Note 17. Stock and Incentive Programs for Employees and Directors

The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and directors, including stock options, restricted stock units and performance share units. The Company estimates the fair value of share-based awards based on assumptions as of the grant date. The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three to four years for restricted stock awards and stock options and the performance period for performance share units. The Company estimates the number of awards expected to vest based, in part, on historical forfeiture rates and also based on management’s expectations of employee turnover within the specific employee groups receiving each type of award. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates.

Share-Based Compensation Expense

The total compensation expense related to all share-based compensation plans was $17.3 million, $17.7 million and $19.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. The income tax benefit related to share-based compensation expense was $6.7 million, $6.9 million and $7.7 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, $19.3 million of total unrecognized compensation expense related to share-based compensation plans is expected to be recognized over a weighted-average period of 1.8 years.

Share-Based Compensation Plans

The Company has one share-based compensation plan under which it may grant future awards, as described below, and one terminated or expired share-based compensation plan under which awards remain outstanding.

The 2012 Performance Incentive Plan (the “2012 PIP”) was approved by shareholders to provide incentives to key employees of the Company and its subsidiaries. Awards under the 2012 PIP are generally not restricted to any specific form or structure and could include, without limitation, stock options, stock units, restricted stock awards, cash or stock bonuses and stock appreciation rights. There were 10 million shares of common stock reserved and authorized for issuance under the 2012 PIP. At December 31, 2015, there were 5.7 million shares of common stock authorized and available for grant under the 2012 PIP.

General Terms of Awards

Under various incentive plans, the Company has granted certain employees non-qualified stock options, restricted stock units, and performance share units. The Human Resources Committee of the Board of Directors has discretion to establish the terms and conditions for grants, including the number of shares, vesting and required service or other performance criteria. The maximum term of any award under the 2012 PIP and previous plans is ten years.

For all of the Company’s stock options outstanding at December 31, 2015, the exercise price of the stock option equals the fair market value of the Company’s common stock on the option grant date. Options generally vest over four years or less from the date of grant, upon retirement or upon a change in control of the Company. Options generally expire ten years from the date of grant or five years after the date of retirement, whichever is earlier.

The rights granted to the recipient of restricted stock unit awards generally accrue ratably over the restriction or vesting period, which is generally four years. The Company has also granted restricted stock unit awards which cliff vest three years from the grant date. Restricted stock unit awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting upon specified events, including death or permanent disability of the grantee, termination of the grantee’s employment under certain circumstances or a change in control of the Company. The Company records compensation expense of restricted stock unit awards based on the fair market value of the awards at the date of grant ratably over the period during which the restrictions lapse. Dividends are not paid on restricted stock units.

The Company also issues restricted stock units as share-based compensation for members of the Board of Directors. Director restricted stock units granted after January 2009 vest ratably over three years from the date of grant with the opportunity to defer any tranche of vesting restricted stock units until termination of service on the Board of Directors. Awards granted between January 2008 and January 2009 vested ratably over three years from the date of grant and were amended in May 2009 to provide the opportunity to defer any tranche of vesting restricted stock units until termination of service on the Board of Directors. For awards granted prior to January 2008, one-third of the restricted stock units vested on the third anniversary of the grant date, and the remaining two-thirds of the restricted stock units vested upon termination of the holder’s service on the Board of Directors; the holder could also elect to defer delivery of the initial one-third of the restricted stock units until termination of service on the Board of Directors. In the event of termination of a holder’s service on the Board of Directors prior to a vesting date, all restricted stock units of such holder will vest. All awards granted prior to December 31, 2007 are payable in shares of common stock or cash. In 2009, the option to have awards paid in cash was removed for awards granted in 2008 and future years. Awards that may be paid in cash are classified as liability awards due to their expected settlement in cash, and are included in accrued liabilities in the Consolidated Balance Sheets. Approximately 86,372, 86,372 and 124,599 restricted stock units classified as liability awards were outstanding at December 31, 2015, 2014 and 2013, respectively. Compensation expense for these awards is measured based upon the fair market value of the awards at the end of each reporting period. Awards payable only in shares are classified as equity awards due to their expected settlement in common stock. Compensation expense for these awards is measured based upon the fair market value of the awards at the date of grant. Dividend equivalents are accrued for shares awarded to the Board of Directors and paid in the form of cash.

The Company has granted performance share unit awards to certain executive officers and senior management. Distributions under these awards are payable at the end of their respective performance periods in common stock or cash, at the Company’s discretion. The number of share units that vest can range from zero to 150% for the 2015 awards and from zero to 100% for the 2014 and 2013 awards, depending on achievement of a targeted performance metric for a performance period of three years inclusive of the year in which the award was granted. These awards are subject to forfeiture upon termination by the Company under certain circumstances prior to vesting. The Company expenses the cost of the performance share unit awards based on the fair market value of the awards at the date of grant and the estimated achievement of the performance metric, ratably over the performance period of three years.

Stock Options

There were no options granted during the years ended December 31, 2015 and 2014.

Stock option awards as of December 31, 2015 and 2014, and changes during the year ended December 31, 2015, were as follows:

	Shares Under Option (thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (millions)
Outstanding at December 31, 2014		3,847		$	19.43		4.7	$	12.6
Exercised		(135	)		13.21
Cancelled/forfeited/expired		(5	)		13.23
Outstanding at December 31, 2015		3,707			19.66		3.6		8.4
Vested and expected to vest at December 31, 2015		3,701			19.67		3.6		8.4
Exercisable at December 31, 2015		1,455		$	9.22		4.2	$	8.0

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on December 31, 2015 and 2014, respectively, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options on December 31, 2015 and 2014. This amount will change in future periods based on the fair market value of the Company’s stock and the number of options outstanding. Total intrinsic value of options exercised for the years ended December 31, 2015, 2014 and 2013 was $0.8 million, $1.1 million and $0.7 million, respectively.

Compensation expense related to stock options for the years ended December 31, 2015, 2014 and 2013 was $0.6 million, $0.9 million and $1.5 million, respectively. As of December 31, 2015, $0.1 million of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted average period of 0.2 years.

Cash received from the option exercises for the year ended December 31, 2015, 2014 and 2013 was $1.8 million, $1.6 million and $2.2 million, respectively. The actual tax benefit realized for the tax deduction from option exercises totaled $0.3 million, $0.4 million and $0.3 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Excess tax benefits on stock option exercises, shown as financing cash inflows as a component of issuance of common stock in the Consolidated Statements of Cash Flows, were $0.2 million, $0.3 million and $0.2 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Restricted Stock Units

Nonvested restricted stock unit awards as of December 31, 2015 and 2014, and changes during the year ended December 31, 2015 were as follows:

	Shares (thousands)			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2014		2,045		$	12.54
Granted		701			17.14
Vested		(1,010	)		13.71
Forfeited		(66	)		13.55
Nonvested at December 31, 2015		1,670		$	13.72

Compensation expense related to restricted stock units was $11.6 million, $13.3 million and $15.9 million for the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, there was $12.5 million of unrecognized share-based compensation expense related to approximately 1.7 million restricted stock unit awards, with a weighted-average grant date fair value of $13.70, that are expected to vest over a weighted-average period of 1.8 years. The fair value of these awards was determined based on the Company’s stock price on the grant date reduced by the present value of expected dividends through the vesting period.

Excess tax benefits on restricted stock units that vested, shown as financing cash inflows as a component of issuance of common stock in the Consolidated Statements of Cash Flows, were $2.4 million, $2.5 million and $2.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Performance Share Units

Nonvested performance share unit awards as of December 31, 2015 and 2014, and changes during the year ended December 31, 2015, were as follows:

	Shares (thousands)			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2014		804		$	11.87
Granted		418			16.73
Expired/forfeited		(5	)		16.73
Vested		(485	)		8.85
Nonvested at December 31, 2015		732		$	16.61

During the years ended December 31, 2015, 2014 and 2013, 418,000, 319,000 and 485,000 performance share unit awards, respectively, were granted to certain executive officers and senior management, payable upon the achievement of certain established performance targets. The performance periods for the shares awarded during the years ended December 31, 2015, 2014 and 2013 are January 1, 2015 through December 31, 2017, January 1, 2014 through December 31, 2016 and January 1, 2013 through December 31, 2015, respectively. Distributions under these awards are payable at the end of the performance period in common stock or cash, at the Company’s discretion. The total potential payouts for awards granted during the years ended December 31, 2015 and 2014 range from 209,000 to 627,000 and 154,500 to 319,000 shares, respectively, should certain performance targets be achieved. The maximum potential payout of 485,000 shares was achieved for awards granted during the year ended December 31, 2013. The fair value of these awards was determined on the date of grant based on the Company’s stock price reduced by the present value of expected dividends through the vesting period. These awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting upon specified events, including death, permanent disability or retirement of the grantee or a change in control of the Company. If the proposed spinoff transactions are completed, the terms of the performance share unit awards may be modified. Refer to Note 1, Basis of Presentation and Summary of Significant Accounting Policies, for further details regarding the proposed spinoff transactions.

Compensation expense for the awards granted in 2015 and 2014 is currently being recognized based on 100% estimated payout of 418,000 and 319,000 shares, for each respective period. Compensation expense for awards granted during 2013 was recognized based on the achieved payout of 100%, or 485,000 shares, which are expected to be distributed during the first quarter of 2016. Compensation expense related to performance share unit awards for the years ended December 31, 2015, 2014 and 2013 was $5.1 million, $3.5 million and $2.5 million, respectively. As of December 31, 2015, there was $6.7 million of unrecognized compensation expense related to performance share unit awards, which is expected to be recognized over a weighted average period of 1.7 years.