Share-Based Compensation

Stock Benefit Plans

We maintain benefit plans whereby shares of our common stock may be issued pursuant to the exercise of stock options or restricted stock granted to officers and key employees. Our Amended and Restated Incentive Plan reserves 44,000,000 shares of common stock for outstanding and future awards of stock options, restricted stock, and other stock based awards to officers and key employees.

Our benefit plans allow for options to be granted as either non-qualified or incentive stock options. The options historically have been granted annually, or upon hire, as approved by the Compensation Committee of the Board of Directors. The options are granted with an exercise price equal to the market price of our common stock on the date the grant, as approved by the Compensation Committee of the Board of Directors. The options are generally exercisable at a rate of 33¹/3% each year unless alternative vesting methods are approved by the Compensation Committee of the Board of Directors. Restricted stock awards are generally expensed to income ratably over the period during which the restrictions lapse. At December 31, 2012 and 2011, 9,218,551 and 11,789,483 shares, respectively, were reserved for future option and restricted stock grants under our stock benefit plans.

We utilize the Black-Scholes option valuation model for estimating the fair value of our stock options. This model allows the use of a range of assumptions related to volatility, risk-free interest rate, expected holding period, and dividend yield. The expected volatility utilized in the valuation model is based on the historical volatility of our stock price. The dividend yield and expected holding period are based on historical experience and management’s estimate of future events. The risk-free interest rate is derived from the U.S. Treasury yield curve based on the expected life of the option in effect at the time of grant. The fair values of our stock options are calculated using the following weighted average assumptions, based on the methods described above for the years ended December 31, 2012, 2011, and 2010:



	Years Ended December 31,
Assumptions	2012		2011		2010
Dividend yield	1.8	%	2.4	%	1.9	%
Expected volatility	40.8	%	38.4	%	37.5	%
Risk-free interest rate	0.8	%	2.4	%	2.3	%
Expected holding period (years)	5.0		5.0		5.0

The following table summarizes certain information with respect to stock option and restricted share compensation for 2012, 2011, and 2010, as included in our consolidated statement of operations for those respective periods:



	December 31,
	2012		2011		2010
	(In thousands)
Total pretax employee share-based compensation expense included in net income	$	10,983	$	9,144	$	8,878
Income tax benefit related to share-based compensation included in net income	$	4,092	$	3,218	$	3,740

We realized windfall tax deductions of $16.3 million, $4.9 million, and $2.7 million in excess of previously recorded tax benefits, based on the option and restricted share value at the time of grant for the years ended December 31, 2012, 2011, and 2010, respectively. Pursuant to the Stock-Based Compensation Topic of the ASC, the additional tax benefit associated with the windfall is not recognized until the deduction reduces taxes payable.

Stock Options

The following table sets forth stock option activity for the year ended December 31, 2012:

(Shares reported in whole numbers and not in thousands)



	Options		Weighted-Average Exercise Price
Outstanding at December 31, 2011	13,404,216		$	7.88
Granted	2,035,400		$	11.17
Exercised	(2,993,046	)	$	6.14
Canceled	(44,600	)	$	9.61
Outstanding at December 31, 2012	12,401,970		$	8.84
Exercisable at December 31, 2012	8,171,966		$	8.33

During the twelve months ended December 31, 2012, 44,600 of the canceled shares were forfeited. The aggregate intrinsic value for stock options outstanding and exercisable was $61.3 million and $44.4 million, respectively, at December 31, 2012.

Set forth below is certain information related to stock options outstanding and exercisable at December 31, 2012:

(Shares reported in whole numbers and not in thousands)



	Options Outstanding				Options Exercisable
	Number Outstanding at December 31,	Weighted- Average Remaining	Weighted- Average		Number Exercisable at December 31,	Weighted- Average
Range of Exercise Price	2012	Contractual Life	Exercise Price		2012	Exercise Price
$4.01 — 6.00	2,152,554	4.1	$	4.19	2,152,554	$	4.19
$6.01 — 9.00	2,691,827	4.1	$	7.80	1,978,662	$	7.86
$9.01 — 15.00	7,557,589	4.8	$	10.53	4,040,750	$	10.77
$4.01 — 15.00	12,401,970	4.5	$	8.84	8,171,966	$	8.33

Other information pertaining to option activity during the years ended December 31 is as follows:



	2012		2011		2010
Weighted average grant-date fair value of stock options granted	$	3.41	$	2.73	$	2.31
Total fair value of stock options vested (in thousands)	$	5,088	$	5,015	$	6,022
Total intrinsic value of stock options exercised (in thousands)	$	20,333	$	5,184	$	1,804

For the years ended December 31, 2012, 2011, and 2010, cash received from the exercise of stock options was $18.4 million, $8.2 million, and $1.8 million, respectively. We recognized compensation expense of $6.2 million, $5.1 million, and $5.3 million related to stock options for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012, the unrecognized compensation expense related to stock options of $7.2 million is expected to be recognized over a weighted average period of 1.3 years.

Restricted Shares

Restricted share activity was as follows:

(Shares reported in whole numbers)



	Restricted Shares		Weighted-Average Grant-Date Fair Value
Nonvested restricted shares at December 31, 2011	1,165,170		$	7.53
Granted	483,170		$	11.18
Vested	(543,761	)	$	6.21
Nonvested restricted shares at December 31, 2012	1,104,579		$	9.78

The fair market value of our restricted stock, as determined on the grant date, is being amortized and charged to income (with an offsetting credit to Capital in excess of par value) generally over the average period during which the restrictions lapse. At December 31, 2012, unrecognized compensation expense of $5.6 million related to restricted shares, which is recorded in Capital in excess of par value on our balance sheet, is expected to be recognized over a weighted average period of 1.3 years. We recognized compensation expense of $4.9 million, $4.1 million, and $3.6 million during the years ended December 31, 2012, 2011, and 2010, respectively, related to our restricted shares.