13.

Share-Based Compensation

The following table sets forth information with regard to the income statement recognition of share-based compensation (in thousands):


	2011		2010		2009
Cost of revenue	$	592	$	418	$	451
Selling, general and administrative		7,057		5,767		9,438
Research and development		371		293		142

Total share-based compensation	$	8,020	$	6,478	$	10,031

The total income tax benefit recognized in the income statement for share-based compensation arrangements was $3.2 million, $2.5 million, and $3.9 million for the years ended December 31, 2011, 2010, and 2009, respectively. No share-based compensation cost was capitalized during the years ended December 31, 2011, 2010, and 2009. The increase (decrease) in net excess tax benefits realized for the tax deductions from stock options exercised and stock awards vesting during the year was $0.9 million, less than $0.1 million and $(1.8) million for the years ended December 31, 2011, 2010, and 2009, respectively.

The Company had two active stock incentive plans ("SIP" individually or "SIPs" collectively) from which awards of stock options, nonvested share awards and performance awards were available for grant to eligible participants during 2011: the 2001 SIP, a non-stockholder-approved plan; and the 2008 Equity Compensation Plan, a stockholder-approved plan. The Company believes that such awards align the interests of its employees with those of its stockholders. Eligible recipients in the SIPs include all employees of the Company and any non-employee director, consultant and independent contractor of the Company. As of December 31, 2011, the number of shares available for future grants was 2,965,033 shares under the 2008 Equity Compensation Plan, which has an expiration date of May 25, 2020.

The Company's policy for issuing shares upon exercise of stock options or the vesting of its share awards and/or conversion of deferred stock units under all of the Company's SIPs is to issue new shares of common stock, unless treasury stock is available at the time of exercise or conversion.

Stock Options

Stock options awarded to employees under the SIPs generally vest annually over a three-year period, have a 10-year term and have an exercise price of not less than the fair market value of the Company's common stock at the date of grant. For stock options granted prior to 2010, the Company's stock option agreements generally provide for accelerated vesting if there is a change in control of the Company. Effective for stock options granted in 2010 and after, the Company's stock option agreements provide for accelerated vesting if (i) there is a change in control of the Company and (ii) the participant's employment terminates during the 24-month period following the effective date of the change in control for one of the reasons specified in the stock option agreement.

Compensation expense for stock options is recognized on a straight-line basis over the vesting period using the fair value of each stock option estimated as of the grant date. The Company uses historical data to estimate future option exercises and employee terminations in order to determine the expected term of the stock option, where the expected term of the stock option granted represents the period of time that such stock option is expected to be outstanding. Identified groups of option holders with similar historical exercise behavior are considered separately for valuation purposes. The expected term of stock options can vary for groups of option holders exhibiting different behavior. The fair value of each stock option granted to employees and non-employee directors was estimated on the date of grant using a Black-Scholes stock option valuation model, which uses a risk-free interest rate and measure of volatility, among other things, to estimate fair value. The risk-free interest rate for periods within the contractual life of the stock option is based on the U.S. Treasury strip bond yield curve in effect at the time of grant. Expected volatilities are based on the historical volatility of the Company's common stock.

The fair value of each stock option granted during the years ended December 31, 2011, 2010, and 2009, was estimated using the assumptions noted in the following table:


Assumptions for Stock Options Granted	2011	2010	2009
Expected volatility	39.64 - 41.09%	35.56 - 39.89%	31.88 - 35.31%
Expected dividends	0.90- 1.19%	1.50- 1.80%	1.91- 2.95%
Expected term (in years)	5.66- 5.89	4.50- 6.50	5.75- 6.25
Risk-free rate	1.24- 2.76%	1.73- 3.29%	2.13- 2.94%
Weighted-average volatility	40.45%	37.76%	33.96%
Weighted-average dividends	1.04%	1.75%	2.22%
Weighted-average term (in years)	5.86	5.43	5.96
Weighted-average risk-free rate	1.97%	2.45%	2.47%
Weighted-average grant date fair value	$14.55	$7.33	$5.31

A summary of stock option activity under the SIPs as of December 31, 2011, and changes during the year then ended, is presented below:


Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (In thousands)
Outstanding at December 31, 2010		2,020,767		$	32.17
Granted		154,226			39.21
Exercised		(115,788	)		20.18
Forfeited or expired		(15,431	)		30.95

Outstanding at December 31, 2011		2,043,774		$	33.39		5.62	$	10,537

Vested or expected to vest at December 31, 2011		2,009,984		$	33.49		5.57	$	10,240

Exercisable at December 31, 2011		1,549,376		$	35.69		4.77	$	5,681

As of December 31, 2011, there was $2.4 million of total unrecognized compensation cost related to stock options granted under the SIPs. This aggregate unrecognized cost is expected to be recognized over a weighted-average remaining period of 1.9 years.


	2011		2010		2009
	(In thousands)
Intrinsic value of stock options exercised	$	2,269	$	3,725	$	3
Cash received from stock options exercised	$	2,336	$	6,076	$	68

Service and Performance Award Units

Service award units. The Company granted service award units under the SIPs. These service award units (i) were issued at the fair market value of the Company's common stock on the date of grant, (ii) vest in four equal annual installments beginning on the first anniversary date of the grant, and (iii) for any unvested units, expire without vesting if the employee is no longer employed by the Company. For those service award units granted prior to 2010, the service award units generally provide for accelerated vesting if there is a change in control of the Company. Effective for service award units granted in 2010 and after, the service award units provide for accelerated vesting if (i) there is a change in control of the Company and (ii) the participant's employment terminates during the 24-month period following the effective date of the change in control for one of the reasons specified in the restricted stock unit agreement.

A summary of the status of the Company's service awards as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:


Service Award Units	Shares			Weighted- Average Grant-Date Fair Value
Outstanding at December 31, 2010		169,203		$	21.07
Granted		18,434			42.72
Vested		(58,819	)		26.99
Cancellations		(1,581	)		22.46

Nonvested at December 31, 2011		127,237		$	21.45

Expected to vest at December 31, 2011		119,577		$	21.45

Compensation expense for service award units is recognized on a straight-line basis over the vesting period using the fair market value of the Company's common stock on the date of grant. As of December 31, 2011, there was $2.0 million of total unrecognized compensation cost related to service award units granted under the SIPs. This aggregate unrecognized cost for service award units is expected to be recognized over a weighted-average period of 1.93 years. The total fair value of service awards vested, using the fair value on vest date, during the years ended December 31, 2011, 2010, and 2009, was $2.6 million, $2.3 million, and $2.0 million, respectively.

Performance award units. During 2011 and 2010, the Company granted performance award units under the SIPs. These performance award units (i) were issued at the fair market value of the Company's common stock on the date of grant, (ii) will expire without vesting if the Company's return on invested capital ("ROIC") for the annual performance period does not exceed 12 percent, which is an approximation of the Company's weighted average cost of capital, (iii) will, if the Company's ROIC exceeds 12 percent, vest in four equal annual installments beginning on the first anniversary date of the grant, and (iv) for any unvested units, expire without vesting if the recipient is no longer employed by the Company. The Company's performance award units provide for accelerated vesting if (i) there is a change in control of the Company and (ii) the recipient's employment terminates during the 24-month period following the effective date of the change in control for one of the reasons specified in the performance-based restricted stock unit agreement.

A summary of the status of the Company's performance awards as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:


Performance Award Units	Shares			Weighted- Average Grant-Date Fair Value
Outstanding at December 31, 2010		78,974		$	26.33
Granted		52,503			42.77
Vested		(19,765	)		26.33
Cancellations		(2,191	)		35.93

Nonvested at December 31, 2011		109,521		$	34.29

Expected to vest at December 31, 2011		102,928		$	34.29

Compensation expense for performance award units is recognized using the fair market value of the Company's common stock on the date of grant and on an accelerated basis. The Company recognizes expense for these performance award units under the assumption that the performance ROIC target will be achieved. If it appears probable such performance ROIC target will not be met, the Company will stop recognizing any further compensation cost and any previously recognized compensation cost would be reversed.

As of December 31, 2011, there was $2.0 million of total unrecognized compensation cost related to performance award units granted under the SIPs. This aggregate unrecognized cost is expected to be recognized over a weighted-average period of 3.04 years. The total fair value of performance awards vested, using the fair value on vest date, during the year ended December 31, 2011, was $0.8 million. No performance award units vested during 2010 and 2009.

Deferred Stock Units

Service DSU grant to CEO. During 2011 and 2010, the Company granted service-based deferred stock unit awards ("Service DSUs") under the SIPs to its CEO. Service DSUs are issued at the fair market value of the Company's stock on the date of grant, and generally vest annually over a four-year period on each anniversary date of the grant. The Service DSUs, if vested, will be convertible into shares of the Company's common stock following the holder's termination of employment. The Service DSUs provide for accelerated vesting upon termination without cause or the CEO's retirement as defined in his employment agreement. No Service DSUs were converted into shares of the Company's common stock during 2011.


Service DSU Units Granted to CEO	Shares			Weighted- Average Grant-Date Fair Value
Outstanding at December 31, 2010		60,144		$	24.94
Granted		900			44.44
Vested		(15,936	)		26.04

Total at December 31, 2011		45,108		$	24.94

Expected to vest at December 31, 2011		45,108		$	24.94

Compensation expense for Service DSUs is recognized on a straight-line basis over the vesting period using the fair market value of the Company's common stock on the date of grant. As of December 31, 2011, there was less than $0.1 million of total unrecognized compensation cost related to Service DSUs. This aggregate unrecognized cost is expected to be recognized over the weighted-average remaining period of 0.03 years. The total fair value of Service DSUs vested, using the fair value on vest date, during the year ended December 31, 2011, was $0.7 million. No Service DSUs vested during 2010 and 2009.

Performance DSU grant to CEO. During 2011 and 2010, the Company granted performance-based deferred stock unit awards ("Performance DSUs") under the SIPs to its CEO. These Performance DSUs (i) were issued at the fair market value of the Company's common stock on the date of grant, (ii) will expire without vesting if the Company's return on invested capital ("ROIC") for the annual performance period does not exceed 12 percent, which is an approximation of the Company's weighted average cost of capital, (iii) will, if the Company's ROIC exceeds 12 percent, vest in four equal annual installments beginning on the first anniversary date of the grant, and (iv) provide for accelerated vesting upon termination without cause or the CEO's retirement as defined in his employment agreement. These Performance DSUs, if vested, will be convertible into shares of the Company's common stock, subsequent to termination of employment.


Performance DSUs Granted to CEO	Shares			Weighted- Average Grant-Date Fair Value
Outstanding at December 31, 2010		23,004		$	22.17
Granted		24,122			44.44
Vested		(5,751	)		22.17

Total at December 31, 2011		41,375		$	35.15

Expected to vest at December 31, 2011		41,375		$	35.15

Compensation expense for Performance DSUs is recognized using the fair market value of the Company's common stock on the date of grant and on an accelerated basis. The Company recognizes expense for these Performance DSUs under the assumption that the performance target will be achieved. If it appears probable such performance target will not be met, the Company will stop recognizing any further compensation cost and any previously recognized compensation cost would be reversed. As of December 31, 2011, there was $0.5 million of total unrecognized compensation cost related to Performance DSUs. This aggregate unrecognized cost is expected to be recognized over the weighted-average remaining period of 1.02 years. The total fair value of Performance DSUs vested, using the fair value on vest date, during the year ended December 31, 2011, was $0.2 million. No Performance DSUs vested during 2010 and 2009.

Awards for service on Board of Directors ("Board"). The Company issues deferred stock units to its Board of Directors ("Board DSUs") under the SIPs. These Board DSUs (i) were issued at the fair market value of the Company's common stock on the date of grant and (ii) if vested, will be convertible to shares of the Company's common stock subsequent to termination of service as a director. Annual grants of Board DSUs vest annually in three equal installments over a three-year period.

In addition to receiving Board DSU grants annually, the Board members have the right to elect to receive all or a portion of their retainer and meeting attendance fees as cash and/or Board DSUs, which vest immediately. Board DSUs are only granted to non-employee Directors.

A summary of the status of the Company's nonvested Board DSUs as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:


Nonvested Board DSUs	Shares			Weighted- Average Grant-Date Fair Value
Outstanding at December 31, 2010		32,961		$	28.43
Granted		30,397			39.89
Vested		(17,212	)		31.46

Nonvested at December 31, 2011		46,146		$	34.85

Vested at December 31, 2011		65,433		$	30.15

Expected to vest at December 31, 2011		43,262		$	34.85

Compensation expense for Board DSUs is recognized on a straight-line basis over the vesting period using the fair market value of the Company's common stock on the date of grant. As of December 31, 2011, there was $1.2 million of total unrecognized compensation cost related to Board DSUs granted to non-employee directors. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of 2.07 years. The total fair value of share awards vested, using the fair value on vest date, during the years ended December 31, 2011, 2010, and 2009, was $0.7 million, $0.2 million, and $1.4 million, respectively.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan ("ESPP") under which full time employees may purchase shares from the Company at a discount to the fair market value. As of December 31, 2011, the number of shares of the Company's common stock available for issuance under the ESPP was 333,603. The purchase price of the stock to ESPP participants is 85% of the lesser of the fair market value on either the first day or the last day of the applicable three-month offering period. Other ESPP information for the years ended December 31, 2011, 2010, and 2009 is noted in the following table (dollars in thousands):


	2011		2010		2009
Number of ESPP shares issued		42,443		56,279		102,081
Amount of proceeds received from employees	$	1,288	$	1,207	$	1,233
Share-based compensation expense	$	352	$	332	$	385