Share-Based Compensation

6 Months Ended

Jun. 30, 2011

Share-Based Compensation

Share-Based Compensation

Note 12 – Share-Based Compensation

Under the 2007 Incentive Compensation Plan (the "2007 Plan"), the Company may grant stock options, stock appreciation rights, restricted stock awards and phantom stock and restricted stock unit awards to selected employees and non-employee directors. The 2007 Plan also provides for the issuance of common stock to non-employee directors as all or part of their annual compensation for serving as directors, as may be determined by the board of directors.

Non-employee directors of the Company are paid a portion of their annual retainer in unrestricted shares of common stock. For purposes of determining the number of shares of common stock to be issued, shares are valued at the average of the high and low price of the Company's common stock on the NYSE on the last trading day of the quarter. The Unaudited Condensed Statements of Consolidated Income include share-based compensation expense for common stock granted to non-employee directors as a component of Selling, general and administrative expenses.

Set forth below is the detail of share-based compensation expense for option grants, restricted stock awards and restricted stock unit awards included as a component of Selling, general and administrative expenses (in thousands, except share information):

	Three Months Ended June 30,					Six Months Ended June 30,
	2011		2010			2011		2010
Stock options and restricted stock awards	$	1,363	$	1,105		$	3,368	$	2,779
Restricted stock unit awards		148		(41	)		330		112
	$	1,511	$	1,064		$	3,698	$	2,891
Number of shares issued to non-employee directors		2,050		1,956			3,985		4,080

Compensation expense for nonvested share-based awards is expected to be recognized as follows (in thousands):

Remaining six months of 2011	$	3,099
2012		4,586
2013		2,362
2014		132
	$	10,179

Unearned compensation expense is recognized over the vesting period for the particular grant. Total unrecognized compensation cost will be adjusted for future changes in actual and estimated forfeitures and fluctuations in the fair value of restricted stock unit awards.

Stock Options

Options granted generally vest in equal increments over a three-year period from the grant date. Upon any change in control of the Company, as defined in the applicable plan, or upon death, disability or retirement, the stock options become 100% vested and exercisable. The Company accounts for options that vest over more than one year as one award and recognizes expense related to those awards on a straight-line basis over the vesting period. During the six months ended June 30, 2011, the Company awarded stock options with a vesting period of one year to its chief executive officer in connection with achievement of financial performance criteria in 2010 under the Company's high-performance incentive plan.

A summary of the stock options granted is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Three year vesting		—		2,700		200,200		238,050
One year vesting		—		—		5,289		—
		—		2,700		205,489		238,050

The fair value of options granted during the six months ended June 30, 2011 and 2010 was estimated at the date of grant using a Black-Scholes options pricing model with the following weighted-average assumptions:

	2011			2010
Risk-free interest rate		2.8	%		2.7	%
Dividend yield		—			—
Volatility factor of Company common stock		0.56			0.58
Weighted-average expected option life (years)		6.0			6.0
Weighted-average grant-date fair value	$	20.01		$	17.23

The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the term of the options being valued. The dividend yield assumption is zero, as the Company intends to continue to retain earnings for use in the operations of the business and does not anticipate paying dividends in the foreseeable future. Expected volatilities are based on historical volatility of the Company's common stock. The expected term of options granted is determined using the simplified method allowed by Staff Accounting Bulletin ("SAB") No. 110 as historical data was not sufficient to provide a reasonable estimate. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.

The following table sets forth the number of shares and weighted-average grant-date fair value:

	Shares			Weighted Average Fair Value at Grant Date
Non-vested at January 1, 2011		397,914		$	17.07
Granted during the first six months of 2011		205,489		$	20.01
Vested during the first six months of 2011		(183,642	)	$	18.63
Forfeited during the first six months of 2011		(3,284	)	$	17.30
Non-vested at June 30, 2011		416,477		$	18.17
Non-vested at January 1, 2010		337,812		$	18.96
Granted during the first six months of 2010		238,050		$	17.23
Vested during the first six months of 2010		(169,709	)	$	21.10
Forfeited during the first six months of 2010		(7,869	)	$	17.34
Non-vested at June 30, 2010		398,284		$	17.04

A summary of the Company's stock option activity for the six months ended June 30, 2011 is as follows (aggregate intrinsic value in thousands):

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2011		1,071,454		$	36.27
Granted		205,489		$	36.51
Exercised		(5,481	)	$	28.64
Expired unexercised		(1,500	)	$	53.63
Forfeited		(3,284	)	$	31.45
Outstanding at June 30, 2011		1,266,678		$	36.33		6.66	$	10,178
Vested or expected to vest at June 30, 2011		1,235,424		$	36.33		6.61	$	9,949
Exercisable at June 30, 2011		850,201		$	38.35		5.52	$	6,668

The Company may use authorized and unissued or treasury shares to satisfy stock option exercises and restricted stock awards. The Company does not settle stock options for cash. The intrinsic value of an option represents the amount by which the market value of the stock exceeds the exercise price of the option.

Cash payments received in connection with the exercise of stock options and the intrinsic value of options exercised was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cash proceeds from exercise of stock options	$	141	$	10	$	157	$	3,802
Intrinsic value of options exercised	$	45	$	7	$	47	$	2,063

Restricted Stock – Performance-Based Awards

The Company grants performance-based restricted stock awards that vest subject to the Company's financial performance. The number of shares of restricted stock that ultimately vest is based upon the Company's achievement of specific measurable performance criteria. A recipient of performance-based restricted stock may earn a total award ranging from 0% to 100% of the initial grant, with target being 50% of the initial grant. The shares awarded during 2011 will vest upon the satisfaction of established performance criteria based on consolidated EBITDA margin (defined as operating profit plus depreciation and amortization expense divided by revenue) percentage and average return on net assets, in each case over a three-year performance period ending December 31, 2013. Shares awarded during 2010 and 2009 will vest upon the satisfaction of established performance criteria based on consolidated EBITDA margin measured against a predetermined peer group, and average return on net assets, in each case over three-year performance periods ending December 31, 2012 and 2011, respectively.

A summary of the Company's performance-based restricted stock awards for the six months ended June 30, 2011 is as follows:

	Shares			Weighted Average Grant Date Fair Value
Non-vested at January 1, 2011		253,975		$	32.90
Granted		117,770		$	36.51
Vested		(1,773	)	$	58.57
Forfeited		(54,502	)	$	57.71
Non-vested at June 30, 2011		315,470		$	29.82
Expected to vest at June 30, 2011		93,848

The value of the performance-based restricted stock awards was based upon the market price of an unrestricted share of the Company's common stock at the date of grant. The Company recognizes expense related to performance-based restricted stock ratably over the requisite performance period based upon the number of shares that are anticipated to vest. The number of shares anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the shares become 100% vested at the target level. In the event of death or disability, a pro rata number of shares remain eligible for vesting at the end of the performance period.

The performance period for shares awarded during 2008 ended on December 31, 2010. Such shares were subject to vesting based upon the level of satisfaction of established performance criteria based on the Company's consolidated operating profit and average return on net assets, in each case over the three-year performance period ended December 31, 2010. Upon vesting, employees surrendered shares of common stock to the Company to pay required minimum statutory withholding taxes applicable to the vesting of restricted stock. The surrendered shares are held by the Company as treasury stock.

The performance period for shares awarded during 2007 ended on December 31, 2009. Certain shares awarded during 2007 were subject to vesting based upon the level of satisfaction of established performance criteria, based on the Company's consolidated operating profit and average return on net assets, in each case over the three-year performance period ended December 31, 2009. Upon vesting, employees surrendered shares of common stock to the Company to pay required minimum statutory withholding taxes applicable to the vesting of restricted stock. The surrendered shares are held by the Company as treasury stock. Additional shares issued in 2007 did not vest as the Company did not meet an established earnings target during any one of the years in the three-year performance period ended December 31, 2009.

Based upon the level of satisfaction of the performance objectives, as determined by the Compensation Committee, the following performance-based shares vested and were issued:

	Six Months Ended June 30,
	2011			2010
Vested based on meeting performance criteria		1,773			74,676
Shares surrendered to pay withholding taxes		(578	)		(26,651	)
Net shares issued		1,195			48,025

Restricted Stock Units – Performance-Based Awards

The Company awards performance-based restricted stock units to employees outside the U.S. that vest subject to the Company's financial performance for three-year performance periods. These awards will be settled in cash based on the value of the Company's common stock at the vesting date. Since the awards will be settled in cash, they are recorded as a liability award in accordance with the "Stock Compensation" topic of the ASC. Accordingly, the Company records these awards as a component of other non-current liabilities on the Unaudited Condensed Consolidated Balance Sheets. The fair value of the award, which determines the measurement of the liability on the balance sheet, is remeasured at each reporting period until the award is settled. Fluctuations in the fair value of the liability awards are recorded as increases or decreases to compensation expense. Over the life of these awards, the cumulative amount of compensation expense recognized will match the actual cash paid. The number of restricted stock units that ultimately vest is based upon the Company's achievement of the same performance criteria as the performance-based restricted stock awards described above.

A summary of the Company's performance-based restricted stock unit awards for the six months ended June 30, 2011 is as follows:

	Units
Non-vested at January 1, 2011		38,530
Granted		17,125
Forfeited		(2,220	)
Non-vested at June 30, 2011		53,435
Expected to vest at June 30, 2011		14,661

The Company recognizes expense related to performance-based restricted stock units ratably over the requisite performance period based upon the number of units that are anticipated to vest. The number of units anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the units become 100% vested at the target level. In the event of death or disability, a pro rata number of units remain eligible for vesting at the end of the performance period.

Restricted Stock – Time-Based Awards

The Company awards time-based restricted stock that vest three years from the date of grant, subject to the respective recipient remaining employed by the Company on that date. During the six months ended June 30, 2011, the Company awarded time-based restricted stock with a vesting period of one year to its chief executive officer in connection with achievement in of financial performance criteria 2010 under the Company's high-performance annual incentive program.

A summary of the Company's time-based restricted stock awards for the six months ended June 30, 2011 is as follows:

	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011		99,025		$	32.67
Granted - one year vesting		60,825		$	36.51
Granted - three year vesting		2,767		$	36.51
Vested		(15,575	)	$	58.41
Forfeited		(400	)	$	30.66
Nonvested at June 30, 2011		146,642		$	31.61
Expected to vest at June 30, 2011		124,242

The value of the time-based restricted stock awards was based upon the market price of an unrestricted share of the Company's common stock at the date of grant. The Company recognizes expense related to time-based restricted stock ratably over the requisite vesting period based upon the number of shares that are anticipated to vest. The number of shares anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the shares become 100% vested. A pro rata number of shares will vest in the event of death or disability prior to the stated vesting date.

Upon vesting, employees may surrender shares of common stock to the Company to pay required minimum statutory withholding taxes applicable to the vesting of time-based restricted stock. The surrendered shares are held by the Company as treasury stock.

The following time-based shares vested and were issued:

	Six Months Ended June 30,
	2011			2010
Vested - 3 year vesting period		15,575			22,760
Vested - 1 year vesting period		—			4,127
Shares surrendered to pay withholding taxes		(5,023	)		(9,233	)
Net shares issued		10,552			17,654

Restricted Stock Units – Time-Based Awards

The Company awards time-based restricted stock units to employees outside the U.S. These awards will be settled in cash based on the value of the Company's common stock at the vesting date. Since the awards will be settled in cash, they are recorded as a liability award in accordance with the "Stock Compensation" topic of the ASC. Accordingly, the Company records these awards as a component of other non-current liabilities on the Unaudited Condensed Consolidated Balance Sheets. The fair value of the award, which determines the measurement of the liability on the balance sheet, is remeasured at each reporting period until the award is settled. Fluctuations in the fair value of the liability awards are recorded as increases or decreases to compensation expense. Over the life of these awards, the cumulative amount of compensation expense recognized will match the actual cash paid. The restricted share units vest three years from the date of grant, subject to the respective recipient remaining employed by the Company on that date. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the units become 100% vested. A pro rata number of units will vest in the event of death or disability prior to the stated vesting date.

A summary of the Company's time-based restricted stock unit awards for the first six months of 2011 is as follows:

	Units
Nonvested at January 1, 2011		13,850
Granted		9,095
Forfeited		(800	)
Nonvested at June 30, 2011		22,145
Expected to vest at June 30, 2011		20,240

The Company recognizes expense related to time-based restricted stock units ratably over the requisite vesting period based upon the number of units that are anticipated to vest. The number of units anticipated to vest is evaluated quarterly and compensation expense is adjusted accordingly. Upon any change in control of the Company, as defined in the applicable plan, or upon retirement, the units become 100% vested. A pro rata number of shares will vest in the event of death or disability prior to the stated vesting date.