Stockbased Compensation Expense

12 Months Ended

Dec. 31, 2011

Stock-based Compensation Expense Disclosure [Abstract]

Stock-based Compensation Expense

Note 5.       Stock-based Compensation Plans

       The company has stock-based compensation plans for its key employees, directors and others. These plans permit the grant of a variety of stock and stock-based awards, including restricted stock, stock options or performance-based shares, as determined by the compensation committee of the company's Board of Directors or for certain non-officer grants, by the company's employee equity committee, which consists of its chief executive officer. Options granted under these plans generally vest over 3-5 years with terms of 7-10 years, assuming continued employment with certain exceptions. The company's practice is to grant options at fair market value. The company generally issues new shares of its common stock to satisfy option exercises. Grants of stock options and restricted stock on or after November 9, 2006, provide that in the event of both a change in control of the company and a qualifying termination of an option holder's employment, all options and service-based restricted stock awards held by the recipient become immediately vested (unless an employment or other agreement with the employee provides for different treatment).

       Compensation cost is based on the grant-date fair value and is recognized ratably over the requisite vesting period or to the retirement date for retirement eligible employees, if earlier.

       The components of pre-tax stock-based compensation expense are as follows:

(In millions)		2011		2010		2009
Stock Option Awards		$	49.4	$	48.6	$	41.4
Restricted Share/Unit Awards			30.6		33.0		25.3
Total Stock-based Compensation Expense		$	80.0	$	81.6	$	66.7
	Stock-based compensation expense is included in the accompanying statement of income as follows:
(In millions)		2011		2010		2009
Cost of Revenues		$	5.7	$	5.8	$	6.1
Selling, General and Administrative Expenses			72.4		74.0		58.5
Research and Development Expenses			1.9		1.8		2.1
Total Stock-based Compensation Expense		$	80.0	$	81.6	$	66.7

       The company has elected to recognize any excess income tax benefits from stock option exercises in capital in excess of par value only if an incremental income tax benefit would be realized after considering all other tax attributes presently available to the company. The company measures the tax benefit associated with excess tax deductions related to stock-based compensation expense by multiplying the excess tax deductions by the statutory tax rates. The company uses the incremental tax benefit approach for utilization of tax attributes. Tax benefits recognized in capital in excess of par value on the accompanying balance sheet were $14.6 million and $10.9 million, respectively, in 2011 and 2010.A tax charge of $1.6 million was recordedin capital in excess of par valuein 2009for the excess of deferred tax asset over actual tax benefits realized at option exercise.

Stock Options

The fair value of most option grants is estimated using the Black-Scholes option pricing model. For option grants that require the achievement of both service and market conditions, a lattice model is used to estimate fair value. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the historical volatility of the company's stock. Historical data on exercise patterns is the basis for estimating the expected life of an option. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant. The compensation expense recognized for all stock-based awards is net of estimated forfeitures. Forfeitures are estimated based on an analysis of actual option forfeitures.

       The weighted average assumptions used in the Black-Scholes option pricing model are as follows:

	2011		2010		2009
Expected Stock Price Volatility		33%		32%		31%
Risk Free Interest Rate		1.7%		2.0%		2.2%
Expected Life of Options (years)		4.1		4.1		3.8
Expected Annual Dividend	$	—	$	—	$	—

       The weighted average per share grant-date fair values of options granted during 2011, 2010 and 2009 were $15.79, $14.12 and $10.41, respectively. The total intrinsic value of options exercised during the same periods was $85.3 million, $48.1 million and $20.7 million, respectively. The intrinsic value is the difference between the market value of the shares on the exercise date and the exercise price of the option.

       A summary of option activity as of December 31,2011 and changes during the three years then ended is presented below:

		Shares (in millions)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (a) (in millions)
Outstanding at December 31, 2008			16.1	$	40.72
	Granted		7.3		37.45
	Exercised		(1.7)		31.77
	Canceled / Expired		(1.8)		50.43
Outstanding at December 31, 2009			19.9		39.39
	Granted		4.3		49.61
	Exercised		(2.4)		31.96
	Canceled / Expired		(0.8)		44.55
Outstanding at December 31, 2010			21.0		42.15
	Granted		3.7		54.74
	Exercised		(4.1)		38.46
	Canceled / Expired		(1.0)		48.11
Outstanding at December 31, 2011			19.6		45.00		4.1
Vested and Unvested Expected to Vest at
December 31, 2011			19.1		44.80		4.1	$	78.4
Exercisable at December 31, 2011			10.8		41.77		2.9	$	63.4

(a)       Market price per share on December 31,2011 was $44.97. The intrinsic value is zero for options with exercise prices above the market price.

As of December 31,2011, there was $80 million of total unrecognized compensation cost related to unvested stock options granted. The cost is expected to be recognized through 2015 with a weighted average amortization period of 2.7 years.

Restricted Share/Unit Awards

The company awards to a number of key employees restricted company common stock or restricted units that convert into an equivalent number of shares of common stock. The awards generally vest in annual installments over three years, assuming continued employment, with some exceptions. Vesting of the awards is contingent upon meeting certain service conditions and may also be contingent upon meeting certain performance and/or market conditions. The fair market value of the award at the time of the grant is amortized to expense over the period of vesting. Recipients of restricted shares have the right to vote such shares and receive cash dividends, whereas recipients of restricted units have no voting rights but are entitled to receive dividend equivalents. The fair value of service- and performance-based restricted share/unit awards is determined based on the number of shares/units granted and the market value of the company's shares on the grant date. For awards with market-based vesting conditions, the company uses a lattice model to estimate the grant-date fair value of the award.

Asummary of the status of the company's restricted shares/units as of December 31,2011 and changes during the three years then ended are presented below:

		Shares (in thousands)		Weighted Average Grant-Date Fair Value
Unvested at December 31, 2008			795	$	47.80
	Granted		1,475		39.76
	Vested		(436)		46.34
	Forfeited		(163)		43.59
Unvested at December 31, 2009			1,671		41.99
	Granted		704		49.43
	Vested		(499)		42.00
	Forfeited		(92)		39.56
Unvested at December 31, 2010			1,784		45.05
	Granted		572		54.96
	Vested		(504)		42.14
	Forfeited		(104)		48.03
Unvested at December 31, 2011			1,748		48.96

At December 31,2011, the vesting of 488,500 unvested restricted units is contingent upon the company's future stock price performance exceeding that of a specified index.The total fair value of shares vested during 2011, 2010 and 2009 was $21.2 million, $21.0 million and $20.2 million, respectively.

As of December 31,2011, there was $40 million of total unrecognized compensation cost related to unvested restricted share/unit awards. The cost is expected to be recognized through 2015 with a weighted average amortization period of 2.0 years.

Employee Stock Purchase Plans

       Qualifying employees are eligible to participate in an employee stock purchase plan sponsored by the company. Shares may be purchased under the program at 95% of the fair market value at the end of the purchase period and the shares purchased are not subject to a holding period. Shares are purchased through payroll deductions of up to 10% of each participating employee's gross wages. The company issued 139,000, 127,000 and 139,000 shares, respectively, of its common stock for the 2011, 2010 and 2009 plan years, which ended on December 31.