10. Stock Compensation Plans

At December 31, 2011, the Company had one stock-based compensation plan that was adopted in 2008 and is described below. The former Employee and Non-Employee Directors' Stock Option Plans were terminated and superceded by the 2008 Equity Incentive Plan, however, they both had stock-based awards outstanding as of December 31, 2011 and 2010.

2008 Equity Incentive Plan

In 2008, the Company adopted an equity incentive plan for eligible employees, service providers, and non-employee directors of the Company and its subsidiaries. The maximum number of shares available for grants and awards is an aggregate of 2,000,000 shares and the plan also includes a fixed sub-limit for the granting of incentive stock options which is 1,500,000 shares. The awards may be stock options, restricted stock units, performance units or other stock-based awards. Stock options may be "nonstatutory" or "incentive." The exercise price for options and stock appreciation rights shall not be less than the fair market value on the date of grant, except if an incentive stock option is granted to a "10% employee," as defined by the plan, then the option price may not be less than 110% of such fair market value. Options and stock appreciation rights may be exercisable commencing with the grant date, and are no longer exercisable after the expiration of seven or ten years from the grant date.

Employee Stock Option Plan

The Employee Stock Option Plan for officers and other key employees of the Company permitted grants of stock options, restricted shares or restricted performance shares for up to 8,238,640 shares of the Company's common stock. Stock options may be "nonstatutory" or "incentive" with a purchase price of not less than 100% of the fair market value on the date of the grant. Stock appreciation rights were permitted to be granted at date of option grant or at any later date during the term of the option. "Incentive" stock options granted since 1986 become exercisable no less than six months after the date of grant and are no longer exercisable after the expiration of ten years from the date of the grant.

Non-Employee Directors' Stock Option Plan

The 1993 Non-Employee Directors' Stock Option Plan, as last amended in 2005, provided for an annual grant on the day following the Annual Meeting of Stockholders of stock options equal to a Black-Scholes calculated value of $25,000 per Director on the date of grant. The options vest and become exercisable six months after the date of the grant and, in general, expire ten years after the date of grant.

Stock-Based Compensation Expense

In accordance with the guidance within ASC 718 "Compensation – Stock Compensation", compensation expense for stock options is recorded over the vesting period based on the fair value on the date of grant, as calculated by the Company using the Black-Scholes model and the assumptions listed below:


	Year Ended December 31
	2011			2010			2009
Average grant date exercise price per share of unvested option awards	$	14.19		$	15.47		$	15.57
Dividend yield		.00	%		.00	%		.00	%
Expected volatility		46	%		44	%		35-44	%
Risk-free interest rates		2.19	%		2.40	%		1.99-2.76	%
Expected lives of options		4 years			6 years			3-6 years
Average grant date fair value per share of unvested option awards	$	5.73		$	6.91		$	6.55

The Dividend yield is based on the latest annualized dividend rate and the current market price of the underlying common stock at the date of grant.

Expected volatility is based on the historical volatility of the Company's stock and the implied volatility calculated from traded options on the Company's stock.

The Risk-free interest rates are based on the U.S. Treasury strip rate for the expected life of the option.

The Expected lives of options are primarily determined from historical stock option exercise data. For the 2011 grant of stock options, the Company used the simplified method for determining the expected life. This method was used since the Company granted stock options to a different population of its employees, and decreased the term from 10 to 7 years. As a result of these changes, the Company does not believe that the historical stock option exercise data provides a reasonable basis upon which to estimate the expected life for the 2011 grant.

Stock Option Activity

The following tables show a summary of the status and activity of stock options for the year ended December 31, 2011:

Employee:


	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at beginning of year		965,344		$	8.50
Granted		180,081			13.89
Exercised		(305,630	)		5.86
Forfeited		(1,445	)		13.89
Expired		(546	)		17.74

Outstanding at December 31, 2011		837,804		$	10.61		4.52	$	4,376

Exercisable at December 31, 2011		627,997		$	9.42		3.87	$	4,060

Exercisable and expected to vest at December 31, 2011		837,804		$	10.61		4.52	$	4,376

The weighted-average grant date fair value of employee stock options granted during the years ended December 31, 2011, 2010, and 2009 was $5.47 per share, $6.90 per share, and $6.45 per share or $1.0 million, $0.5 million, and $0.6 million, respectively. The total grant date fair value of options vested during the years ended December 31, 2011, 2010, and 2009 was $6.79 per share, $6.60 per share, and $5.08 per share, or $0.5 million, $0.5 million, and $0.4 million, respectively.

Non-Employee Directors:


	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at beginning of year		83,022	$	6.65
Granted		—		—
Exercised		—		—
Forfeited		—		—
Expired		—		—

Outstanding at December 31, 2011		83,022	$	6.65		3.42	$	686

Exercisable at December 31, 2011		83,022	$	6.65		3.42	$	686

During the years ended December 31, 2011, 2010, and 2009 the total intrinsic value of stock options exercised (i.e., the difference between the market price at exercise and the price paid by the employee or non-employee directors to exercise the option) was $2.7 million, $1.8 million, and $0.8 million, respectively. The total amount of cash received from the exercise of options was $2.1 million, $2.0 million, and $1.0 million, for the years ended December 31, 2011, 2010, and 2009, respectively.

Stock Awards

In accordance with guidance within ASC 718, compensation expense for nonvested stock awards is recorded over the vesting period based on the fair value at the date of grant.

The grant date fair value of time vested restricted stock awards is the market price of the underlying common stock and is expensed over the vesting period of three years.

Performance stock awards, based on Total Shareholder Return ("TSR"), vest subject to the satisfaction of a market condition, at the end of a three-year performance period. The number of performance stock awards that are scheduled to vest is a function of TSR. Under the terms of the TSR performance stock award, the Company's actual TSR for the performance period is compared to the results of its peer companies for the same period with the Company's relative position in the group determined by percentile rank. The actual award payout is determined by multiplying the target award by the performance factor percentage based upon the Company's percentile ranking and can vest at between zero and 200 percent of the target award. The initial grant date fair value of the TSR performance stock is determined using a Monte Carlo simulation model. The grant date fair value is expensed on a straight-line basis over the three-year performance period. The following significant assumptions were used:


	Year Ended December 31
	2011		2010		2009
Dividend yield		.00%		.00%		.00%
Expected volatility		65.4%		70.1%		52-53%
Risk-free interest rates		1.15%		1.38%		1.47-1.78%
Performance period		3 years		3 years		3 years

The following table shows the historical vesting of the TSR performance stock awards:


Year Vested	TSR Performance Period		Payout Level			Shares Issued
2009		2006-2008		200	%		128,800
2010		2007-2009		200	%		107,900
2011		2008-2010		97	%		16,781

In addition, the TSR performance stock award that was granted in 2009 vested and was awarded in February 2012 at 52% of the target award, based on the Company's satisfaction of performance goals during the preceding three-year period with 8,528 shares of common stock issued.

Performance stock awards, based on Return on Capital (ROC), vest subject to the satisfaction of this performance condition, at the end of a three-year performance period. Under the terms of the ROC performance stock award, the Company's actual ROC for the performance period is compared to the target set, and the actual award payout is interpolated. The ROC award can vest at between zero and 200 percent of the target award. The grant date fair value of the ROC performance stock is the market price of the underlying common stock. The fair value is expensed on a straight-line basis over the performance period when it is probable that the performance condition will be achieved. No expense was recognized in 2011 as it was not considered probable that the performance condition will be achieved.

The following table shows a summary of the status and activity of employee and non-employee directors' nonvested stock awards for the year ended December 31, 2011:


	Restricted Stock Awards			Weighted- Average Grant Date Fair Value (per share)		Performance Stock Awards (a)			Weighted- Average Grant Date Fair Value (per share)
Nonvested at January 1, 2011		207,948		$	16.00		51,510		$	26.46
Granted		92,696			14.88		45,010			14.51
Vested		(99,155	)		16.13		(16,781	)		26.97
Forfeited		(1,598	)		15.05		(519	)		26.97

Nonvested at December 31, 2011		199,891		$	15.43		79,220	(b)	$	19.56

(a)

The number of shares shown for the performance stock awards is based on the target number of share awards.

(b)

No compensation expense was recognized in 2011 for 24,057 of these awards as it was not considered probable that the performance conditions would be achieved.

The weighted-average grant date fair value of restricted stock awards granted during the years ended December 31, 2011, 2010, and 2009 was $14.88 per share, $16.21 per share, and $15.08 per share or $1.4 million, $1.9 million, and $1.8 million, respectively. The total fair value of restricted stock awards vested during the years ended December 31, 2011, 2010, and 2009 was $1.6 million, $1.4 million, and $1.6 million, respectively.

The weighted-average grant date fair value of performance stock awards granted during the years ended December 31, 2011, 2010, and 2009 was $14.51 per share, $25.45 per share, and $26.83 per share or $0.7 million, $0.5 million, and $0.7 million, respectively. The total fair value of performance stock awards vested during the years ended December 31, 2011, 2010, and 2009 was $0.5 million, $0.7 million, and $0.8 million, respectively.

Compensation expense related to all stock-based compensation totaled $2.6 million, $2.5 million, and $2.4 million for the years ended December 31, 2011, 2010, and 2009, respectively, and was recognized as a component of selling, general and administrative expense. The related income tax benefit was $0.9 million, $0.7 million, and $0.7 million for the years ended December 31, 2011, 2010, and 2009, respectively.

As of December 31, 2011, there was $2.8 million of total future compensation cost related to nonvested share-based compensation arrangements and the weighted-average period over which this cost is expected to be recognized is approximately 1.6 years.