NOTE 12 – STOCK BASED COMPENSATION

At December 31, 2017, we had the following incentive stock plans:

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the 2017 Incentive Stock Plan, which our stockholders approved in May 2017;

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the 2014 Incentive Stock Plan, which our stockholders approved in May 2014;

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the 2011 Incentive Stock Plan, which our stockholders approved in May 2011;

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the 2008 Incentive Stock Plan, which our stockholders approved in May 2008;

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the 2005 Incentive Stock Plan, which our stockholders approved in April 2005;

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the 2000 Non-statutory Stock Option plan, which expired on February 2010;

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the Employee Stock Purchase Plan ("ESPP"), which our stockholders approved in May 2001 (as amended and restated in May 2017), and

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The Canadian Employee Stock Purchase Plan (“Canada ESPP”), which our stockholders approved in May 2016.

At December 31, 2017, we have reserved a total of 9,295,973 shares for issuance under our Incentive Stock plans.

In terms of the stock options authorized, the 2017 Plan, 2014 Plan, 2011 Plan, 2008 Plan, and the 2005 Plan provide for the grant of non-statutory stock options ("NSOs"), incentive stock options ("ISOs"), restricted stock units (“RSUs”), and performance-based restricted stock units (“PSUs”) intended to qualify under section 422 of the Internal Revenue Code; and the 2000 Plan provides for the grant of NSOs. Our Plans authorize awards to our officers, employees and consultants, and to our directors.

The exercise price per share of an option granted under any of our stock option plans may not be less than the closing price of a share of our common stock on the date of grant. The maximum term of an option granted under any plan may not exceed 8 or 10 years. An option may be exercised only when it is vested and, in the case of an option granted to an employee (including an officer), only while he or she remains an employee and for a limited period following the termination of his or her employment. New shares are issued upon exercise of stock options.

Employee Stock Purchase Plan:

In October 2000, our Board of Directors adopted the Employee Stock Purchase Plan ("ESPP"), which our stockholders approved in May 2001, and was made effective as of July 1, 2001. The ESPP authorizes 1,299,999 shares of our common stock, which substantially most employees may purchase through payroll deductions at a price equal to 85% of the fair market values of the stock as of the end of the six-month offering period. An employee's payroll deductions, and stock purchase, may not exceed $5,000 during any offering period. During 2017, 2016 and 2015, 111,528 shares, 89,100 shares, and 68,039 shares, respectively, were issued through the ESPP. In May 2017, our shareholders approved an ‘Amended and Restated ESPP Plan’ which authorizes the issuance of an additional 300,000 shares. At December 31, 2017, we had 390,835 shares available for issuance under the ESPP plan.

In March 2016, our Board of Directors approved the Canadian Employee Stock Purchase Plan (“Canada ESPP”), which our stockholders approved in May 2016. The Canada ESPP authorizes 100,000 shares of our common stock which substantially most Canadian employees may purchase through payroll deductions, at a price equal to 95% of the fair market values of the stock at the end of the six-month offering period. An employee's payroll deductions, and stock purchase, may not exceed $5,000 during any offering period. During 2017 and 2016, 1,766 shares and 756 shares, respectively, were issued through the Canada ESPP. At December 31, 2017, we had 97,478 shares available for issuance under the Canada ESPP plan.

Stock Based Compensation Expense:

During 2017, there were no changes to our stock compensation plans or modifications to outstanding stock-based awards which would change the value of any awards outstanding.

The following table presents the total stock-based compensation expense resulting from stock option awards, RSUs, PSUs, and the ESPP included on the Consolidated Statements of Income:

In millions
	Years Ended December 31,
	2017		2016		2015
Selling, general and administrative - stock option plan	$	14.7	$	17.4	$	18.6
Selling, general and administrative - RSUs		5.2		0.9		1.5
Selling, general and administrative - PSUs		0.2		-		-
Selling, general and administrative - ESPP		1.2		2.2		1.6
Total pre-tax expense	$	21.3	$	20.5	$	21.7

Stock Options:

Options granted to directors vest in one year and options granted to officers and employees generally vest over five years. Expense related to options with graded vesting is recognized using the straight-line method over the vesting period. Stock option activity for the year ended December 31, 2017 is summarized as follows:

	Number of Options			Weighted Average Exercise Price per Share
Outstanding at beginning of year		5,468,732		$	96.90
Granted		456,424			82.89
Exercised		(217,922	)		51.54
Forfeited		(188,879	)		111.78
Canceled or expired		(124,938	)		101.94
Outstanding as of December 31, 2017		5,393,417		$	96.91
Exercisable as of December 31, 2017		3,472,994		$	90.55

At December 31, 2017, there was $28.1 million of total unrecognized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.64 years.

The following table sets forth the intrinsic value of options exercised for the years ended December 31:

In millions
	2017		2016		2015
Total exercise intrinsic value of options exercised	$	4.8	$	26.0	$	62.6

The exercise intrinsic value represents the total pre-tax intrinsic value (the difference between the fair value on the trading day the option was exercised and the exercise price associated with the respective option).

The following table sets forth the information related to outstanding and exercisable options for the years ended December 31:

	2017		2016		2015
Weighted average remaining contractual life of outstanding options (in years)		4.56		5.25		5.70
Total aggregate intrinsic value of outstanding options (in millions)	$	12.8	$	25.1	$	162.4
Weighted average remaining contractual life of exercisable options (in years)		3.87		4.40		4.70
Total aggregate intrinsic value of exercisable options (in millions)	$	12.8	$	25.1	$	130.6

The Company uses historical data to estimate expected life and volatility. The estimated fair value of stock options at the time of the grant using the Black-Scholes option pricing model was as follows:

	Years Ended December 31,
	2017			2016			2015
Stock options granted (shares)		456,424			1,100,492			1,056,490
Weighted average fair value at grant date	$	19.46		$	20.16		$	22.90
Assumptions:
Expected term (in years)		4.82			4.77			4.79
Expected volatility		22.68	%		18.28	%		16.71	%
Expected dividend yield		—	%		—	%		—	%
Risk free interest rate		1.90	%		1.21	%		1.47	%

Restricted Stock Units:

The fair value of RSUs is based on the closing price of the Company's common stock on the date of grant and is amortized to expense over the service period. RSUs vest at the end of three or five years. Our 2017 Plan includes a share reserve for RSUs granted at a 1-1 ratio while our 2008, 2011, and 2014 Plans reserve at a 2-1 ratio. No RSUs were granted under the 2005 Plan.

The following table sets forth the information related to RSUs for the years ended December 31:

	2017		2016		2015
Total aggregate intrinsic value of outstanding units (in millions)	$	18.2	$	8.8	$	8.4
Per share weighted average fair value of units granted	$	82.93	$	106.01	$	114.27

A summary of the status of our non-vested RSUs and changes during the year ended December 31, 2017, are as follows:

	Number of Units			Weighted Average Grant Date Fair Value
Non-vested at beginning of year		114,838		$	104.22
Granted		210,829			82.93
Vested and Released		(37,225	)		93.86
Forfeited		(21,145	)		93.19
Non-vested as of December 31, 2017		267,297		$	89.74

At December 31, 2017, there was $17.7 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted average period of 3.55 years. The fair value of units that vested during the year ended December 31, 2017 was $2.9 million. There were no units that vested during the years ended December 31, 2016 and 2015.

Performance-Based Restricted Stock Units:

Our executive officers were granted PSUs in 2017. PSUs vest, or not, in three equal annual installments based on the achievement of pre-determined annual earnings per share performance goals as approved by the Compensation Committee. Each of the units granted represent the right to receive one share of the Company’s common stock at a specified future date. The maximum number of common shares issuable upon vesting of these PSUs under the first installment was 11,149 shares. Weighted average fair value at grant date was $82.85 per share with the total fair value of $0.9 million. For the year ended December 31, 2017, 25% of the performance goal was met which will result in 2,787 shares to vest in February 2018.