15. SHARE-BASED COMPENSATION PLANS

The Corporation maintains two share-based compensation plans, restricted stock units and performance share units, both of which are utilized only in our executive Long Term Incentive grants. Previous grants included non-qualified stock options (NQSO) to all participants. Under our employee benefit program, the Corporation also provides an Employee Stock Purchase Plan (ESPP) available to most active employees. Certain awards provide for accelerated vesting if there is a change in control.

The compensation cost for employee and non-employee director share-based compensation programs during 2013, 2012, and 2011 is as follows:



(In thousands)	2013		2012		2011
Non-qualified stock options	$	238	$	942	$	3,066
Employee Stock Purchase Plan	1,260		1,303		658
Performance Share Units	3,495		3,179		2,591
Restricted Share Units	1,700		3,237		2,771
Other share-based payments	657		767		535
Total share-based compensation expense before income taxes	$	7,350	$	9,428	$	9,621

Other share-based payments include restricted stock awards to non-employee directors, who are treated as employees as prescribed by the accounting guidance on share-based payments. The compensation cost recognized follows the cost of the employee, which is primarily reflected as General and administrative expenses in the Consolidated Statements of Earnings. No share-based compensation costs were capitalized during 2013, 2012, or 2011.

2005 Long-Term Incentive Plan

Awards under the 2005 Long Term Incentive Plan (the "2005 LTI Plan") consist of performance units (cash), performance share units, time-based restricted share units, and two legacy components, restricted stock units and non-qualified stock options. Under the 2005 LTI Plan, an aggregate total of 5,000,000 shares (as adjusted for subsequent stock splits and dividends) of common stock were registered. Issuances of common stock to satisfy employee option exercises will be made from the Corporation’s treasury stock. No more than 200,000 shares of common stock or 100,000 shares of restricted stock may be awarded in any year to any one participant in the 2005 LTI Plan.

The Corporation awarded total performance units (cash) of $17.1 million, $16.2 million, and $19.3 million in 2013, 2012, and 2011, respectively, to certain key employees. The performance units are denominated in U.S. dollars, settled in U.S. dollars, and are contingent upon the Corporation’s satisfaction of performance objectives keyed to achieving profitable growth over a period of three fiscal years commencing with the fiscal year following such awards. The estimated cost of such awards is expensed over the three-year performance period. Performance unit expense was $16.6 million, $12.6 million, and $8.1 million in 2013, 2012, and 2011, respectively. The actual cost of the performance units may vary from the total value of the awards depending upon the degree to which the key performance objectives are met.

Non-Qualified Stock Options (NQSO)

The Corporation no longer grants non-qualified stock options under the 2005 LTI Plan. Prior to November 2011, the Corporation granted non-qualified stock options to key employees each year. Stock options granted under the 2005 LTI Plan expire ten years after the date of the grant and are generally exercisable (vest) one-third per year beginning with 12 months following the date of grant, and fully vesting on the third anniversary of the grant date. The fair value of the NQSO’s was estimated at the date of grant using a Black-Scholes option-pricing model with the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Corporation’s stock and other factors. The Corporation uses historical data to estimate the expected term of options granted. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.



	2013			2012			2011
Risk-free rate	—		%	—		%	2.45		%
Expected volatility	—		%	—		%	30.20		%
Expected dividend yield	—		%	—		%	0.92		%
Expected term (in years)	—			—			6
Weighted-average grant-date fair value of options	$	—		$	—		$	10.57

A summary of employee stock option activity under the 2005 LTI Plan is as follows:



	Shares (000’s)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term in Years	Aggregate Intrinsic Value (000’s)
Outstanding at December 31, 2012	3,033		$	32.71
Granted	—		—
Exercised	(715	)	29.09
Adjustment	19		19.08
Forfeited	(16	)	35.42
Outstanding at December 31, 2013	2,321		$	33.69	4.9	$	66,221
Exercisable at December 31, 2013	2,321		$	33.69	4.9	$	65,969

The total intrinsic value of stock options exercised during 2013, 2012, and 2011 was $11.4 million, $3.1 million, and $3.9 million, respectively. The above table represents the Corporation’s estimate of options fully vested and/or expected to vest.

NQSO grants vest over three years and compensation cost is recognized over the requisite service period for each separately vesting portion of each award as if each award was, in substance, multiple awards. During 2013, 2012, and 2011, compensation cost associated with NQSOs was $0.2 million, $0.9 million, and $3.1 million respectively. As of December 31, 2013, there was less than $0.1 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized during 2014.

Cash received from option exercises during 2013, 2012, and 2011 was $20.8 million, $6.7 million, and $4.2 million, respectively. The total tax benefit generated from options exercised during 2013, 2012, and 2011, was $2.0 million, $1.0 million, and $1.1 million, respectively. Tax benefits received on exercised options, which were subject to expense under U.S. GAAP, have been credited to deferred taxes up to the amount of benefit recorded in the income statement, with the difference charged to additional paid in capital, while tax benefits received on exercised options that were not subject to expense have been credited to additional paid in capital.

Performance Share Units

Since 2005, the Corporation has granted performance share units to certain employees under the 2005 LTI Plan, whose vesting is contingent upon meeting various company-wide, three-year performance goals around net income targets, both against budget and as a percentage of sales against a peer group. In addition, certain key executives are awarded performance based share units if the Corporation's total shareholder return over the three-year term of the awards compares favorably to that of a self-constructed peer group. The non-vested shares are subject to forfeiture if established performance goals are not met or employment is terminated other than due to death, disability, or retirement. Share plans are denominated in share-based units based on the fair market value of the Corporation’s Common stock on the date of grant.

A summary of the Corporation’s performance share units for 2013 is as follows:



	Shares/Units (000’s)		Weighted- Average Fair Value		Weighted- Average Remaining Contractual Term in Years	Aggregate Intrinsic Value (000’s)
Nonvested at December 31, 2012	872		$	32.12
Granted	77		62.91
Vested	(88	)	30.90
Forfeited	(492	)	34.59
Nonvested at December 31, 2013	368		$	35.52	2.2	$	22,928
Expected to vest at December 31, 2013	139		$	37.99	2.2	$	8,630

The performance share unit’s compensation cost is amortized to expense on a straight-line basis over the three-year requisite service period. As forfeiture and performance assumptions change, compensation cost will be adjusted on a cumulative basis in the period of the assumption change.

As of December 31, 2013, there was $7.5 million of unrecognized compensation cost, which is expected to be recognized over a period of 2.2 years related to non-vested performance share units.

Restricted Share Units

Restricted share units cliff vest at the end of the awards’ vesting period. The restricted share units contain only a service condition, and thus compensation cost is amortized to expense on a straight-line basis over the requisite service period, which ranges from 3 to 10.1 years. The non-vested restricted stock is subject to forfeiture if employment is terminated other than due to death or disability. The restricted share units are subject to forfeiture if employment is terminated and are nontransferable. During 2013, restricted share units associated with one of the Corporation's former executives who resigned in 2013 were forfeited and the related stock compensation expense of $1.3 million that was previously recorded was reversed.

A summary of the Corporation’s restricted share units for 2013 is as follows:



	Shares/Units (000’s)		Weighted- Average Fair Value		Weighted- Average Remaining Contractual Term in Years	Aggregate Intrinsic Value (000’s)
Nonvested at December 31, 2012	396		$	33.53
Granted	75		44.79
Vested	(78	)	29.88
Forfeited	(74	)	35.83
Nonvested at December 31, 2013	319		$	36.53	2.9	$	19,842
Expected to vest at December 31, 2013	319		$	36.53	2.9	$	19,842

As of December 31, 2013, there was $6.6 million of unrecognized compensation cost, which is expected to be recognized over a period of 2.9 years related to restricted share units.

Employee Stock Purchase Plan

The Corporation’s ESPP enables eligible employees to purchase the Corporation’s Common stock at a price per share equal to 85% of the fair market value at the end of each offering period. Each offering period of the ESPP lasts six months, commencing on January 1st and July 1st of each year. Participation in the offering is limited to 10% of an employee’s base salary (not to exceed amounts allowed under Section 423 of the Internal Revenue Code), participation may be terminated at any time by the employee and automatically ends on termination of employment with the Corporation. Effective January 1, 2011, the Corporation increased the number of shares authorized for issuance under the ESPP by an additional 1,200,000 shares, from 2,000,000 to 3,200,000, and extended the term of the ESPP by an additional two years through October 1, 2015. The common stock to satisfy the stock purchases under the ESPP were originally designated as newly issued shares of common stock; however, the Company has reserved the additional 1,200,000 shares from Treasury. During 2013, there were 284,900 shares purchased under the ESPP. As of December 31, 2013, the Corporation has withheld $4.4 million from employees, the equivalent of 82,846 shares. Compensation cost is recognized on a straight-line basis over the six-month vesting period during which employees perform related services. The Corporation recognized $0.3 million of tax benefit associated with disqualifying dispositions during 2013, all of which was credited to additional paid in capital.

2005 Stock Plan for Non-Employee Directors

The 2005 Stock Plan for Non-Employee Directors ("2005 Stock Plan"), approved by the stockholders in 2005, provided for the grant of stock awards and, at the option of the non-employee directors, the deferred payment of regular stipulated compensation and meeting fees in equivalent shares. Under the 2005 Stock Plan, the Corporation’s non-employee directors each receive an annual restricted stock award, which is subject to a three-year restriction period commencing on the date of the grant. For 2013, 2012, and 2011, the value of the award granted was $70,000 per director, respectively. These restricted stock awards are subject to forfeiture if the non-employee director resigns or retires by reason of his or her decision not to stand for re-election prior to the lapsing of all restrictions, unless the restrictions are otherwise removed by the Committee on Directors and Governance. The cost of the restricted stock awards is amortized over the three year restriction period from the date of grant or such shorter restriction period as determined by the removal of such restrictions. Newly elected non-employee directors also receive a one-time five year restricted stock award of $35,000. The total number of shares of Common stock available for grant under the 2005 Stock Plan may not exceed 100,000 shares. During 2013, the Corporation awarded 15,256 shares of restricted stock, of which 5,721, have been deferred by certain directors. During 2012, the Corporation awarded 16,977 shares of restricted stock, of which 8,935 have been deferred by certain directors. During 2011, the Corporation awarded 16,680 shares of restricted stock, of which 7,820 have been deferred by certain directors.

Pursuant to election by non-employee directors to receive shares in lieu of payment for earned and deferred compensation under the 2005 Stock Plan, the Corporation had provided for an additional aggregate of 65,503 and 68,974 shares at an average price of $31.94 and $31.16, respectively, as of December 31, 2013 and 2012. During 2013 and 2012, the Corporation issued 19,670 and 12,955 shares, respectively, in compensation pursuant to such elections.