Share-Based Compensation

6 Months Ended

Jun. 30, 2014

Share-Based Compensation

NOTE F – Share-Based Compensation

The following table shows the total compensation expensed for share-based compensation plans, including stock options and share grants, recognized in the statements of operations (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2014		2013		2014		2013
Cost of sales	$	107	$	126	$	203	$	249
Selling and administrative expense		2,979		2,877		5,829		5,720
Research and development expense		305		301		578		591
Total share-based compensation expense	$	3,391	$	3,304	$	6,610	$	6,560

Stock Options. Stock options generally vest in equal annual installments over a four-year period and expire eight years after the grant date, and expense was estimated on the date of grant using the Black-Scholes-Merton option pricing model.

The total net cash proceeds received from stock option exercises during the six months ended June 30, 2014 was approximately $3 million. Stock option expense was approximately $1 million for both the three months ended June 30, 2014 and 2013, and $2 million for both the six months ended June 30, 2014 and 2013.

A summary of the stock option grants is as follows:

Stock Options	Shares (000)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (yrs)		Aggregate Intrinsic Value ($000)
Outstanding at January 1, 2014		3,126		$	18.93		4	$	17,461
Granted		176			27.92
Exercised		(304	)		9.66				5,422
Forfeited or expired		(2	)		29.21
Outstanding at June 30, 2014		2,996		$	20.39		4	$	25,754
Exercisable at June 30, 2014		2,406		$	19.43		3	$	22,967

The aggregate intrinsic value in the table above is before applicable income taxes and represents the amount option holders would have received if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price.

As of June 30, 2014, total unrecognized share-based compensation expense related to unvested stock options, net of forfeitures, was approximately $7 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 3 years.

Share Grants. Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period.

Share grant expense for the three months ended June 30, 2014 and 2013 was approximately $3 million and $2 million, respectively, and share grant expense for both the six months ended June 30, 2014 and 2013 was approximately $5 million.

A summary of the Company’s non-vested share grants is as follows:

Share Grants	Shares (000)			Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value ($000)
Non-vested at January 1, 2014		1,131		$	22.35	$	26,656
Granted		234			27.46
Vested		(95	)		22.42		2,606
Forfeited		(12	)		21.81
Non-vested at June 30, 2014		1,258		$	23.32	$	30,650

As of June 30, 2014, total unrecognized share-based compensation expense related to non-vested stock awards, net of forfeitures, was approximately $20 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 3 years.