Stock-Based Compensation

The Company offers stock-based compensation to its employees that includes stock options and time-based and performance-based restricted stock units, as follows:

Stock Options

The Company has issued both nonqualified and incentive stock options at exercise prices equal to the Company’s common stock price on the date of grant with contractual terms of ten years. Stock options issued by the Company generally vest and are expensed ratably over three years. For options granted prior to 2008, options become fully vested and are exercisable for one year following termination due to death, disability or retirement at age 65 or older. For options granted since the beginning of 2008, options fully vest and are exercisable for a period of time depending on the employee’s age and years of service in the case of retirement (as defined in the stock option agreement). Stock option grants are generally subject to forfeiture if employment terminates prior to vesting, except upon retirement, in which case the options may remain outstanding and exercisable for the remaining contractual term of the option. The Company has not granted stock options since 2011.

Time-Based Restricted Stock Units

Awards of time-based restricted stock units are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. The awards generally cliff-vest in one to three years or vest ratably over three years from the date of grant. In the case of retirement (as defined in the award agreement), awards vest depending on the employee’s age and years of service. The time-based restricted stock units have rights to dividend equivalents payable in cash. The Company expenses the cost of restricted stock units ratably over the vesting period, net of estimated forfeitures.

Performance-Based Restricted Stock Units

Performance-based restricted stock unit awards represent the right to receive unrestricted shares of stock based on the achievement of Company performance objectives and/or individual performance goals established by the Organizational Development & Compensation Committee and the Board of Directors. The performance-based restricted stock units generally entitle recipients to shares of common stock equal to 0% up to 200% of the number of units granted at the vesting date, depending on the level of achievement of the specified market and performance conditions (“Performance-Based RSUs”). With respect to Performance-Based RSUs granted in all years other than 2015, the number of shares in which the participant vests is based on the Company’s total shareholder return relative to its peer group over a three-year period (“Relative TSR Metric”). For Performance-Based RSUs granted in 2015, the number of shares in which the participant will vest is based on three criteria, including the Relative TSR Metric, a sales growth metric and an earnings growth metric.

Other performance-based restricted stock units entitle the recipient to shares of common stock if specified market and performance conditions are achieved and vest no earlier than one year from the date of grant and no later than seven years from the date of grant (“Stock-Price Based RSUs”).

The grant date fair value of the Performance-Based RSUs subject to the Relative TSR Metric and certain Stock-Price Based RSUs is estimated using Monte Carlo simulation, with the primary input into such valuation being the expected future volatility of the Company’s common stock, and if applicable, the volatilities of the common stocks of the companies in the Company’s peer group, upon which the relative total shareholder return performance is measured. The fair values of these awards generally approximate the fair value of the Company’s common stock on the date of grant. For Performance-Based RSUs and Stock-Price Based RSUs whose vesting is dependent on a sales growth, earnings growth or other performance metric, the Company assesses the probability of achievement of such metrics each period and records expense for the awards based on the probable achievement of such metrics.

Performance-based restricted stock units are not subject to the payment of dividend equivalents in the same manner as time-based restricted stock units. Rather, with respect to performance-based restricted stock units, dividend equivalents are credited to the recipient and are paid only to the extent the applicable performance criteria are met and the performance-based restricted stock units vest and the related stock is issued. In the case of retirement (as defined in the award agreement), awards vest depending on the employee’s age and years of service, subject to the satisfaction of the applicable performance criteria.

Stock Plans

The Company’s stock plans include plans adopted in 2003, 2010 and 2013. In 2013, a plan was approved by the Company’s stockholders (the “2013 Plan”). Upon approval of the 2013 Plan, shares available for issuance of new awards under all plans other than the 2013 Plan were canceled, and all future grants are required to be made from the 2013 Plan. In addition, awards under the 2010 plan granted and forfeited after December 31, 2012 have the effect of decreasing and increasing, respectively, the availability under the 2013 Plan as if the 2013 Plan were in effect as of January 1, 2013. The total number of shares of the Company’s common stock that may be issued under the 2013 Plan may not exceed 62.5 million; however, stock awards and stock units for one share reduce availability under the 2013 Plan by 3.5 shares. The 2013 Plan generally provides for awards to vest over a minimum three-year period, except for performance-based grants, which may vest over a minimum of one year, and executive new hire grants, which have no required minimum vesting period.

The following table depicts the number of shares authorized for issuance and available under the 2013 Plan (shares in millions):



	2013 Plan
Authorized for issuance	62.5
Effects of:
Restricted stock units and Stock-Price Based RSUs (3½ times the number of awards)	5.0
Performance-Based RSUs (7 times the number of awards)	14.4
Shares available for issuance	43.1

As of December 31, 2016, the Company had 0.3 million and 0.4 million options outstanding under the 2010 and 2003 plans, respectively.

The Company accounts for stock-based compensation pursuant to relevant authoritative guidance, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest.

The table below summarizes the expense related to share-based payments for the years ended December 31, (in millions):



	2016		2015		2014
Stock options	$	—	$	—	$	0.7
Restricted stock units	63.9		29.2		29.2
Stock-based compensation	$	63.9	$	29.2	$	29.9
Stock-based compensation, net of income tax benefit of $30.4 million, $12.9 million and $11.5 million in 2016, 2015 and 2014, respectively	$	33.5	$	16.3	$	18.4

The following table summarizes the changes in the number of shares of common stock under option for 2016 (shares and aggregate intrinsic value in millions):



	Shares		Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value
Outstanding at December 31, 2015	1.2		$	20
Exercised	(0.5	)	$	21
Outstanding at December 31, 2016	0.7		$	20	$	17.5
Exercisable at December 31, 2016	0.7		$	20	$	17.5

The total intrinsic value of options exercised was $11.3 million in 2016. The weighted-average remaining contractual life for options outstanding and options exercisable was two years as of December 31, 2016.

The following table summarizes the changes in the number of outstanding restricted stock units for 2016 (shares in millions):



	Restricted Stock Units		Weighted-Average Grant Date Fair Value Per Share
Outstanding at December 31, 2015	2.9		$	34
Granted	2.7		$	54
Vested	(1.0	)	$	26
Forfeited	(0.3	)	$	45
Outstanding at December 31, 2016	4.3		$	48
Expected to vest at December 31, 2016	4.0		$	48

The weighted-average grant-date fair values of awards granted were $41 and $33 per share in 2015 and 2014, respectively. The fair values of awards that vested were $54.1 million, $74.2 million and $41.0 million in 2016, 2015 and 2014, respectively. In 2017, the Company expects to repurchase 0.4 million shares to satisfy employee tax withholding obligations in connection with the vesting of restricted stock units and Performance-Based RSUs.

During 2016, 2015 and 2014, the Company awarded 1.1 million, 0.7 million and 0.7 million Performance-Based RSUs, respectively, which entitle recipients to shares of the Company’s stock at the end of a three-year vesting period if specified performance or market conditions are achieved. The Performance-Based RSUs entitle recipients to shares of common stock equal to 0% up to 200% of the number of units granted at the vesting date, depending on the level of achievement of the specified performance, market and service conditions. As of December 31, 2016, 2.1 million Performance-Based RSUs were outstanding, and based on performance through December 31, 2016, recipients of Performance-Based RSUs would be entitled to 3.0 million shares at the vesting date. The Performance-Based RSUs are included in the preceding table as if the participants earn shares equal to 100% of the units granted.

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of December 31, 2016 (in millions):



	Unrecognized Compensation Cost		Weighted-Average Period of Expense Recognition (in years)
Restricted stock units	$	119.1	2