Common Stock

Overview

The Company’s common stock has a stated value of $1 per share, with no cumulative voting rights or preemptive rights. Holders of the common stock have the right to elect the Company’s directors and to vote on other matters.

Long-Term Incentive Plan

On May 29, 2014, the Company’s shareholders approved an amended and restated stock-based long-term incentive plan (the "Amended and Restated 2007 LTIP") and authorized the issuance of up to 1.7 million shares of the Company's common stock for the benefit of directors and employees. Under the Amended and Restated 2007 LTIP, shares of the Company's common stock may be issued through the award or grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, bonus stock, performance stock, cash-based awards and other stock-based awards. The Company may issue new shares, purchase shares on the open market, or issue shares from shares of the Company's common stock the Company has repurchased to meet the share requirements of the Amended and Restated 2007 LTIP. Beginning in 2015, shares of the Company's common stock issued for employee benefit and stock incentive plans have been issued from the shares repurchased and held in treasury stock. As discussed in Part II, Item 8, Financial Statements and Supplementary Data, Note A, the Company accounts for its stock-based long-term incentive plan under the FASB guidance for stock-based compensation.

Stock Options. Stock options have been granted at exercise prices equal to or greater than the market value of the underlying shares at the date of grant. The fair value for these options was estimated at the grant date using the Black-Scholes option pricing model. The options expired ten years from the date of grant unless terminated earlier by the Board of Directors (the “Board”). Stock options have not been granted since 2003.

The 15,000 options outstanding at December 31, 2012 were exercised during 2013 with a weighted average exercise price of $12.78. The Company received $0.2 million in cash and realized a current tax benefit of $0.1 million. The Company had no stock options outstanding as of December 31, 2014 and December 31, 2015.

The intrinsic value of stock options exercised in 2013 was $0.3 million. No options were forfeited, vested or expired during 2015, 2014 and 2013. No compensation cost was recognized in 2015, 2014 and 2013 for stock options.

Restricted Stock with Service Condition and Other Stock-Based Awards. The Company has awarded restricted stock and other stock-based awards under its long-term incentive plan. Restrictions from resale on restricted stock awards generally lapse and awards vest over periods of one to three years. The market value of the unvested restricted stock at the date of grant is amortized to expense over the restriction period net of anticipated forfeitures.

Other stock-based awards are fully vested and are expensed at fair value on the date of grant. Previously directors could elect to receive retainers and meeting fees in cash, restricted stock, or a combination of cash and stock. On May 29, 2014, the Board of Directors voted to revise the terms of the restricted stock awards granted to directors in lieu of cash for retainers and meeting fees. Stock elections by directors in lieu of cash for retainer and meeting fees are now fully vested and are expensed at fair value on the date of grant. The modification to 13,863 outstanding restricted stock awards granted to directors resulted in forfeiture of those awards and the granting of new awards which were fully vested and expensed at $37.81 per share, the fair value on the date of grant. Effective fiscal year ended December 31, 2015, other stock-based awards are not included in the tables below.

The expense, deferred tax benefit, and current tax expense recognized related to restricted stock and other stock-based awards in 2015, 2014 and 2013 is presented below (in thousands):



	2015		2014		2013

Expense (a)	$	2,755	$	3,471	$	2,458
Deferred tax benefit	964		1,215		860
Current tax benefit recognized	43		39		109

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(a) Any capitalized costs related to these expenses is less than $0.3 million for all years.

The aggregate intrinsic value and fair value at grant date of restricted stock and other stock-based awards which vested in 2015, 2014 and 2013 is presented below (in thousands):



	2015		2014		2013

Aggregated intrinsic value	$	3,451	$	3,441	$	2,077
Fair value at grant date	3,327		3,330		1,765

The unvested restricted stock transactions for 2015 are presented below:



	Total Shares		Weighted Average Grant Date Fair Value		Unrecognized Compensation Expense (a)		Aggregate Intrinsic Value
					(In thousands)		(In thousands)
Restricted shares outstanding at December 31, 2014	124,297		$	35.81
Stock awards	72,187		37.17
Vested	(92,188	)	36.09
Forfeitures	(13,086	)	35.76
Restricted shares outstanding at December 31, 2015	91,210		36.61		$	1,397	$	3,512

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(a) The unrecognized compensation expense is expected to be recognized over the weighted average remaining contractual term of the outstanding restricted stock of approximately one year.

The weighted average fair value per share at grant date for restricted stock and other stock-base awards granted during 2015, 2014 and 2013 were:



	2015		2014		2013
Weighted average fair value per share	$	37.17	$	36.95	$	35.48

The holder of a restricted stock award has rights as a shareholder of the Company, including the right to vote and receive cash dividends on restricted stock.

Restricted Stock with a Performance Condition. On December 15, 2015, the Company issued a stock based retention grant to the Chief Executive Officer of 27,624 shares in accordance with of the Company's Amended and Restated 2007 LTIP that is eligible for vesting based on the achievement of certain performance conditions and a five year service period, as stated in the employment agreement. As of December 31, 2015, the adjusted grant date fair value for the award was $30.43, unrecognized compensation expense was $0.7 million, and the intrinsic value was $1.1 million. For 2015, the Company recognized $6,000 as compensation expense and $2,000 of deferred tax benefit related to this grant.

Restricted Stock with a Market Condition (Performance Shares). The Company has granted performance share awards to certain officers under the Company’s Amended and Restated 2007 LTIP, which provides for issuance of Company stock based on the achievement of certain performance criteria over a three-year period. The payout varies between 0% to 200% of performance share awards.

Detail of performance shares vested follows:



Date Vested	Payout Ratio		Performance Shares Awarded	Compensation Costs Expensed		Period Compensation Costs Expensed	Aggregated Intrinsic Value
				(In thousands)			(In thousands)
January 27, 2016	0	%	0	$	851	2013-2015	$	—
February 20, 2015	0	%	0	1,502		2012-2014	—
February 18, 2014	0	%	0	954		2011-2013	—
January 29, 2013	150.0	%	64,275	849		2010-2012	2,176

In 2016, 2017 and 2018, subject to meeting certain performance criteria, additional performance shares could be awarded. In accordance with the FASB guidance related to stock-based compensation, the Company recognizes the related compensation expense by ratably amortizing the grant date fair value of awards over the requisite service period and the compensation expense is only adjusted for forfeitures. Excluding the 2013 award, the actual number of shares to be issued can range from zero to 155,970 shares.

The fair value at the date of each separate grant of performance shares was based upon a Monte Carlo simulation. The Monte Carlo simulation reflected the structure of the performance plan which calculates the share payout on performance of the Company relative to a defined peer group over a three-year performance period based upon total return to shareholders. The fair value was determined as the average payout of one million simulation paths discounted to the grant date using a risk-free interest rate based upon the constant maturity treasury rate yield curve at the grant date. The expected volatility of total return to shareholders is calculated in accordance with the plan’s term structure and includes the volatilities of all members of the defined peer group.

The outstanding performance share awards at the 100% performance level is summarized below:



	Number Outstanding		Weighted Average Grant Date Fair Value		Unrecognized Compensation Expense (a)		Aggregate Intrinsic Value
					(In thousands)		(In thousands)
Performance shares outstanding at December 31, 2014	121,481		$	30.71
Performance share awards	52,948		35.72
Performance shares expired	(57,299	)	29.51
Performance shares forfeited	(14,618	)	35.13
Performance shares outstanding at December 31, 2015	102,512		33.34		$	1,112	$	3,947

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(a) The unrecognized compensation expense is expected to be recognized over the weighted average remaining contractual term of the awards of approximately one year.

A summary of information related to performance shares for 2015, 2014 and 2013 is presented below:



	2015		2014		2013
Weighted average per share grant date fair value per share of performance shares awarded	$	35.72	$	26.36	$	34.69
Fair value of performance shares vested (in thousands)	—		—		849
Intrinsic value of performance shares vested (in thousands) (a)	—		—		1,450
Compensation expense (in thousands) (b)	1,042		1,181		1,188
Deferred tax benefit related to compensation expense (in thousands)	365		413		416

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(a) Based on a 100% performance level.

(b) Includes adjustments for forfeiture of performance share awards by certain executives.

Repurchase Program

No shares of the Company's common stock were repurchased during the twelve months ended December 31, 2015. Detail regarding the Company's stock repurchase program are presented below:

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(a)	Represents repurchased shares and cost since inception of the stock repurchase program in 1999.

(b)

Shares repurchased does not include 86,735 treasury shares related to employee compensation arrangements outside of the Company's repurchase programs. Beginning in 2015, shares of the Company's common stock issued for employee benefit and stock incentive plans have been issued from the shares repurchased and held in treasury stock. The Company awarded 108,085 shares out of treasury stock during 2015.

The Company may in the future make purchases of shares of its common stock pursuant to its authorized program in open market transactions at prevailing prices and may engage in private transactions where appropriate. The repurchased shares will be available for issuance under employee benefit and stock incentive plans, or may be retired.

Dividend Policy

On December 30, 2015, the Company paid $11.9 million in quarterly cash dividends to shareholders. The Company paid a total of $47.1 million, $44.6 million and $42.0 million in cash dividends during the twelve months ended December 31, 2015, 2014 and 2013, respectively. On January 28, 2016, the Board of Directors declared a quarterly cash dividend of $0.295 per share payable on March 31, 2016 to shareholders of record as of the close of business on March 15, 2016.

Basic and Diluted Earnings Per Share

The FASB guidance requires the Company to include share-based compensation awards that qualify as participating securities in both basic and diluted earnings per share to the extent they are dilutive. A share-based compensation award is considered a participating security if it receives non-forfeitable dividends or may participate in undistributed earnings with common stock. The Company awards unvested restricted stock which qualifies as a participating security. The basic and diluted earnings per share are presented below:



	Years Ended December 31,
	2015			2014			2013
Weighted average number of common shares outstanding:
Basic number of common shares outstanding	40,274,986			40,190,991			40,114,594
Dilutive effect of unvested performance awards	33,576			20,726			12,053
Diluted number of common shares outstanding	40,308,562			40,211,717			40,126,647
Basic net income per common share:
Net income	$	81,918		$	91,428		$	88,583
Income allocated to participating restricted stock	(243		)	(301		)	(254		)
Net income available to common shareholders	$	81,675		$	91,127		$	88,329
Diluted net income per common share:
Net income	$	81,918		$	91,428		$	88,583
Income reallocated to participating restricted stock	(243		)	(301		)	(254		)
Net income available to common shareholders	$	81,675		$	91,127		$	88,329
Basic net income per common share:
Distributed earnings	$	1.165		$	1.105		$	1.045
Undistributed earnings	0.865			1.165			1.155
Basic net income per common share	$	2.030		$	2.270		$	2.200
Diluted net income per common share:
Distributed earnings	$	1.165		$	1.105		$	1.045
Undistributed earnings	0.865			1.165			1.155
Diluted net income per common share	$	2.030		$	2.270		$	2.200

The amount of restricted stock awards and performance shares at 100% performance level excluded from the calculation of the diluted number of common shares outstanding because their effect was antidilutive is presented below:



	Year Ended December 31,
	2015	2014	2013
Restricted stock awards	56,375	60,455	51,489
Performance shares (a)	66,804	96,208	115,044

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(a)	Certain performance shares were excluded from the computation of diluted earnings per share as no payouts would have been required based upon performance at the end of each corresponding period.

Since 1999
(a)

Authorized
Shares

Shares repurchased (b)

Cost, including commission (in thousands)

Total remaining shares available for repurchase at December 31, 2015