14.

Share-Based Compensation

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


	Three-Month Periods Ended March 31,
	2012		2011
Cost of revenue	$	146	$	128
Selling, general and administrative		1,922		1,795
Research and development		100		82

Share-based compensation	$	2,168	$	2,005

No share-based compensation cost was capitalized during the three-month periods ended March 31, 2012, and 2011.

Stock Options

Stock options awarded to employees under the Company's 2008 Equity Compensation Plan ("2008 Plan") generally vest annually over a three-year period, have a 10-year term and have an exercise price equal to the fair market value of the Company's common stock at the date of grant. 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.

For the three-month periods ended March 31, 2012 and 2011, the number of stock options granted was 93,955 and 73,225, respectively, and the weighted-average exercise price for those stock options granted was $33.87 and $44.06, respectively.

As of March 31, 2012, there was $3.0 million in total unrecognized compensation cost related to unvested stock options. This aggregate unrecognized cost is expected to be recognized over a weighted-average remaining period of 2.2 years. The weighted-average exercise price and weighted-average remaining contractual term for outstanding stock options as of March 31, 2012, were $33.52 and 5.6 years, respectively.

Service and Performance Award Units

Service award units. The Company's unvested 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. 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 March 31, 2012, there was $1.6 million of total unrecognized compensation cost related to unvested service award units. This aggregate unrecognized cost for service award units is expected to be recognized over a weighted-average period of 1.8 years.

Additional information for the three-month periods ended March 31, 2012, and 2011, is noted in the following table (dollars in thousands, except per share amounts):


	Three-Month Period Ended March 31, 2012		Three-Month Period Ended March 31, 2011
Number of service award shares granted during the period		—		18,434
Weighted average grant-date fair value per share granted during the period		—	$	42.72
Fair value of service award shares vested during the period	$	448	$	683

Performance award units. During the three-month periods ended March 31, 2012 and 2011, the Company granted performance award units under the 2008 Plan. 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%, which is an approximation of the Company's weighted average cost of capital, (iii) will, if the Company's ROIC exceeds 12%, vest in four equal annual installments beginning with 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.

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 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 March 31, 2012, there was $2.7 million of total unrecognized compensation cost related to unvested performance award units. This aggregate unrecognized cost is expected to be recognized over a weighted-average period of 3.1 years.

Additional information for the three-month periods ended March 31, 2012, and 2011, is noted in the following table (dollars in thousands, except per share amounts):


	Three-Month Period Ended March 31, 2012		Three-Month Period Ended March 31, 2011
Number of performance award shares granted during the period		34,229		22,511
Weighted average grant-date fair value per share during the period	$	33.87	$	44.44
Fair value of performance award shares vested during the period	$	522	$	389

Deferred Stock Units

Service DSU grants to CEO. During the three-month periods ended March 31, 2012 and 2011, the Company granted service-based deferred stock unit awards ("Service DSUs") under the 2008 Plan 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. Service DSUs also include dividend equivalent DSUs, which vest immediately upon the date of 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 the three-month periods ended March 31, 2012, and 2011.

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 March 31, 2012, there was no unrecognized compensation cost related to Service DSUs.

Additional information for the three-month periods ended March 31, 2012, and 2011, is noted in the following table (dollars in thousands, except per share amounts):


Service DSU's Granted to CEO	Three-Month Period Ended March 31, 2012		Three-Month Period Ended March 31, 2011
Number of shares granted during the period		1,283		900
Weighted-average grant date fair value per share granted during the period	$	34.03	$	44.44
Fair value of shares vested during the period	$	572	$	704

Performance DSU grants to CEO. During the three-month periods ended March 31, 2012 and 2011, the Company granted performance-based deferred stock unit awards ("Performance DSUs") under the 2008 Plan 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 ROIC for the annual performance period does not exceed 12%, which is an approximation of the Company's weighted average cost of capital, (iii) will, if the Company's ROIC exceeds 12%, 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.

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 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 March 31, 2012, there was $2.1 million of total unrecognized compensation cost related to Performance DSUs. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of .8 years.

Additional information for the three-month periods ended March 31, 2012, and 2011, is noted in the following table (dollars in thousands, except per share amounts):


Performance DSU's Granted to CEO	Three-Month Period Ended March 31, 2012		Three-Month Period Ended March 31, 2011
Number of shares granted during the period		59,049		24,122
Weighted-average grant date fair value per share granted during the period	$	33.87	$	44.44
Fair value of shares vested during the period	$	396	$	227

Service DSU grants to Board of Directors ("Board"). The Company issues deferred stock units to its Board of Directors ("Board DSUs") under the 2008 Plan. 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. The 2010 and 2011 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, Company stock, and/or Board DSUs, which vest immediately. Board DSUs are only granted to nonemployee Directors.

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 March 31, 2012, there was $1.1 million of total unrecognized compensation cost related to Board DSUs granted to nonemployee directors. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of 1.8 years.

Additional information for the three-month periods ended March 31, 2012, and 2011, is noted in the following table (dollars in thousands, except per share amounts):


Board DSUs and Dividend Equivalents Granted to Board	Three-Month Period Ended March 31, 2012		Three-Month Period Ended March 31, 2011
Number of shares granted during the period		1,286		1,420
Weighted-average grant date fair value per share during the period	$	36.74	$	39.43
Fair value of shares vested during the period	$	102	$	116