8. Stock Compensation

The Company’s Amended and Restated 2008 Incentive Stock Plan (the “2008 Plan”) authorizes the Compensation Committee of the Board of Directors to issue up to 4,000,000 shares of various types of stock-based awards including stock options, restricted stock, restricted stock units and stock appreciation rights to key employees and directors. Options granted and outstanding vest over the requisite service period and expire ten years from the date of grant.

Stock compensation expense reduced income before taxes approximately $1.3 million and $1.0 million for the three months ended March 31, 2016 and 2015, respectively. These expenses are included in selling, general and administrative expenses in the accompanying Condensed Consolidated Statements of Operations (Unaudited). Total unrecognized compensation cost related to non-vested stock-based compensation arrangements at March 31, 2016 was approximately $3.7 million which will be recognized over the next three years, as such compensation is earned.

Stock Options

The fair value of options granted is estimated using a binomial lattice option pricing model based on assumptions set forth in the following table. The Company uses historical data to estimate employee exercise and departure behavior. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant and through the contractual term. The dividend yield rate is based on the Company’s historical dividend yield. The expected volatility is derived from historical volatility of the Company’s shares and those of similar companies measured against the market as a whole. The suboptimal exercise factor is based on historical and estimated option exercise behavior.

Risk free interest rate		1.80	%
Expected dividend yield		4.60	%
Suboptimal exercise factor		1.57
Expected volatility		50.00	%
Fair value per option	$	3.45

The following table provides a summary of stock option activity for the three months ended March 31, 2016:

	Shares			Average Exercise Price		Weighted Average Life (in Years)
Outstanding at January 1, 2016		1,409,881		$	14.12
Options granted		271,350			11.62
Options exercised		(1,111	)		10.28
Canceled or forfeited		(9,983	)		19.32
Outstanding at March 31, 2016		1,670,137			13.69		5.97
Exercisable at March 31, 2016		1,375,024		$	13.78		5.18

The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. The intrinsic value of stock options exercised during the three months ended March 31, 2016 and 2015 was less than $0.1 million and $0.5 million, respectively.

Restricted Stock Units

The following table provides a summary of restricted stock unit activity for the three months ended March 31, 2016:

	Shares			Average Grant-Date Fair Value
Unvested shares at January 1, 2016		229,390
Granted		124,150		$	11.62
Vested		(65,931	)		16.93
Forfeited		(5,333	)		19.10
Unvested shares at March 31, 2016		282,276		$	14.35

Restricted stock units are rights to receive shares of common stock, subject to forfeiture and other restrictions, which vest over a two or three year period. Restricted stock units are considered to be non-vested shares under the accounting guidance for share-based payment and are not reflected as issued and outstanding shares until the restrictions lapse. At that time, shares are released to the grantee and the Company records the issuance of the shares. Restricted stock units are valued based on the market price of the underlying shares on the grant date. Compensation expense is recognized on a straight-line basis over the requisite service period. At March 31, 2016, restricted stock units had vesting periods through March 2019.

Performance-Based Restricted Stock Units

In March 2016, the Company granted 91,700 performance-based restricted stock units. The fair value of these awards is calculated using the market price of the underlying common stock on the date of grant. In determining fair value, the Company does not take into account performance-based vesting requirements. For these awards, the performance-based vesting requirements determines the number of shares that ultimately vest, which can vary from 0% to 200% of target depending on the level of achievement of established performance criteria. Compensation expense is recognized over the requisite service period subject to adjustment based on the probable number of shares expected to vest under the performance condition.