6.Share-Based Compensation

Stock Options:

Under the Company’s stock incentive plan, stock options are granted at exercise prices that equal the market value of the underlying common stock on the date of grant. The options have a 10-year term and are exercisable upon vesting, which occurs over a three-year period at the anniversary dates of the date of grant. Compensation expense is recognized on a straight-line basis for all awards.

The Company granted non-qualified options to purchase 336 thousand shares and 710 thousand shares of the Company’s common stock during the three months ended March 31, 2015 and 2014, respectively. The fair value of each option grant was estimated using the Black-Scholes option-pricing model with the following assumptions:

	For the Three Months Ended March 31,
	2015		2014
Expected life (in years)	5.5		5.5
Risk-free interest rate	1.36	%	1.63	%
Expected volatility	25.19	%	30.28	%
Expected dividend yield	2.04	%	2.82	%

The expected life of options represents the weighted-average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns. The risk-free interest rate is based on the US Treasury yield curve in effect at the grant date for the period corresponding to the expected life of the options. Expected volatility is based on historical volatilities of the Company’s common stock. Dividend yields are based on historical dividend payments.

Stock option activity for the three months ended March 31, 2015 was as follows:

(dollars and options in thousands, except per share amounts)	Number of Options		Weighted Average Exercise Price per Share		Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2014	2,889		$	46.84
Granted	336		82.28
Exercised	(90	)	41.00
Cancelled	(8	)	60.67
Outstanding at March 31, 2015	3,127		50.77		6.33	$	86,057

Exercisable at March 31, 2015	2,210		43.31		5.25	$	76,262

For the three months ended March 31, 2015, cash received from the exercise of stock options was $3 million. At March 31, 2015, the total remaining unrecognized compensation cost related to stock options approximated $12 million, which will be amortized over a weighted-average period of approximately 2.1 years.

Additional information pertaining to stock option activity is as follows:

	Three Months Ended March 31,
(dollars in thousands, except per share)	2015		2014
Weighted average grant date fair value of stock options granted (per share)	$	16.04	$	12.97
Total intrinsic value of stock options exercised	$	3,740	$	2,775

Restricted Shares of Common Stock and Restricted Stock Units:

The Company has granted shares of restricted common stock (“RSAs”) and restricted stock units (“RSUs”) to certain key employees. The RSAs and RSUs are subject to cliff vesting, generally after three to five years provided the employee remains in the service of the Company. The fair value of the RSAs and RSUs is determined based upon the number of shares granted and the quoted market price of the Company’s common stock at the date of the grant.

The following table summarizes RSA and RSU activity for the three months ended March 31, 2015:

	RSAs				RSUs
(in thousands, except per share amounts)	Number of RSAs		Weighted Average Fair Value per Share		Number of RSUs		Weighted Average Fair Value per Share
Non-vested at December 31, 2014	16		$	27.94	434		$	59.61
Granted	—		—		145		82.33
Vested	(14	)	28.75		(127	)	56.41
Cancelled	—		—		(4	)	61.38
Non-vested at March 31, 2015	2		21.42		448		67.85

At March 31, 2015, the total remaining unrecognized compensation cost related to RSUs was $20 million, which will be amortized over a weighted-average period of approximately 2.4 years. Unrecognized compensation cost related to RSAs was insignificant at March 31, 2015.

The following table summarizes the components of the Company’s share-based compensation expense:

	Three Months Ended
	March 31,
(in millions)	2015			2014
Stock options:
Pre-tax compensation expense	$	1.8		$	1.9
Income tax benefit	(0.7		)	(0.7		)
Stock option expense, net of income taxes	1.1			1.2

RSUs, RSAs and other share-based compensation:
Pre-tax compensation expense	3.3			2.7
Income tax benefit	(1.2		)	(1.0		)
RSUs, RSAs and other share-based compensation expense, net of income taxes	2.1			1.7

Total share-based compensation:
Pre-tax compensation expense	5.1			4.6
Income tax benefit	(1.9		)	(1.7		)
Total share-based compensation expense, net of income taxes	$	3.2		$	2.9