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Stock-Based Incentive Plans
 6 Months Ended
Jun. 30, 2012
Stock-Based Incentive Plans  
Stock-Based Incentive Plans

8.                                       Stock-Based Incentive Plans

 

The Company currently has one stock-based incentive plan, which incorporates and supersedes its two previous plans (see Note 1 “Basis of Presentation — Accounting for Stock-Based Compensation”). Participants are granted stock-based awards only if the applicable Company-wide or profit-center operating goals, or both, established by the Compensation and Leadership Development Committee of the Board of Directors at the beginning of the year, are met. Certain participants may have additional goals based on strategic initiatives of the Company.

 

The fair value of each restricted stock unit award is estimated on the date of the award based on the closing market price of the underlying stock on the day preceding the date of the award. On January 30, 2012, 361,061 restricted stock units were awarded, including 8,550 awarded to the Company’s independent directors, at an estimated value of $33.23 per share, based on the closing price on January 27, 2012. The restrictions on these awards generally lapse one quarter on the date of the award and one quarter on each of the first, second and third anniversaries of the date of the award.

 

The following table summarizes the Company’s unvested restricted stock unit activity for the six months ended June 30, 2012:

 

 

 

 

 

 

 

Aggregate

 

 

 

 

 

Weighted-

 

Intrinsic

 

 

 

Shares

 

Average

 

Value *

 

Unvested Restricted Stock Units (RSUs)

 

(in thousands)

 

Price

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2012

 

—

 

$

—

 

 

 

Awarded

 

361

 

33.23

 

 

 

Vested

 

(93

)

33.23

 

 

 

Forfeited

 

(1

)

33.23

 

 

 

Outstanding at June 30, 2012

 

267

 

$

33.23

 

$

7,867

 

Outstanding and expected to vest at June 30, 2012

 

259

 

$

33.23

 

$

7,634

 

 

 

*  The intrinsic value is calculated using the closing price per share of $29.51 as reported by the New York Stock Exchange on June 29, 2012.

 

The total intrinsic value of restricted stock units vested during the six months ended June 30, 2012, was $3.1 million, based on the market value on the award date.

 

The fair value of each stock option award was estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility is based on historical volatilities of the Company’s common stock measured monthly over a term that is equivalent to the expected life of the award. The expected term of each award is estimated based on the Company’s prior exercise experience and future expectations of the exercise and termination behavior of the grantees. The risk-free rate is based on the yield of United States Treasury zero-coupon bonds with maturities comparable to the expected life in effect at the time of grant. The dividend yield is based on the expected dividend yield on the grant date.

 

No stock options were granted in 2012.

 

Black-Scholes option pricing model assumptions for stock options granted in 2011 are as follows:

 

 

Number

 

 

 

Risk-

 

 

 

 

 

 

 

 

 

Weighted

 

of Options

 

 

 

Free

 

 

 

 

 

 

 

 

 

Average

 

Granted

 

Grant

 

Interest

 

Dividend

 

Expected

 

 

 

 

 

Fair

 

(in thousands)

 

Date

 

Rate

 

Yield

 

Life

 

Volatility

 

Exercise Price

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1994 Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,362

 

 

02/03/11

 

2.62

%

1.75

%

6.2 years

 

39.0

%

$29.66 to $32.63

 

$

10.33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1995 Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

02/15/11

 

2.92

%

1.76

%

6.6 years

 

38.0

%

$29.58

 

$

10.49

 

 

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2012:

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

Weighted-

 

Average

 

Aggregate

 

 

 

 

 

Average

 

Remaining

 

Intrinsic

 

 

 

Shares

 

Exercise

 

Contractual

 

Value *

 

Non-Qualified Stock Options

 

(in thousands)

 

Price

 

Life (in years)

 

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2012

 

2,134

 

$

31.15

 

 

 

 

 

Exercised

 

(82

)

24.12

 

 

 

 

 

Forfeited

 

(24

)

35.97

 

 

 

 

 

Outstanding at June 30, 2012

 

2,028

 

$

31.38

 

4.3

 

$

1,041

 

Outstanding and expected to vest at June 30, 2012

 

1,985

 

$

31.43

 

4.3

 

$

1,024

 

Exercisable at June 30, 2012

 

1,027

 

$

33.44

 

3.2

 

$

655

 

 

 

*  The intrinsic value represents the amount, if any, by which the fair market value of the underlying common stock exceeds the exercise price of the stock option, using the closing price per share of $29.51 as reported by the New York Stock Exchange on June 29, 2012.

 

The total intrinsic value of stock options exercised during the six months ended June 30, 2012 and 2011, was $0.7 million and $40 thousand, respectively.

 

A summary of the status of unvested stock options as of June 30, 2012, and changes during the six months ended June 30, 2012, are presented below:

 

 

 

 

 

Weighted-

 

 

 

 

 

Average

 

 

 

Shares

 

Grant-Date

 

Unvested Stock Options

 

(in thousands)

 

Fair Value

 

 

 

 

 

 

 

Unvested at January 1, 2012

 

1,242

 

$

10.11

 

Vested

 

(238

)

9.84

 

Forfeited

 

(3

)

10.33

 

Unvested at June 30, 2012

 

1,001

 

$

10.17

 

 

As of June 30, 2012, $22.0 million of total unrecognized compensation cost was related to unvested stock-based compensation arrangements under the 2011 Incentive Plan. The portions of this cost related to stock options, and restricted stock units awarded through January 2012, are expected to be recognized over a weighted-average period of 2.6 years.