Common Stock and Share-Based Compensation

Adoption of Cash Dividend Policy — In November 2013, we announced that our Board of Directors had adopted a cash dividend policy. Under the policy, holders of our common stock will receive dividends when and as declared by our Board of Directors. Pursuant to the policy, we expect to pay quarterly dividends with an initial quarterly dividend rate of $0.07 per share ($0.28 per share annually). Quarterly dividends of $0.07 per share, totaling approximately $6.5 million each, were paid in March, June and September of 2014. Our cash dividend policy is subject to modification, suspension or cancellation at any time.

Stock Repurchase Program — Since 1998, our Board of Directors has from time to time authorized the repurchase of our common stock up to an aggregate of $2.38 billion, excluding fees and commissions. We made no share repurchases during the three months ended September 30, 2014 and we repurchased 1,727,275 shares during the nine months ended September 30, 2014. We made no share repurchases during the three months or nine months ended September 30, 2013. As of September 30, 2014, $275.0 million was available for repurchases under this program (excluding fees and commissions). Our management is authorized to purchase shares from time to time through open market transactions at prevailing prices or in privately negotiated transactions, subject to market conditions and other factors. Shares, when repurchased, are retired.

Conversion of Equity Awards Outstanding at Spin-Off Date — At the date of the WhiteWave spin-off, in the second quarter of 2013, certain of our outstanding Dean Foods stock options and unvested restricted stock units held by WhiteWave employees and directors were converted to equivalent options or restricted stock units, as applicable, with respect to WhiteWave’s common stock. These modified awards otherwise retained substantially the same terms and conditions, including term and vesting provisions, as the existing Dean Foods Company equity awards had at the time of conversion. We did not incur any future compensation cost related to conversion of our outstanding Dean Foods Company stock options and restricted stock units held by WhiteWave employees and directors in connection with the WhiteWave spin-off.

Stock Options — The following table summarizes stock option activity during the nine months ended September 30, 2014:



	Options		Weighted Average Exercise Price		Weighted Average Contractual Life (Years)	Aggregate Intrinsic Value
Options outstanding at January 1, 2014	5,055,035		$	19.35
Granted	—		—
Forfeited and canceled	(501,716	)	20.90
Exercised	(524,498	)	14.21
Options outstanding at September 30, 2014	4,028,821		$	19.82	3.14	$	1,675,345
Options exercisable at September 30, 2014	3,920,761		$	20.07	3.02	$	1,413,501

We recognize share-based compensation expense for stock options ratably over the vesting period. The fair value of each option award is estimated on the date of grant using a Black-Scholes valuation model. During each of the nine months ended September 30, 2014 and 2013, there were no stock options granted.

Restricted Stock Units — The following table summarizes RSU activity during the nine months ended September 30, 2014:



	Employees			Directors (1)			Total
Stock units outstanding at January 1, 2014	680,017			96,273			776,290
Stock units issued	344,421			59,367			403,788
Shares issued upon vesting of stock units	(181,570		)	(42,281		)	(223,851		)
Stock units canceled or forfeited(2)	(183,102		)	(780		)	(183,882		)
Stock units outstanding at September 30, 2014	659,766			112,579			772,345
Weighted average grant date fair value	$	14.64		$	13.75		$	14.52


(1)	Directors' stock units include Restricted Stock Awards ("RSAs"), which participate in declared dividends.


(2)	Pursuant to the terms of our stock unit plans, employees have the option of forfeiting stock units to cover their minimum statutory tax withholding when shares are issued. Any stock units surrendered or canceled in satisfaction of participants’ tax withholding obligations are not available for future grants under the plans.

Phantom Shares — We grant phantom shares as part of our long-term incentive compensation program, which are similar to RSUs in that they are based on the price of our stock and vest ratably over a three-year period, but are cash-settled based upon the value of our stock at each vesting period. The fair value of the awards is remeasured at each reporting period. Compensation expense is recognized over the vesting period with a corresponding liability, which is recorded in accounts payable and accrued expenses in our unaudited Condensed Consolidated Balance Sheets. The following table summarizes the phantom share activity during the nine months ended September 30, 2014:



	Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2014	1,111,059		$	17.72
Granted	581,129		14.25
Converted/paid	(544,309	)	17.70
Forfeited	(87,691	)	16.76
Outstanding at September 30, 2014	1,060,188		$	15.91

Share-Based Compensation Expense — The following table summarizes the share-based compensation expense recognized during the three and nine months ended September 30, 2014 and 2013:



	Three Months Ended September 30					Nine Months Ended September 30
	2014		2013			2014		2013
	(In thousands)
Stock Options	$	75	$	418	(1)	$	338	$	6,347	(1)
Stock Units	892		1,467		(1)	3,279		4,010		(1)
Phantom Shares	585		1,626			3,185		6,747
Total	$	1,552	$	3,511		$	6,802	$	17,104


(1)	The share-based compensation expense recorded during the three and nine months ended September 30, 2013 includes additional compensation expense of $0.2 million and $5.6 million, respectively, for stock options and $0.4 million and $0.7 million, respectively, for stock units related to the equity modification of share-based compensation pursuant to the WhiteWave spin-off described above.

Stock options, phantom shares and stock units held by employees do not currently participate in any dividends and accordingly, no expense attributed to dividends has been recorded.