STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 11 — 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 first nine months of 2011 was approximately $12.1 million ($8.5 million after tax), or $0.13 per basic share and $0.12 per diluted share.  The income tax benefit related to this compensation expense was approximately $3.6 million.  Approximately $11.2 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 first nine months of 2010 was approximately $9.8 million ($7.0 million after tax), or $0.10 per share (basic and diluted).  The income tax benefit related to this compensation expense was approximately $2.9 million.  Approximately $8.8 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 $11.36 and $9.18 per share in 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:

Nine months ended September 30,	2011		2010
Dividend Yield	1.7	%	1.8	%
Expected Stock Price Volatility	23.3	%	22.7	%
Risk-free Interest Rate	2.7	%	3.7	%
Expected Life of Option (years)	6.9		6.9

The fair value of stock options granted under the Director Stock Option Plan during the third quarter of 2011 was $12.00.  The fair value of stock options granted under the Director Stock Option Plan during the third quarter of 2010 was $10.07.  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:

Nine months ended September 30,	2011		2010
Dividend Yield	1.6	%	1.7	%
Expected Stock Price Volatility	22.9	%	22.6	%
Risk-free Interest Rate	2.5	%	3.4	%
Expected Life of Option (years)	6.9		6.9

A summary of option activity under the Company’s stock option plans as of September 30, 2011, and changes during the nine months then ended is presented below:

	Stock Awards Plans					Director Stock Option Plans
	Weighted Average					Weighted Average
	Shares			Exercise Price		Shares			Exercise Price
Outstanding, January 1, 2011	8,208,736			$	28.91	219,000			$	30.40
Granted	1,284,150			48.21		85,500			51.26
Exercised	(859,487		)	20.79		(34,500		)	22.79
Forfeited or expired	(37,030		)	33.72		—			—
Outstanding at September 30, 2011	8,596,369			$	32.59	270,000			$	37.98
Exercisable at September 30, 2011	6,104,374			$	28.91	125,836			$	29.15
Weighted-Average Remaining Contractual Term (Years):
Outstanding at September 30, 2011	6.1					7.3
Exercisable at September 30, 2011	4.9					5.3
Aggregate Intrinsic Value ($000):
Outstanding at September 30, 2011	$	107,324				$	2,369
Exercisable at September 30, 2011	$	95,097				$	1,953
Intrinsic Value of Options Exercised ($000) During the Nine Months Ended:
September 30, 2011	$	25,475				$	970
September 30, 2010	$	24,034				$	703

The fair value of shares vested during the nine months ended September 30, 2011 and 2010 was $11.1 million and $11.7 million, respectively.  Cash received from option exercises was approximately $17.1 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $6.3 million in the nine months ended September 30, 2011.  Cash received from option exercises was approximately $23.6 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $5.4 million in the nine months ended September 30, 2010.  As of September 30, 2011, the remaining valuation of stock option awards to be expensed in future periods was $9.8 million and the related weighted-average period over which it is expected to be recognized is 1.5 years.

The fair value of restricted stock unit grants is the market price of the underlying shares on the grant date.  A summary of restricted stock unit activity as of September 30, 2011, and changes during the period then ended is presented below:

			Weighted-Average
	Shares		Grant-Date Fair Value
Nonvested at January 1, 2011	22,303		$	34.71
Granted	5,035		49.63
Vested	(10,045	)	34.44
Nonvested at September 30, 2011	17,293		$	39.21

Compensation expense recorded attributable to restricted stock unit grants for the first nine months of 2011 and 2010 was approximately $247 and $452 thousand, respectively.  The fair value of units vested during the nine months ended September 30, 2011 and 2010 was $346 and $298 thousand, respectively.  The intrinsic value of units vested during the nine months ended September 30, 2011 and 2010 was $492 and $330 thousand, respectively.  As of September 30, 2011 there was $125 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted average period of 1.4 years.