Share-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Stock Option Activity

A summary of our stock option activity for the nine months ended September 30, 2012 is as follows (in thousands):

	Stock Options		Weighted- Average Exercise Price
Outstanding at December 31, 2011	3,776		$	16.92
Granted	462		$	18.94
Exercised	(225	)	$	14.78
Canceled	(52	)	$	14.84
Outstanding at September 30, 2012	3,961		$	17.25
Exercisable at September 30, 2012	2,828		$	17.27
Vested and expected to vest at September 30, 2012	3,931		$	17.26

There were 462,229 stock options granted during the nine months ended September 30, 2012, which had an estimated weighted-average grant date fair value of approximately $5.48. The aggregate intrinsic value of our stock options exercised during the three and nine months ended September 30, 2012 was $360,000 and $1.6 million, respectively, and the actual tax benefit realized on options exercised during these periods was $141,000 and $629,000, respectively.

Calculation of Fair Value

The fair value of our options is estimated on the date of grant using the Black-Scholes option pricing model. We amortize the fair value of our options on a straight-line basis over the requisite service period. The following assumptions were used to determine the preliminary fair value of those options granted during the nine months ended September 30, 2012:

Expected volatility (1)	34.1	%
Weighted-average volatility (1)	34.1	%
Expected dividends	—
Expected term (years)	4.4
Risk-free rate (2)	0.62	%

_________________

(1) We estimated the volatility of our common stock on the date of grant based on using both historical and implied volatilities.

(2) The risk-free interest rate is based on the implied yield in effect at the time of option grant on U.S. Treasury zero-coupon issues with equivalent remaining terms.

8. Share-Based Compensation, continued

At September 30, 2012 there was $5.8 million of total unrecognized compensation cost related to our stock options. This cost is expected to be recognized over a weighted-average period of 3.4 years.

The compensation cost charged against income, for stock options for the three months ended September 30, 2012 and 2011, was $362,000 and $347,000, respectively. The corresponding income tax benefit recognized was $142,000 and $136,000, for the three months ended September 30, 2012 and 2011, respectively.

The compensation cost charged against income, for stock options for the nine months ended September 30, 2012 and 2011, was $1.1 million and $1.0 million, respectively. The corresponding income tax benefit recognized was $433,000 and $407,000, for the nine months ended September 30, 2012 and 2011, respectively.

Nonvested Stock Activity

During the nine months ended September 30, 2012, we granted 68,900 shares of nonvested common stock as incentives to certain employees, including 14,308 shares for the annual directors' grant. Assuming continued service through each vesting date, the majority of these awards will vest in four equal annual installments beginning February 2013 through August 2016.

Total compensation cost charged against income related to nonvested stock awards was $2.1 million and $3.7 million, for the three months ended September 30, 2012 and 2011, respectively. The corresponding income tax benefit recognized in the income statement was $805,000 and $1.5 million, for the three months ended September 30, 2012 and 2011, respectively. Total compensation cost charged against income related to nonvested stock awards was $9.1 million and $5.6 million, for the nine months ended September 30, 2012 and 2011, respectively. The corresponding income tax benefit recognized in the income statement was $3.6 million and $2.2 million, for the nine months ended September 30, 2012 and 2011, respectively.

At September 30, 2012, there was $14.8 million of unrecognized compensation cost related to these nonvested shares, which will be recognized over a weighted-average period of 2.7 years. A summary of our nonvested stock activity for the nine months ended September 30, 2012 is as follows (in thousands, except per share amounts):

	Shares		Grant Date Weighted- Average Fair Value Per Share
Outstanding at December 31, 2011	1,516		$	20.76
Granted	69		$	21.41
Vested	(437	)	$	22.15
Forfeited/Canceled	(1	)	$	42.33
Outstanding at September 30, 2012	1,147		$	20.27

Restricted Stock Unit Activity

During the three and nine months ended September 30, 2012, we granted 307,989 performance based restricted stock units ("RSUs") to our executive officers representing the right to receive one share of common stock. These RSUs will be earned upon achievement of the applicable performance criteria during the performance periods, from the fourth quarter 2012 through December 31, 2014, as set forth in the 2012 equity performance award agreements. Assuming achievement of the required performance conditions and continued service through each vesting date, these awards will vest in four equal annual installments beginning August 2013 through August 2016.

Total compensation cost charged against income, related to RSU awards was $279,000, for the three and nine months ended September 30, 2012. The corresponding income tax benefit recognized in the income statement for the same periods were $109,000.

8. Share-Based Compensation, continued

At September 30, 2012, there was $5.6 million of unrecognized compensation cost related to these RSUs, which will be recognized over a weighted-average period of 3.9 years.