STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

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 quarter of 2012 was approximately $5.8 million ($3.9 million after tax), or $0.06 per basic and dilutedshare.  The income tax benefit related to this compensation expense was approximately $1.9 million.  Approximately $5.3 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 first quarter of 2011 was approximately $7.7 million ($5.4 million after tax), or $0.08 per basic and dilutedshare.  The income tax benefit related to this compensation expense was approximately $2.3 million.  Approximately $7.3 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 and $11.36 per share in 2012 and 2011, 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:

Three months ended March 31,	2012		2011
Dividend Yield	1.8	%	1.7	%
Expected Stock Price Volatility	22.9	%	23.3	%
Risk-free Interest Rate	1.3	%	2.7	%
Expected Life of Option (years)	6.9		6.9

There were no grants under the Director Stock Option Plan during the three months ended 2012 and 2011.

A summary of option activity under the Company’s stock option plans during the quarter ended March 31, 2012 is presented below:

	Stock Awards Plans					Director Stock Option Plans
	Weighted Average					Weighted Average
	Shares			Exercise Price		Shares			Exercise Price
Outstanding, January 1, 2012	8,345,917			$	32.90	270,000			$	37.98
Granted	1,233,800			51.81		—			—
Exercised	(799,811		)	25.99		(18,500		)	25.67
Forfeited or expired	(2,033		)	41.44		—			—
Outstanding at March 31, 2012	8,777,873			$	36.18	251,500			$	38.89
Exercisable at March 31, 2012	6,284,281			$	31.45	107,336			$	29.75
Weighted-Average Remaining Contractual Term (Years):
Outstanding at March 31, 2012	6.4					7.1
Exercisable at March 31, 2012	5.2					5.0
Aggregate Intrinsic Value ($000):
Outstanding at March 31, 2012	$	160,487				$	3,994
Exercisable at March 31, 2012	$	143,863				$	2,685
Intrinsic Value of Options Exercised ($000) During the Three Months Ended:
March 31, 2012	$	21,524				$	509
March 31, 2011	$	11,069				$	187

The fair value of shares vested during the three months ended March 31, 2012 and 2011 was $11.4 million and $10.8 million, respectively.  Cash received from option exercises was approximately $19.7 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $5.8 million in the three months ended March 31, 2012.  As of March 31, 2012, the remaining valuation of stock option awards to be expensed in future periods was $14.9 million and the related weighted-average period over which it is expected to be recognized is 1.6 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 March 31, 2012, and changes during the period then ended is presented below:

			Weighted-Average
	Shares		Grant-Date Fair Value
Nonvested at January 1, 2012	17,293		$	39.21
Granted	13,092		52.52
Vested	(8,440	)	37.47
Nonvested at March 31, 2012	21,945		$	47.82

Compensation expense recorded attributable to restricted stock unit grants for the first quarter of 2012 and 2011 was approximately $219 thousand and $208 thousand, respectively.  The fair value of units vested during the three months ended March 31, 2012 and 2011 was $316 thousand and $346 thousand, respectively.  The intrinsic value of units vested during the three months ended March 31, 2012 and 2011 was $448 thousand and $492 thousand, respectively.  As of March 31, 2012 there was $574 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted-average period of 1.8 years.