Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

(7) Stock-Based Compensation

Our Equity Plan provides for grants of nonqualified stock options, restricted stock and stock appreciation rights. The Board of Directors or the Compensation Committee of our Board of Directors determines the terms of each award, including the type, recipients, number of shares subject to and vesting conditions of each award. Stock option and restricted stock awards are described below. No awards of stock appreciation rights have been issued under the Equity Plan to date. The maximum number of shares of common stock that may be awarded under the Equity Plan is 20,000,000 shares. The maximum aggregate number of shares that may be awarded to any one person under the Equity Plan is 2,562,500. As of June 30, 2011, there were 8,139,132 shares available for granting additional awards.

We apply the fair value method of accounting for stock-based compensation awards granted under our Equity Plan. Stock-based employee compensation expense is included in salaries, wages and benefits within the Consolidated Statements of Income. During the three-month period ended June 30, 2010, we recorded a $0.4 million reduction of expense because the actual forfeiture rate for a stock option grant that became fully vested during the period was higher than the estimated forfeiture rate we used to initially record expense. As of June 30, 2011, the total unrecognized compensation cost related to nonvested stock-based compensation awards was approximately $6.9 million and is expected to be recognized over a weighted average period of 2.0 years. The following table summarizes the stock-based compensation expense and related income tax benefit recognized in the Consolidated Statements of Income (in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Stock options:
Pre-tax compensation expense	$	92	$	(233	)	$	260	$	(2	)
Tax benefit		38		(97	)		107		(1	)
Stock option expense, net of tax	$	54	$	(136	)	$	153	$	(1	)
Restricted stock:
Pre-tax compensation expense	$	446	$	255		$	887	$	508
Tax benefit		184		106			366		212
Restricted stock expense, net of tax	$	262	$	149		$	521	$	296

We do not have a formal policy for issuing shares upon an exercise of stock options or vesting of restricted stock, so such shares are generally issued from treasury stock. From time to time, we repurchase shares of our common stock, the timing and amount of which depends on market and other factors. Historically, the shares acquired from such repurchases have provided us with sufficient quantities of stock to issue for stock-based compensation. Based on current treasury stock levels, we do not expect to repurchase additional shares specifically for stock-based compensation during 2011.

Stock Options

Stock options are granted at prices equal to the market value of the common stock on the date the option award is granted. Option awards currently outstanding become exercisable in installments from 24 to 72 months after the date of grant. The options are exercisable over a period not to exceed ten years and one day from the date of grant.

The following table summarizes stock option activity for the six months ended June 30, 2011:

	Number of Options (in thousands)			Weighted Average Exercise Price ($)		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in  thousands)
Outstanding at beginning of period		1,315		$	17.37
Options granted		0		$	0.00
Options exercised		(160	)	$	14.90
Options forfeited		(6	)	$	17.00
Options expired		0		$	0.00
Outstanding at end of period		1,149		$	17.71		4.58	$	8,435
Exercisable at end of period		782		$	17.66		3.48	$	5,781

We did not grant any stock options during the three-month and six-month periods ended June 30, 2011 and June 30, 2010. The fair value of stock option grants is estimated using a Black-Scholes valuation model. The total intrinsic value of stock options exercised was $0.5 million and $3.5 million for the three-month periods ended June 30, 2011 and June 30, 2010, respectively, and $1.7 million and $5.2 million for the six-month periods ended June 30, 2011 and June 30, 2010, respectively.

Restricted Stock

Restricted stock awards entitle the holder to shares of common stock when the award vests. The value of these shares may fluctuate according to market conditions and other factors. Restricted stock awards currently outstanding vest over periods ranging from 36 to 84 months from the grant date of the award. The restricted shares do not confer any voting or dividend rights to recipients until such shares fully vest and do not have any post-vesting sales restrictions.

The following table summarizes restricted stock activity for the six months ended June 30, 2011:

	Number of Restricted Shares (in thousands)			Weighted Average Grant Date Fair Value ($)
Nonvested at beginning of period		453		$	19.49
Shares granted		0		$	0.00
Shares vested		0		$	0.00
Shares forfeited		(2	)	$	20.64
Nonvested at end of period		451		$	19.48

We did not grant any shares of restricted stock during the three-month and six-month periods ended June 30, 2011 and 2010. We estimate the fair value of restricted stock awards based upon the market price of the underlying common stock on the date of grant, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior to vesting. Our estimate of future dividends is based on the most recent quarterly dividend rate at the time of grant, adjusted for any known future changes in the dividend rate.