Share-Based Awards

The Company has a share-based compensation plan which was approved by its Shareholders in April 2009 (Plan) under which the Board of Directors may grant to employees share-based awards including nonqualified stock options, stock appreciation rights (SARs), shares of restricted stock and restricted stock units (RSUs). The options and SARs granted under the Plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and, prior to 2010, generally vested ratably over a four-year period with the first 25% becoming exercisable one year after the date of grant. Beginning with awards granted in 2010, options and SARs granted under the Plan will vest ratably over a three-year period with the first one-third of the grant becoming exercisable one year after the date of grant. The options and SARs expire 10 years from the date of grant. Shares of restricted stock and RSUs that were issued under the Plan prior to 2010 generally vested over periods ranging from 2 to 5 years with certain of the shares and RSUs subject to accelerated vesting should the Company meet certain performance conditions. Beginning with awards granted in 2010, shares of restricted stock and RSUs granted under the Plan vest ratably over a three-year period with the first one-third of the grant vesting one year after the date of grant. Dividends are paid on shares of restricted stock and dividend equivalents are paid on RSUs. At December 31, 2012, there were 12.1 million shares of common stock available for future awards under the Plan.

Stock Options:

The Company estimates the grant date fair value of its option awards granted using a lattice-based option valuation model. The Company believes that the lattice-based option valuation model provides a more precise estimate of fair value than the Black-Scholes option pricing model. Lattice-based option valuation models utilize ranges of assumptions over the expected term of the options. The Company uses a weighted-average of implied and historical volatility to determine the expected volatility of its stock. The Company uses historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

Assumptions used in calculating the lattice-based fair value of options granted during 2012, 2011 and 2010 were as follows:



	2012		2011		2010
Expected average term (in years)	6.3		6.5		6.9
Expected volatility	32% - 50%		39% - 52%		42% - 60%
Weighted average volatility	41	%	43	%	48	%
Expected dividend yield	1.1	%	1.0	%	1.8	%
Risk-free interest rate	0.1% - 2.1%		0.1% - 3.7%		0.1% - 3.7%

The following table summarizes the stock option transactions for the year ended December 31, 2012 (in thousands except for per share amounts):



	Options		Weighted- Average Price
Options outstanding, beginning of period	6,311		$	37
Options granted	480		$	45
Options exercised	(1,666	)	$	28
Options forfeited	(665	)	$	52
Options outstanding, end of period	4,460		$	38
Exercisable, end of period	3,065		$	42

The weighted-average fair value of options granted during the years ended December 31, 2012, 2011 and 2010 was $14, $15 and $8, respectively.

As of December 31, 2012, there was $2.3 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.5 years.

The following table summarizes the aggregate intrinsic value related to options outstanding, exercisable and exercised as of and for the years ended December 31 (in thousands):



	2012		2011		2010
Exercised	$	34,443	$	7,919	$	12,710
Outstanding	$	60,963	$	55,701	$	53,249
Exercisable	$	35,873	$	22,926	$	8,545

The Company’s policy is to issue new shares of common stock upon the exercise of employee stock options. The Company has a continuing authorization from its Board of Directors to repurchase shares to offset dilution caused by the exercise of stock options which is discussed in Note 17.

Stock options outstanding at December 31, 2012 (options in thousands):



Price Range	Weighted-Average Contractual Life	Options	Weighted-Average Exercise Price
$10.01 to $20	6.0	910	$	13
$20.01 to $30	6.9	695	$	23
$30.01 to $40	4.7	503	$	39
$40.01 to $50	8.0	910	$	43
$50.01 to $60	1.6	706	$	52
$60.01 to $70	2.5	736	$	65
Options outstanding	5.1	4,460	$	38
Options exercisable	7.6	3,065	$	42

Stock Appreciation Rights (SARs)

SARs vest under the same terms and conditions as options; however, they are settled in cash equal to their settlement date fair value. As a result, SARs are recorded in the Company’s consolidated balance sheets as a liability until the date of exercise.

The fair value of each SAR award is estimated using a lattice-based valuation model. In accordance with ASC Topic 718, “Stock Compensation”, the fair value of each SAR award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value and the percent vested.

The assumptions used to determine the fair value of the SAR awards at December 31, 2012 and 2011 were as follows:



	2012		2011
Expected average term (in years)	1.3 - 5.6		2.2 - 6.2
Expected volatility	31% - 45%		40% - 49%
Expected dividend yield	1.3	%	1.0	%
Risk-free interest rate	.1% - 1.8%		0.1% - 2.2%

The following table summarizes the SAR transactions for the year ended December 31, 2012 (in thousands except for per share amounts):



	SARs		Weighted- Average Price
Outstanding, beginning of period	273		$	21
Granted	21		$	45
Exercised	(40	)	$	22
Forfeited	(1	)	$	22
Outstanding, end of period	253		$	23
Exercisable, end of period	160		$	22

The weighted-average fair value of SARs granted during the years ended December 31, 2012, 2011 and 2010 was $14, $15 and $8, respectively.

Restricted (Nonvested) Stock:

The fair value of restricted stock is determined based on the market price of the Company’s shares on the grant date. The following table summarizes the restricted stock transactions for the year ended December 31, 2012 (in thousands except for per share amounts):



	Restricted Shares		Grant Date Fair Value Per Share
Nonvested, beginning of period	1,941		$	26
Granted	521		$	45
Vested	(687	)	$	32
Forfeited	(83	)	$	29
Nonvested, end of period	1,692		$	29

As of December 31, 2012, there was $24.4 million of unrecognized compensation cost related to restricted stock that is expected to be recognized over a weighted-average period of 1.4 years.

Restricted Stock Units (RSUs)

Restricted stock units vest under the same terms and conditions as restricted stock; however, they are settled in cash equal to their settlement date fair value. As a result, RSUs are recorded in the Company’s consolidated balance sheets as a liability until the date of vesting.

The fair value of RSUs is determined based on the market price of the Company’s shares on the grant date. The following table summarizes the RSU transactions for the year ended December 31, 2012 (in thousands except for per share amounts):



	Restricted Stock Unit		Weighted-Average Grant Date Fair Value Per Share
Nonvested, beginning of period	245		$	47
Granted	80		$	48
Vested	(81	)	$	46
Forfeited	(2	)	$	48
Nonvested, end of period	242		$	47