Share-Based Compensation

During the six months ended June 30, 2014, the Company granted approximately 0.5 million stock options, 0.2 million unvested shares and 0.1 million performance share units. During the six months ended June 30, 2013, the Company granted approximately 0.6 million stock options, 0.2 million unvested shares and 0.1 million performance share units.

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 June 30,
	2014	2013
Weighted average fair value of option grants	$19.34	$13.28
Dividend yield	1.43%	1.51%
Volatility	30.43%	30.76%
Risk-free forward interest rate	0.10% - 4.17%	0.14% - 3.94%
Expected life (in years)	5.87	5.84




	Six Months Ended June 30,
	2014	2013
Weighted average fair value of option grants	$19.53	$12.85
Dividend yield	1.26%	1.57%
Volatility	30.36%	30.94%
Risk-free forward interest rate	0.12% - 4.67%	0.17% - 4.10%
Expected life (in years)	5.89	5.87

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 and Six Months Ended June 30,
	2014	2013
Weighted average fair value of performance share units	$94.55	$50.45
Dividend yield	0.00%	0.00%
Volatility	26.41%	28.99%
Risk-free forward interest rate	0.65%	0.40%
Expected life (in years)	2.88	2.87

Total compensation cost for stock options is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Cost of goods sold	$	133		$	99		$	375		$	291
Selling, general and administrative expenses	1,425			1,253			3,615			3,421
Total expense before income taxes	1,558			1,352			3,990			3,712
Income tax benefit	(496		)	(445		)	(1,251		)	(1,182		)
Total expense after income taxes	$	1,062		$	907		$	2,739		$	2,530

Total compensation cost for unvested shares is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Cost of goods sold	$	693		$	212		$	1,165		$	614
Selling, general and administrative expenses	2,578			2,098			5,324			4,758
Total expense before income taxes	3,271			2,310			6,489			5,372
Income tax benefit	(644		)	(609		)	(1,331		)	(1,319		)
Total expense after income taxes	$	2,627		$	1,701		$	5,158		$	4,053

Total compensation cost for performance share units is as follows:



	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
Cost of goods sold	$	—		$	—		$	—		$	—
Selling, general and administrative expenses	823			216			1,484			405
Total expense before income taxes	823			216			1,484			405
Income tax benefit	(288		)	(77		)	(474		)	(114		)
Total expense after income taxes	$	535		$	139		$	1,010		$	291

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 June 30, 2014, there was $12.8 million of total unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.5 years, $14.2 million of total unrecognized compensation cost related to unvested shares/units that is expected to be recognized over a weighted-average period of 1.1 years, and $6.8 million of total unrecognized compensation cost related to performance share units that is expected to be recognized over a weighted-average period of 1.3 years.

A summary of the Company’s stock option activity as of June 30, 2014, and changes during the six months ended June 30, 2014, is presented in the following table:



Stock Options	Shares		Weighted Average Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2014	2,516,618		$	39.60	6.87	$	86,200,655
Granted	505,950		72.75
Exercised	(254,815	)	34.71
Forfeited/Expired	(85,483	)	49.52
Outstanding at June 30, 2014	2,682,270		$	46.00	7.04	$	93,185,771
Vested and expected to vest as of June 30, 2014	2,521,604		$	45.12	6.93	$	89,815,814
Exercisable at June 30, 2014	1,372,277		$	36.13	5.55	$	61,210,657