13.

Share-Based Compensation

The Company maintains two share-based compensation plans for executives, non-employee directors, and certain key employees that authorize the granting of stock options, unvested shares, unvested share units, and other types of awards consistent with the purpose of the plans. The number of shares authorized for issuance under the Company’s plans as of December 31, 2012 totals 10.6 million, of which 3.4 million shares were available for future issuance. Stock options granted under these plans are generally non-qualified, and are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. The majority of the options issued to employees become exercisable in four equal installments, beginning one year from the date of grant, and generally expire 10 years from the date of grant. Stock options granted to non-employee directors cliff vest after one year. Unvested share and unvested share unit awards generally cliff vest after three years for employees and non-employee directors. The Company issued 230,975, 341,876 and 264,915 of unvested shares as compensation to key employees in 2012, 2011 and 2010, respectively.

All unvested shares carry dividend and voting rights, and the sale of the shares is restricted prior to the date of vesting.

The Company accounts for share-based payments in accordance with ASC 718. Accordingly, the Company expenses the fair value of awards made under its share-based plans. That cost is recognized in the consolidated financial statements over the requisite service period of the grants.

Weighted average option fair values and assumptions for the period specified are disclosed in the following table:


	Years Ended December 31,
	2012	2011	2010
Weighted average fair value of grants	$11.40	$12.30	$ 9.56
Dividend yield	1.59%	1.46%	1.51%
Volatility	32.00%	32.72%	33.43%
Risk-free interest rate	0.17% - 3.96%	0.28% - 5.61%	0.32% - 5.67%
Expected life (in years)	5.98	6.14	5.98

The assumptions are as follows:

•

The Company estimated volatility using its historical share price performance over the contractual term of the option.

•

The Company uses historical data to estimate the expected life of the option. The expected life assumption for the years ended December 31, 2012, 2011 and 2010 is an output of the Binomial lattice option-pricing model, which incorporates vesting provisions, rate of voluntary exercise and rate of post-vesting termination over the contractual life of the option to define expected employee behavior.

•

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. For the years ended December 31, 2012, 2011 and 2010, we present the range of risk-free one-year forward rates, derived from the U.S. treasury yield curve, utilized in the Binomial lattice option-pricing model.

•

The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option.

The Company’s policy is to recognize compensation cost on a straight-line basis over the requisite service period for the entire award. Additionally, the Company’s general policy is to issue new shares of common stock to satisfy stock option exercises or grants of unvested shares.

Total compensation cost for stock options is as follows:


	Years Ended December 31,
	2012			2011			2010
	(In thousands)
Cost of goods sold	$	650		$	805		$	804
Selling, general and administrative expenses		5,642			6,153			6,923

Total expense before income taxes		6,292			6,958			7,727
Income tax benefit		(1,988	)		(2,208	)		(2,450	)

Total expense after income taxes	$	4,304		$	4,750		$	5,277

Total compensation cost for unvested shares is as follows:


	Years Ended December 31,
	2012			2011⁽¹⁾			2010
	(In thousands)
Cost of goods sold	$	991		$	684		$	311
Selling, general and administrative expenses		5,819			4,434			8,382
Restructuring expenses		—			—			938

Total expense before income taxes		6,810			5,118			9,631
Income tax benefit		(1,682	)		(1,827	)		(2,097	)

Total expense after income taxes	$	5,128		$	3,291		$	7,534

(1)	Reflects the forfeiture of unvested shares related to the Company’s transition to a new CEO in August 2011.

Recognition of compensation cost was consistent with recognition of cash compensation for the same employees. Compensation cost capitalized as part of inventory was immaterial.

As of December 31, 2012, there was $8.3 million and $9.4 million of total unrecognized compensation cost related to stock options and unvested shares, respectively, that is expected to be recognized over a weighted-average period of 1.4 years and 1.0 years, respectively.

A summary of the Company’s stock option activity as of December 31, 2012, and changes during the year ended December 31, 2012 is presented in the following table:


Stock Options	Shares			Weighted Average Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2012		4,314,044		$	29.61		7.01	$	34,899,200
Granted		764,700			42.66
Exercised		(1,631,923	)		27.77
Forfeited/Expired		(223,079	)		36.60

Outstanding at December 31, 2012		3,223,742		$	33.16		6.37	$	43,106,153

Vested and expected to vest at December 31, 2012		3,100,929		$	32.86		6.28	$	42,398,877
Exercisable at December 31, 2012		1,780,761		$	29.00		4.82	$	31,219,847

The intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company’s common stock as of the end of the period, and the grant price. The total intrinsic value of options exercised in 2012, 2011 and 2010, was $23.5 million, $21.9 million and $14.4 million, respectively. In 2012, 2011 and 2010, cash received from options exercised was $45.8 million, $33.1 million and $18.1 million, respectively, while the actual tax benefit realized for the tax deductions from stock options exercised totaled $8.6 million, $8.0 million and $5.2 million, respectively.

A summary of the Company’s unvested share activity as of December 31, 2012, and changes during the year ending December 31, 2012 is presented in the following table:


Unvested Shares	Shares			Weighted-Average Grant Date Fair Value
Nonvested at January 1, 2012		613,375		$	32.44
Granted		230,975			43.56
Vested		(166,134	)		22.00
Forfeited		(88,230	)		38.61

Nonvested at December 31, 2012		589,986		$	40.27

Unvested share grants accrue dividends and their fair value is equal to the market price of the Company’s stock at the date of the grant.

As of 2011, the Company also maintains a share based compensation plan for non-executives. Total expense related to this plan was $2.3 million and $0.8 million in 2012 and 2011, respectively. At December 31, 2012 and 2011, the Company has $2.0 million and $0.8 million, respectively, included in Accrued expenses in the Consolidated Balance Sheets and $1.0 million included in Other non-current liabilities at December 31, 2012.