Stock-Based Compensation and Other Incentive Plans

Under the Company's Stock Incentive Plan (the "Incentive Plan"), 18,000,000 shares of the Company's common stock are reserved for awards to officers and other selected key management employees of the Company. The Incentive Plan provides the Board of Directors with the flexibility to grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock or units, merit awards, phantom stock awards and rights to acquire stock through purchase under a stock purchase program ("Awards"). Awards the Board of Directors elects to pay out in cash do not count against the 18,000,000 shares authorized in the Incentive Plan. The Incentive Plan calls for the adjustment of shares awarded under the plan in the event of a split.

As of December 31, 2012, the Company had stock options, restricted stock and restricted stock units outstanding under the Incentive Plan.

Stock Options

Stock options are granted at a price equal to the closing market price of the Company's common stock on the date of grant and are generally subject to vesting provisions of at least one year from the date of grant. Information regarding stock option activity under the Incentive Plan follows for the year ended December 31, 2012:



			Weighted Average		Aggregate		Average
	Common		Exercise		Intrinsic		Contract
	Shares		Price		Value		Life
	(In thousands)		(In thousands)		(In thousands)
Options outstanding at January 1	4,953		$	26.72
Granted	1,311		13.28
Exercised	(527	)	9.79
Canceled	(73	)	31.17
Expired	(449	)	13.89
Options outstanding at December 31	5,215		25.99		$	4	6.67
Options exercisable at December 31	2,847		32.26		—		5.40

The aggregate intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $1.8 million, $2.6 million and $3.0 million, respectively.

Information regarding changes in stock options outstanding and not yet vested and the related grant-date fair value under the Incentive Plan follows for the year ended December 31, 2012:



		Weighted Average
	Common Shares	Grant-Date Fair Value
	(In thousands)
Unvested options at January 1	1,796	$	10.96
Granted	1,311	5.27
Vested	(721)	11.13
Canceled	(17)	9.81
Unvested options at December 31	2,369	7.77

Compensation expense related to stock options for the years ended December 31, 2012, 2011 and 2010 was $8.0 million, $8.8 million and $10.6 million, respectively. As of December 31, 2012, there was $7.0 million of unrecognized compensation cost related to the unvested stock options. The total grant-date fair value of options vested during the years ended December 31, 2012, 2011 and 2010 was $8.0 million, $9.9 million and $10.6 million, respectively. The options provide for the continuation of vesting for retirement-eligible recipients that meet certain criteria. The expense for these options is recognized through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn part or all of the award. The majority of the cost relating to the stock-based compensation plans is included primarily in selling, general and administrative expenses in the accompanying consolidated statements of income.

Weighted average assumptions used in the Black-Scholes option pricing model for granted options follow:



	Year Ended December 31
	2012		2011		2010
Weighted average grant-date fair value per share of options granted	$	5.27	$	14.18	$	9.43
Assumptions (weighted average):
Risk-free interest rate	0.76%		1.92%		2.16%
Expected dividend yield	2.92%		1.25%		1.99%
Expected volatility	60.72%		57.4%		57.1%
Expected life (in years)	4.5		4.5		4.5

Expected volatilities are based on historical stock price movement and implied volatility from traded options on the Company's stock. The expected life of the option was determined based on historical exercise activity. Most options granted vest over a period of three to four years.

Restricted Stock and Restricted Stock Unit Awards

The Company may issue restricted stock and restricted stock units, which require no payment from the employee. Restricted stock cliff-vests at various dates and restricted stock units typically vest ratably over three years. Compensation expense is based on the fair value on the grant date and is recorded ratably over the vesting period. During the vesting period, the employee receives cash compensation equal to the amount of dividends that would have been paid on the underlying shares.

Information regarding restricted stock and restricted stock unit activity and weighted average grant-date fair value follows for the year ended December 31, 2012:



	Restricted Stock				Restricted Stock Units
			Weighted Average				Weighted Average
	Common		Grant-Date		Common		Grant-Date
	Shares		Fair Value		Shares		Fair Value
	(In thousands)				(In thousands)
Outstanding at January 1	182		$	26.68	27		$	52.69
Granted	22		13.44		547		13.31
Vested	(10	)	22.89		(27	)	52.69
Canceled	(6	)	32.49		(36	)	13.93
Outstanding at December 31	188		25.14		511		13.26

The weighted average fair value of restricted stock granted during 2011 and 2010 was $30.42 and $22.03, respectively. There were no restricted stock units granted during 2011 or 2010. The total grant-date fair value of restricted stock that vested during 2012, 2011 and 2010 was $0.2 million, $1.1 million and $0.4 million, respectively. The total grant-date fair value of restricted stock units that vested during 2012 and 2011 was $1.4 million in each year. There were no restricted stock units that vested during 2010.

Unearned compensation of $6.9 million will be recognized over the remaining vesting period of the outstanding restricted stock and restricted stock units. The Company recognized expense of approximately $3.5 million, $2.1 million and $1.1 million related to restricted stock and restricted stock units for the years ended December 31, 2012, 2011 and 2010, respectively, primarily in selling, general and administrative expenses.

Long-Term Incentive Compensation

The Company has a long-term incentive program that allows for the award of performance units. The total number of units earned by a participant is based on financial and operational performance measures, and may be paid out in cash or in shares of the Company's common stock. The Company recognizes compensation expense over the three year term of the grant. The liabilities are remeasured quarterly. The Company recognized $8.1 million, $2.7 million and $3.8 million for the years ended December 31, 2012, 2011 and 2010, respectively. The expense is included primarily in selling, general and administrative expenses in the accompanying consolidated statements of income. Amounts accrued under the plan were $13.1 million and $9.6 million at December 31, 2012 and 2011, respectively.

Deferred Compensation Plan

The Company maintains a deferred compensation plan that allows eligible employees to defer receipt of compensation until the dates elected by the participant. Participants in the plan may defer up to 85% of their base salaries and up to 100% of their annual incentive awards. The plan also allows participants to defer receipt of up to 100% of the shares under any restricted stock unit or performance-contingent stock awards. The amounts deferred are invested in accounts that mirror the gains and losses of a number of different investment funds, including a hypothetical investment in shares of the Company's common stock. Participants are always vested in their deferrals to the plan and any related earnings. The Company has established a grantor trust to fund the obligations under the plan. The trust has purchased corporate-owned life insurance to offset these obligations. The net cash surrender values of the policies of $35.4 million and $35.8 million at December 31, 2012 and 2011, respectively, are included in other noncurrent assets in the accompanying consolidated balance sheets. The participants have an unsecured contractual commitment by the Company to pay the amounts due under the plan. Any assets placed in trust by the Company to fund future obligations of the plan are subject to the claims of creditors in the event of insolvency or bankruptcy, and participants are general creditors of the company as to their deferred compensation in the plans.

Under the plan, the Company credits each participant's account with the number of units equal to the number of shares or units that the participant could purchase or receive with the amount of compensation deferred, based upon the fair market value of the underlying investment on that date. The amount the employee will receive from the plan will be based on the number of units credited to each participant's account, valued on the basis of the fair market value of an equivalent number of shares or units of the underlying investment on that date. The liability under the plan was $31.3 million at December 31, 2012 and $32.7 million at December 31, 2011.

The Company's net income (expense) related to the deferred compensation plan for the years ended December 31, 2012, 2011 and 2010 was $3.3 million, $6.2 million and $(2.8) million, respectively, most of which is included in selling, general and administrative expenses in the accompanying consolidated statements of income.