Share-Based Compensation and Capital Stock

The Company recognizes compensation cost related to share-based payment transactions in the financial statements based on the fair value of the equity or liability instruments issued. Compensation expense related to the fair value of share-based awards is recognized over the requisite service period based on an estimate of those awards that will ultimately vest. The Company estimates the share-based compensation expense for awards that will ultimately vest at the inception of the grant. Over the life of the grant, the estimate of share-based compensation expense for awards with performance and/or service requirements is adjusted so that compensation cost is recognized only for awards that ultimately vest.

The Company has calculated a pool of income tax benefits that are available to absorb future income tax shortfalls that can result from the exercise or maturity of stock awards. The Company has calculated its windfall pool under the short-cut method based on the actual income tax benefits received from exercises and maturities of stock awards granted after October 15, 1997.

The Company has stock compensation plans pursuant to which it is authorized to grant stock-based awards of up to 4.6 million shares of the Company’s common stock, of which 1.8 million shares remain available for grant as of December 31, 2011. The Company’s policy allows the issuance of new or treasury shares to satisfy stock-based awards. Restricted stock, stock options, stock appreciation rights and performance share awards may be granted to officers, key employees and non-employee directors with contractual terms set by the Compensation Committee of the Board of Directors.

Stock Options

The Company granted approximately 0.2 million, 0.3 million and 0.5 million options to certain employees of the Company at a fair value of approximately $2.1 million, $2.6 million and $4.0 million during the years ended December 31, 2011, 2010 and 2009, respectively. The stock options granted by the Company had an exercise price equal to the market price of the Company’s common stock on the date of grant. The fair value of the options granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:



	2011			2010			2009
Risk-free interest rate	2.10		%	2.19		%	1.82		%
Expected volatility	39.51		%	41.92		%	39.71		%
Expected life of stock option	4.4 years			4.4 years			4.4 years
Dividend yield	1.79		%	2.26		%	2.74		%
Requisite service period	4 years			4 years			4 years
Contractual life	7 years			7 years			7 years
Weighted average fair value of options granted (per option)	$	12.42		$	10.07		$	7.41

The expected life of the options and volatility are based on the historical data and are not necessarily indicative of exercise patterns or actual volatility that may occur. Historical volatility is calculated based on a period that corresponds to the expected life of the stock option. The dividend yield and the risk-free rate of return are calculated on the grant date based on the then current dividend rate and the risk-free rate for the period corresponding to the expected life of the stock option. Compensation expense related to the fair value of these awards is recognized straight-line over the requisite service period based on those awards that ultimately vest.

The aggregate intrinsic value of stock options outstanding and exercisable at December 31, 2011 was $9.1 million and $5.6 million, respectively. The total intrinsic value of options exercised during the year ended December 31, 2011, 2010 and 2009 was $2.8 million, $2.0 million and $12.6 million, respectively.

The Company received $3.8 million, $2.5 million, and $9.2 million in proceeds from the exercise of 0.2 million, 0.1 million, and 0.8 million employee stock options during the years ended December 31, 2011, 2010 and 2009, respectively.

The following table summarizes information about stock options outstanding at December 31, 2011:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding at December 31, 2011	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable at December 31, 2011	Weighted Average Exercise Price
$ 0.00 to $19.50	53,824	1.0 years	$	10.72	53,824	$	10.72
$19.51 to $29.25	377,128	4.1 years	$	27.00	187,149	$	27.00
$29.26 to $34.12	481,288	4.8 years	$	32.59	259,032	$	32.45
$34.13 to $39.00	327,764	3.2 years	$	35.55	265,363	$	35.68
$39.01 to $43.87	251,045	5.3 years	$	40.97	105,114	$	40.58
$43.88 to $48.75	82,677	4.1 years	$	48.73	82,677	$	48.73
	1,573,726	4.2 years	$	33.30	953,159	$	33.36

Restricted Stock

The following table is a summary of activity related to restricted stock grants to non-employee directors and key employees for the year ended December 31:



	2011		2010		2009
Restricted shares granted	247,298		279,157		262,128
Weighted average grant date fair value per share	$	38.84	$	33.07	$	27.28
Aggregate grant date fair value ($000)	$	9,604	$	9,233	$	7,150
Restricted shares forfeited	68,580		41,796		43,408
Vesting service period of shares granted	1-4 years		3-4 years		3-4 years
Grant date fair value of shares vested ($000)	$	6,662	$	6,222	$	5,572

Compensation expense related to the fair value of these awards is recognized straight-line over the requisite service period based on those restricted stock grants that ultimately vest. The fair value of grants is measured by the market price of the Company’s common stock on the date of grant. Restricted stock awards generally vest ratably over the service period beginning with the first anniversary of the grant date. Awards granted to retirement eligible non-employee directors are recognized over the shorter of the requisite service period or the length of time until retirement since the terms of the grant provide that awards will vest upon retirement.

Performance Vested Restricted Stock Units

The Company has granted performance vested restricted stock units (“PVRSU”) to certain employees. The fair value is measured by the market price of the Company’s common stock on the date of grant. The vesting of these stock awards is contingent upon the Company achieving performance targets at the end of specified performance periods and the employees’ continued employment. The performance conditions affect the number of shares that will ultimately vest. The range of possible stock-based awards vesting is generally between 0% and 200% of the initial target. If a minimum of 50% of the performance target is not attained then no awards will vest under the terms of the various PVRSU agreements. Compensation expense related to these awards is recognized over the requisite period based on the Company's estimate of the achievement of the various performance targets. The Company has currently estimated that between 0% and 130% of the various award targets will be achieved. Compensation expense is recognized ratably over the requisite service period only on those PVRSUs that ultimately vest.

The following table is a summary of activity related to PVRSU grants during the years ended December 31, 2011, 2010 and 2009:



	2011		2010		2009
Performance vested restricted stock units granted at target	25,036		33,517		9,588
Weighted average grant date fair value per share	$	41.25	$	32.60	$	26.88
Average aggregate grant date fair value ($000)	$	1,033	$	1,093	$	258
Stock units forfeited	43,179		13,110		6,046
Requisite service period	3 years		3 years		2 years

During the year ended December 31, 2011, no PVRSU grants vested and 43,179 units were forfeited. PVRSU grants forfeited included 39,070 units that were forfeited since the Company did not achieve the minimum performance conditions contained in the stock awards and 4,109 related to employee terminations. During the year ended December 31, 2010, PVRSU grants totaling 10,880 vested at a fair value of $0.4 million. These PVRSU grants were initially granted at a target of 15,541 units, however, since the Company achieved only 70% of the targeted performance conditions contained in the stock awards, 4,661 units were forfeited. In addition, during the year ended December 31, 2010, 4,989 units were forfeited since the performance targets of the applicable PVRSU grant were not achieved and 3,460 were forfeited due to employee terminations. During the year ended December 31, 2009, PVRSU grants totaling 19,761 vested at a fair value of $1.0 million. These PVRSU grants were initially granted at a target of 14,638 units, however, since the Company exceeded targeted performance conditions contained in the stock awards by 35%, an additional 5,123 shares were earned and issued. All PVRSU units forfeited during the year ended December 31, 2009 were related to employee terminations.

A summary of stock-based award activity as of December 31, 2011, 2010 and 2009 and the changes during the years are presented below:



	2011
	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Contractual Term	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2011	1,732,674		$	31.43		592,131		$	31.81	127,912		$	33.43
Granted	166,306		$	41.25		247,298		$	38.84	25,036		$	41.25
Exercised/Vested	(175,386	)	$	21.92		(205,222	)	$	32.46	—		$	—
Forfeited/Expired	(149,868	)	$	33.76		(68,580	)	$	33.55	(43,179	)	$	32.53
Outstanding at December 31, 2011	1,573,726		$	33.30	4.2 years	565,627		$	34.43	109,769		$	35.57
Options exercisable at December 31, 2011	953,159		$	33.36	3.8 years



	2010
	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Contractual Term	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2010	1,658,844		$	30.05		539,341		$	31.68	118,385		$	34.58
Granted	261,137		$	32.84		279,157		$	33.07	33,517		$	32.60
Exercised/Vested	(123,109	)	$	19.96		(184,571	)	$	33.71	(10,880	)	$	40.65
Forfeited/Expired	(64,198	)	$	23.53		(41,796	)	$	30.31	(13,110	)	$	35.70
Outstanding at December 31, 2010	1,732,674		$	31.43	4.4 years	592,131		$	31.81	127,912		$	33.43
Options exercisable at December 31, 2010	792,499		$	31.73	3.5 years



	2009
	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Contractual Term	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2009	1,950,783		$	24.03		482,236		$	34.93	129,481		$	37.00
Granted	537,006		$	27.02		262,128		$	27.28	9,588		$	26.88
Exercised/Vested	(764,612	)	$	11.98		(161,615	)	$	34.48	(19,761	)	$	48.72
Performance-Based Leveraging*	—		$	—		—		$	—	5,123		$	48.72
Forfeited/Expired	(64,333	)	$	37.13		(43,408	)	$	30.79	(6,046	)	$	39.95
Outstanding at December 31, 2009	1,658,844		$	30.05	5.4 years	539,341		$	31.68	118,385		$	34.58
Options exercisable at December 31, 2009	576,577		$	27.67	4.4 years

____________________________


*	PVRSU grants outstanding at January 1, 2009 have been increased by 5,123 units due to the Company exceeding the targeted performance conditions contained in PVRSUs granted in prior periods during the year ended December 31, 2009.

The components of the Company’s pretax stock-based compensation expense and associated income tax benefits are as follows for the years ended December 31:



(in millions)	2011		2010			2009
Stock options	$	2.8	$	2.4		$	2.8
Restricted stock	7.7		6.8			6.4
Performance vested restricted stock units	0.7		(0.3		)	(0.2		)
Total	$	11.2	$	8.9		$	9.0
Income tax benefits	$	4.1	$	3.3		$	3.4

During 2011 and 2010, the Company revised its estimate of the projected achievement of various performance conditions that affect the number of PVRSUs that will ultimately vest. As a result, previously recognized stock-based compensation costs related to these PVRSUs has been increased by $0.1 million during the year ended December 31, 2011 and reduced by $0.8 million and $0.9 million during the years ended December 31, 2010 and 2009, respectively.

In conjunction with the termination of certain Company officers, stock option and restricted stock compensation expense for the year ended December 31, 2011 includes an additional $0.2 million and $0.5 million, respectively of expense related to the acceleration of award vesting conditions. Stock option and restricted stock compensation for the year ended December 31, 2009 also included an additional $0.5 million and $0.2 million, respectively of expense related to the acceleration of award vesting conditions for terminated Company officers.

The total unrecognized compensation costs related to stock-based awards that have not yet vested and the related weighted average amortization period over which the costs are to be recognized as of December 31, 2011 are as follows:



	Unrecognized Compensation Expense on Unvested Awards		Weighted Average Amortization Period
	(in millions)
Stock options	$	3.3	2.2 years
Restricted stock	12.3		2.4 years
Performance vested restricted stock units	0.9		1.7 years
Total	$	16.5

Dividends

During the year ended December 31, 2011 and 2010, the Company's board of directors declared quarterly cash dividends at an annual rate of $0.74 per share totaling $43.7 million and $43.8 million, respectively

Share Repurchases and Redemptions

The Company announced a stock repurchase program on June 25, 1998 to return excess capital to its shareholders. Treasury stock activity is recorded at cost in the accompanying consolidated financial statements. During 2011 and 2010, the Company repurchased 1.6 million and 0.3 million shares of its common stock under the repurchase program at a total cost of $51.0 million and $8.7 million, respectively. Through December 31, 2011, the Company repurchased 44.8 million shares of its common stock (including 33.0 million prior to the two-for-one stock split effected in October 2005) under the share repurchase program at a total cost of $1.1 billion.

During 2011, the Company redeemed 67,426 shares of common stock at a total cost of $2.6 million from employees to satisfy statutory minimum tax-withholding requirements from the vesting of restricted stock grants. During 2010, the Company redeemed 76,485 shares of common stock at a total cost of $2.5 million from employees to satisfy statutory minimum tax-withholding requirements from the vesting of restricted stock and PVRSU grants. These redemptions were outside the share repurchase program initiated in June 1998.