Note 9. Stock-Based Employee Compensation

We currently have awards outstanding under three stock-based compensation plans, which provide for awards to our officers, directors and key employees. The plans consist of a 1995 Incentive Stock Option Plan, a 2000 Stock Award Plan, and a 2008 Equity Plan. Our ability to issue new awards under the 1995 Incentive Stock Option Plan and the 2000 Stock Award Plan terminated in accordance with the terms of the plans in February 2005 and September 2009, respectively. The 2008 Equity Plan, as amended, provides for the issuance of up to 11,000,000 shares of our common stock pursuant to grants of (i) incentive and non-qualified stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units and (v) performance shares. During any calendar year, no one individual shall be granted awards of more than 500,000 shares. With limited exceptions, options and restricted stock units outstanding as of December 31, 2012 vest in equal installments over four to five years from the date of grant. With certain limited exceptions, options and restricted stock units are forfeited if the recipient ceases to be a director or employee before the shares vest. Options are granted at a price not less than the fair value of the shares on the date of grant and expire not later than ten years after the date of grant.

In 2012, we redesigned our long-term incentive award program and began to grant performance shares to our officers in lieu of stock options. Under our prior program, our officers received a combination of stock options and restricted stock units. Beginning in 2012, our officers instead receive their long-term incentive awards through a combination of performance shares and restricted stock units. Each performance share award is expressed as a target number of performance shares based upon the fair market value of our common stock on the date the award is issued. The actual number of shares underlying each award (not to exceed 200% of the target number of performance shares) will be determined based upon the Company's achievement of a specified performance target range. For the grants awarded in 2012, the performance target is diluted earnings per share ("EPS") for the year ended December 31, 2012, as adjusted by the Compensation Committee of our Board of Directors for events that are outside of management's control. In 2012, we issued a target number of 329,088 performance shares which will vest on the third anniversary of the award issue date. In February 2013, the Compensation Committee of our Board of Directors set the actual payout level at 94% of target for the performance shares issued in 2012.

We also provide an Employee Stock Purchase Plan ("ESPP") to facilitate the purchase by employees of up to 800,000 shares of common stock in the aggregate. Offerings to employees are made on a quarterly basis. Subject to certain limitations, the purchase price for each share of common stock is equal to 90% of the average of the market prices of the common stock as reported on the New York Stock Exchange on the first business day of the purchase period and the last business day of each month of the purchase period. 35,927, 28,802, and 30,054 shares of our common stock were issued under the ESPP at a weighted-average price of $25.58, $29.46 and $27.87 during 2012, 2011 and 2010, respectively.

Under the chief executive officer's employment agreement, we issued 10,086 shares of our common stock per quarter during 2012, 2011 and 2010 to the chief executive officer.

Total compensation expense recognized for employee stock-based compensation for the years ended December 31, 2012, 2011 and 2010 were as follows:

	Employee Stock-Based Compensation

Classification of expense	2012		2011		2010
In thousands
Marketing, selling and administrative expenses	$	24,153	$	23,803	$	27,598
Payroll and related expenses		—		—		475

Total Compensation Expense	$	24,153	$	23,803	$	28,073

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The estimated fair value of stock options, less estimated forfeitures, is amortized over the vesting period using the graded-vesting method. The majority of our stock option grants occur early in our fiscal year. The assumptions used in the Black-Scholes option-pricing model are as follows:

	2012	2011	2010

Dividend yield	1.5%	0.0%	0.0%
Expected stock price volatility	46.0%	46.0%	45.0%
Risk-free interest rate	1.1%	2.6%	2.6%
Expected option life	6 years	6 years	6 years

Expected volatility was based on a combination of historical and implied volatilities. The risk-free interest rate was based on United States Treasury zero coupon issues with a remaining term equal to the expected option life assumed at the date of grant. The expected term was calculated based on historical experience and represents the time period options actually remain outstanding. We estimate forfeitures based on historical pre-vesting forfeiture rates and revise those estimates as appropriate to reflect actual experience.

Stock options activity and information about stock options outstanding are summarized in the following tables:

Stock Options Activity			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value⁽¹⁾

					(years)		(in thousands)
Outstanding at January 1, 2012	5,671,658		$	30.62		6.15	$	21,887
Granted	7,576		$	26.06
Exercised	(906,011	)	$	16.24
Canceled	(324,450	)	$	30.40

Outstanding at December 31, 2012	4,448,773		$	33.56		4.55	$	25,522

Vested and expected to vest at December 31, 2012	4,367,468		$	33.54		4.50	$	25,113
Options Exercisable at December 31, 2012	3,329,335		$	36.24		3.83	$	12,565

(1): The intrinsic value represents the amount by which the fair value of stock exceeds the option exercise price as of December 31, 2012.

The weighted-average estimated fair value of stock options granted was $9.90, $21.39 and $11.69 during the years ended December 31, 2012, 2011 and 2010, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2012, 2011 and 2010 was $15.3 million, $17.3 million and $26.9 million, respectively. As of December 31, 2012, there was approximately $2.6 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options granted under our stock incentive plans which is expected to be recognized over a weighted-average period of 0.6 years.

Restricted stock units are converted into shares of common stock upon vesting or, if applicable, settle on a one-for-one basis. The cost of these awards is determined using the fair value of our common stock on the date of the grant, and compensation expense is recognized over the vesting period. Restricted stock activity is summarized in the following table:

Restricted Stock Activity			Weighted- Average Grant Date Fair Value

Non-vested share units at January 1, 2012	1,372,225		$	15.67
Granted	599,163		$	30.03
Vested	(613,650	)	$	30.19
Canceled	(161,298	)	$	26.00

Non-vested share units expected to vest as of December 31, 2012	1,196,440		$	14.02

The weighted-average estimated fair value of restricted stock units granted during the year ended December 31, 2011, and 2010 were $45.67 and $25.32, respectively. The total fair value of shares released on the vesting of restricted stock units during the years ended December 31, 2012, 2011 and 2010 was $18.8 million, $25.1 million and $12.0 million, respectively. As of December 31, 2012, we had $9.3 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock unit grants, which will be recognized over the weighted-average period of 1.1 years.

Performance stock awards are converted into shares of common stock upon vesting on a one-for-one basis. We estimate the fair value of each performance share when the grant is authorized and the related service period has commenced. We remeasure the fair value of our performance shares in each subsequent reporting period until the grant date has occurred, which is the date when the performance conditions are satisfied. We recognize compensation cost over the vesting period based on the probability of the service and performance conditions being achieved adjusted for each subsequent fair value measurement until the grant date. If the specified service and performance conditions are not met, compensation expense will not be recognized and any previously recognized compensation expense will be reversed. Performance stock activity is summarized in the following table:

Performance Share Activity			Weighted- Average Grant Date Fair Value

Non-vested share units at January 1, 2012	—		$	—
Granted	329,088		$	30.16
Vested	—		$	—
Canceled	(40,595	)	$	25.74

Non-vested share units expected to vest as of December 31, 2012	288,493		$	30.78

As of December 31, 2012, we had $6.2 million of total unrecognized compensation expense, net of estimated forfeitures, related to performance share unit grants, which will be recognized over the weighted-average period of 2 years.