Share-Based Compensation

Our stock compensation plans (collectively, the “Stock Compensation Plans”) permit the grant of incentive and nonqualified stock options, common stock, deferred common stock units, restricted stock and restricted stock units to our employees and directors. As of December 31, 2012, there were approximately 2,317,176 and 88,119 shares available for issuance to employees and directors, respectively, pursuant to the Stock Compensation Plans.

With the exception of performance-based restricted stock units (“PBRSUs”), all of the awards issued under our Stock Compensation Plans are classified as equity instruments because they result in the issuance of common stock on the date of grant, upon exercise or are otherwise payable in common stock upon vesting, as applicable. The compensation cost attributable to these awards is measured at the grant date and recognized over the applicable vesting period as a non-cash item of expense. Because the PBRSUs are payable in cash, they are considered liability-classified awards and are included in the Other liabilities caption on our Consolidated Balance Sheets. Compensation cost associated with the PBRSUs is measured at the end of each reporting period and recognized based on the period of time that has elapsed during each of the individual performance periods.

The following table summarizes share-based compensation expense recognized for the periods presented:



	Year Ended December 31,
	2012		2011		2010
Equity-classified awards:
Stock option awards	$	4,424	$	5,477	$	5,828
Common, deferred, restricted and restricted unit awards	1,923		1,953		1,983
	6,347		$	7,430	$	7,811
Liability-classified awards	714		—		—
	$	7,061	$	7,430	$	7,811

Stock Options

The exercise price of all stock options granted under the Stock Compensation Plans is equal to the fair market value of our common stock on the date of the grant. Options may be exercised at any time after vesting and prior to ten years following the date of grant. Options vest upon terms established by the compensation and benefits committee of our board of directors (the “Committee”). Generally, options vest over a three-year period, with one-third vesting in each year. In addition, all options will vest upon a change of control of us, as defined in the Stock Compensation Plans. In the case of employees, if a grantee’s employment terminates (i) for cause, all of the grantee’s options, whether vested or unvested, will be automatically forfeited, (ii) by reason of death, disability or retirement after becoming retirement eligible (age 62 and providing 10 consecutive years of service) the grantee’s options will automatically vest and (iii) for any other reason, the grantee’s unvested options will be automatically forfeited. In the case of directors, if a grantee’s membership on our board of directors terminates for any reason, the grantee’s unvested options will be automatically forfeited. We have historically issued new shares to satisfy stock option exercises.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option-pricing formula that uses the assumptions noted in the following table. Expected volatilities are based on historical changes in the market value of our stock. Separate groups of employees that have similar historical exercise behavior are considered separately to estimate expected lives. Options granted have a maximum term of ten years. We base the risk-free interest rate on the U.S. Treasury rate for the week of the grant having a term equal to the expected life of the option.



	2012	2011	2010
Expected volatility	67.3% to 72.9%	61.7% to 71.9%	59.5% to 67.6%
Dividend yield	2.25% to 4.98%	1.25% to 2.25%	0.90% to 1.20%
Expected life	3.5 to 4.6 years	3.5 to 4.6 years	3.5 to 4.6 years
Risk-free interest rate	0.36% to 0.51%	0.39% to 2.18%	0.68% to 2.30%

The following table summarizes activity for our most recent fiscal year with respect to stock options:



	Shares Under Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of year	2,475,074		$	22.84
Granted	224,501		5.59
Exercised	—		—
Forfeited	(412,841	)	22.99
Outstanding at end of year	2,286,734		$	21.14	6.6	$	7
Exercisable at end of year	1,711,098		$	23.21	6.1	$	—

The weighted-average grant-date fair value of options granted during the years ended December 31, 2012, 2011 and 2010 was $2.54, $7.30 and $10.13 per option. The total intrinsic value of options exercised during the years ended December 31, 2011 and 2010 was $0.4 million and $1.2 million. There were no options exercised during 2012.

As of December 31, 2012, we had $2.6 million of unrecognized compensation cost related to unvested stock options. We expect that cost to be recognized over a weighted-average period of 0.5 years. The total grant-date fair values of stock options that vested in 2012, 2011 and 2010 were $4.7 million, $3.7 million and $4.6 million, respectively.

Common Stock

A portion of the compensation paid to certain non-employee members of our board of directors is paid in common stock. Each share of common stock granted as compensation vests immediately upon issuance. In 2012, we granted 79,700 shares of common stock to our non-employee directors at a weighted-average grant date fair value of $5.33 per share.

Deferred Common Stock Units

A portion of the compensation paid to certain non-employee members of our board of directors is paid in deferred common stock units. Each deferred common stock unit represents one share of common stock, vests immediately upon issuance, and is available to the holder upon termination or retirement from our board of directors. Deferred common stock units awarded to directors receive all cash or other dividends we pay on shares of our common stock.

The following table summarizes activity for our most recent fiscal year with respect to awarded deferred common stock units:



	Deferred Common Stock Units		Weighted-Average Grant Date Fair Value
Balance at beginning of year	208,783		$	17.34
Granted	29,295		5.38
Converted	(35,202	)	18.95
Balance at end of year	202,876		$	15.33

As of December 31, 2012, 2011 and 2010, shareholders’ equity included deferred compensation obligations of $3.1 million, $3.6 million and $2.7 million, respectively, and corresponding amounts for treasury stock.

Restricted Stock

Restricted stock vests upon terms established by the Committee and as specified in the award agreement. In addition, all restricted stock will vest upon a change of control of us. If a grantee’s employment terminates for any reason other than death or disability, the grantee’s restricted stock will be automatically forfeited unless otherwise determined by the Committee and specified in the award agreement. If a grantee’s employment terminates by reason of death or disability, or if a grantee becomes retirement eligible, the grantee’s restricted stock will automatically vest. Except as specified by the Committee, a grantee shall be entitled to receive any dividends declared on our common stock. Restricted stock vests generally over a three-year period, with one-third vesting in each year. We recognize compensation expense on a straight-line basis over the vesting period.

The total grant-date fair values of restricted stock that vested in 2011 and 2010 were $0.3 million and $0.5 million. There were no unvested restricted stock awards outstanding during 2012, and no restricted stock awards vested during 2012.

Restricted Stock Units

A restricted stock unit entitles the grantee to receive a share of common stock upon the vesting of the restricted stock unit or, at the discretion of the Committee, the cash equivalent of the fair market value of a share of common stock. The Committee determines the time period over which restricted stock units granted to employees and directors will vest. In addition, all restricted stock units will vest upon a change of control of us. If an employee’s employment with us or our affiliates terminates for any reason other than death, disability or retirement after becoming retirement eligible, the grantee’s restricted stock units will be automatically forfeited unless, and to the extent, the Committee provides otherwise. Restricted stock units generally vest over a three-year period, with one-third vesting in each year. The Committee, in its discretion, may grant tandem dividend equivalent rights with respect to restricted stock units. A dividend equivalent right is a right to receive an amount in cash equal to, and 30 days after, the cash dividends made with respect to a share of common stock during the period such restricted stock unit is outstanding. Payments of dividend equivalent rights associated with restricted stock units that are expected to vest are recorded as dividends; payments associated with restricted stock units that are not expected to vest are recorded as compensation expense.

The following table summarizes activity for our most recent fiscal year with respect to awarded restricted stock units:



	Restricted Stock Units		Weighted-Average Grant Date Fair Value
Balance at beginning of year ¹	99,826		$	18.10
Granted	108,157		5.67
Vested	(105,773	)	13.09
Forfeited	(10,239	)	9.20
Balance at end of year¹	91,971		$	10.08

________________________

¹ Excludes 61,344 units at the beginning of the year and 78,864 units at the end of year that have vested due to retirement eligibility, but have not yet been settled or converted to common shares.

As of December 31, 2012, we had $0.6 million of unrecognized compensation cost attributable to unvested restricted stock units. We expect that cost to be recognized over a weighted-average period of 0.8 years. The total grant-date fair values of restricted stock units that vested in 2012, 2011 and 2010 were $1.4 million, $0.9 million and $0.9 million, respectively.

Performance-Based Restricted Stock Units

In February 2012, we granted PBRSUs to certain executive officers. Vested PBRSUs are payable in cash on the third anniversary of the date of grant based upon the achievement of specified market-based performance metrics with respect to each of a one-year, two-year and three-year performance period, in each case commencing on the date of grant. The number of PBRSUs vested can range from 0% to 200% of the initial grant. The PBRSUs do not have voting rights and do not participate in dividends.

If the grantee's employment terminates for any reason prior to the third anniversary of the grant date, then the grantee's PBRSUs will be forfeited and no cash will be payable with respect to any PBRSUs. If the grantee is or becomes retirement eligible, which is defined as reaching age 62 and completing 10 years of consecutive service with us or our affiliate, and his or her employment terminates for any reason other than cause prior to the third anniversary of the grant date, then all of the grantee's PBRSUs will vest and become payable in the amount and at the time the PBRSUs would have otherwise vested and been payable. If the grantee dies or becomes disabled prior to the third anniversary of the grant date, a pro-rated share (based on the number of days employed during the three-year vesting period) of the PBRSUs will vest and the grantee will be paid for such PBRSUs at the target percentage at the end of the end of the original three-year vesting period. In the event of a change in control of us, all of the grantee's PBRSUs will immediately vest and the grantee will be paid for such PBRSUs following the change in control at the target percentage (regardless of our actual market-based performance) and using the value of our common stock on the effective date of the change in control (calculated as the closing price of our common stock on the effective date of the change in control).

The compensation cost of the PBRSUs is based on the fair value derived from a Monte Carlo model. The Monte Carlo model is a binomial valuation model that utilizes certain assumptions, including expected volatility, dividend yield, risk-free interest rates and a measure of total shareholder return. The ranges for the assumptions used in the Monte Carlo model for the PBRSUs granted in 2012 are as follows:



Expected volatility		29.3% to 78.0%
Dividend yield		0.00% to 5.30%
Risk-free interest rate		0.02% to 0.43%

The following table summarizes activity for our most recent fiscal year with respect to PBRSUs:



	Performance-Based Restricted Stock Units		Weighted-Average Fair Value
Balance at beginning of year	—		$	—
Granted	216,441		6.80
Forfeited	(15,617	)	12.80
Balance at end of year	200,824		$	6.67

As of December 31, 2012, $0.7 million, which represents the fair value of the outstanding PBRSUs, is included in the Other liabilities caption on our Consolidated Balance Sheets.