11.

COMMON STOCK AND SHARE-BASED COMPENSATION

Our authorized shares of capital stock include one million shares of preferred stock and 500 million shares of common stock with a par value of $0.01 per share.

Public Offerings of Equity Securities — In May 2009, we issued and sold 25.4 million shares of our common stock in a public offering. Net proceeds from this offering of $444.7 million were used to reduce our indebtedness under our credit agreements.

Stock Award Plans — As of December 31, 2011, we had three award plans with remaining shares available for issuance. These plans, which are our 1997 Stock Option and Restricted Stock Plan, the 1989 Dean Foods Company Stock Awards Plan (which we adopted upon completion of our acquisition of Legacy Dean) and the Dean Foods Company 2007 Stock Incentive Plan (the "2007 Plan") provide for grants of stock options, stock units, restricted stock and other stock-based awards to employees, officers, directors and, in some cases, consultants, up to a maximum of 37.5 million, 5.7 million and 12.3 million shares, subject to adjustments as provided in these respective plans. Options and other stock-based awards vest in accordance with provisions set forth in the applicable award agreements. The remaining shares available for grant under the historical plans are granted pursuant to the terms and conditions of the 2007 Plan. As of December 31, 2011, we had 8,226,050 shares, in aggregate, available for issuance, which includes 2.34 million shares approved at our 2011 annual stockholders' meeting.

Under our stock award plans, we grant stock options and restricted stock units to certain employees and directors. Non-employee directors also can elect to receive their director's fees in the form of restricted stock in lieu of cash.

Stock Options — Under the terms of our stock option plans, employees and non-employee directors may be granted options to purchase our stock at a price equal to the market price on the date the option is granted. In general, employee options vest one-third on the first anniversary of the grant date, one-third on the second anniversary of the grant date and one-third on the third anniversary of the grant date. All unvested options vest immediately upon a change of control or in certain cases upon death or qualified disability. Options granted to non-employee directors generally vest immediately.

We recognize share-based compensation expense for stock options ratably over the vesting period. The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model, using the following assumptions:

Year Ended December 31

2011

2010

2009

Expected volatility

41%

34%

33%

Expected dividend yield

Expected option term

5 years

4.75 years

Risk-free rate of return

1.32 to 2.30%

1.26 to 2.59%

1.65 to 2.66%

The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to contractual terms (generally 10 years), vesting schedules and expectations of future employee and director behavior. Expected stock price volatility is based on a combination of historical volatility of our stock and expectations with regard to future volatility. The risk-free rates are based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. We have not historically declared or paid a regular cash dividend on our common stock, and we have no current plans to pay a cash dividend in the future.

The following table summarizes stock option activity during the year ended December 31, 2011:


	Options		Weighted Average Exercise Price		Weighted Average Contractual Life		Aggregate Intrinsic Value
Options outstanding at January 1, 2011		21,523,733	$	20.20
Granted		1,869,603		10.35
Forfeited and cancelled(1)		(3,076,382)		22.40
Exercised		(688,754)		10.00

Options outstanding at December 31, 2011		19,628,200		19.27		4.54	$	1,811,169

Options vested and expected to vest at December 31, 2011		19,521,233		19.32		4.52	$	1,738,374

Options exercisable at December 31, 2010		17,209,000		20.60
Options exercisable at December 31, 2011		16,263,080		20.46		3.74	$	216,020

(1)	Pursuant to the terms of our stock option plans, options that are forfeited or cancelled may be available for future grants.

The following table summarizes information about options outstanding and exercisable at December 31, 2011:


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted-Average Remaining Contractual Life		Weighted-Average Exercise Price		Number Exercisable		Weighted-Average Exercise Price
$ 7.44 to 10.35		2,003,602		9.07	$	10.29		201,830	$	10.14
10.38 to 14.24		2,136,522		0.29		12.16		2,116,544		12.17
14.25 to 14.56		3,079,206		3.71		14.37		2,354,685		14.31
15.99 to 18.30		2,996,206		2.68		18.04		2,935,462		18.05
18.69 to 19.98		379,782		4.80		19.58		354,520		19.59
20.07		2,315,690		6.99		20.07		1,596,922		20.07
20.19 to 25.37		2,373,603		5.47		24.74		2,359,528		24.76
25.39 to 25.68		2,064,708		4.00		25.66		2,064,708		25.66
25.81 to 30.11		2,037,436		5.09		29.58		2,037,436		29.58
30.64 to 31.90		241,445		5.33		31.34		241,445		31.34

The following table summarizes additional information regarding our stock option activity (in thousands, except per share amounts):

		December 31		December 31		December 31
	Year Ended December 31
	2011		2010		2009
Weighted-average grant date fair value of options granted	$	3.96	$	4.68	$	6.26
Intrinsic value of options exercised		1,198		2,507		8,486
Fair value of shares vested		16,182		21,972		24,142
Tax benefit related to stock option expense		4,463		6,135		8,197

During the year ended December 31, 2011, cash received from stock option exercises was $6.9 million and the total cash benefit for tax deductions to be realized for these option exercises was $0.5 million.

At December 31, 2011, there was $7.8 million of total unrecognized stock option expense, all of which is related to nonvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.4 years.

Restricted Stock Units — We issue restricted stock units to certain senior employees and non-employee directors as part of our long-term incentive program. A restricted stock unit represents the right to receive one share of common stock in the future. Restricted stock units have no exercise price. Restricted stock units granted to employees generally vest ratably over three years, subject to certain accelerated vesting provisions based primarily on a change of control, or in certain cases upon death or qualified disability. Restricted stock units granted to non-employee directors vest ratably over three years.

The following table summarizes stock unit activity during the year ended December 31, 2011:


	Employees		Directors		Total
Stock units outstanding January 1, 2011		2,648,843		70,386		2,719,229
Stock units issued		865,735		53,792		919,527
Shares issued		(710,293)		(21,797)		(732,090)
Stock units cancelled or forfeited(1)		(607,835)		—		(607,835)

Stock units outstanding at December 31, 2011		2,196,450		102,381		2,298,831

Weighted average grant date fair value	$	15.02	$	11.83	$	14.90

(1)	Pursuant to the terms of our stock unit plans, employees have the option of forfeiting stock units to cover their minimum statutory tax withholding when shares are issued. Stock units that are cancelled or forfeited may be available for future grants.

The following table summarizes information about our stock unit grants and stock unit expense during the years ended December 31, 2011, 2010 and 2009 (in thousands, except per share amounts):

		December 31		December 31		December 31
	Year Ended December 31
	2011		2010		2009
Weighted-average grant date fair value of stock units granted	$	10.33	$	18.43	$	19.78
Tax benefit related to stock unit expense		5,910		6,256		5,156

At December 31, 2011, there was $17.8 million of total unrecognized stock unit expense, all of which is related to nonvested awards. This compensation expense is expected to be recognized over the weighted-average remaining vesting period of 1.4 years.

Restricted Stock — We offer our non-employee directors the option to receive their compensation for services rendered in either cash or shares of restricted stock equal to 150% of the fee amount. Shares of restricted stock vest one-third on grant, one-third on the first anniversary of grant and one-third on the second anniversary of grant. The following table summarizes restricted stock activity during the year ended December 31, 2011:


	Shares			Weighted- Average Grant Date Fair Value
Nonvested at January 1, 2011		64,074		$	11.92
Restricted shares granted		69,611			10.44
Restricted shares vested		(61,421	)		11.99
Restricted shares forfeited		—			—

Nonvested at December 31, 2011		72,264			10.43

Cash Performance Units — In 2010, we began granting cash performance units ("CPUs") as part of our long-term incentive compensation program under the terms of our 2007 Stock Incentive Plan (the "2007 Plan"). The CPU awards are cash-settled awards and are designed to link compensation of certain executive officers and other key employees to our performance over a three-year period. The performance metric, as defined in the award, is the performance of our stock price relative to that of a peer group of companies. The range of payout under the award is between 0% and 200% and is payable in cash at the end of each respective performance period. The fair value of the awards is measured at each reporting period. Compensation expense is recognized over the vesting period with a corresponding liability, which is recorded in other long-term liabilities in our Consolidated Balance Sheets. The following table summarizes CPU activity during the years ended December 31, 2011:


	Units
Outstanding at January 1, 2011		10,812,001
Granted		2,593,750
Converted/paid		—
Forfeited		(1,550,667)

Outstanding at December 31, 2011		11,855,084

Phantom Shares — In 2011, we began granting phantom shares as part of our long-term incentive compensation program, which are similar to RSUs in that they are based on the price of our stock and vest ratably over a three-year period, but are cash-settled based upon the value of our stock at each vesting period. The fair value of the awards is remeasured at each reporting period. Compensation expense is recognized over the vesting period with a corresponding liability, which is recorded in accounts payable and accrued expenses in our Consolidated Balance Sheets. The following table summarizes the phantom share activity during the year ended December 31, 2011:

		December 31		December 31
	Shares		Weighted-Average Grant Date Fair Value
Outstanding at January 1, 2011		—	$	—
Granted		1,195,673		10.36
Converted/paid		(5,332)		10.35
Forfeited		(108,673)		10.35

Outstanding at December 31, 2011		1,081,668		10.36

Share-Based Compensation Expense — The following table summarizes the share-based compensation expense recognized during the years ended December 31, 2011, 2010, and 2009 (in thousands):

		December 31		December 31		December 31
	Year Ended December 31
	2011		2010		2009
Stock Options	$	11,800	$	16,243	$	22,288
Stock Units		19,608		20,629		17,109
Cash Performance Units		1,729		—		—
Phantom Shares		3,578		—		—

Stock Repurchases — Since 1998, our Board of Directors has from time to time authorized the repurchase of our common stock up to an aggregate of $2.3 billion, excluding fees and expense. We made no share repurchases in 2011 or 2010. As of December 31, 2011, $218.7 million was available for repurchases under this program (excluding fees and commissions). Shares, when repurchased, are retired.