Note 16. Stock and Incentive Programs for Employees

The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and directors, including stock options, restricted stock units and performance stock units. The Company estimates the fair value of share-based awards on the date of grant. The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite service period of the award, which is generally the vesting term of three to four years for restricted stock awards and stock options. The Company estimated the number of awards expected to vest based, in part, on historical forfeiture rates and also based on management's expectations of employee turnover within the specific employee groups receiving each type of award. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods, if actual forfeitures differ from those estimates.

Share-Based Compensation Expense

The total compensation expense related to all share-based compensation plans was $28.3 million, $28.6 million and $24.0 million for the years ended December 31, 2011, 2010 and 2009, respectively. The income tax benefit related to share-based compensation expense was $11.0 million, $11.2 million and $9.6 million for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, $31.2 million of total unrecognized compensation expense related to share-based compensation plans is expected to be recognized over a weighted-average period of 2.2 years. The total unrecognized share-based compensation expense to be recognized in future periods as of December 31, 2011 does not consider the effect of share-based awards that may be issued in subsequent periods.

Share-Based Compensation Plans

The Company has one share-based compensation plan under which it may grant future awards, as described below, and five terminated or expired share-based compensation plans under which awards remain outstanding.

The 2004 Performance Incentive Plan (the "2004 PIP") was approved by shareholders to provide incentives to key employees of the Company and its subsidiaries. Awards under the 2004 PIP are generally not restricted to any specific form or structure and could include, without limitation, stock options, stock units, restricted stock awards, cash or stock bonuses and stock appreciation rights. There were 17 million shares of common stock reserved and authorized for issuance under the 2004 PIP, as amended on May 28, 2008. At December 31, 2011, there were 2.3 million shares of common stock authorized and available for grant under the 2004 PIP.

General Terms of Awards

Under various incentive plans, the Company has granted certain employees non-qualified stock options and restricted stock units. The Human Resources Committee of the Board of Directors has discretion to establish the terms and conditions for grants, including the number of shares, vesting and required service or other performance criteria. The maximum term of any award under the 2004 PIP is ten years.

For all of the Company's stock options outstanding at December 31, 2011, the exercise price of the stock option equals the fair market value of the Company's common stock on the option grant date. Options generally vest over four years or less from the date of grant, upon retirement or upon a change in control of the Company. Options granted prior to November 2004 and after December 2006 expire ten years from the date of grant or five years after the date of retirement, whichever is earlier, while options granted between November 2004 and December 2006 expire five years from the date of grant.

The rights granted to the recipient of restricted stock unit awards generally accrue ratably over the restriction or vesting period, which is generally four years or less, except the restricted stock units awarded in March 2008, that vest 100% on the fourth anniversary of the grant. Restricted stock unit awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting upon specified events, including death or permanent disability of the grantee, termination of the grantee's employment under certain circumstances or a change in control of the Company. The Company records compensation expense of restricted stock unit awards based on the fair market value of the awards at the date of grant ratably over the period during which the restrictions lapse. Dividends are not paid to restricted stock unit holders.

The Company also issues restricted stock units as share-based compensation for members of the Board of Directors. Director restricted stock units granted after January 2009 vest ratably over three years from the date of grant with the opportunity to defer any tranche of vesting restricted stock units until termination of service on the Board of Directors. Awards granted between January 2008 and January 2009 vest ratably over three years from the date of grant and were amended in May 2009 to provide the opportunity to defer any tranche of vesting restricted stock units until termination of service on the Board of Directors. For awards granted prior to January 2008, one-third of the restricted stock units vested on the third anniversary of the grant date, and the remaining two-thirds of the restricted stock units vested upon termination of the holder's service on the Board of Directors; the holder could also elect to defer delivery of the initial one-third of the restricted stock units until termination of service on the Board of Directors. In the event of termination of service on the Board of Directors prior to a vesting date, all restricted stock units will vest. All awards granted prior to December 31, 2007 are payable in shares of common stock or cash. In 2009, the option to have awards paid in cash was removed for awards granted in 2008 and future years. Awards that may be paid in cash are classified as liability awards due to their expected settlement in cash, and are included in accrued liabilities in the Consolidated Balance Sheets. Compensation expense for these awards is measured based upon the fair market value of the awards at the end of each reporting period. Awards payable only in shares are classified as equity awards due to their expected settlement in common stock. Compensation expense for these awards is measured based upon the fair market value of the awards at the date of grant. Dividend equivalents are accrued for shares awarded to the Board of Directors and paid in the form of cash.

The Company has granted performance share unit awards to certain executive officers. Distributions under these awards are payable at the end of the performance period (December 31, 2013) in common stock or cash, at the Company's discretion. The number of share units awarded can range from zero to 100%, depending on achievement of a targeted performance metric. These awards are subject to forfeiture upon termination by the Company under certain circumstances prior to vesting. The Company expenses the cost of the performance share unit awards based on the fair market value of the awards at the date of grant and the estimated achievement of the performance metric, ratably over the performance period of three years.

Stock Options

The Company granted 200,000, 540,000 and 1,520,468 stock options during the years ended December 31, 2011, 2010 and 2009, respectively. The fair market value of each stock option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The fair market value of the stock options was determined using the following assumptions:


	2011			2010			2009
Expected volatility		36.69	%		35.61	%		29.67	%
Risk-free interest rate		2.54	%		2.75	%		2.27	%
Expected life (years)		6.25			6.25			6.25
Expected dividend yield		4.57	%		4.19	%		3.63	%

The grant date fair market value of options granted was $4.39, $4.81 and $1.47 for the years ended December 31, 2011, 2010 and 2009, respectively.

The following table is a summary of the Company's 2011 stock option activity:


	Shares Under Option (thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (millions)
Outstanding at December 31, 2010		4,155		$	20.80		6.3	$	14.4
Granted		200			18.62		9.2
Exercised		(110	)		9.37
Cancelled/forfeited/expired		(250	)		23.91

Outstanding at December 31, 2011		3,995			20.75		5.9		9.5

Vested and expected to vest at December 31, 2011		3,995			20.75		5.9		9.5
Exercisable at December 31, 2011		645		$	7.09		7.2	$	4.7

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company's closing stock price on December 31, 2011 and 2010 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2011 and 2010. This amount will change in future periods based on the fair market value of the Company's stock and the number of options outstanding. Total intrinsic value of options exercised for the years ended December 31, 2011 and 2010 was $1.0 million and $3.0 million, respectively.

Compensation expense related to stock options for the years ended December 31, 2011, 2010 and 2009 was $2.7 million, $3.1 million and $2.4 million, respectively. As of December 31, 2011, $2.9 million of total unrecognized compensation expense related to stock options is expected to be recognized over a weighted average period of 2.1 years.

Cash received from the option exercises as of and for the year ended December 31, 2011, 2010 and 2009 was $1.0 million, $2.4 million and $1.5 million, respectively. The actual tax benefit realized for the tax deduction from option exercises totaled $0.4 million, $1.1 million and $0.1 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Excess tax benefits on stock option exercises, shown as financing cash inflows as a component of issuance of common stock in the Consolidated Statements of Cash Flows, were $0.3 million and $0.8 million for the years ended December 31, 2011 and 2010, respectively. There were no excess tax benefits on stock option exercises for the year ended December 31, 2009.

Restricted Stock Units

Nonvested restricted stock unit awards as of December 31, 2011 and 2010, and changes during the year ended December 31, 2011 were as follows:


	Shares (thousands)			Weighted-Average Grant Date Fair Value
Nonvested at December 31, 2010		5,430		$	12.96
Granted		1,524			16.37
Vested		(1,858	)		12.93
Forfeited		(107	)		15.78

Nonvested at December 31, 2011		4,989		$	13.94

Compensation expense related to restricted stock units was $24.4 million, $25.5 million and $21.6 million for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, there was $25.9 million of unrecognized share-based compensation expense related to approximately 4.6 million restricted stock unit awards, with a weighted-average grant date fair value of $13.80, that are expected to vest over a weighted-average period of 1.7 years.

Excess tax benefits on restricted stock units that vested, shown as financing cash inflows as a component of issuance of common stock in the Consolidated Statements of Cash Flows, were $5.7 million and $6.0 million for the years ended December 31, 2011 and 2010, respectively. There were no excess tax benefits on restricted stock units that vested for the year ended December 31, 2009.

Performance Share Unit Awards

During the year ended December 31, 2011, a total of 235,000 performance share unit awards were granted to certain executive officers, payable upon the achievement of certain established performance targets for the three years ending December 31, 2013. Distributions under these awards are payable at the end of the performance period, which is January 1, 2011 through December 31, 2013, in common stock or cash, at the Company's discretion. The total potential payouts range from 117,500 shares to 235,000 shares should certain performance targets be achieved. The grant date fair market value of the awards granted was $15.54 for the year ended December 31, 2011. These awards are subject to forfeiture upon termination of employment prior to vesting, subject in some cases to early vesting upon specified events, including death or permanent disability of the grantee or a change in control of the Company. No performance share unit awards were granted during the years ended December 31, 2010 and 2009.

Compensation expense for the awards granted in 2011 is currently being recognized based on an estimated payout of 235,000 shares. Compensation expense related to performance share unit awards for the year ended December 31, 2011 was $1.2 million. There was no compensation expense recognized related to performance share unit awards for the years ended December 31, 2010 and 2009. As of December 31, 2011, there was $2.4 million of unrecognized share-based compensation expense related to performance share unit awards, which is expected to be recognized over a period of 2.0 years.

Board of Directors Liability Awards

At December 31, 2011, 2010 and 2009, approximately 147,263, 145,459 and 158,633, respectively, restricted stock units issued to directors were outstanding for liability awards. For the years ended December 31, 2011, 2010 and 2009, the compensation expense recorded for these awards was less than $0.1 million, $0.4 million and $0.9 million, respectively. The Board of Directors equity awards are included above in the section "Restricted Stock Units."

Other Information

Authorized unissued shares or treasury shares may be used for issuance under the Company's share-based compensation plans. The Company intends to use treasury shares of its common stock to meet the stock requirements of its awards in the future. On May 3, 2011, the Company's Board of Directors approved a new share repurchase program, authorizing the repurchase of up to $1.0 billion of the Company's common stock through December 31, 2012 and terminated its existing authorization of October 29, 2008 for the repurchase of up to 10 million shares. During the year ended December 31, 2011, the Company purchased 29.2 million shares of its common stock at a total cost of $500.0 million under the ASR (see Note 15) entered into on May 5, 2011. No shares were repurchased for the years ended December 31, 2010 and 2009.