Stock-Based Compensation Plans

The Company has a stock incentive plan, the 2009 Stock Option and Incentive Plan (the "2009 Plan"), which includes an authorization to issue shares of the Company's common stock, par value $0.01 per share. At December 31, 2015, the Company has 1,364,678 shares remaining available to issue under the 2009 Plan, exclusive of shares that may be issued to satisfy currently outstanding awards such as stock options or performance awards. In addition, any awards that were outstanding under the Company's1994 Stock Option and Incentive Plan (the "1994 Plan") on May 21, 2009, the date the Company adopted the 2009 Plan, that are subsequently forfeited, canceled, surrendered or terminated (other than by exercise) will become available for awards under the 2009 Plan. The 2009 Plan provides for various types of equity awards to associates, officers, non-employee directors and other key personnel of the Company and its subsidiaries. The types of awards that may be granted under the 2009 Plan include restricted stock, stock options that qualify as incentive stock options ("ISOs") under Section 422 of the Code, non-qualified stock options, stock appreciation rights and performance awards, among others. The 2009 Plan will expire on May 21, 2019.

Information with respect to stock options granted under the 2009 and 1994 Plans is as follows:



	2009 Plan shares		Weighted average exercise price per share		1994 Plan shares		Weighted average exercise price per share
Options Outstanding, December 31, 2012	307,554		$	112.67	719,830		$	105.40
Exercised	(19,949	)	84.43		(24,292	)	79.42
Granted	215,230		129.03		—		—
Forfeited	(1,267	)	131.56		(4,012	)	127.56
Options Outstanding, December 31, 2013	501,568		$	120.77	691,526		$	106.19
Exercised	(157,454	)	116.40		(342,743	)	99.03
Granted	—		—		—		—
Forfeited	(4,052	)	131.05		(76,381	)	142.66
Options Outstanding, December 31, 2014	340,062		$	122.67	272,402		$	104.96
Exercised	(90,884	)	124.01		(190,207	)	105.70
Granted	—		—		—		—
Forfeited	—		—		—		—
Options Outstanding, December 31, 2015	249,178		$	122.17	82,195		$	103.27
Options Exercisable:
December 31, 2013	184,167		$	107.18	691,526		$	106.19
December 31, 2014	185,227		$	116.71	272,402		$	104.96
December 31, 2015	188,081		$	119.98	82,195		$	103.27

The following summarizes the exercise prices and contractual lives of options outstanding as of December 31, 2015:



2009 Plan Number of Options	Range—Exercise Price			Weighted Average Remaining Contractual Term (in years)
25,622	$70.00	-	$79.99	4.1
38,326	110.00	-	119.99	5.1
44,135	120.00	-	129.99	7.2
141,095	130.00	-	139.99	6.6
249,178



1994 Plan Number of Options	Range—Exercise Price			Weighted Average Remaining Contractual Term (in years)
9,854	$40.00	-	$49.99	3.1
35,511	80.00	-	89.99	2.1
7,174	90.00	-	99.99	0.1
29,656	140.00	-	149.99	1.1
82,195

Options outstanding under the 2009 and 1994 Plans at December 31, 2015 had an intrinsic value of $15,438,000 and $6,647,000, respectively. Options exercisable under the 2009 and 1994 Plans at December 31, 2015 had an intrinsic value of $12,066,000 and $6,647,000, respectively. Options exercisable under the 2009 and 1994 Plans had a weighted average contractual life of 6.3 years and 1.7 years, respectively. The intrinsic value of options exercised during 2015, 2014 and 2013 was $18,080,000, $20,028,000 and $2,395,000, respectively.

The cost related to stock-based employee compensation for employee stock options included in the determination of net income is based on estimated forfeitures for the given year. Estimated forfeitures are adjusted to reflect actual forfeitures at the end of the vesting period. The following table summarizes the weighted average fair value of employee stock options for 2013 and the associated assumptions used to calculate the value. There were no stock options granted in 2015 and 2014.



	2013
Weighted average fair value per share	$	26.78
Life of options (in years)	5.0
Dividend yield	3.7		%
Volatility	34.00		%
Risk-free interest rate	0.91		%

During 2013, the Company adopted a revised compensation framework under which share-based compensation will be granted, composed of annual restricted stock awards for which one third of the award will vest annually over a three year period, and multi-year long term incentive performance awards. Under the multi-year long term incentive component of the revised framework, the Company will grant a target number of performance awards, with the ultimate award determined by the total shareholder return of the Company's common stock and/or operating performance metrics, measured in each case over a measurement period of up to three years. The performance awards will be earned in the form of restricted stock, or upon election of the recipient, up to 25% in the form of stock options, for which one third of the award will vest annually over an additional three year period following the completion of the performance cycle.

In general, performance awards are forfeited if the employee's employment terminates for any reason prior to the measurement date. However, for performance awards with performance periods beginning on or after January 1, 2015, after the first year of the performance period, if the employee's employment terminates on account of death, disability, retirement, or termination without cause at a time when the employee meets the age and service requirements for retirement, the employee shall vest in a pro rata portion of the award (based on the employee's service time during the performance period), with such vested portion to be earned and converted into shares at the end of the performance period based on actual achievement under the performance award.

Information with respect to performance awards granted is as follows:



	Performance awards		Weighted average grant date fair value per award
Outstanding at December 31, 2012	—		$	—
Granted (1)	191,008		70.00
Forfeited	(1,243	)	70.00
Outstanding at December 31, 2013	189,765		$	70.00
Granted (2)	136,276		117.43
Change in awards based on performance (3)	(46,790	)	74.37
Converted to restricted stock	(16,209	)	74.37
Forfeited	(23,140	)	76.22
Outstanding at December 31, 2014	239,902		$	95.20
Granted (4)	85,636		148.49
Change in awards based on performance (3)	14,697		78.50
Converted to restricted stock	(95,826	)	78.50
Forfeited	(6,143	)	110.34
Outstanding at December 31, 2015	238,266		$	119.65

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(1)	The amount of restricted stock ultimately earned is based on the total shareholder return metrics related to the Company’s common stock.


(2)	The amount of restricted stock ultimately earned is based on the total shareholder return metrics related to the Company’s common stock for 60,391 performance awards and financial metrics related to operating performance and leverage metrics of the Company for 75,885 performance awards.


(3)	Represents the change in the number of performance awards converted to restricted stock shares based on performance achievement.


(4)	The amount of restricted stock ultimately earned is based on the total shareholder return metrics related to the Company’s common stock for 55,162 performance awards and financial metrics related to operating performance and leverage metrics of the Company for 30,474 performance awards.

The Company used a Monte Carlo model to assess the compensation cost associated with the portion of the performance awards determined by using total shareholder return measures. The assumptions used are as follows:



	2015	2014	2013

Dividend yield	3.0%	3.6%	3.3%
Estimated volatility over the life of the plan (1)	12.0% - 17.3%	17.6% - 18.6%	17.0% - 21.0%
Risk free rate	0.07% - 1.09%	0.04% - 0.72%	0.09% - 0.46%
Estimated performance award value based on total shareholder return measure	$139.18	$103.20	$70.00

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(1)	Estimated volatility of the life of the plan is using 50% historical volatility and 50% implied volatility.

For the portion of the performance awards determined by using financial metrics, the estimated compensation cost was based on the baseline share value of $166.23, $128.97 and $130.23, for the years ended December 31, 2015, 2014 and 2013, respectively, and the Company's estimate of corporate achievement for the financial metrics.

Information with respect to restricted stock granted is as follows:



	Restricted stock shares		Restricted stock shares weighted average grant date fair value per share		Restricted stock shares converted from performance awards
Outstanding at December 31, 2012	202,218		$	107.58	—
Granted	123,977		129.21		—
Vested	(141,673	)	104.69		—
Forfeited	(2,439	)	123.05		—
Outstanding at December 31, 2013	182,083		$	124.35	—
Granted	98,954		129.35		16,209
Vested	(93,963	)	120.81		(5,073	)
Forfeited	(7,767	)	128.62		(203	)
Outstanding at December 31, 2014	179,307		$	129.06	10,933
Granted	61,953		173.04		95,826
Vested	(91,847	)	130.75		(8,412	)
Forfeited	(1,529	)	151.86		—
Outstanding at December 31, 2015	147,884		$	146.21	98,347

Total employee stock-based compensation cost recognized in income was $14,703,000, $13,314,000 and $17,775,000 for the years ended December 31, 2015, 2014 and 2013, respectively, and total capitalized stock-based compensation cost was $9,667,000, $5,457,000 and $8,379,000 for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, there was a total unrecognized compensation cost of $99,000 for unvested stock options and $21,096,000 for unvested restricted stock and performance awards, which does not include estimated forfeitures. The unrecognized compensation cost for unvested stock options and restricted stock and performance awards is expected to be recognized over a weighted average period of 0.1 and 3.6 years, respectively.

The Company estimates the forfeiture of stock options and recognizes compensation cost net of the estimated forfeitures. The estimated forfeitures included in compensation cost are adjusted to reflect actual forfeitures at the end of the vesting period. The forfeiture rate at December 31, 2015 was 1.0%. The application of estimated forfeitures did not materially impact compensation expense for the years ended December 31, 2015, 2014 and 2013.

Employee Stock Purchase Plan

In October 1996, the Company adopted the 1996 Non-Qualified Employee Stock Purchase Plan (as amended, the "ESPP"). Initially 1,000,000 shares of common stock were reserved for issuance under this plan. There are currently 704,160 shares remaining available for issuance under the ESPP. Full-time employees of the Company generally are eligible to participate in the ESPP if, as of the last day of the applicable election period, they have been employed by the Company for at least one month. All other employees of the Company are eligible to participate provided that, as of the applicable election period, they have been employed by the Company for 12 months. Under the ESPP, eligible employees are permitted to acquire shares of the Company's common stock through payroll deductions, subject to maximum purchase limitations. During 2013, the purchase period was a period of seven months beginning April 1 and ending October 30. The Company modified the ESPP beginning in 2014, establishing two purchase periods. The first purchase period begins January 1 and ends June 10, and the second purchase period begins July 1 and ends December 10. The purchase price for common stock purchased under the plan is 85% of the lesser of the fair market value of the Company's common stock on the first day of the applicable purchase period or the last day of the applicable purchase period. The offering dates, purchase dates and duration of purchase periods may be changed if the change is announced prior to the beginning of the affected date or purchase period. The Company issued 10,667, 9,848 and 9,260 shares and recognized compensation expense of $321,000, $407,000 and $174,000 under the ESPP for the years ended December 31, 2015, 2014 and 2013, respectively. The Company accounts for transactions under the ESPP using the fair value method prescribed by accounting guidance applicable to entities that use employee share purchase plans.