Stock-Based Compensation

The 2011 Omnibus Incentive Compensation Plan (the “2011 Plan”) provides for the granting of stock options, stock appreciation rights, restricted stock awards and performance awards to employees and non-employee directors. The terms and conditions of awards to be granted are determined by our Board's nominating and compensation committees. Vesting requirements vary by award. At December 31, 2013, there were 5,286,868 shares remaining in the 2011 Plan for future grants.

Stock options and stock appreciation rights reduce the number of shares available for grant by one share for each award granted. All other awards that will be distributed in stock under the 2011 Plan will reduce the total number of shares available for grant by an amount equal to 2.35 times the number of shares awarded. If awards made under previous plans would entitle a plan participant to an amount of West stock in excess of the target amount, the additional shares (up to a maximum threshold amount) will be distributed under the 2011 Plan.

The following table summarizes our stock-based compensation expense for the years ended December 31:



($ in millions)	2013		2012		2011
Stock option and appreciation rights	$	7.7	$	5.3	$	4.4
Performance-vesting shares	6.5		6.0		3.0
Performance-vesting units	2.4		0.9		0.2
Performance-vesting shares/units dividend equivalents	0.4		0.1		0.1
Employee stock purchase plan	0.4		0.4		0.3
Deferred compensation plans	3.8		2.8		0.4
Total stock-based compensation expense	$	21.2	$	15.5	$	8.4

In 2011, $0.8 million of stock option expense and $0.7 million of performance-vesting shares expense, which related to the retirement of our former President and Chief Operating Officer, were recorded within restructuring and other items. The remainder of the 2011 stock-based compensation expense balance was recorded within selling, general and administrative expenses.

The amount of unrecognized compensation expense for all nonvested awards as of December 31, 2013, was approximately $18.7 million, which is expected to be recognized over a weighted average period of 1.6 years.

Stock Options

Stock options granted to employees vest in equal annual increments over 4 years of continuous service. All awards expire 10 years from the date of grant. Upon the exercise of stock options, shares are issued in exchange for the exercise price of the options.

The following table summarizes changes in outstanding options:



(in millions, except per share data)	2013		2012		2011
Options outstanding, January 1	5.6		5.8		5.7
Granted	0.9		1.2		1.0
Exercised	(1.6	)	(1.4	)	(0.8	)
Forfeited	(0.1	)	—		(0.1	)
Options outstanding, December 31	4.8		5.6		5.8
Options exercisable, December 31	2.3		3.0		3.5



Weighted Average Exercise Price	2013		2012		2011
Options outstanding, January 1	$	19.83	$	17.88	$	16.16
Granted	29.71		21.47		20.43
Exercised	18.97		13.12		8.84
Forfeited	23.10		20.66		19.84
Options outstanding, December 31	$	21.99	$	19.83	$	17.88
Options exercisable, December 31	$	19.51	$	19.01	$	16.46

As of December 31, 2013, the weighted average remaining contractual life of options outstanding and of options exercisable was 6.8 years and 5.3 years, respectively.

As of December 31, 2013, the aggregate intrinsic value of total options outstanding was $128.7 million, of which $67.6 million represented vested options.

The fair value of the options was estimated on the date of grant using a Black-Scholes option valuation model that used the following weighted average assumptions in 2013, 2012 and 2011: a risk-free interest rate of 0.9%, 0.9% and 2.2%, respectively; stock volatility of 22.5%, 23.3% and 24.3%, respectively; and dividend yields of 1.3%, 1.7% and 1.7%, respectively. Stock volatility is estimated based on historical data and the impact from expected future trends. Expected lives, which are based on prior experience, averaged 6 years for 2013, 2012 and 2011. The weighted average grant date fair value of options granted in 2013, 2012 and 2011 was $5.73, $4.01 and $4.38, respectively.

For the years ended December 31, 2013, 2012 and 2011, the intrinsic value of options exercised was $27.3 million, $16.9 million and $10.7 million, respectively. The grant date fair value of options vested during those same periods was $4.0 million, $3.8 million and $4.0 million, respectively.

Stock Appreciation Rights

Stock appreciation rights (“SARs”) granted to eligible international employees vest in equal annual increments over 4 years of continuous service. All awards expire ten years from the date of grant. The fair value of each SAR is adjusted at the end of each reporting period, with the resulting change reflected in expense. During the year, we converted 324,920 cash-settled SARs to stock-settled SARs ("SSARs"). As of December 31, 2013, SARs outstanding were 375,104, of which 104,790 were cash-settled and 270,314 were stock-settled. Upon exercise of a cash-settled SAR, the employee receives cash for the difference between the grant date price and the fair market value of the Company's stock on the date of exercise. As a result of the cash settlement feature, SAR awards are recorded within other long-term liabilities. Upon exercise of a SSAR, shares are issued in exchange for the exercise price of the SSAR. As a result of the stock settlement feature, SSAR awards are recorded within equity.

The following table summarizes changes in outstanding SARs:



	2013		2012		2011
SARs outstanding, January 1	389,686		320,336		222,096
Granted	132,566		145,018		126,048
Exercised	(147,148	)	(75,668	)	(15,370	)
Forfeited	—		—		(12,438	)
SARs outstanding, December 31	375,104		389,686		320,336
SARs exercisable, December 31	56,938		110,292		117,800




Weighted Average Exercise Price	2013		2012		2011
SARs outstanding, January 1	$	20.81	$	20.17	$	19.87
Granted	29.56		21.22		20.57
Exercised	20.47		18.91		19.58
Forfeited	—		—		19.59
SARs outstanding, December 31	24.03		20.81		20.17
SARs exercisable, December 31	$	20.95	$	20.70	$	19.86

Performance Awards

In addition to stock options and SAR awards, we grant performance vesting share (“PVS”) awards and performance vesting unit (“PVU”) awards to eligible employees. These awards are earned based on the Company's performance against pre-established targets, including annual growth rate of revenue and return on invested capital (“ROIC”), over a specified performance period. Depending on the achievement of the targets, recipients of PVS awards are entitled to receive a certain number of shares of common stock, whereas recipients of PVU awards are entitled to receive a payment in cash per unit based on the fair market value of a share of our common stock at the end of the performance period.

The following table summarizes changes in our outstanding PVS awards:



	2013			2012			2011
Non-vested PVS awards, January 1	652,662			657,038			695,100
Granted at target level	175,498			209,680			202,198
Adjustments above/(below) target	38,330			(120,155		)	(116,355		)
Vested and converted	(273,044		)	(83,859		)	(103,507		)
Forfeited	(15,088		)	(10,042		)	(20,398		)
Non-vested PVS awards, December 31	578,358			652,662			657,038

Weighted Average Grant Date Fair Value	2013			2012			2011
Non-vested PVS awards, January 1	$	21.42		$	19.39		$	19.61
Granted at target level	29.67			21.33			20.43
Adjustments above/(below) target	23.83			13.86			20.97
Vested and converted	29.56			21.22			20.43
Forfeited	23.29			20.98			19.23
Non-vested PVS awards, December 31	$	23.79		$	21.42		$	19.39

The actual payout of PVS and PVU awards may vary from 0% to 200% of an employee's targeted amount. The fair value of PVS awards is based on the market price of our stock at the grant date and is recognized as expense over the performance period. The weighted average grant date fair value of PVS awards granted during the years 2013, 2012 and 2011 was $29.67, $21.33 and $20.43, respectively. Including forfeiture and above-target achievement expectations, we expect that the PVS awards will convert to 731,007 shares to be issued over an average remaining term of 1.0 years.

The fair value of PVU awards is also based on the market price of our stock at the grant date. These awards are revalued at the end of each quarter based on changes in our stock price. As a result of the cash settlement feature, PVU awards are recorded within other long-term liabilities.

The following table summarizes changes in our outstanding PVU awards:



	2013		2012		2011
Non-vested PVU awards, January 1	69,240		54,572		46,840
Granted at target level	25,538		27,100		26,884
Adjustments above/(below) target	3,000		(7,156	)	(8,330	)
Vested and converted	(18,322	)	(5,276	)	(7,386	)
Forfeited	—		—		(3,436	)
Non-vested PVU awards, December 31	79,456		69,240		54,572



Weighted Average Grant Date Fair Value	2013		2012		2011
Non-vested PVU awards, January 1	$	20.98	$	19.65	$	19.47
Granted at target level	29.56		21.22		20.56
Adjustments above/(below) target	25.30		15.22		20.53
Vested and converted	29.56		21.22		20.43
Forfeited	—		—		18.77
Non-vested PVU awards, December 31	$	23.86	$	20.98	$	19.65

Employee Stock Purchase Plan

We also offer an Employee Stock Purchase Plan (“ESPP”) which provides for the sale of our common stock to eligible employees at 85% of the current market price on the last trading day of each quarterly offering period. Payroll deductions are limited to 25% of the employee's base salary, not to exceed $25 thousand in any one calendar year. In addition, employees may not buy more than 2,000 shares during any offering period (8,000 shares per year). Purchases under the ESPP were 84,675 shares, 103,010 shares and 110,776 shares for the years 2013, 2012 and 2011, respectively. At December 31, 2013, there were approximately 4.2 million shares available for issuance under the ESPP.

Deferred Compensation Plans

Our deferred compensation plans include a Non-Qualified Deferred Compensation Plan for Non-Employee Directors, under which non-employee directors may defer all or part of their annual cash retainers. The deferred fees may be credited to a stock-equivalent account. Amounts credited to this account are converted into deferred stock units based on the fair market value of one share of our common stock on the last day of the quarter. For deferred stock units ultimately paid in cash, a liability is calculated at an amount determined by multiplying the number of units by the fair market value of our common stock at the date of termination. In addition, deferred stock awards are granted on the date of our annual meeting, and are distributed in shares of common stock. In 2013, we granted 36,054 deferred stock awards, with a grant date fair value of $32.46. Similarly, a non-qualified deferred compensation plan for designated executive officers provides for the conversion of compensation into deferred stock units. As of December 31, 2013, the two deferred compensation plans held a total of 581,058 deferred stock units, including 24,296 units to be paid in cash.

Annual Incentive Plan

Under our annual incentive plan, participants are paid bonuses on the attainment of certain financial goals, which they can elect to receive in either cash or shares of our common stock. If the employee elects payment in shares, they are also given a restricted incentive stock award equal to one share for each four bonus shares issued. The incentive stock awards vest at the end of four years provided that the participant has not made a disqualifying disposition of their bonus shares. Incentive stock award grants were 5,300 shares, 2,800 shares and 3,800 shares in 2013, 2012 and 2011, respectively. Incentive stock forfeitures of 200 shares, 800 shares and 2,800 shares occurred in 2013, 2012 and 2011, respectively. Compensation expense is recognized over the vesting period based on the fair market value of common stock on the award date: $29.56 per share granted in 2013, $21.22 per share granted in 2012 and $20.43 per share granted in 2011.