Stock Based Compensation

9 Months Ended

Sep. 28, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based Compensation

Stock Based Compensation

The Company records compensation expense using the applicable accounting guidance for share-based payments related to stock options, restricted stock, restricted stock units and performance share awards granted to directors and employees. Compensation expense for share-based awards is recorded straight line over the required service period, based on the fair value of the award, although with respect to performance share awards, this is subject to an assessment of the likelihood of reaching performance levels included in the programs.

Stock Options

Stock options to purchase the Company's common stock are granted to employees, upon approval by the Company's Board of Directors, with an exercise price equal to the fair market value of the stock on the date of grant. Options generally become exercisable in three years, in equal installments beginning one year from the date of grant, and generally expire 10 years from the date of grant. In the year-to-date period of 2013, the Company has granted options to acquire 11,804 shares. The fair value of the Company’s stock options was estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to value the 2013 option grants: dividend yield of 2.7 percent; expected volatility of 39 percent; risk-free interest rate of 1.8 percent; and expected life of 8 years. The weighted average of the grant date fair value of the stock options granted during the year-to-date period of 2013 was $25.60 per share. Options to acquire 24,300 shares of stock were granted during the year-to-date period of 2012. Compensation expense associated with all outstanding stock option awards was $0.5 million and $0.6 million in the third quarters of 2013 and 2012, respectively, and $1.4 million and $1.8 million in the respective year-to-date periods.

Stock option activity for 2013, under all of the Company's incentive plans, is summarized in the following table:

	Shares subject to option		Weighted average exercise price per share		Aggregate intrinsic value (in millions)
Outstanding at December 29, 2012	2,935,919			$37.15
Granted	11,804		78.61
Expired / Forfeited	(32,585	)	58.08
Exercised	(694,275	)	27.27
Outstanding at September 28, 2013	2,220,863			$40.15		$103.8
Exercisable at September 28, 2013	1,508,330			$32.12		$82.6

The intrinsic value of options exercised totaled $6.0 million and $3.2 million in the third quarters of 2013 and 2012, respectively, and $35.3 million and $18.3 million in the respective year-to-date periods.

Performance Awards, Restricted Stock and Restricted Stock Units

The Company also grants performance awards, restricted stock and restricted stock units to employees and directors. The Company has time-vested and performance-vested awards, which typically have initial vesting periods ranging from one to six years. Compensation expense associated with restricted stock and restricted stock units is equal to the market value of the Company's common stock on the date of grant, and for time-vested awards, is recorded straight-line over the required service period. For performance-vested awards, expense is recorded over the required service period, subject to a probability assessment of achieving the performance criteria.

The Company granted 64,725 and 68,000 performance-vested award shares under its performance share plan in February2013 and 2012, respectively. The Company's performance-vested awards provide incentive opportunity based on the overall success of the Company, as reflected through cash flow and earnings per share achieved over a three year performance period. The program is based upon a pre-defined number of performance share units. Depending on achievement under the performance measures, the actual payout can be up to 150 percent of share units initially granted.

In the year-to-date periods of 2013 and 2012, the Company granted 79,734 and 2,000 shares of time-vested restricted stock and restricted stock units with average fair values of $82.58 and $54.51 per share, respectively, that vest three years from the date of grant.

During the year-to-date periods of 2013 and 2012, the Company granted 13,910 and 17,600 shares of time-vested restricted stock units with average fair values of $82.72 and $53.99 per share, respectively, that provide for vesting one year from the date of grant.

For the third quarters of 2013 and 2012, compensation expense associated with all employee and director restricted stock and restricted stock unit awards outstanding, including performance shares, was $3.7 million and $3.5 million, respectively. Such expense was $10.5 million and $9.5 million for the year-to-date periods of 2013 and 2012, respectively.

Restricted stock, restricted stock units, and performance share award activity for 2013 under all of the Company's incentive plans is summarized in the following table:

	Shares outstanding		Weighted average grant date fair value
December 29, 2012	800,041			$43.01
Granted	158,369		81.05
Performance share adjustments	29,109		58.71
Vested	(105,299	)	47.08
Forfeited	(41,747	)	55.73
September 28, 2013	840,473			$49.58

The fair value of performance awards, restricted stock and restricted stock units vested in the year-to-date periods of 2013 and 2012 was $7.6 million and $14.3 million, respectively. There were no such amounts vested in the third quarters of 2013 or 2012.

As of September 28, 2013, total unrecognized stock based compensation expense related to all stock based awards was $21.9 million, which is expected to be recognized over a weighted average period of 1.9 years. The average remaining contractual life on outstanding and exercisable stock options was 6.0 and 4.9 years, respectively.