Note H – Incentive Plans

The costs resulting from all share-based payment transactions are recognized as an expense in the Consolidated Statements of Income using a fair value-based measurement method over the periods that the awards vest.

The 2012 Annual Incentive Plan (2012 Annual Plan) authorizes the Executive Compensation Committee (the Committee) to establish specific performance goals associated with annual cash awards that may be earned by officers, executives and other key employees. Cash awards under the 2012 Annual Plan are determined based on the Company’s actual financial and operating results as measured against the performance goals established by the Committee. The 2012 Long-Term Incentive Plan (2012 Long-Term Plan) authorizes the Committee to make grants of the Company’s Common Stock and other stock-based incentives to employees. These grants may be in the form of stock options (nonqualified or incentive), stock appreciation rights (SAR), restricted stock, restricted stock units, performance units, performance shares, dividend equivalents and other stock-based incentives. The 2012 Long-Term Plan expires in 2022. A total of 8,700,000 shares are issuable during the life of the 2012 Long-Term Plan, with annual grants limited to 1% of Common shares outstanding. The Company has an Employee Stock Purchase Plan that permits the issuance of up to 980,000 shares through September 30, 2017. The Company also has a Stock Plan for Non-Employee Directors that permits the issuance of restricted stock and stock options or a combination thereof to the Company’s Directors.

During 2013, the Committee has granted stock options for 1,163,300 shares at exercise prices ranging between $60.15 and $60.585 per share. The Black-Scholes valuation for these awards was $15.81 per option. The Committee also granted 455,700 performance-based restricted stock units during the first six months of 2013. The fair value of the performance-based restricted stock units, using a Monte Carlo valuation model, ranged from $39.50 to $54.82 per unit. Additionally, on February 5, 2013, the Committee granted 851,000 stock appreciation rights (SAR) and 93,200 units of restricted stock-cash (RSU-C) to certain employees. The SAR and RSU-C are to be settled in cash, net of applicable income taxes, and are accounted for as liability-type awards. The initial fair values of these SAR were equivalent to the stock options granted, while the initial value of RSU-C were equivalent to restricted stock units granted. On February 6, 2013, the Committee granted 36,600 shares of time-based restricted stock units to the Company’s Directors under the Non-employee Director Plan. These shares vest on the third anniversary of the date of grant. The fair value of these awards was estimated based on the fair market value of the Company’s stock on the date of grant, which was $60.30 per share.

Cash received from options exercised under all share-based payment arrangements for the six-month periods ended June 30, 2013 and 2012 was $2.6 million and $8.8 million, respectively. The actual income tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements totaled $3.0 million and $2.4 million for the six-month periods ended June 30, 2013 and 2012, respectively.

Amounts recognized in the financial statements with respect to share-based plans are as follows:


	Six Months Ended
	June 30,
(Thousands of dollars)	2013		2012
Compensation charged against income before tax benefit	$	35,142		20,994
Related income tax benefit recognized in income		7,246		6,453