Share-Based Compensation and Capital Stock

Stock Options

No stock options were granted during the three month periods ended September 30, 2011 and 2010. The Company granted 0.2 million and 0.3 million options to certain employees of the Company at a fair value of $2.1 million and $2.6 million during the nine months ended September 30, 2011 and 2010, 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 Grants			2010 Grants
Risk-free interest rate	2.10		%	2.19		%
Expected volatility	39.51		%	41.92		%
Expected life of stock option	4.4 years			4.4 years
Dividend yield	1.79		%	2.26		%
Requisite service period	4 years			4 years
Contractual life	7 years			7 years
Weighted average fair value of options granted	$	12.42		$	10.07

The expected life of the options and volatility are based on 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 of return 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 the stock options outstanding and exercisable at September 30, 2011 was $2.3 million and $1.7 million, respectively. The total intrinsic value of options exercised during the three months ended September 30, 2011 and 2010 was approximately $0.2 million and $16,000, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2011 and 2010 was $2.5 million and $1.0 million, respectively.

The Company received approximately $0.6 million and $6,000 in proceeds from the exercise of 26,614 and 600 employee stock options during the three month periods ended September 30, 2011 and 2010, respectively. The Company received $3.7 million and $1.3 million in proceeds from the exercise of approximately 0.2 million and 66,000 of employee stock options during the nine month periods ended September 30, 2011 and 2010, respectively.

Restricted Stock

The following table is a summary of activity related to restricted stock grants:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Restricted share grants	45,674		4,203		247,298		279,157
Weighted average grant date fair value per share	$	30.27	$	35.69	$	38.84	$	33.07
Aggregate grant date fair value ($000)	$	1,383	$	150	$	9,604	$	9,233
Restricted shares forfeited	5,884		2,354		33,252		11,183
Vesting service period of shares granted	3 years		4 years		1-4 years		3-4 years
Grant date fair value of shares vested ($000)	$	298	$	200	$	6,655	$	5,948

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 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 board of 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 the awards will vest upon retirement.

Performance Vested Restricted Stock Units

The Company has granted performance vested restricted stock units (“PVRSU”) to certain employees. 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 award vesting is 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 PVRSU agreements. Compensation expense related to these awards will be recognized over the requisite service period and will only be recognized on those PVRSUs that ultimately vest based on the Company's estimate of the achievement of the various performance targets. The Company has currently estimated that between 0% and 100% of the various award targets will be achieved. The fair value is measured by the market price of the Company's common stock on the date of grant. Compensation expense is recognized ratably over the requisite service period.

The following table is a summary of activity related to PVRSU grants:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Performance vested restricted stock units granted at target	—		—		25,036		33,517
Weighted average grant date fair value per share	$	—	$	—	$	41.25	$	32.60
Aggregate grant date fair value ($000)	$	—	$	—	$	1,033	$	1,093
Stock units forfeited	—		—		41,512		9,650
Requisite service period	—		—		3 years		3 years

During the three and nine months ended September 30, 2011, no PVRSU grants vested. During the nine months ended September 30, 2011, PVRSU grants totaling 39,070 units were forfeited since the Company did not achieve the minimum performance conditions contained in the stock awards. The remaining 2,442 units were forfeited upon employee termination. During the nine months ended September 30, 2010, PVRSU grants totaling 10,880 vested at a fair value of $0.3 million and 9,650 units were forfeited since certain performance targets were not achieved.

A summary of stock-based award activity as of September 30, 2011 and changes during the nine months ended are presented below:



	Stock Options					Restricted Stock				Performance Vested Restricted Stock Units
	Options		Weighted Average Exercise Price		Weighted Average Remaining 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	(164,150	)	22.70			(204,972	)	32.47		0		0
Forfeited/Expired	(126,587	)	32.97			(33,252	)	33.33		(41,512	)	32.18
Outstanding at September 30, 2011	1,608,243		$	33.21	4.5 years	601,205		$	34.39	111,436		$	35.66
Options exercisable at September 30, 2011	954,395		$	33.06	4.0 years

The components of the Company’s pretax stock-based compensation expense and associated income tax benefits are as follows for the three and nine months ended September 30, 2011 and 2010:



	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in millions)	2011		2010			2011		2010
Stock options	$	0.7	$	0.7		$	2.0	$	1.9
Restricted stock	1.9		1.8			5.6		5.3
Performance vested restricted stock units	0.1		(0.7		)	0.4		(0.4		)
Total	$	2.7	$	1.8		$	8.0	$	6.8
Income tax benefits	$	1.0	$	0.7		$	3.0	$	2.5

Dividends

On September 16, 2011, the Company's board of directors declared a cash dividend of $0.185 per share (or approximately $10.9 million in the aggregate), which was paid on October 14, 2011 to shareholders of record as of October 3, 2011. On May 5, 2011, the Company's board of directors declared a cash dividend of $0.185 per share (or approximately $11.0 million in the aggregate), which was paid on July 15, 2011 to shareholders of record as of July 1, 2011. On February 21, 2011, the Company's board of directors declared a cash dividend of $0.185 per share (or approximately $11.0 million in the aggregate), which was paid on April 15, 2011 to shareholders of record as of April 1, 2011.

On September 17, 2010, the Company's board of directors declared a cash dividend of $0.185 per share (or approximately $11.0 million in the aggregate), which was paid on October 15, 2010 to shareholders of record as of October 1, 2010. On April 29, 2010, the Company's board of directors declared a cash dividend of $0.185 per share (or approximately $11.0 million in the aggregate), which was paid on July 16, 2010 to shareholders of record as of July 2, 2010. On February 16, 2010, the Company's board of directors declared a cash dividend of $0.185 per share (or approximately $11.0 million in the aggregate), which was paid on April 16, 2010 to shareholders of record as of April 5, 2010.

Share Repurchases and Redemptions

During the three and nine months ended September 30, 2011, the Company purchased 0.7 million shares of common stock under the share repurchase program at a total cost of $22.2 million. During the three months ended September 30, 2010, the Company purchased approximately 50,000 shares of common stock under the share repurchase program at a total cost of $1.9 million. During the nine months ended September 30, 2010, the Company purchased 0.3 million shares of common stock under the share repurchase program at a total cost of $8.7 million.

During the three and nine months ended September 30, 2011, the Company redeemed 3,309 and 67,336 shares of common stock at a total cost of approximately $0.1 million and $2.6 million, respectively, from employees to satisfy statutory minimum tax requirements from the vesting of restricted stock grants.

During the three and nine months ended September 30, 2010, the Company redeemed 1,736 and 75,432 shares of common stock at a total cost of approximately $60,000 and $2.4 million, respectively, from employees to satisfy statutory minimum tax requirements from the vesting of restricted stock grants and PVRSU grants.

These redemptions were outside the share repurchase program initiated in June 1998.