Note 15 - Share-Based Compensation:

We account for share-based compensation as required by FASB ASC 718-10 Compensation – Stock Compensation, which requires companies to recognize compensation expense in the amount equal to the fair value of all share-based payments granted to employees. Under FASB ASC 718-10, we recognize share-based compensation ratably over the service period applicable to the award. FASB ASC 718-10 also requires that excess tax benefits be reflected as financing cash flows.

We grant share-based awards under our various plans, which provide for the granting of non-qualified stock options, restricted stock and restricted stock units to members of our Board of Directors and to our employees. Stock options, restricted stock and restricted stock units generally vest ratably over four years or sooner and stock options have a maximum term of ten years.

On May 17, 2012, our stockholders approved the 2012 Omnibus Incentive Plan (the "omnibus plan"), which reserves a pool of awards equal to the sum of 6.5 million shares, plus any shares added to the omnibus plan related to an award granted under the prior plans that expires, is forfeited or is terminated. Each stock option or stock appreciation right granted will count as one share against the omnibus plan and all other grants will count as 1.75 shares against the omnibus plan share reserve. We issue new shares of common stock when stock option awards are exercised. Stock option awards outstanding under our current plans were granted at exercise prices that were equal to the market value of our common stock on the date of grant. At June 30, 2012, approximately 6.5 million shares remain available under the omnibus plan for stock option, restricted stock and restricted stock unit and other permitted grants.

Stock Options

We use the Black-Scholes stock option pricing model to estimate the fair value of stock option awards with the following weighted average assumptions:



	Three months ended				Six months ended
	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Risk-free interest rate	0.8	%	—	%	0.8	%	2.2	%
Expected life (in years)	4.7		—		4.7		5.2
Expected volatility	42.8	%	—	%	43.9	%	44.6	%
Dividend	—	%	—	%	—	%	—	%

The Black-Scholes stock option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. We have three distinct populations of optionees; the Executive Officers Group, the Outside Directors Group, and the All Others Group. The expected life of options represents the period of time that the options are expected to be outstanding (that is, the period of time from the service inception date to the date of expected exercise or other expected settlement) and is based generally on historical trends. Our expected life weighted average assumption is based on an actuarial study derived from historical exercise data. The risk-free rate is based on the yield on the Federal Reserve treasury rate with a maturity date corresponding to the expected term of the option granted. The expected volatility assumption is based on the historical volatility of our common stock over a term equal to the expected term of the option granted. FASB ASC 718-10 also requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. It is assumed that no dividends will be paid during the entire term of the options. All option valuation models require input of highly subjective assumptions. Because our employee stock options have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, the actual value realized at the time the options are exercised may differ from the estimated values computed above.

The following is a summary of the weighted average per share fair value of options granted in the six-month periods ended June 30, 2012 and June 30, 2011.



	Three months ended				Six months ended
	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Weighted average per share fair value of options granted	$	13.48	$	—	$	12.46	$	15.42

Set forth below is the impact on our results of operations of recording share-based compensation from stock options for the six-month periods ended June 30, 2012 and June 30, 2011 ($ amounts in thousands):



	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Cost of goods sold	$	97		$	910		$	200		$	2,253
Selling, general and administrative	871			101			1,800			250
Total, pre-tax	$	968		$	1,011		$	2,000		$	2,503
Tax effect of share-based compensation	(358		)	(384		)	(740		)	(951		)
Total, net of tax	$	610		$	627		$	1,260		$	1,552

The following is a summary of our stock option activity (shares and aggregate intrinsic value in thousands):



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Life	Aggregate Intrinsic Value
Balance at December 31, 2011	2,286		$	30.11
Granted	310		32.97
Exercised	(224	)	21.56
Forfeited	(28	)	29.80
Balance at June 30, 2012	2,344		$	31.31	5.5	$	20,774
Exercisable at June 30, 2012	1,519		$	33.35	4.1	$	13,619
Vested and expected to vest at June 30, 2012	2,314		$	31.31	5.5	$	20,617

Total fair value of shares vested ($ amounts in thousands):



	Three months ended				Six months ended
	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Total fair value of shares vested	$	63	$	173	$	3,120	$	3,928

As of June 30, 2012, the total compensation cost related to all non-vested stock options granted to employees but not yet recognized was approximately $7.6 million net of estimated forfeitures. This cost will be amortized on a straight-line basis over the remaining weighted average vesting period of 2.6 years.

Restricted Stock/Restricted Stock Units

Outstanding restricted stock and restricted stock units generally vest ratably over four years. The related share-based compensation expense is recorded over the requisite service period, which is the vesting period. The fair value of restricted stock is based on the market value of our common stock on the date of grant.

The impact on our results of operations of recording share-based compensation from restricted stock for the six-month periods ended June 30, 2012 and June 30, 2011 was as follows ($ amounts in thousands):



	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Cost of goods sold	$	118		$	1,265		$	245		$	2,772
Selling, general and administrative	1,062			140			2,207			308
Total, pre-tax	$	1,180		$	1,405		$	2,452		$	3,080
Tax effect of stock-based compensation	(437		)	(534		)	(907		)	(1,170		)
Total, net of tax	$	743		$	871		$	1,545		$	1,910

The following is a summary of our restricted stock activity (shares and aggregate intrinsic value in thousands):



	Shares		Weighted Average Grant Price		Aggregate Intrinsic Value
Non-vested balance at December 31, 2011	281		$	24.28
Granted	99		32.89
Vested	(128	)	21.90
Forfeited	(10	)	32.00
Non-vested balance at June 30, 2012	242		$	28.73	$	8,736

The following is a summary of our restricted stock unit activity (shares and aggregate intrinsic value in thousands):



	Shares		Weighted Average Grant Price		Aggregate Intrinsic Value
Non-vested restricted stock unit balance at December 31, 2011	69		$	36.47
Granted	79		32.97
Vested	(24	)	36.16
Forfeited	—		—
Non-vested restricted stock unit balance at June 30, 2012	124		$	34.30	$	4,496
Vested awards not issued	193		$	24.05	$	6,950
Total restricted stock unit balance at June 30, 2012	317		$	28.07	$	11,446

As of June 30, 2012, the total compensation cost related to all non-vested restricted stock and restricted stock units (excluding restricted stock grants with market conditions described below) granted to employees but not yet recognized was approximately $8.2 million, net of estimated forfeitures; this cost will be amortized on a straight-line basis over the remaining weighted average vesting period of approximately 2.6 years.

Cash-settled Restricted Stock Unit Awards

We grant cash-settled restricted stock unit awards that vest ratably over four years to certain employees. The cash-settled restricted stock unit awards are classified as liability awards and are reported within accrued expenses and other current liabilities and other long-term liabilities on the condensed consolidated balance sheet. Cash settled restricted stock units entitle such employees to receive a cash amount determined by the fair value of our common stock on the vesting date. The fair values of these awards are remeasured at each reporting period (mark-to-market) until the awards vest and are paid. Fair value fluctuations are recognized as cumulative adjustments to share-based compensation expense and the related liabilities. Cash-settled restricted stock unit awards are subject to forfeiture if employment terminates prior to vesting. Share-based compensation expense for cash-settled restricted stock unit awards are recognized ratably over the service period. Cash-settled restricted stock unit awards do not decrease shares available for future share-based compensation grants.

The impact on our results of operations of recording share-based compensation from cash-settled restricted stock units for the six-month periods ended June 30, 2012 and June 30, 2011 was as follows ($ amounts in thousands):



	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Cost of goods sold	$	48		$	257		$	132		$	934
Selling, general and administrative	432			28			1,190			104
Total, pre-tax	$	480		$	285		$	1,322		$	1,038
Tax effect of stock-based compensation	(178		)	(108		)	(489		)	(394		)
Total, net of tax	$	302		$	177		$	833		$	644

Information regarding activity for cash-settled restricted stock units outstanding is as follows (number of awards in thousands):



	Number of Awards		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Awards outstanding at December 31, 2011	149		$	32.97
Granted	137		33.37
Vested	(38	)	32.55
Forfeited	(14	)	32.04
Awards outstanding at June 30, 2012	234		$	33.33	$	8,471

As of June 30, 2012, unrecognized compensation costs related to non-vested cash-settled restricted stock units was approximately $6.5 million, net of estimated forfeitures. This cost will be amortized on a straight-line basis over the remaining vesting period of approximately 3.0 years.

Employee Stock Purchase Program:

We maintain an Employee Stock Purchase Program (the “Program”). The Program is designed to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended. It enables eligible employees to purchase shares of our common stock at a 5% discount to the fair market value. An aggregate of 1.0 million shares of common stock has been reserved for sale to employees under the Program. At June 30, 2012, approximately 700 thousand shares remain available under the Program.

(amounts in thousands)



	Three months ended		Six months ended
	June 30, 2012	June 30, 2011	June 30, 2012	June 30, 2011
Shares purchased by employees	3	3	5	6

Chief Executive Officer Specific Share-based Compensation

On November 2, 2010, we entered into a new employment agreement with Patrick LePore, in his capacity as President and Chief Executive Officer, effective as of January 1, 2011. His new employment agreement is for a three-year term, ending December 31, 2013, subject to certain early termination events. Pursuant to the employment agreement, Mr. LePore is eligible to receive an incentive compensation award based on the compound annual growth rate (“CAGR”) of our common stock over the course of Mr. LePore’s three-year employment term (January 1, 2011 to December 31, 2013). Mr. LePore will be eligible to receive an incentive compensation award ranging from $2 million (for a three-year CAGR of 4%) to $9 million (for a three-year CAGR of 20% or more). He will not be eligible to receive an incentive compensation award if the Company’s three-year CAGR is below 4%, and no incentive compensation award will be payable if the employment agreement is terminated prior to its expiration unless a change of control (as defined in the agreement) has occurred. These CAGR based awards will be classified as liability awards and are reported within accrued expenses and other current liabilities and other long-term liabilities on the condensed consolidated balance sheet. The fair values of these awards are remeasured at each reporting period (mark-to-market) using a Monte Carlo valuation model until the awards vest and are paid. Fair value fluctuations are recognized as cumulative adjustments to share-based compensation expense and the related liabilities. Share-based compensation expense for these CAGR awards will be recognized ratably over the three-year service period. From January 1, 2011 through June 30, 2012, we recognized $749 thousand of expense associated with this plan.

In January 2011, Mr. LePore was granted an equity award consisting of restricted stock units with a total grant date economic value of approximately $1.85 million. The units will vest on the earlier of (a) the expiration of Mr. LePore’s employment term on December 31, 2013, (b) the date that a change of control (as defined in the agreement) occurs, or (c) the date of an eligible earlier termination of Mr. LePore’s employment term in accordance with the provisions of the agreement. The related share-based compensation expense is being recorded over the three-year term of the new employment agreement, which is the vesting period. The fair value of restricted stock units was based on the market value of our common stock on the date of grant.