SHAREHOLDERS’ EQUITY

A. | Stock Repurchase Plans

The Company has a Non-Discretionary Stock Repurchase Plan, originally approved by the Board of Directors in November 1993, under which management is authorized to repurchase up to 40,000 shares of the Company’s common stock in the open market with the proceeds received from the exercise of employee and director stock options.

The Company has a Discretionary Stock Repurchase Plan originally approved by the Board of Directors in November 2001, and amended from time to time under which management as of December 31, 2015 is authorized to repurchase shares down to 180,000 shares of common stock outstanding.

The following table summarizes by repurchase plan the Company’s repurchasing activity:



	Cumulative shares repurchased	Average price per share
Non-Discretionary Plan (1994 through 2015)	30,231	$	27.58
Discretionary Plan (2001 through 2015)	54,471	$	39.98

B. | Stock Option Plans

At December 31, 2015, the Company had one stock option plan (the 2015 Plan) under which the Board of Directors may grant officers and employees options to purchase common stock at prices equal to or greater than market value on the date of grant. On May 21, 2015, the shareholders approved the Company’s 2015 Plan, which made available a total of 3 million shares of the Company’s common stock for purchase upon exercise of options granted. The 2015 Plan provides for qualified and non-qualified grants, which are limited to 100 shares per person. As of December 31, 2015, there are 81 shares available for grant under the 2015 Plan. No additional shares can be granted under the 2015 Plan after April 30, 2016. Outstanding options generally vest and become exercisable over periods up to five years from the date of grant and expire no more than ten years from the date of grant.

Upon the exercise of non-qualified stock options and disqualifying dispositions of incentive stock options, the Company derives a tax deduction measured by the excess of the market value over the option price at the date of exercise or disqualifying disposition. The portion of the benefit from the deduction which equals the estimated fair value of the options (previously recognized as compensation expense) is recorded as a credit to the deferred tax asset for non-qualified stock options and is recorded as a credit to current tax expense for any disqualified dispositions of incentive stock options. For disqualifying dispositions, when the amount of the tax deduction is less than the cumulative amount of compensation expense recognized for the award, the amount credited to current tax expense is limited to the tax benefit associated with the tax deduction. All of the tax benefit received upon option exercise for the tax deduction in excess of the estimated fair value of the options is credited to additional paid-in capital.

C. | Stock Purchase Plan

In May 2002, the shareholders approved the Company’s 2002 Employee Stock Purchase Plan (the 2002 Plan), which became effective August 1, 2002. On May 7, 2014, the shareholders approved an amendment to the 2002 Plan to increase the Company's common stock available for purchase under that plan by 3 million shares. The Company’s amended 2002 Plan provides for 12,305 shares of the Company’s common stock to be reserved for issuance upon exercise of purchase rights granted to employees who elect to participate through regular payroll deductions beginning August 1 of each year. The purchase rights are exercisable on July 31 of the following year at a price equal to the lesser of (1) 85% of the fair market value of the Company’s stock on the last trading day in July or (2) 85% of the fair market value of the Company’s stock on the first trading day in August of the preceding year. A total of 9,511 shares have been issued under the 2002 Plan and $13,783 have been withheld from employees at December 31, 2015 in connection with the plan year ending July 31, 2016.

D. | Director Restricted Stock Plan

On May 7, 2014, the shareholders approved the Company’s 2014 Directors’ Restricted Stock Plan (the 2014 Directors’ Plan), which provides for annual awards of restricted stock to non-employee directors and makes 250 shares of the Company’s common stock available for grant. The plan provides for an annual grant of restricted stock awards with a fair market value equal to $200 to each participant on June 1 of each year. There are 185 shares available for grant under this plan as of December 31, 2015. Each restricted stock award under the 2014 Directors’ Plan vests either at the time of grant or with a vesting schedule, as determined by the Compensation Committee of the Board of Directors. Restricted shares granted in 2014 and 2015 vested at the time of grant and there were no unvested restricted shares as of December 31, 2015. Restricted shares entitle the grantees to all shareholder rights, including cash dividends and transfer rights once vested. If a non-employee director’s service is terminated, any unvested portion of an award would be forfeited.

E. | Stock Option Activity

The following table summarizes information about stock options:



	Number of shares		Weighted average exercise price per share		Weighted average remaining contractual life	Aggregate intrinsic value
Outstanding at December 31, 2014	19,372		$	41.92
Options granted	2,956		$	47.27
Options exercised	(2,819	)	$	37.33
Options forfeited	(593	)	$	42.21
Options canceled	(184	)	$	47.88
Outstanding at December 31, 2015	18,732		$	43.39	5.84	$	60,057
Exercisable at December 31, 2015	8,918		$	44.36	3.44	$	23,546

F. | Share-Based Compensation Expense

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:



	For the years ended December 31,
	2015			2014			2013
Dividend yield	1.60			1.50 - 1.51%			1.50 - 1.53%
Volatility – stock option plans	29 - 34%			35 - 36%			38%
Volatility – stock purchase rights plans	20		%	20		%	21		%
Risk-free interest rates	0.30 - 2.04%			0.11 - 2.27%			0.12 - 1.40%
Expected life (years) – stock option plans	6.41 - 7.47			6.52 - 7.43			5.91 - 7.43
Expected life (years) – stock purchase rights plans	1			1			1
Weighted average fair value of stock options granted during the period	$	13.44		$	14.44		$	11.17
Weighted average fair value of stock purchase rights granted during the period	$	10.45		$	9.60		$	9.43

The Company’s expected volatility assumptions are based on the historical volatility of the Company’s stock over a period of time commensurate to the expected life. The expected life assumption is primarily based on historical employee exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the corresponding yield curve in effect at the time of grant for U.S. Treasury bonds having the same term as the expected life of the option. The expected dividend yield is based on the Company’s historical experience. The forfeiture assumption used to calculate compensation expense is primarily based on historical pre-vesting employee forfeiture patterns.

The compensation for restricted stock awards is based on the fair market value of the Company’s share of common stock on the date of grant. In 2015, restricted shares totaling 34 were granted with a fair value per share of $47.27.

The total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was approximately $31 million, $18 million and $24 million, respectively.

As of December 31, 2015, the total unrecognized compensation cost related to unvested stock options and stock purchase rights is $93 million and the weighted average period over which that cost is expected to be recognized is 3.2 years.

Total stock compensation expense and the total related tax benefit recognized are as follows:



	For the years ended December 31,
	2015		2014	2013
Stock compensation expense	$	43,415	42,533	43,813
Recognized tax benefit	$	6,010	4,356	3,473

Shares issued as a result of stock option exercises, restricted stock awards and employee stock plan purchases are issued as new shares outstanding by the Company.