Stock-Based Compensation

The Company recognizes compensation expense for all share-based payments granted based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. Compensation expense is recognized on a straight-line basis over the options’ or other awards’ estimated lives for fixed awards with ratable vesting provisions.

Under the Company’s 2007 Incentive Plan (“2007 Plan”), the Company's principal stock compensation plan prior to May 9, 2012, the Company reserved up to a maximum of 3,200 shares of common stock for issuance upon the grant or exercise of stock options, restricted stock, restricted stock units (“RSUs”) and other types of awards, to directors and key employees through 2017. Option awards are granted with an exercise price equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years with a 10-year contractual term. Restricted stock and RSUs are granted with a price equal to the market price of the Company’s common stock on the date of the grant and generally vest between three and five years. On May 9, 2012, the Company's stockholders approved the 2012 Long-Term Incentive Plan (“2012 Plan”), which allows the Company to reserve up to a maximum of 3,200 shares of common stock for issuance upon the grant or exercise of awards under the 2012 Plan. No additional awards may be granted under the 2007 Plan after May 9, 2012. As of December 31, 2012, there have been no awards granted under the 2012 Plan.

Additional information relating to the Company’s stock option plans follows:



	2012		2011		2010
Options outstanding at beginning of year	1,305		1,371		1,481
Options granted	83		76		40
Options exercised	(277	)	(82	)	(74	)
Options forfeited and expired	(116	)	(60	)	(76	)
Options outstanding at end of year	995		1,305		1,371
Options exercisable at end of year	814		1,106		1,160
Option prices per share:
Options granted during the year	66.14		57.34		46.80
Options exercised during the year	28.37-88.33		28.37-63.14		16.66-57.88
Options forfeited and expired during the year	46.80-93.65		28.37-93.65		22.63-93.65
Options outstanding at end of year	28.37-93.65		28.37-93.65		28.37-93.65
Options exercisable at end of year	28.37-93.65		28.37-93.65		28.37-93.65

During 2012, 2011 and 2010, a total of 2, 3 and 4 shares, respectively, were awarded to the non-employee directors in lieu of cash for their annual retainers.

In addition, the Company maintains an employee incentive program that awards restricted stock on the attainment of certain service criteria. The outstanding awards related to these programs and related compensation expense was not significant for any of the years ended December 31, 2012, 2011 or 2010.

The Company’s Board of Directors has authorized the repurchase of up to 15,000 shares of the Company’s outstanding common stock. For the years ended December 31, 2012 and 2011, no shares of the Company’s common stock were purchased. For the year ended December 31, 2010, the Company repurchased approximately 6 shares at an average price of $56.94 in connection with the exercise of stock options under the Company’s 2007 Incentive Plan. Since the inception of the program, a total of approximately 11,518 shares have been repurchased at an aggregate cost of approximately $335,110. All of these repurchases have been financed through the Company’s operations and banking arrangements.

The fair value of option awards is estimated on the date of grant using the Black-Scholes-Merton valuation model that uses the assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s common stock and other factors. The Company uses historical data to estimate option exercise and forfeiture rates within the valuation model. Optionees that exhibit similar option exercise behavior are segregated into separate groups within the valuation model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate is based on U.S. Treasury yields in effect at the time of the grant for the expected term of the award.



	2012		2011		2010
Dividend yield	—		—		—
Risk-free interest rate	1.0	%	2.0	%	2.3	%
Volatility	47.1	%	48.1	%	45.2	%
Expected life (years)	5		5		5

A summary of the Company’s options under the 2002 and 2007 Plan as of December 31, 2012, and changes during the year then ended is presented as follows:



	Shares		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Options outstanding, December 31, 2011	1,305		$	72.08
Granted	83		66.14
Exercised	(277	)	60.76
Forfeited and expired	(116	)	70.93
Options outstanding, December 31, 2012	995		74.87		3.9	$	15,643
Vested and expected to vest as of December 31, 2012	989		$	74.95	3.9	$	15,453
Exercisable as of December 31, 2012	814		$	77.78	3.0	$	10,437

The weighted-average grant-date fair value of an option granted during 2012, 2011 and 2010 was $28.71, $25.39 and $19.10, respectively. The total intrinsic value of options exercised during the years ended December 31, 2012, 2011, and 2009 was $4,226, $1,148 and $1,714, respectively. Total compensation expense recognized for the years ended December 31, 2012, 2011 and 2010 was $2,176 ($1,378, net of tax), $1,885 ($1,194, net of tax) and $2,436 ($1,543, net of tax), respectively, which was allocated to selling, general and administrative expenses. The remaining unamortized expense for non-vested compensation expense as of December 31, 2012 was $2,096 with a weighted average remaining life of 1.4 years.

The following table summarizes information about the Company’s stock options outstanding as of December 31, 2012:



	Outstanding				Exercisable
Exercise price range	Number of shares	Average life	Average price		Number of shares	Average price
Under $57.34	171	6.4	$	47.90	98	$	44.34
$57.88-$73.45	197	4.4	69.97		115	72.75
$73.54-$81.40	162	4.7	74.91		136	74.99
$81.90-$86.51	167	2.8	83.16		167	83.16
$87.87-$88.00	35	2.8	87.96		35	87.96
$88.33-$93.65	263	2.3	89.08		263	89.08
Total	995	3.9	$	74.87	814	$	77.78

A summary of the Company’s RSUs under the 2007 Plan as of December 31, 2012, and changes during the year then ended is presented as follows:



	Shares		Weighted average price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Restricted Stock Units outstanding, December 31, 2011	495		$	50.76
Granted	260		65.98
Released	(140	)	43.55
Forfeited	(10	)	59.07
Restricted Stock Units outstanding, December 31, 2012	605		57.87		2.3	$	54,774
Expected to vest as of December 31, 2012	551				2.1	$	49,872

The Company recognized stock-based compensation costs related to the issuance of RSU’s of $11,887 ($7,530, net of taxes), $8,186 ($5,186, net of taxes) and $4,262 ($2,700, net of taxes) for the years ended December 31, 2012, 2011 and 2010, respectively, which has been allocated to selling, general and administrative expenses. Pre-tax unrecognized compensation expense for unvested RSU’s granted to employees, net of estimated forfeitures, was $15,437 as of December 31, 2012, and will be recognized as expense over a weighted-average period of approximately 2.9 years.

Additional information relating to the Company’s RSUs under the 2007 Plan is as follows:



	2012		2011		2010
Restricted Stock Units outstanding, January 1	495		404		359
Granted	260		196		149
Released	(140	)	(91	)	(95	)
Forfeited	(10	)	(14	)	(9	)
Restricted Stock Units outstanding, December 31	605		495		404
Expected to vest as of December 31	551		438		343