Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2011

Share-Based Compensation Plans [Abstract]

SHARE-BASED COMPENSATION PLANS

23.    SHARE-BASED COMPENSATION PLANS

The following table provides information on share-based compensation expense and income tax benefits recognized in 2011, 2010 and 2009:

	Years ended December 31,
	2011			2010			2009
	(In thousands)
Stock option and stock purchase plans	$	9,497			9,069			9,887
Nonvested stock		7,926			7,474			6,517
Share-based compensation expense		17,423			16,543			16,404
Income tax benefit		(5,794	)		(5,572	)		(5,412	)
Share-based compensation expense, net of tax	$	11,629			10,971			10,992

Total unrecognized pre-tax compensation expense related to share-based compensation arrangements at December 31, 2011 was $25 million and is expected to be recognized over a weighted-average period of approximately 1.9 years. The total fair value of equity awards vested during the years ended December 31, 2011, 2010, and 2009 were $23 million, $11 million and $14 million, respectively.

Share-Based Incentive Awards

Share-based incentive awards are provided to employees under the terms of six share-based compensation plans (collectively, the “Plans”). The Plans are administered by the Compensation Committee of the Board of Directors. Awards under the Plans principally include at-the-money stock options and nonvested stock at December 31, 2011. There are 8.0 million shares authorized to be issued under the Plans at December 31, 2011. There were 2.2 million unused shares available to be granted under the Plans as of December 31, 2011.

A majority of share-based compensation expense is generated from stock options. Stock options are awards which allow employees to purchase shares of our stock at a fixed price. Stock option awards are granted at an exercise price equal to the market price of our stock at the time of grant. These awards, which generally vest one-third each year, are fully vested three years from the grant date and generally have contractual terms of seven years.

Restricted stock awards are nonvested stock rights that are granted to employees and entitle the holder to shares of common stock as the award vests. Participants are entitled to non-forfeitable dividend equivalents on such awarded shares, but the sale or transfer of these shares is restricted during the vesting period. Time-vested restricted stock rights typically vest in three years regardless of company performance. The fair value of the time-vested awards is determined and fixed on the grant date based on Ryder’s stock price on the date of grant. Market-based restricted stock awards include a market-based vesting provision. Employees only receive the grant of stock if Ryder’s cumulative average total shareholder return (TSR) at least meets the S&P 500 cumulative average TSR for the applicable three-year period. The fair value of the market-based awards is determined on the date of grant and is based on the likelihood of Ryder achieving the market-based condition. Expense on the market-based restricted stock awards is recognized regardless of whether the awards vest.

Employees granted market-based restricted stock rights also received market-based cash awards. The cash awards granted during 2011, 2010 and 2009 have the same vesting provisions as the market-based restricted stock rights except that Ryder’s TSR must at least meet the TSR of the 33rd percentile of the S&P 500. The cash awards are accounted for as liability awards as the awards are based upon the performance of our common stock and are settled in cash. As a result, the liability is adjusted to reflect fair value at the end of each reporting period. The fair value of the cash awards was estimated using a lattice-based option pricing valuation model that incorporates a Monte-Carlo simulation. The liability related to the cash awards was $3 million and $4 million at December 31, 2011 and December 31, 2010, respectively.

The following table is a summary of compensation expense recognized related to cash awards in addition to share-based compensation expense reported in the previous table.

	Years ended December 31
	2011		2010		2009
	(In thousands)
Cash awards	$	1,882		2,052		2,456

We grant restricted stock units (RSUs) to non-management members of the Board of Directors. Once granted, RSUs are eligible for non-forfeitable dividend equivalents but have no voting rights. The fair value of the awards is determined and fixed on the grant date based on Ryder’s stock price on the date of grant. The board member receives the RSUs upon their departure from the Board. The initial grant of RSUs will not vest unless the director has served a minimum of one year. When the board member receives the RSUs, they are redeemed for an equivalent number of shares of our common stock. Share-based compensation expense is recognized for RSUs in the year the RSUs are granted.

Option Awards

The following is a summary of option activity under our stock option plans as of and for the year ended December 31, 2011:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic  Value
	(In thousands)					(In years)		(In thousands)
Options outstanding at January 1		3,483		$	42.16
Granted		712			49.54
Exercised		(711	)		39.90
Forfeited or expired		(187	)		42.01
Options outstanding at December 31		3,297		$	44.25		3.9	$	32,350
Vested and expected to vest at December 31		3,217		$	44.29		3.9	$	31,516
Exercisable at December 31		1,845		$	47.07		2.8	$	14,165

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the market price of our stock on the last trading day of the year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options at year-end. The amount changes based on the fair market value of our stock.

Information about options in various price ranges at December 31, 2011 follows:

	Options Outstanding						Options Exercisable
Price Ranges	Shares		Weighted- Average Remaining Contractual Term		Weighted- Average  Exercise Price		Shares		Weighted- Average  Exercise Price
	(In thousands)		(In years)				(In thousands)
Less than $35.00		1,247		4.6	$	32.78		475	$	32.63
35.00-45.00		387		1.2		42.40		384		42.41
45.00-55.00		1,140		4.5		50.68		475		52.48
55.00 and over		523		3.2		58.94		511		58.95
Total		3,297		3.9	$	44.25		1,845	$	47.07

Restricted Stock Awards

The following is a summary of the status of Ryder’s nonvested restricted stock awards as of and for the year ended December 31, 2011:

	Time-Vested					Market-Based Vested
	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value
	(In thousands)					(In thousands)
Nonvested stock outstanding at January 1		330		$	47.05		469		$	23.23
Granted		202			52.56		144			25.37
Vested		(148	)		55.33		(99	)		49.45
Forfeited		(11	)		49.45		(38	)		18.01
Nonvested stock outstanding at December 31		373		$	46.72		476		$	18.69

Stock Purchase Plan

We maintain an Employee Stock Purchase Plan (ESPP), which enables eligible participants in the U.S. and Canada to purchase full or fractional shares of Ryder common stock through payroll deductions of up to 15% of eligible compensation. The ESPP provides for quarterly offering periods during which shares may be purchased at 85% of the fair market value on either the first or the last trading day of the quarter, whichever is less. Stock purchased under the ESPP must generally be held for 90 days. The amount of shares authorized to be issued under the existing ESPP was 4.5 million at December 31, 2011. There were 0.9 million unused shares available to be purchased under the ESPP at December 31, 2011.

The following table summarizes the status of Ryder’s ESPP:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic  Value
	(In thousands)					(In years)		(In thousands)
Outstanding at January 1		—		$	—
Granted		216			37.45
Exercised		(216	)		37.45
Forfeited or expired		—			—
Outstanding at December 31		—		$	—		—	$	—
Exercisable at December 31		—		$	—		—	$	—

Share-Based Compensation Fair Value Assumptions

The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing valuation model that uses the weighted-average assumptions noted in the table below. Expected volatility is based on historical volatility of our stock and implied volatility from traded options on our stock. The risk-free rate for periods within the contractual life of the stock option award is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted with a maturity equal to the expected term of the stock option award. We use historical data to estimate stock option exercises and forfeitures within the valuation model. The expected term of stock option awards granted is derived from historical exercise experience under the share-based employee compensation arrangements and represents the period of time that stock option awards granted are expected to be outstanding. The fair value of market-based restricted stock awards is estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by employees who receive equity awards, and subsequent events are not indicative of the reasonableness of the original estimates of fair value made by Ryder.

The following table presents the weighted-average assumptions used for options granted:

	Years ended December 31,
	2011		2010		2009
Option plans:
Expected dividends		2.2%		3.0%		2.8%
Expected volatility		38.7%		43.9%		46.4%
Risk-free rate		1.7%		1.7%		1.5%
Expected term in years		3.6 years		3.4 years		3.1 years
Grant-date fair value	$	12.88	$	8.93	$	9.26
Purchase plan:
Expected dividends		2.4%		2.5%		2.8%
Expected volatility		32.8%		35.6%		67.6%
Risk-free rate		0.1%		0.2%		0.2%
Expected term in years		0.25 years		0.25 years		0.25 years
Grant-date fair value	$	10.21	$	8.95	$	9.43

Exercise of Employee Stock Options and Purchase Plans

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was $9 million, $4 million, and $2 million, respectively. The total cash received from employees as a result of exercises under all share-based employee compensation arrangements for the years ended December 31, 2011, 2010 and 2009 was $33 million, $17 million, and $7 million, respectively. In connection with these exercises, the tax benefits realized from share-based employee compensation arrangements were $1 million, $1 million, and $0.4 million for the years ended December 31, 2011, 2010, and 2009, respectively.