SHARE-BASED PAYMENTS

The Company had a stock and incentive plan ("1995 Plan") which provided for the grant of any or all of the following types of awards to eligible employees: (1) stock options, including incentive stock options and nonqualified stock options; (2) stock appreciation rights, in tandem with stock options or freestanding; (3) restricted stock; and, (4) performance awards. The 1995 Plan began on April 21, 1995, and was amended on June 25, 2004 to extend the termination date to April 20, 2010. The number of shares of Class A, $1.00 par value, common stock which were allowed to be issued under the 1995 Plan, or as to which stock appreciation rights or other awards were allowed to be granted, could not exceed 300,000. Effective June 20, 2008, the Company's shareholders approved a 2008 Incentive Plan (“2008 Plan”). The 2008 Plan is substantially similar to the 1995 Plan and authorized an additional number of Class A, $1.00 par value, common stock shares eligible for issue not to exceed 300,000. These shares may be authorized and unissued shares. The Company has issued only nonqualified stock options and stock appreciation rights under these plans.

All of the employees of the Company and its subsidiaries are eligible to participate in the current 2008 Plan (as well as previously in the expired 1995 Plan). In addition, directors of the Company are eligible to receive the same types of awards as employees except that they are not eligible to receive incentive stock options. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options. The directors' grants vest 20% annually following one full year of service to the Company from the date of grant. The employees' grants vest 20% annually following three full years of service to the Company from the date of grant. All grants issued expire after ten years. No awards were issued during the first nine months of 2014 or the first nine months of 2013.

Effective during March 2006, the Company adopted and implemented a limited stock buy-back program with respect to the 1995 Plan which provides option holders the additional alternative of selling shares acquired through the exercise of options directly back to the Company. Option holders may elect to sell such acquired shares back to the Company at any time within ninety (90) days after the exercise of options at the prevailing market price as of the date of notice of election. The buy-back program did not alter the terms and conditions of the 1995 Plan; however, the program necessitated a change in accounting from the equity classification to the liability classification.

In August 2008, the Company implemented another limited stock buy-back program, substantially similar to the 2006 program, for shares issued under the 2008 Plan.

The Company uses the current fair value method to measure compensation cost. As of September 30, 2014 and December 31, 2013, the liability balance was $7.7 million and $5.9 million, respectively. A summary of shares available for grant and activity during the nine months ended September 30, 2014 is detailed below.



		Options Outstanding
	Shares Available For Grant	Shares		Weighted- Average Exercise Price

Stock Options:
Balance at January 1, 2014	291,000	36,668		$	229.24
Exercised	—	(5,000	)	$	150.00
Forfeited	—	(500	)	$	255.13
Expired	—	—		$	—
Stock options granted	—	—		$	—

Balance at September 30, 2014	291,000	31,168		$	241.54



	Stock Appreciation Rights Outstanding
	Awards		Weighted- Average Exercise Price

Stock Appreciation Rights:
Balance at January 1, 2014	99,461		$	156.93
Exercised	(1,825	)	$	114.64
Forfeited	(3,350	)	$	165.46
Granted	—		$	—

Balance at September 30, 2014	94,286		$	157.45

Stock options and stock appreciation rights (SARs) shown as forfeited in the above tables represent vested and unvested awards not exercised by plan participants prior to their termination from the Company. Forfeited stock options during the nine months ended September 30, 2014 were awarded under the 1995 Plan. As the 1995 Plan terminated during calendar year 2010, the forfeited shares are not shown as being added back to the "Shares Available For Grant" balance.

The total intrinsic value of options exercised was $0.8 million and $2.1 million for the nine months ended September 30, 2014 and 2013, respectively. The total share-based liabilities paid were $0.6 million and $2.1 million for the nine months ended September 30, 2014 and 2013, respectively. The total fair value of shares vested during the nine months ended September 30, 2014 and 2013 was $0.7 million and $0.4 million, respectively. For the nine months ended September 30, 2014 and 2013, the total cash received from the exercise of options under the Plans was $0.2 million and $0, respectively.

The following table summarizes information about stock options and SARs outstanding at September 30, 2014.



	Options/SARs Outstanding
	Number Outstanding		Weighted- Average Remaining Contractual Life	Number Exercisable

Exercise prices:
255.13 (options)	22,168		3.6 years	17,815
208.05 (options)	9,000		3.7 years	9,000
236.00 (SARs)	250		3.9 years	200
114.64 (SARs)	26,518		4.4 years	17,761
132.56 (SARs)	31,518		7.2 years	3,600
210.22 (SARs)	36,000		9.2 years	—

Totals	125,454			48,376

Aggregate intrinsic value (in thousands)	$	7,471		$	3,116

The aggregate intrinsic value in the table above is based on the closing stock price of $247.01 per share on September 30, 2014.

In estimating the fair value of the options outstanding at September 30, 2014 and December 31, 2013, the Company employed the Black-Scholes option pricing model with assumptions as detailed below.



	September 30, 2014		December 31, 2013

Expected term of options	3.6 to 9.2 years		0 to 10 years
Expected volatility:
Range	18.16% to 38.35%		21.03% to 42.71%
Weighted-average	22.24	%	30.50	%
Expected dividend yield	0.15	%	0.16	%
Risk-free rate:
Range	0.11% to 1.63%		0.12% to 3.93%
Weighted-average	0.55	%	2.10	%

The Company reviewed the contractual term relative to the options as well as perceived future behavior patterns of exercise. Volatility is based on the Company’s historical volatility over the expected term of the option’s expected exercise date.

The pre-tax compensation cost recognized in the financial statements related to the two plans defined above was $0.0 million and$2.5 million for the three and nine months ended September 30, 2014 compared to $0.6 million and $4.0 million for the three and nine months ended September 30, 2013. The related tax expense recognized was $0.0 million and $0.8 million for the three and nine months ended September 30, 2014 compared to $0.2 million and $1.4 million for the three and nine months ended September 30, 2013.

As of September 30, 2014, the total compensation cost related to nonvested options not yet recognized was $2.7 million. This amount is expected to be recognized over a weighted-average period of 2.3 years. The Company recognizes compensation cost over the graded vesting periods.