Equity Compensation Plans

As of December 31, 2014, the Company’s equity compensation plans consisted of the 2003 Stock Incentive Compensation Plan (the “2003 Plan”) and the 2012 Stock Incentive Plan (the “2012 Plan” and together with the 2003 Plan, the “Plans”) under which incentive and non-qualified stock options and time and performance based restricted shares have been granted to employees and directors from authorized but unissued shares of common stock or treasury shares. The 2003 Plan is not active, but continues to govern all outstanding awards granted under the plan until the awards themselves are exercised or terminate in accordance with their terms. The 2012 Plan, approved by shareholders on April 27, 2012, authorized 1,750,000 shares of common stock for awards. The 2012 Plan also authorizes an additional 1,200,000 shares of common stock to the extent awards granted under prior stock plans that were outstanding as of April 27, 2012 are forfeited. The 2012 Plan provides for the following type of awards: options, restricted stock, restricted stock units and other stock-based awards.

The Company accounts for the expense of all share-based compensation by measuring the awards at fair value on the date of grant. The Company recognizes expense on a straight-line basis over the vesting period of the entire award. Options issued by the Company under its stock option plans have a term of ten years and generally vest ratably over a period of three to four years. Time-based restricted stock grants are expensed over the vesting period of the award, which is typically two to four years. The number of performance based restricted shares that vest or forfeit depend upon achievement of certain targets during the performance period. Stock-based compensation expense includes the estimated effects of forfeitures. Compensation expense for performance based awards is recorded based upon management’s assessment of the probability of achieving the performance goals and service period and will be adjusted based upon actual achievement. Stock options issued under the current plan must have an exercise price that may not be less than the fair market value of the Company’s Common Stock on the date of grant. The Plans provide for automatic acceleration of vesting in the event of a change in control of the Company. Upon the exercise of a stock option under the Plans, shares are issued from authorized shares or treasury shares held by the Company.

The Company incurred compensation expense of $2.8 million, $1.8 million, and $1.4 million for the years ended December 31, 2014, 2013, and 2012, respectively, for all stock-based compensation plans, including restricted stock awards. No compensation costs were capitalized as part of inventory. The associated tax benefit realized was $2.5 million, $1.0 million, and $0.5 million for the years ended December 31, 2014, 2013, and 2012, respectively.

Stock Options

The fair value of each option granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for the years ended December 31:



	2014		2013		2012
Risk-free interest rate	1.6	%	1.7	%	1.4	%
Expected life	5.1 years		5.2 years		5.7 years
Expected volatility	46	%	65	%	68	%
Expected dividend yield	—	%	—	%	—	%

The following is a summary of the option activity as of December 31, 2014 and changes during the year then ended:

In thousands except per share amounts and years



	Shares	Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at December 31, 2013	758	$	10.32
Granted	132	$	27.96
Exercised	(277)	$	8.87
Forfeited/Cancelled	(4)	$	9.24
Outstanding at December 31, 2014	609	$	14.81	7.0	$	10,967
Options exercisable at December 31, 2014	321	$	9.99	5.2	$	7,323
Expected to vest at December 31, 2014	261	$	19.78	8.9	$	3,408

The Company granted 131,800, 75,279, and 146,500 stock options during 2014, 2013, and 2012, respectively. The weighted-average grant-date fair value of options granted during the years 2014, 2013, and 2012 was $11.85, $9.41, and $7.79, respectively. There were 277,006 options exercised in 2014, 158,322 options exercised in 2013, and 129,675 options exercised in 2012. The intrinsic value for options exercised during 2014 was $5.0 million and the associated tax benefit realized from stock options exercised was $1.8 million. The total intrinsic value for options exercised during 2013 was $1.0 million and the associated tax benefit realized from stock options exercised was $0.3 million. The total intrinsic value for options exercised during 2012 was $0.7 million and the associated tax benefit realized from stock options exercised was $0.2 million. The amount of cash received from the exercise of stock options was $2.5 million in 2014, $1.5 million in 2013, and $1.0 million in 2012. At December 31, 2014, the total unrecognized compensation cost related to non-vested stock option awards was approximately $2.0 million, with a weighted average expected amortization period of 3.1 years.

Restricted Stock

The following is a summary of the Company’s unvested restricted shares for the year ended and as of December 31, 2014:



In thousands except per share amounts
Outstanding Restricted Shares	Shares	Weighted-Average Grant-Date Fair Value
Outstanding at December 31, 2013	308	$	12.99
Granted	253	$	22.93
Vested	(96)	$	9.41
Forfeited/Cancelled	(6)	$	16.48
Outstanding at December 31, 2014	459	$	19.17
Expected to vest at December 31, 2014	431	$	19.50

Restricted stock includes both performance-based and time-based awards. Compensation for restricted stock is recorded based on the market value of the stock on the grant date and amortized to expense over the vesting period of the award. The Company granted 204,800, 95,090, and 114,500 shares of performance-based restricted stock during 2014, 2013, and 2012, respectively. The Company granted 48,649 shares of time-based restricted stock in 2014, 29,480 shares in 2013, and 73,750 in 2012. The weighted average fair value per share of restricted stock granted was $22.93, $16.01, and $12.56 during 2014, 2013, and 2012, respectively. During 2014, 2013, and 2012, respectively, there were 6,212, 10,565, and 171,369 shares of restricted stock forfeited. The fair value of awards for which restrictions lapsed during the years ended December 31, 2014, 2013, and 2012 was $2.2 million, $1.6 million, and $0.6 million, respectively. At December 31, 2014, the total unrecognized compensation cost related to non-vested restricted stock awards was approximately $4.8 million, with a weighted average expected amortization period of 2.2 years.

Stock Repurchase Program

In April 2012, the Company’s Board of Directors approved a stock repurchase program (the “2012 Stock Repurchase Program”) which authorized the Company to repurchase up to 1.0 million shares of its common stock.

The Company did not repurchase any shares of its common stock during the year ended December 31, 2014 under the 2012 Stock Repurchase Program. As of December 31, 2014, there were 267,089 shares remaining and authorized for repurchase under the 2012 Stock Repurchase Program.

During the year ended December 31, 2014, the Company purchased 33,252 shares of common stock valued at $0.8 million, through withholding, pursuant to provisions in agreements with recipients of restricted stock granted under the Company's equity compensation plans, which allow the Company to withhold the number of shares having fair value equal to each recipient's tax withholding due.