Stock-Based Incentive Plans

6 Months Ended

Jun. 30, 2013

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 February 6, 2013, 359,371 restricted stock units were awarded, including 9,975 awarded to the Company’s directors who are not employees, at an estimated value of $31.96 per share, based on the closing price on February 5, 2013. 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, 2013:

					Aggregate
			Weighted-		Intrinsic
	Shares		Average		Value *
Unvested Restricted Stock Units (RSUs)	(in thousands)		Price		(in thousands)
Outstanding at January 1, 2013	264		$	33.23
Awarded	359
Vested	(169	)
Forfeited	(1	)
Outstanding at June 30, 2013	453		$	32.45	$	13,339
Outstanding and expected to vest at June 30, 2013	442		$	32.45	$	12,993

*  The intrinsic value is calculated using the closing price per share of $29.42 as reported by the New York Stock Exchange on June 28, 2013.

Based on the market value on the award date, the total intrinsic value of vested restricted stock units during the six-month periods ended June 30, 2013 and 2012, was $5.5 million and $3.1 million, respectively.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model. Expected volatility was based on historical volatilities of the Company’s common stock measured monthly over a term that is equivalent to the expected life of the stock option. The expected term of each stock option was 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 was 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 was based on the expected dividend yield on the grant date.

No stock options were granted in 2012 or the first half of 2013. The following table summarizes the Company’s stock option activity for the six months ended June 30, 2013:

					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, 2013	1,907		$	31.58
Exercised	(30	)	25.34
Forfeited	(374	)	40.65
Outstanding at June 30, 2013	1,503		$	29.45		$	717
Outstanding and expected to vest at June 30, 2013	1,478		$	29.44	4.2	$	713
Exercisable at June 30, 2013	890		$	29.40	3.9	$	631

*  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 $29.42 as reported by the New York Stock Exchange on June 28, 2013.

The total intrinsic value of stock options exercised during the six-month periods ended June 30, 2013 and 2012, was $0.2 million and $0.7 million, respectively.

A summary of the status of unvested stock options as of June 30, 2013, and changes during the six months ended June 30, 2013, are presented below:

			Weighted-
			Average
	Shares		Grant-Date
Unvested Stock Options	(in thousands)		Fair Value
Unvested at January 1, 2013	826		$	10.25
Vested	(212	)	10.17
Forfeited	(1	)	10.33
Unvested at June 30, 2013	613		$	10.27

As of June 30, 2013, $12.8 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 2013, are expected to be recognized over a weighted-average period of 2.0 years.