Share-Based Compensation

Stock Options

Weighted average option fair values and assumptions for the periods specified are disclosed below. The fair value of each option grant was estimated on the date of the grant using the Binomial lattice option pricing model.




	Three Months Ended March 31,
	2016	2015
Weighted average fair value of option grants	$18.40	$20.40
Dividend yield	1.70%	1.42%
Volatility	29.71%	29.94%
Risk-free forward interest rate	0.53% - 2.50%	0.23% - 2.75%
Expected life (in years)	5.91	5.90

Total compensation cost for stock options is as follows:



	Three Months Ended March 31,
	2016			2015
Cost of goods sold	$	119		$	226
Selling, general and administrative expenses	2,295			2,197
Total expense before income taxes	2,414			2,423
Income tax benefit	(760		)	(767		)
Total expense after income taxes	$	1,654		$	1,656

A summary of the Company’s stock option activity as of March 31, 2016, and changes during the three months ended March 31, 2016, is presented in the following table:



Stock Options	Shares		Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2016	2,266,433		$	54.05	6.58	$	51,918,028
Granted	546,185		74.75
Exercised	(210,413	)	39.24
Forfeited	(31,010	)	70.17
Outstanding at March 31, 2016	2,571,195		$	59.46	7.24	$	60,206,101
Vested and expected to vest as of March 31, 2016	2,392,411		$	58.33	7.09	$	58,731,553
Exercisable at March 31, 2016	1,373,554		$	47.40	5.69	$	48,736,086

Restricted Stock

Restricted stock awards generally cliff vest after three years for employees and non-employee directors. Unvested restricted stock carries dividend and voting rights and the sale of the shares is restricted prior to the date of vesting. A summary of the Company’s restricted stock activity as of March 31, 2016, and changes during the three months ended March 31, 2016, is as presented as follows:



Restricted Stock	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2016	272,755		$	65.90
Granted	57,670		74.73
Vested	(98,102	)	50.83
Forfeited	(5,510	)	71.30
Unvested at March 31, 2016	226,813		$	74.53

Dividends are paid on restricted stock awards and their fair value is equal to the market price of the Company’s stock at the date of the grant.

Total compensation cost for restricted shares is as follows:



	Three Months Ended March 31,
	2016			2015
Cost of goods sold	$	128		$	142
Selling, general and administrative expenses	1,530			2,257
Total expense before income taxes	1,658			2,399
Income tax benefit	(513		)	(690		)
Total expense after income taxes	$	1,145		$	1,709

Cash-Settled Restricted Stock

The Company also maintains a cash-settled share based compensation plan for certain employees. Cash-settled restricted stock awards generally cliff vest after three years. A summary of the Company’s unvested cash-settled restricted stock activity as of March 31, 2016, and changes during the three months ended March 31, 2016, is presented in the following table:



Cash-Settled Restricted Stock	Shares		Weighted-Average Fair Value
Unvested at January 1, 2016	110,860		$	76.61
Granted	39,100		82.88
Vested	(33,920	)	71.81
Forfeited	(4,250	)	82.88
Unvested at March 31, 2016	111,790		$	82.88

Dividend equivalents are paid on certain cash-settled restricted stock awards. Total compensation cost for cash-settled restricted stock is as follows:



	Three Months Ended March 31,
	2016			2015
Cost of goods sold	$	189		$	278
Selling, general and administrative expenses	500			440
Total expense before income taxes	689			718
Income tax benefit	(98		)	(116		)
Total expense after income taxes	$	591		$	602

Performance Share Units

Weighted average performance share unit fair values and assumptions for the period specified are disclosed below. The performance share units are market condition awards and have been assessed at fair value on the date of grant using a Monte Carlo simulation model.



	Three Months Ended March 31,
	2016	2015
Weighted average fair value of performance share units	$111.42	$95.07
Dividend yield	—%	—%
Volatility	17.99%	19.14%
Risk-free forward interest rate	0.89%	1.01%
Expected life (in years)	2.86	2.86

A summary of the Company’s performance share unit activity as of March 31, 2016, and changes during the three months ended March 31, 2016, is presented in the following table:



Performance Share Units	Shares		Weighted-Average Grant Date Fair Value
Unvested at January 1, 2016	146,275		$	94.80
Granted	85,130		111.42
Vested	—		—
Forfeited	(1,065	)	94.74
Unvested at March 31, 2016	230,340		$	100.95

Performance share units that vested on December 31, 2015 resulted in 87,600 shares issued in February 2016.

Total compensation cost for performance share units is as follows:



	Three Months Ended March 31,
	2016			2015
Cost of goods sold	$	—		$	—
Selling, general and administrative expenses	1,681			1,342
Total expense before income taxes	1,681			1,342
Income tax benefit	(535		)	(430		)
Total expense after income taxes	$	1,146		$	912

The Company’s policy is to recognize compensation cost on a straight-line basis, assuming forfeitures, over the requisite service period for the entire award. Classification of stock compensation cost within the Consolidated Statements of Operations is consistent with classification of cash compensation for the same employees.

As of March 31, 2016, there was $16.0 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.6 years, $12.3 million of total unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.2 years, and $11.5 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.2 years.