	5.28%
Expected volatility	18%	24%	25%

A summary of stock option activity for 2014, and information related to outstanding and exercisable stock options at December 31, 2014, is presented below:



	Stock Options		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (Millions)
Outstanding at December 31, 2013	1,550,374		$	50.93
Granted	264,332		55.23
Exercised	(1,676,831	)	51.33
Forfeited	(3,858	)	55.23
Outstanding at December 31, 2014	134,017		$	54.31	6.6	$	3.2
Exercisable at December 31, 2014	59,714		$	55.21	5.6	$	1.4

The aggregate intrinsic value for outstanding and exercisable options in the above table represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options on December 31, 2014. This is calculated as the difference between our closing stock price on December 31, 2014, and the option exercise price, multiplied by the number of in-the-money stock options. The intrinsic value of options exercised during 2014, 2013, and 2012, was $32.0 million, $9.0 million, and $11.0 million, respectively. The actual tax benefit realized for the tax deductions from these option exercises was $12.8 million, $3.6 million, and $4.4 million during 2014, 2013, and 2012, respectively.

Due to the accelerated vesting of all unvested stock options held by active employees in October 2014, all compensation expense related to outstanding stock options has been recognized at December 31, 2014.

Performance Stock Rights

The table below reflects the assumptions used in the Monte Carlo valuation models to estimate the fair value of the outstanding performance stock rights at December 31:



	2014	2013	2012
Risk-free interest rate	0.21% – 0.63%	0.13% – 1.27%	0.17% – 1.27%
Expected dividend yield	5.25% – 5.33%	5.28% – 5.34%	5.18% – 5.34%
Expected volatility	18% – 22%	15% – 36%	14% – 36%

A summary of the 2014 activity related to performance stock rights accounted for as equity awards is presented below:



	Performance Stock Rights		Weighted-Average Fair Value ⁽²⁾
Outstanding at December 31, 2013	85,749		$	46.62
Granted	21,146		44.28
Award modifications	64,612		85.09
Distributed ⁽¹⁾	(74,345	)	77.67
Adjustment for estimated payout and shares not distributed ⁽¹⁾	(28,591	)	52.67
Forfeited	(308	)	44.28
Outstanding at December 31, 2014	68,263		$	58.54

⁽¹⁾

No shares of common stock were distributed for performance stock rights with a performance period ending December 31, 2013, because the performance percentage was below the threshold payout level. In October 2014, our Board of Directors approved the acceleration of a portion of the estimated distribution for those performance stock rights held by active employees with a performance period ending December 31, 2014. This distribution was made in December 2014.


⁽²⁾	Reflects the weighted-average fair value used to measure equity awards. Equity awards are measured using the grant date fair value or the fair value on the modification date.

The weighted-average grant date fair value of performance stock rights awarded during 2014, 2013, and 2012, was $44.28, $48.50, and $52.70 per performance stock right, respectively.

A summary of the 2014 activity related to performance stock rights accounted for as liability awards is presented below:



	Performance Stock Rights
Outstanding at December 31, 2013	198,904
Granted	84,529
Award modifications	(64,612	)
Distributed *	(10,760	)
Adjustment for estimated payout and shares not distributed *	(36,519	)
Forfeited	(1,234	)
Outstanding at December 31, 2014	170,308

The weighted-average fair value of all outstanding performance stock rights accounted for as liability awards as of December 31, 2014, was $108.51 per performance stock right.

As of December 31, 2014, $4.2 million of compensation cost related to unvested and outstanding performance stock rights (equity and liability awards) was expected to be recognized over a weighted-average period of 1.6 years.

The total intrinsic value of performance stock rights distributed during 2014, 2013, and 2012, was $6.4 million, $8.8 million, and $4.7 million, respectively. The actual tax benefit realized for the tax deductions from the distribution of performance stock rights during 2014, 2013, and 2012, was $2.6 million, $3.6 million, and $1.9 million, respectively.

Restricted Share Units

A summary of the 2014 activity related to all restricted share unit awards (equity and liability awards) is presented below:



	Restricted Share Unit Awards		Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2013	511,301		$	52.24
Granted	214,953		55.23
Dividend equivalents	21,422		54.47
Vested and released	(208,964	)	49.76
Forfeited	(111,407	)	54.62
Outstanding at December 31, 2014	427,305		$	54.45

As of December 31, 2014, $7.3 million of unrecognized compensation cost related to these awards was expected to be recognized over a weighted-average period of 2.3 years.

The total intrinsic value of restricted share unit awards vested and released during 2014, 2013, and 2012, was $11.4 million, $11.7 million, and $10.7 million, respectively. The actual tax benefit realized for the tax deductions from the vesting and release of restricted share units during 2014, 2013, and 2012, was $4.6 million, $4.7 million, and $4.3 million, respectively.

The weighted-average grant date fair value of restricted share units awarded during 2014, 2013, and 2012, was $55.23, $55.93, and $53.24 per unit, respectively.