8. Share-Based Compensation

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 share units. The total compensation expense related to all share-based compensation plans was $3.8 million and $18.6 million for the three and nine months ended September 30, 2012, respectively. The total compensation expense related to all share-based compensation plans was $6.1 million and $22.5 million for the three and nine months ended September 30, 2011, respectively.

Stock Options

During the nine months ended September 30, 2012 and 2011, the Company granted 1,221,000 and 200,000 stock options, respectively. The fair market value of each stock option award was 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 weighted average assumptions:


	2012			2011
Expected volatility		39.71	%		36.69	%
Risk-free interest rate		1.18	%		2.54	%
Expected life (years)		6.25			6.25
Expected dividend yield		5.06	%		4.57	%

The weighted average fair market value of options granted was $2.96 and $4.39 for the nine months ended September 30, 2012 and 2011, respectively.

The following table is a summary of the Company’s 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, 2011		3,995		$	20.75		5.9	$	9.5
Granted		1,221			13.22		9.4
Exercised		(197	)		7.09
Cancelled/forfeited/expired		(276	)		29.12

Outstanding at September 30, 2012		4,743		$	18.89		6.5	$	3.8

Exercisable at September 30, 2012		713		$	7.09		6.4	$	2.5

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 September 30, 2012 and December 31, 2011, respectively, 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 in-the-money options on September 30, 2012 and December 31, 2011. This amount will change in future periods based on the fair market value of the Company’s stock and the number of options outstanding. There were no options exercised during the three months ended September 30, 2012. Total intrinsic value of options exercised for the nine months ended September 30, 2012 was $1.2 million. Total intrinsic value of options exercised for the three and nine months ended September 30, 2011 was less than $0.1 million and $1.0 million, respectively.

Compensation expense related to stock options for the three and nine months ended September 30, 2012 was $0.6 million and $2.4 million, respectively. Compensation expense related to stock options for the three and nine months ended September 30, 2011 was $0.6 million and $2.0 million, respectively. As of September 30, 2012, $3.9 million of total unrecognized compensation expense, related to 1.9 million stock options with a weighted average grant date fair market value of $3.04, is expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock Units

Nonvested restricted stock unit awards as of September 30, 2012 and December 31, 2011, and changes during the nine months ended September 30, 2012, were as follows:


	Shares (Thousands)			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011		4,989		$	13.94
Granted		1,048			10.53
Vested		(2,617	)		15.25
Forfeited		(100	)		12.82

Nonvested at September 30, 2012		3,320		$	11.86

Compensation expense related to restricted stock units for the three and nine months ended September 30, 2012 was $3.8 million and $15.8 million, respectively. Compensation expense related to restricted stock units for the three and nine months ended September 30, 2011 was $5.2 million and $19.6 million, respectively. As of September 30, 2012, there was $20.6 million of unrecognized compensation expense related to approximately 3.1 million of the total nonvested restricted stock unit awards that are expected to vest over a weighted average period of 2.0 years, with a weighted average grant date fair market value of $11.79. The fair value of these awards was determined on the date of grant based on the Company’s stock price reduced by the present value of expected dividends through the vesting period.

Performance Share Units

Nonvested performance share unit awards as of September 30, 2012 and December 31, 2011, and changes during the nine months ended September 30, 2012, were as follows:


	Shares (Thousands)		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011		235	$	15.54
Granted		233		10.12

Nonvested at September 30, 2012		468	$	12.84

During the nine months ended September 30, 2012 and 2011, 233,000 and 235,000 performance share unit awards were granted to certain executive officers, payable upon the achievement of certain established performance targets. The performance periods for the shares awarded during the nine months ended September 30, 2012 and 2011 are January 1, 2012 through December 31, 2014 and January 1, 2011 through December 31, 2013, respectively. Distributions under these awards are payable at the end of the performance period in common stock or cash, at the Company’s discretion. The total potential payouts for awards granted during the nine months ended September 30, 2012 and 2011 range from 116,500 to 233,000 shares and 117,500 to 235,000 shares, respectively, should certain performance targets be achieved. The fair value of these awards was determined on the date of grant based on the Company’s stock price reduced by the present value of expected dividends through the vesting period. 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.

Compensation expense for the awards granted in 2012 is currently being recognized based on the maximum estimated payout of 233,000. Compensation expense for awards granted during 2011 is currently being recognized based on an estimated payout of 50%, or 117,500 shares. Compensation expense related to performance share unit awards for the three and nine months ended September 30, 2012 was income of $0.6 million, due to a change in the estimated payout of the 2011 awards, and expense of $0.4 million, respectively. Compensation expense related to performance share unit awards for the three and nine months ended September 30, 2011 was $0.3 million and $0.9 million, respectively. As of September 30, 2012, there was $2.5 million of unrecognized compensation expense related to performance share unit awards, which is expected to be recognized over a weighted average period of 2.0 years.