Share-Based Compensation

On May 13, 2014, our stockholders approved the 2014 Equity and Incentive Compensation Plan (the “2014 Plan”). The 2014 Plan supersedes and replaces the 2007 Incentive Compensation Plan (the “2007 Plan”), which terminated upon the approval of the 2014 Plan. No further grants may be made under the 2007 plan. The termination of the 2007 Plan will not impact outstanding awards issued as part of the 2007 Plan.

Under the 2014 Plan, we may provide equity-based compensation in the form of stock options, stock appreciation rights (or SARs), restricted stock, restricted stock units (or RSUs), performance shares, performance units, dividend equivalents and other stock or stock-based awards to selected employees and non-employee directors. The 2014 Plan also provides for the issuance of common stock to non-employee directors as all or part of their annual compensation for serving as directors, as may be determined by the board of directors.

The total number of shares of common stock available for awards under the 2014 Plan (including any annual stock issuances made to non-employee directors) is 2,550,000. Awards other than stock options and SARs will be counted against the aggregate share limit as 1.79 shares of common stock. Under the 2014 Plan, no more than 1,424,581 shares of common stock could be issued in settlement of restricted stock unit (“RSU”) awards. In addition, no person will be granted (i) stock options or SARs, in the aggregate, for more than 400,000 shares of common stock during any calendar year or (ii) awards of restricted stock, RSUs, performance shares or other stock-based awards intended to qualify as “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code, in the aggregate, for more than 400,000 shares of common stock during any calendar year.

The 2014 Plan and the 2007 Plan provide that all options granted must have an exercise price of not less than the per share fair market value on the date of grant and that no option may have a term of more than ten years. We satisfy stock option exercises and restricted stock awards through the issuance of authorized but unissued shares or treasury shares.

Set forth below is a summary of share-based compensation expense for option grants, restricted stock awards and restricted stock unit awards included as a component of Selling, general and administrative expenses in the Statements of Consolidated Operations for the year ended December 31:



	2014		2013		2012
Stock options and restricted stock awards	$	6.5	$	5.4	$	5.0
Restricted stock unit awards	0.6		0.3		0.2
Share-based compensation expense - employees	$	7.1	$	5.7	$	5.2
Share-based compensation expense - non-employee directors	$	0.5	$	0.5	$	0.5

No tax benefit for share-based compensation was realized during 2014, 2013 or 2012 as a result of the valuation allowance against U.S. deferred tax assets.

At December 31, 2014, there was $6.3 million of unrecognized compensation expense related to unvested share-based awards. That cost is expected to be recognized as follows: $4.6 million in 2015, $1.6 million in 2016 and $0.1 million in 2017 as a component of Selling, general and administrative expenses. Unearned compensation expense is recognized over the vesting period for the particular grant. Total unrecognized compensation cost will be adjusted for future changes in actual and estimated forfeitures, updated vesting assumptions for the performance awards, and fluctuations in the fair value of restricted stock unit awards.

Our non-employee directors are paid a portion of their annual retainer in unrestricted shares of common stock which are valued as of the last trading date of the quarter. For purposes of determining the number of shares of common stock to be issued prior to May 13, 2014, the 2007 plan provides that shares are to be valued at the average of the high and low sale price of the Company’s common stock on the New York Stock Exchange ("NYSE"). Pursuant to the 2007 plan we issued 7,084 shares in the six months ended June 30, 2014 and 18,069 shares and 23,752 shares in the 12 months ended December 31, 2013 and 2012, respectively, to non-employee directors. For purposes of determining the number of shares of common stock to be issued subsequent to May 13, 2014, the 2014 plan provides that shares are to be valued at the closing sale price of the Company’s common stock on the NYSE. Pursuant to the 2014 plan, we issued 8,795 shares in the 12 months ended December 31, 2014.

Stock Options

Options granted generally vest in equal increments over a three-year period from the grant date. Upon any change in control of the Company, as defined in the applicable plan, or upon death, disability or retirement, the stock options become 100% vested and exercisable. We account for options that vest over more than one year as one award and recognize expense related to those awards on a straight-line basis over the vesting period.

During 2014, 2013 and 2012, we granted stock options to purchase 230,300, 273,200 and 238,319 shares of common stock, respectively. Included in the 2012 grants are stock options to purchase 4,419 shares of common stock with a vesting period of one year, which were granted to our Chief Executive Officer (“CEO”) in connection with achievement of financial performance criteria in 2011 under our then high-performance incentive plan.

The fair value of options was estimated at the date of grant using a Black-Scholes options pricing model with the following weighted-average assumptions:



	2014			2013			2012
Risk-free interest rate	1.9		%	1.1		%	1.1		%
Dividend yield	0.9		%	—			—
Volatility factor of Company common stock	56		%	54		%	55		%
Weighted-average expected option term (years)	6			6			6
Weighted-average grant-date fair value	$	15.03		$	13.49		$	15.29

The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the term of the options being valued. The dividend yield assumption was ninety-four hundredths for the awards in 2014 due to the initiation of a dividend by the Company. The dividend assumption was previously zero based on the historical expectation of retaining earnings for use in operations at the time of the award issuances in 2013 and 2012. Expected volatilities are based on historical volatility of our common stock. The expected term of options granted is determined using the simplified method allowed by Staff Accounting Bulletin (“SAB”) No. 110 as historical data was not sufficient to provide a reasonable estimate. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.

The following table sets forth the number of option shares and weighted-average grant-date fair value:



	Shares		Weighted-Average Fair Value at Grant Date
Non-vested at December 31, 2012	442,626		$	17.20
Granted during 2013	273,200		13.49
Vested during 2013	(214,816	)	17.37
Forfeited during 2013	(64,983	)	16.02
Non-vested at December 31, 2013	436,027		14.78
Granted during 2014	230,300		15.03
Vested during 2014	(218,532	)	15.18
Forfeited during 2014	(26,581	)	14.74
Non-vested at December 31, 2014	421,214		$	14.36

A summary of our stock option activity for 2014 is as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2014	1,308,573		$	34.81
Granted	230,300		32.06
Exercised	(18,764	)	28.03
Expired unexercised	(36,201	)	38.91
Forfeited	(26,581	)	29.96
Outstanding at December 31, 2014	1,457,327		$	32.97	5.4	$	7.9
Vested or expected to vest at December 31, 2014	1,431,451		$	33.04	5.4	$	7.7
Exercisable at December 31, 2014	1,042,314		$	34.30	4.2	$	4.4

The fair value of options that vested during 2014, 2013 and 2012 was $3.3 million, $3.7 million and $3.5 million, respectively. The intrinsic value of options exercised in 2014 and 2013 was $0.1 million and $1.2 million, respectively. No stock options were exercised in 2012. The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option.

We received cash payments of $0.5 million and $2.8 million in 2014 and 2013, respectively, in connection with the exercise of stock options previously granted. The Company does not settle stock options for cash.

Restricted Stock

We issue restricted stock and, beginning in 2012, issue stock-settled restricted stock units to our employees in the U.S (“Restricted Stock," and "US-Based RSUs," respectively). We issue restricted stock units to employees outside the U.S. ("International RSUs"). Certain of the Restricted Stock, US-Based RSUs, and International RSU awards contain time-based vesting conditions and certain of the awards contain performance-based vesting conditions.

The Restricted Stock and US-Based RSU awards are in all cases settled in our common stock. The value of the Restricted Stock and US-Based RSU awards are based upon the market price of an unrestricted share of our common stock at the date of grant. We recognize compensation expense ratably over the requisite performance period based upon the number of awards that are anticipated to vest. The number of awards anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. We may withhold shares issued upon vesting if directed by individual employees as a means of meeting minimum statutory tax withholding requirements. We hold the surrendered shares as treasury stock.

The International RSUs are settled in a cash payment that is based on the market price of an unrestricted share of our common stock at the vesting date. Since the awards will be settled in cash, they are treated as a liability award in accordance with the “Stock Compensation” topic of the ASC and are presented as a component of Other non-current liabilities on the Consolidated Balance Sheets. During the vesting period we remeasure the fair value of the International RSUs at each reporting date until the award is settled. Fluctuations in the fair value of the International RSUs are recorded as increases or decreases to compensation expense. Over the life of these awards, the cumulative amount of compensation expense recognized will match the actual cash paid.

Performance-Based Awards

During 2014, 2013 and 2012, we awarded 206,225, 245,950 and 130,500 shares, respectively, of performance-based Restricted stock to U.S. employees and 24,175, 35,150, and 33,450 performance-based International RSUs, respectively, to employees outside the U.S. (collectively "Performance-Based Awards").

The number of Performance-Based Awards that ultimately vest is based upon our achievement of specific measurable financial performance criteria. A recipient of Performance-Based Awards may earn a total award ranging from 0% to 100% of the initial grant, with the target being 50% of the initial grant. The Performance-Based Awards granted during 2013 and 2014 will vest upon the satisfaction of established performance criteria based on average return on net assets and the performance of our share price as compared to the performance of the Russell 2000 unweighted index over a three-year performance period ending December 31, 2015 and 2016, respectively.

The performance period for Performance-Based Awards granted during 2012 ended on December 31, 2014. The vesting of these awards was based on the achievement of consolidated EBITDA margin percentage measured against a predetermined peer group, and average return on net assets, in each case over three-year performance periods ending December 31, 2014. Based upon our performance against the stated performance objectives, 4% of the Performance-Based Awards granted in 2012 remain available to vest, or roughly 3,927 shares of Restricted Stock and 548 International RSUs. Vesting is conditional on approval from the Compensation Committee that the performance objectives were satisfied. The Compensation Committee makes this determination in the first quarter of 2015.

The performance period for Performance-Based Awards granted during 2011 ended on December 31, 2013. The vesting of these awards was based on the achievement of consolidated EBITDA margin percentage (as defined above) measured against a predetermined peer group, and average return on net assets, in each case over three-year performance periods ending December 31, 2013. Based upon our performance against the stated performance objectives, 20% of the Performance-Based Awards granted in 2011 vested, or roughly 18,194 shares of Restricted Stock and 850 International RSUs. The Compensation Committee approved this vesting in the first quarter of 2014.

Upon any change in control of the Company, as defined in the plan, the Performance-Based Awards under the terms of the award agreements vest at the target level. In the event of retirement, death, or disability, a pro rata number of Performance-Based Awards shall remain eligible for vesting at the end of the performance period.

A summary of our Performance-Based Awards for 2014 is as follows:



	International Restricted Stock Units		US Shares of Restricted Stock		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2014	61,250		435,090		$	29.56
Granted	24,175		206,225		32.20
Vested	(850	)	(18,194	)	36.51
Forfeited	(12,183	)	(125,617	)	33.63
Non-vested at December 31, 2014	72,392		497,504		$	29.37
Expected to vest as of December 31, 2014	9,516		57,189

For awards granted prior to 2011, no performance-based shares vested and were issued in 2014, 2013 or 2012.

Time-Based Awards

In 2014, 2013 and 2012 we awarded 18,525, 60,000 and 69,327 time-based restricted stock units (RSUs); in 2012 we issued 20,000 shares of time-based restricted stock, respectively (collectively "US Time-Based Awards"). Included in the 2012 grant are 2,177 units of time-based awards with a vesting period of one year, which were granted to our Chief Executive Officer ("CEO") in connection with achievement of financial performance criteria under our then high performance annual incentive program. The value of the restricted stock units and restricted stock awarded in 2014, 2013 and 2012, based upon the market price of an unrestricted share of our common stock at the date of grant, was $0.6 million, $1.5 million and $2.6 million, respectively. During 2014, 2013 and 2012, we also awarded 6,050, 7,950, and 17,060 Time-Based International RSUs, respectively.

The US Time-Based Awards and Time-Based International RSUs have similar terms and vest three years from the date of grant, subject to the recipient remaining employed by the Company on that date. Upon any change in control of the Company, as defined in the plan, or upon retirement, the Time-Based Awards become 100% vested. A pro rata number of Time-Based Awards will vest in the event of death or disability prior to the stated vesting date.

A summary of our Time-Based awards for 2014 is as follows:



	Time-Based International RSUs		Shares of US Time-Based Awards		Weighted Average Grant Date Fair Value - US Time-Based Awards
Non-vested at January 1, 2014	16,330		180,560		$	29.26
Granted - three year vesting	6,050		18,525		32.17
Vested	(6,220	)	(50,895	)	35.99
Forfeitures	(1,085	)	(13,020	)	29.63
Non-vested at December 31, 2014	15,075		135,170		$	27.08
Expected to vest as of December 31, 2014	13,967		130,174

The following US Time-Based Awards vested and were issued in the respective years ended December 31:



	2014		2013		2012
Vested - three year vesting period	50,895		54,300		22,100
Vested -one year vesting period	—		2,177		2,767
Shares surrendered to pay withholding taxes	(18,069	)	(19,645	)	(8,538	)
Net shares issued	32,826		36,832		16,329