Share-Based Compensation and Capital Stock

Stock Options

No stock options were granted during the three months ended June 30, 2016 and 2015. The Company granted 0.7 million and 0.5 million options to certain employees of the Company at a fair value of $6.9 million and $6.2 million for the six months ended June 30, 2016 and 2015, 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:



	2016 Grants			2015 Grants
Risk-free interest rate	1.22		%	1.45		%
Expected volatility	23.76		%	23.94		%
Expected life of stock option	4.6 years			4.6 years
Dividend yield	1.59		%	1.23		%
Requisite service period	4 years			4 years
Contractual life	7 years			7 years
Weighted average fair value of options granted (per option)	$	9.30		$	12.39

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 June 30, 2016 was $15.8 million and $14.7 million, respectively. The total intrinsic value of options exercised during the three months ended June 30, 2016 and 2015 was approximately $4 thousand and $0.1 million, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2016 and 2015 was approximately $4.4 million and $8.6 million, respectively.

The Company received approximately $0.1 million and $0.1 million in proceeds from the exercise of 2,126 and 3,829 employee stock options during the three months ended June 30, 2016 and 2015, respectively. The Company received approximately $4.2 million and $5.7 million in proceeds from the exercise of 192,956 and 232,792 employee stock options during the six months ended June 30, 2016 and 2015, respectively.

Restricted Stock

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



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Restricted share grants	42,042		20,653		167,152		106,445
Weighted average grant date fair value per share	$	52.00	$	62.57	$	51.62	$	63.29
Aggregate grant date fair value ($000)	$	2,186	$	1,292	$	8,628	$	6,737
Restricted shares forfeited	5,342		3,664		9,614		8,442
Vesting service period of shares granted	12 - 48 months		12 - 48 months		12 - 48 months		12 - 48 months
Fair value of shares vested ($000)	$	880	$	1,054	$	7,183	$	11,739

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 160% 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				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Performance vested restricted stock units granted at target	44,524		20,956		79,557		51,309
Weighted average grant date fair value per share	$	44.92	$	57.27	$	47.81	$	60.94
Aggregate grant date fair value ($000)	$	2,000	$	1,200	$	3,804	$	3,126
Stock units forfeited	—		—		28,193		—
Requisite service period	31 - 43 months		36 - 43 months		31 -43 months		36 - 43 months

No PVRSU grants vested during the three months ended June 30, 2016. During the six months ended June 30, 2016, PVRSU grants totaling 22,062 vested at a grant date fair value of $0.8 million. These PVRSU grants were initially granted at a target of 44,118 units. However, since the Company achieved only 50% of the targeted performance conditions contained in the stock awards granted in prior periods, 22,056 shares were forfeited. In addition, during the six months ended June 30, 2016, PVRSU grants totaling 6,126 vested at a grant date fair value of $0.2 million. These PVRSU grants were initially granted at a target of 4,083 units. However, since the Company achieved 150% of the targeted performance conditions contained in the stock awards granted in prior periods, an additional 2,043 shares were earned and issued.

No PVRSU grants vested during the three months ended June 30, 2015. During the six months ended June 30, 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.

A summary of stock-based award activity as of June 30, 2016 and changes during the six 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, 2016	2,084,201		$	41.36		384,490		$	47.40	226,737		$	45.09
Granted	745,769		$	51.49		167,152		$	51.62	79,557		$	47.81
Performance based leveraging ⁽¹⁾	—		$	—		—		$	—	2,043		$	36.76
Exercised/Vested	(192,956	)	$	21.94		(145,544	)	$	43.49	(28,188	)	$	36.76
Expired	—		$	—		—		$	—	—		$	—
Forfeited	(21,825	)	$	55.80		(9,614	)	$	52.36	(28,193	)	$	35.85
Outstanding at June 30, 2016	2,615,189		$	45.56	4.6 years	396,484		$	50.49	251,956		$	47.85
Options exercisable at June 30, 2016	1,164,548		$	36.62	3.0 years

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⁽¹⁾PVRSU units outstanding have been increased by 2,043 units due to the Company exceeding the targeted performance conditions contained in PVRSUs granted in prior periods during the six months ended June 30, 2016.

The components of the Company’s pretax share-based compensation expense and associated income tax benefits are as follows for the three and six months ended June 30, 2016 and 2015:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in millions)	2016		2015		2016		2015
Stock options	$	1.5	$	0.9	$	2.6	$	1.6
Restricted stock	2.2		1.7		4.0		3.5
Performance vested restricted stock units	0.7		0.3		1.3		0.6
Total	$	4.4	$	2.9	$	7.9	$	5.7
Income tax benefits	$	1.6	$	1.1	$	2.9	$	2.1

In conjunction with the termination of a company officer stock option, restricted stock and performance vested restricted stock compensation expense for the three and six months ended June 30, 2016, included an additional $0.4 million, $0.4 million and $0.1 million, respectively, of accelerated recognition of share based payment awards.

During the three and six months ended June 30, 2015, 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 share-based compensation costs related to these PVRSUs has been decreased by $0.2 million and $0.2 million for the three and six months ended June 30, 2015.

Dividends

The Company currently pays a quarterly dividend on its common stock of $0.205 per share, however the declaration of future dividends is subject to the discretion of the board of directors. During the three and six months ended June 30, 2016, the Company's board of directors declared dividends totaling $0.205 and $0.41 per share or approximately $11.5 million and $23.1 million, respectively, in the aggregate.

In addition, during the six months ended June 30, 2016, the Company recorded dividends totaling $0.1 million related to previously declared dividends that were contingent upon the vesting of performance vested restricted stock units.

Share Repurchases and Redemptions

The Company purchased 0.4 million and 0.5 million shares of common stock under the share repurchase program at a total cost of $19.4 million and $23.0 million during the three and six months ended June 30, 2016, respectively.

During the three and six months ended June 30, 2016, the Company redeemed 556 and 116,779 shares of common stock at a total cost of approximately $29 thousand and $5.3 million, respectively, 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.