NOTE 13 STOCK-BASED COMPENSATION

The Company issues stock options and restricted stock units to employees under Stock Awards Plans approved by shareholders. Stock options are issued to non-employee directors for their services as directors under Director Stock Option Plans approved by shareholders. Options are awarded with the exercise price equal to the market price on the date of grant and generally become exercisable over three years and expire 10 years after grant. Restricted stock units generally vest over three years.

Compensation expense recorded attributable to stock options for the year ended December 31, 2012 was approximately $12.7 million ($8.5 million after tax), or $0.13 per share basic and $0.12 per share diluted. The income tax benefit related to this compensation expense was approximately $4.2 million. Approximately $11.3 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the year ended December 31, 2011 was approximately $13.7 million ($9.6 million after tax), or $0.14 per share basic and diluted. The income tax benefit related to this compensation expense was approximately $4.1 million. Approximately $12.5 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the year ended December 31, 2010 was approximately $11.2 million ($8.0 million after tax), or $0.12 per share basic and $0.11 per share diluted. The income tax benefit related to this compensation expense was approximately $3.2 million. Approximately $9.9 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales.

The Company uses historical data to estimate expected life and volatility. The weighted-average fair value of stock options granted under the Stock Awards Plans was $10.35, $11.36 and $9.18 per share in 2012, 2011 and 2010, respectively. These values were estimated on the respective dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:




Stock Awards Plans: Years ended December 31,	2012		2011		2010

Dividend Yield		1.8%		1.7%		1.8%
Expected Stock Price Volatility		22.9%		23.3%		22.7%
Risk-free Interest Rate		1.3%		2.7%		3.6%
Expected Life of Option (years)		6.9		6.9		6.9

The fair value of stock options granted under the Director Stock Option Plan in 2012 was $10.59. The fair value of stock options granted under the Director Stock Option Plan in 2011 and 2010 was $12.00 and $10.07, respectively. These values were estimated on the respective date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:




Director Stock Option Plans: Years ended December 31,	2012		2011		2010

Dividend Yield		1.7%		1.6%		1.7%
Expected Stock Price Volatility		22.5%		22.9%		22.6%
Risk-free Interest Rate		1.3%		2.5%		3.4%
Expected Life of Option (years)		6.9		6.9		6.9

A summary of option activity under the Company's stock option plans as of December 31, 2012, and changes during the period then ended is presented below:




	Stock Awards Plans					Director Stock Option Plans
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price

Outstanding, January 1, 2012		8,345,917		$	32.90		270,000		$	37.98
Granted		1,245,300			51.81		85,500			53.72
Exercised		(1,613,616	)		25.26		(69,833	)		26.24
Forfeited or expired		(98,404	)		47.44		(9,000	)		48.02

Outstanding at December 31, 2012		7,879,197		$	37.27		276,667		$	45.48

Exercisable at December 31, 2012		5,474,974		$	32.49		121,834		$	38.09

Weighted-Average Remaining Contractual Term (Years):
Outstanding at December 31, 2012		6.0								7.8
Exercisable at December 31, 2012		4.9								6.6
Aggregate Intrinsic Value:
Outstanding at December 31, 2012	$	87,889							$	1,412
Exercisable at December 31, 2012	$	83,577							$	1,274
Intrinsic Value of Options Exercised During the Years Ended:
December 31, 2012	$	42,226							$	1,674
December 31, 2011	$	32,782							$	970
December 31, 2010	$	31,217							$	1,151

The fair value of shares vested during the years ended December 31, 2012, 2011 and 2010 was $12.1 million, $11.1 million and $11.7 million, respectively. Cash received from option exercises was approximately $44.6 million and the tax deduction from option exercises was approximately $11.7 million in the year ended December 31, 2012. As of December 31, 2012, the remaining valuation of stock option awards to be expensed in future periods was $8.7 million and the related weighted-average period over which it is expected to be recognized is 1.4 years.

The fair value of restricted stock grants is the market price of the underlying shares on the grant date. A summary of restricted stock unit activity as of December 31, 2012, and changes during the period then ended is presented below:




	Shares			Weighted-Average Grant-Date Fair Value

Nonvested at January 1, 2012		17,293		$	39.21
Granted		17,592			52.52
Vested		(8,440	)		37.47
Forfeited		(583	)		42.56

Nonvested at December 31, 2012		25,862		$	48.76

Compensation expense recorded attributable to restricted stock unit grants for the years ended December 31, 2012, 2011 and 2010 was approximately $501 thousand, $267 thousand and $467 thousand, respectively. The fair value of units vested during the years ended December 31, 2012, 2011 and 2010 was $316 thousand, $346 thousand and $298 thousand, respectively. The intrinsic value of units vested during the years ended December 31, 2012, 2011 and 2010 was $448 thousand, $492 thousand and $330 thousand, respectively. As of December 31, 2012, there was $502 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted average period of 1.6 years.