SHARE-BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

In first quarter 2012, we granted 1,908,786 stock options, 702,098 restricted stock units, 344,237 performance share units, and 52,304 stock appreciation rights. In addition, 372,783 outstanding restricted stock unit awards vested during first quarter 2012. A total of 946,549 shares of common stock were issued as a result of restricted stock unit vesting and stock option exercises.

STOCK OPTIONS

The weighted average exercise price of all of the stock options granted in 2012 was $20.42. The vesting and post-termination vesting terms for stock options granted in 2012 were as follows:

• options vest ratably over 4 years;

• options vest or continue to vest in the event of death, disability, or retirement at an age of at least 62;

• options continue vesting for one year in the event of involuntary termination when the retirement criteria for full or continued vesting have not been met; and

• options stop vesting for all other situations including early retirement prior to age 62.

Weighted Average Assumptions Used in Estimating the Value of Stock Options Granted in 2012

	OPTIONS
Expected volatility	40.41		%
Expected dividends	2.94		%
Expected term (in years)	5.33
Risk-free rate	1.01		%
Weighted average grant date fair value	$	5.72

RESTRICTED STOCK UNITS

The weighted average fair value of the restricted stock units granted in 2012 was $20.42. The vesting provisions for restricted stock units granted in 2012 were as follows:

• restricted stock units vest ratably over 4 years;

• restricted stock units immediately vest in the event of death while employed or disability;

• restricted stock units partially vest upon retirement at an age of at least 62 or job elimination depending on the employment period after grant date; and

• restricted stock units will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.

PERFORMANCE SHARE UNITS

The weighted average grant date fair value of performance share units granted in 2012 was $21.71. The vesting provisions for performance share units granted in 2012 and that are earned were as follows:

• units vest 50 percent, 25 percent and 25 percent on the second, third and fourth anniversaries of the grant date, respectively, as long as the individual remains employed by the company;

• units fully vest in the event of death while employed or disability;

• units partially vest upon retirement at an age of at least 62 or job elimination depending on the employment period after grant date; and

• units will be forfeited upon termination of employment in all other situations including early retirement prior to age 62.

Weighted Average Assumptions Used in Estimating the Value of Performance Share Units Granted 2012

	Performance Share Units
Performance period	1/1/2012 – 12/31/2013
Valuation date closing stock price	$	20.56
Expected dividends	2.92					%
Risk-free rate	0.08		%	–	0.32	%
Volatility	34.66		%	–	34.86	%

STOCK APPRECIATION RIGHTS

Stock appreciation rights are remeasured to reflect the fair value at each reporting period. The following table shows the weighted average assumptions applied to all outstanding stock appreciation rights as of March 31, 2012.

Weighted Average Assumptions Used to Remeasure the Value of Stock Appreciation Rights as of March 31, 2012

	MARCH 31, 2012
Expected volatility	36.43		%
Expected dividends	2.74		%
Expected term (in years)	2.32
Risk-free rate	0.44		%
Weighted average fair value	$	4.33

The vesting and post-termination vesting terms for stock appreciation rights granted in 2012 are the same as for stock options described above.

DEFERRED COMPENSATION STOCK EQUIVALENT UNITS

During first quarter 2012, the directors' deferred compensation plan was amended to allow the directors to elect to receive payments of amounts deferred into stock equivalent units in cash or stock. Elections to receive these deferred amounts in stock resulted in the issuance of 40,889 shares. The number of common shares to be issued in the future to directors who elected common share payments is 468,185.