Share-Based Compensation and Capital Stock

The Company granted 0.5 million and 0.7 million options to certain employees of the Company at a fair value of $6.2 million and $5.7 million for the three months ended March 31, 2015 and 2014, 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:



	2015 Grants			2014 Grants
Risk-free interest rate	1.45		%	1.56		%
Expected volatility	23.94		%	25.01		%
Expected life of stock option	4.6 years			4.5 years
Dividend yield	1.23		%	1.62		%
Requisite service period	4 years			4 years
Contractual life	7 years			7 years
Weighted average fair value of options granted (per option)	$	12.39		$	8.82

The expected life of the options and volatility are based on historical data which is believed to be indicative of future exercise patterns or actual 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 of return 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 the stock options outstanding and exercisable at March 31, 2015 was $50.2 million and $37.0 million, respectively. The total intrinsic value of options exercised during the three months ended March 31, 2015 and 2014 was approximately $8.5 million and $1.3 million, respectively.

The Company received approximately $5.6 million and $1.5 million in proceeds from the exercise of 228,963 and 58,749 employee stock options during the three months ended March 31, 2015 and 2014, respectively.

Restricted Stock

The following table is a summary of activity related to restricted stock grants:



	Three Months Ended
	March 31,
	2015		2014
Restricted share grants	85,792		129,793
Weighted average grant date fair value per share	$	63.46	$	46.71
Aggregate grant date fair value ($000)	$	5,445	$	6,062
Restricted shares forfeited	4,778		1,332
Vesting service period of shares granted	3-4 years		4 years
Fair value of shares vested ($000)	10,684		7,269

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 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 the 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 the 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 award 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 service 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:



	Three Months Ended
	March 31,
	2015		2014
Performance vested restricted stock units granted at target	30,353		43,871
Weighted average grant date fair value per share	$	63.47	$	45.59
Aggregate grant date fair value ($000)	$	1,927	$	2,000
Stock units forfeited	—		—
Requisite service period	3 years		3 years

During the three months ended March 31, 2015, a total of 42,326 PVRSU grants vested at a grant date fair value of $1.5 million. These PVRSU grants were initially granted at a target of 38,476 units. However, since the Company achieved 110% of the targeted performance conditions contained in the stock awards granted in prior periods, an additional 3,850 shares were earned and issued.

During the three months ended March 31, 2014, a total of 28,886 PVRSU grants vested at a grant date 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.

A summary of stock-based award activity as of March 31, 2015 and changes during the three months ended are presented below:



	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2015	1,903,177		$	33.03		479,556		$	40.14	200,286		$	38.28
Granted	498,911		$	63.47		85,792		$	63.46	30,353		$	63.47
Performance based leveraging ⁽¹⁾	—		$	—		—		$	—	3,850		$	35.60
Exercised/Vested	(228,963	)	$	24.54		(172,165	)	$	38.82	(42,326	)	$	35.60
Expired	—		$	—		—		$	—	—		$	—
Forfeited	(3,685	)	$	45.59		(4,778	)	$	39.89	—		$	—
Outstanding at March 31, 2015	2,169,440		$	40.91	4.6 years	388,405		$	45.88	192,163		$	42.79
Options exercisable at March 31, 2015	1,057,276		$	29.08	2.9 years

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⁽¹⁾PVRSU units outstanding have been increased by 3,850 units due to the Company exceeding the targeted performance conditions contained in PVRSUs granted in prior periods during the three months ended March 31, 2015.

The components of the Company’s pretax share-based compensation expense and associated income tax benefits are as follows for the three months ended March 31, 2015 and 2014:



	Three Months Ended
	March 31,
(in millions)	2015		2014
Stock options	$	0.7	$	0.4
Restricted stock	1.8		1.9
Performance vested restricted stock units	0.3		0.7
Total	$	2.8	$	3.0
Income tax benefits	$	1.0	$	1.1

Dividends

The Company currently pays a quarterly dividend on its common stock of $0.195 per share, however the declaration of future dividends are subject to the discretion of the board of directors. During the three months ended March 31, 2015, the Company's board of directors declared dividends totaling $0.195 per share or approximately $11.2 million in the aggregate.

In addition, during the three months ended March 31, 2015, the Company recorded dividends totaling $0.5 million related to previously declared dividends that were contingent upon the vesting of performance vested restricted stock units.

Share Repurchases and Redemptions

No shares of common stock were purchased by the Company under the share repurchase program during the three months ended March 31, 2015.

During the three months ended March 31, 2015, the Company redeemed 102,457 shares of common stock at a total cost of approximately $6.2 million from employees to satisfy the option exercise price and statutory minimum tax-withholding requirements related to the exercising of stock options and vesting of performance vested restricted stock units and restricted stock grants. These redemptions were outside the share repurchase program.