Share-Based Compensation and Capital Stock

Dividends

The Company currently maintains the payment of a quarterly dividend on its common shares outstanding, however, the declaration of future dividends are subject to the discretion of our board of directors. During the years ended December 31, 2013 and 2012, the Company's board of directors declared quarterly cash dividends at a quarterly rate of $0.185 per share for an annual rate of $0.74 per share or $43.2 million and $42.7 million, respectively. The Company maintained its quarterly dividend rate of $0.185 per share for the first three quarters of 2014. In the fourth quarter of 2014, the Company's board of directors announced an increase in the quarterly dividend rate to $0.195 per share. As a result, annual dividends declared during the year ended December 31, 2014 were $0.75 per share or $43.8 million.

In addition, during the years ended December 31, 2014 and 2013, the Company paid previously declared but unrecorded dividends totaling $0.4 million and $0.5 million, respectively, that were contingent upon the vesting of performance vested restricted units. No dividends on performance vested restricted units were paid during the year ended December 31, 2012.

On July 26, 2012, the Company's board of directors declared a special cash dividend to common shareholders in the amount of $10.41 per share or approximately $600.7 million ("Special Cash Dividend") which was paid on August 23, 2012.

Share-Based Compensation

The Company recognizes compensation cost related to share-based payment transactions in the financial statements based on the fair value of the equity or liability instruments issued. Compensation expense related to the fair value of share-based awards is recognized over the requisite service period based on an estimate of those awards that will ultimately vest. The Company estimates the share-based compensation expense for awards that will ultimately vest at the inception of the grant. Over the life of the grant, the estimate of share-based compensation expense for awards with performance and/or service requirements is adjusted so that compensation cost is recognized only for awards that ultimately vest.

The Company has stock compensation plans pursuant to which it is authorized to grant stock-based awards of up to 7.6 million shares of the Company’s common stock, of which 2.7 million shares remain available for grant as of December 31, 2014. The Company’s policy allows the issuance of new or treasury shares to satisfy stock-based awards. Restricted stock, stock options, stock appreciation rights and performance share awards may be granted to officers, key employees and non-employee directors with contractual terms set by the Compensation and Management Development Committee of the Board of Directors.

Stock Options

The Company granted approximately 0.7 million, 0.2 million and 0.2 million options to certain employees of the Company at a fair value of approximately $5.7 million, $1.7 million and $1.6 million during the years ended December 31, 2014, 2013 and 2012, respectively. The stock options granted by the Company had an exercise price equal to the market price of the Company’s common stock on the date of grant. The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:



	2014			2013			2012
Risk-free interest rate	1.56		%	0.73		%	0.78		%
Expected volatility	25.01		%	38.14		%	40.15		%
Expected life of stock option	4.5 years			4.5 years			4.4 years
Dividend yield	1.62		%	2.01		%	2.08		%
Requisite service period	4 years			4 years			4 years
Contractual life	7 years			7 years			7 years
Weighted average fair value of options granted (per option)	$	8.82		$	9.89		$	9.98

The expected term of the options and volatility are based on the historical data which is believed to be indicative of future exercise patterns and volatility. Historical volatility is calculated based on a period that corresponds to the expected term of the stock option. The dividend yield and the risk-free rate of return are calculated on the grant date based on the then current dividend rate and the risk-free rate for the period corresponding to the expected life of the stock option. Compensation expense related to the fair value of these awards is recognized straight-line over the requisite service period based on those awards that ultimately vest.

The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2014 was $43.7 million and $30.8 million respectively. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $10.1 million, $5.2 million and $2.8 million, respectively.

The Company received $10.1 million, $8.9 million, and $7.1 million in proceeds from the exercise of 0.4 million, 0.3 million and 0.3 million employee stock options during the years ended December 31, 2014, 2013 and 2012, respectively.

The following table summarizes information about stock options outstanding at December 31, 2014:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at December 31, 2014	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2014	Weighted Average Exercise Price
$ 0.00 to $24.37	337,565	1.1 years	$	20.57	337,565	$	20.57
$24.38 to $29.25	591,074	2.4 years	$	25.84	494,330	$	25.61
$29.26 to $34.12	163,058	3.1 years	$	31.31	122,288	$	31.31
$34.13 to $39.00	163,975	5.1 years	$	36.76	40,990	$	36.76
$43.88 to $48.75	647,505	6.2 years	45.59		—	—
	1,903,177	3.8 years	$	33.03	995,173	$	25.06

Special Dividend Adjustment

The Company's long-term incentive plans ("the Plans") contain provisions which require the automatic adjustment of

outstanding share-based awards in the event that the Company makes any changes to its capital structure, such as special

dividends, stock splits or spin-offs, if such changes result in the dilution or enlargement of the benefits or potential benefits

intended upon the grant of the award. The Company's board of directors concluded that the Special Cash Dividend paid on

August 23, 2012 would result in the dilution of the value of the Company's outstanding stock options. Therefore, in accordance

with the anti-dilution provision of the Plans, the Company's outstanding stock options were automatically adjusted to maintain their pre-dividend value. The Company elected to maintain the pre-dividend value of the outstanding options by adjusting both the exercise price and the number of stock options outstanding as of the ex-dividend date of the Special Dividend so that the

aggregate difference between the market price and exercise price multiplied by the number of shares issuable upon exercise

was substantially the same immediately before and after the payment of the Special Cash Dividend. As a result of this

adjustment, an additional 0.5 million stock options were awarded during the year ended December 31, 2012 and the

exercise price of the outstanding options were reduced by approximately 24%. This adjustment did not result in additional

stock-based compensation expense as the fair value of the options immediately before and after the payment of the Special

Cash Dividend was substantially equal.

Restricted Stock

The following table is a summary of activity related to restricted stock grants for the year ended December 31:



	2014		2013		2012
Restricted shares granted	154,833		225,240		266,159
Weighted average grant date fair value per share	$	46.81	$	37.74	$	35.76
Aggregate grant date fair value ($000)	$	7,248	$	8,500	$	9,517
Restricted shares forfeited	23,804		40,552		26,824
Vesting service period of shares granted	12 - 48 months		12 - 48 months		12-68 months
Grant date fair value of shares vested ($000)	$	10,280	$	8,569	$	6,696

Compensation expense related to the fair value of these awards is recognized straight-line over the requisite service period based on those restricted stock grants that ultimately vest. The fair value of grants is measured by the market price of the Company’s common stock on the date of grant. Restricted stock awards generally vest ratably over the service period beginning with the first anniversary of the grant date. Awards granted to retirement eligible non-employee directors are recognized over the shorter of the requisite service period or the length of time until retirement since the terms of the grant provide that awards will vest upon retirement.

Performance Vested Restricted Stock Units

The Company has granted performance vested restricted stock units (“PVRSU”) to certain employees. The fair value is measured by the market price of the Company’s common stock on the date of grant. The vesting of these stock awards is contingent upon the Company achieving performance targets at the end of specified performance periods and the employees’ continued employment. The performance conditions affect the number of shares that will ultimately vest. The range of possible stock-based awards vesting is generally between 0% and 200% of the initial target. If minimum performance targets are not attained then no awards will vest under the terms of the various PVRSU agreements. Compensation expense related to these awards is recognized over the requisite period based on the Company's estimate of the achievement of the various performance targets. The Company has currently estimated that between 0% and 180% of the various award targets will be achieved. Compensation expense is recognized ratably over the requisite service period only on those PVRSUs that ultimately vest.

The following table is a summary of activity related to PVRSU grants for the years ended December 31, 2014, 2013 and 2012:



	2014		2013		2012
Performance vested restricted stock units granted at target	24,678		80,184		117,523
Weighted average grant date fair value per share	$	45.59	$	39.48	$	35.27
Aggregate grant date fair value ($000)	$	1,125	$	3,165	$	4,145
Stock units forfeited	22,099		3,334		57,176
Requisite service period	36 months		22-38 months		24-60 months

During the year ended December 31, 2014, a total of 28,886 PVRSU grants vested at a fair value of $1.4 million. These PVRSU grants were initially granted at a target of 18,635 units. However, since the Company achieved 155% of the targeted performance conditions contained in the stock awards granted in prior periods, an additional 10,251 shares were earned and issued. During the year ended December 31, 2013, a total of 39,816 PVRSU grants vested at a fair value of $1.5 million. These PVRSU grants were initially granted at a target of 30,624 units. However, since the Company achieved 130% of the targeted performance conditions contained in the stock awards granted in prior periods, an additional 9,192 shares were earned and issued. During the year ended December 31, 2012, no PVRSU grants vested.

During the year ended December 31, 2014 and 2013, PVRSU grants totaling 22,099 units and 3,334 units, respectively, were forfeited due to termination of employment. During the year ended December 31, 2012, PVRSU grants totaling 57,176 units were terminated in accordance with an amended and restated employment agreement of an executive officer.

A summary of stock-based award activity as of December 31, 2014, 2013 and 2012 and the changes during the years are presented below:



	2014
	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual LIfe	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2014	1,661,952		$	26.44		563,345		$	36.64	216,342		$	37.34
Granted	651,757		$	45.59		154,833		$	46.81	24,678		$	45.59
Performance-Based Leveraging*	—		—			—		$	—	10,251		$	41.25
Exercised/Vested	(390,290	)	$	25.87		(214,818	)	$	35.91	(28,886	)	$	41.25
Expired	—		$	—		—		$	—	—		$	—
Forfeited	(20,242	)	$	34.33		(23,804	)	$	38.97	(22,099	)	$	34.77
Outstanding at December 31, 2014	1,903,177		$	33.03	3.8 years	479,556		$	40.14	200,286		$	38.28
Options exercisable at December 31, 2014	995,173		$	25.06	2.0 years

* PVRSU units outstanding have been increased by 10,251 units during the year ended December 31, 2014, due to the Company exceeding the targeted performance conditions contained in PVRSU's granted in prior periods.



	2013
	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2013	1,934,034		$	25.80		606,547		$	35.17	170,116		$	35.56
Granted	173,413		$	36.76		225,240		$	37.74	80,184		$	39.48
Performance-Based Leveraging*	—		—			—		—		9,192		$	32.60
Exercised/Vested	(347,180	)	$	25.54		(227,890	)	$	33.94	(39,816	)	$	32.60
Expired	(75,473	)	$	36.99		—		—		—		—
Forfeited	(22,842	)	$	28.94		(40,552	)	$	35.85	(3,334	)	$	41.25
Outstanding at December 31, 2013	1,661,952		$	26.44	3.0 years	563,345		$	36.64	216,342		$	37.34
Options exercisable at December 31, 2013	1,181,374		$	24.61	2.2 years

* PVRSU units outstanding have been increased by 9,192 units during the year ended December 31, 2013, due to the Company exceeding the targeted performance conditions contained in PVRSU's granted in prior periods.



	2012
	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price⁽¹⁾		Weighted Average Remaining Contractual Life	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2012	1,573,726		$	33.30		565,627		$	34.43	109,769		$	35.57
Granted	160,408		$	35.60		266,159		$	35.76	117,523		$	35.27
Special Dividend Adjustment	497,497		$	25.31		—		—		—		—
Exercised/Vested	(266,754	)	$	26.57		(198,415	)	$	33.75	—		—
Forfeited	(30,843	)	$	36.67		(26,824	)	$	36.06	(57,176	)	$	34.98
Outstanding at December 31, 2012	1,934,034		$	25.80	4.0 years	606,547		$	35.17	170,116		$	35.56
Options exercisable at December 31, 2012	1,302,624		$	25.62	3.1 years

⁽¹⁾ The weighted average exercise price for options outstanding and exercisable reflect the reduction of the option price for outstanding options as described under "Special Dividend Adjustment". The weighted average exercise price for options granted, exercised or forfeited reflects the option price in effect at the time of the transaction.

The components of the Company’s pretax stock-based compensation expense and associated income tax benefits are as follows for the years ended December 31:



(in millions)	2014			2013		2012
Stock options	$	2.4		$	1.8	$	2.1
Restricted stock	7.2			7.5		7.5
Performance vested restricted stock units	(0.2		)	2.2		1.7
Total	$	9.4		$	11.5	$	11.3
Income tax benefits	$	3.5		$	4.2	$	4.1

During all years presented, the Company revised its estimate of the projected achievement of various performance conditions that affect the number of PVRSUs that will ultimately vest. As a result, previously recognized stock-based compensation costs related to these PVRSUs has been decreased by $1.3 million for the year ended December 31, 2014 and decreased by $0.3 million and increased by $0.5 million during the years ended December 31, 2013 and 2012, respectively.

The total unrecognized compensation costs related to stock-based awards that have not yet vested and the related weighted average amortization period over which the costs are to be recognized as of December 31, 2014 are as follows:



	Unrecognized Compensation Expense on Unvested Awards		Weighted Average Remaining Amortization Period
	(in millions)
Stock options	$	5.7	2.8 years
Restricted stock	11.9		2.4 years
Performance vested restricted stock units	1.8		2.0 years
Total	$	19.4

Share Repurchases and Redemptions

The Company announced a stock repurchase program on June 25, 1998 to return excess capital to its shareholders. Treasury stock activity is recorded at cost in the accompanying consolidated financial statements. During the year ended December 31, 2014, the Company repurchased 1.4 million of its common stock under the repurchase program at a total cost of $72.6 million. These shares were purchased from family members of the Company's largest shareholder. There were no share repurchases during the year ended December 31, 2013. During the year ended December 31, 2012, the Company purchased 0.5 million shares of its common stock under the repurchase program at a total cost of $19.9 million. Through December 31, 2014, the Company repurchased 46.7 million shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) under the share repurchase program at a total cost of $1.2 billion.

During 2014, the Company redeemed 110,579 shares of common stock at a total cost of $5.3 million from employees to satisfy the option price and minimum tax-withholding requirements related to the exercising of options and vesting of performance vested restricted stock units and restricted stock grants. During 2013 and 2012, the Company redeemed 103,880 and 75,105 shares of common stock at a total cost of $4.0 million and $2.7 million, respectively. These redemptions were outside the share repurchase program initiated in June 1998.

Other

Effective January 1, 2014, the Company reduced its reported number of common shares outstanding by 0.3 million shares to address a reconciling item with the Company's share transfer agent.