Stock Plans

The 2008 Management Equity Incentive Plan provides for various forms of stock-based compensation for eligible employees through May 2018. Management stock-based compensation includes stock options, restricted stock, and performance stock units. The 2008 Non-Employee Directors’ Equity Incentive Plan provides for grants of stock options and restricted stock to non-employee directors through May 2018. Stock options are granted at market value option prices and expire after ten years. Stock options are exercisable beginning three years after the grant date. Restricted stock is granted without payment to the company and generally vests three years after the grant date. Restricted stock is valued at the market value of the stock on the grant date. Performance stock units with a market condition are valued at an estimated fair value using a Monte Carlo model. The final number of shares to be issued for performance stock units may range from zero to 200% of the target award based on achieving the specified performance targets over the performance period. We issue Stock Compensation Trust shares or new shares for stock option exercises, restricted stock grants, and performance stock unit grants.

Stock compensation expense is as follows:



	Three Months Ended March 31,
(In thousands)	2014		2013
Stock compensation expense	$	5,165	$	5,195
Income tax benefit	1,890		1,922
Stock compensation expense, net of income tax benefit	3,275		3,273

Stock option expense is based on the fair value of stock option grants estimated on the grant dates using the Black-Scholes option pricing model and the following weighted average assumptions for options granted in 2014.



	2014
Fair value per option	$	17.26
Risk-free interest rate	2.06		%
Expected dividend yield	2.41		%
Expected volatility	40.50		%
Expected life (years)	6.6

The risk-free interest rate is based on the U.S. Treasury Constant Maturity rates as of the grant date converted into an implied spot rate yield curve. Expected dividend yield is based on the most recent annualized dividend divided by the 1 year average closing share price. Expected volatility is based on the historical volatility using daily stock prices. Expected life is based on historical stock option exercise data.

A summary of stock option activity for the three months ended March 31, 2014 follows:



	Shares		Weighted Average Exercise Price
Outstanding at January 1	1,695,380		$	34.55
Granted	138,519		51.69
Exercised	(92,311	)	35.37
Forfeited	(18,651	)	37.99
Outstanding at March 31	1,722,937		35.84
Exercisable at March 31	1,229,401		32.01

A summary of restricted stock activity for the three months ended March 31, 2014 follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1	303,419		$	39.79
Granted	68,807		51.69
Vested	(93,766	)	34.01
Forfeited	(1,189	)	39.76
Unvested at March 31	277,271		44.70

A summary of performance stock unit activity for the three months ended March 31, 2014 follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at January 1	149,389		$	46.32
Granted	46,242		57.42
Performance adjustments	41,428		39.42
Vested	(88,996	)	39.11
Unvested at March 31	148,063		52.20

The final number of shares issued for the 2011 Management Performance Units were 200% of the target award based on Total Shareholder Return during the three year performance period.