Common Stock

9 Months Ended

Sep. 30, 2011

Common Stock [Abstract]

Common Stock

(9)   Common Stock

Equity Plans — We have granted a variety of awards, including common stock, restricted stock, restricted stock units, performance units, stock appreciation rights (“SARs”), and stock options to our directors, officers, and employees.

Accounting Methods — We have recorded $1 million and less than $1 million in compensation expense in the three months ended September 30, 2011 and 2010, and $2 million in compensation expense for both the nine months ended September 30, 2011 and 2010, related to nonqualified stock options as part of our selling, general and administrative expense. This resulted in a decrease of $0.01 in basic and diluted earnings per share for both the three month periods ended September 30, 2011 and 2010, respectively, and a decrease of $0.04 in basic and diluted earnings per share for both the nine month periods ended September 30, 2011 and 2010.

We immediately expense stock options and restricted stock awarded to employees who are eligible to retire. When employees become eligible to retire during the vesting period, we recognize the remaining expense associated with their stock options and restricted stock.

As of September 30, 2011, there was approximately $6 million of unrecognized compensation costs related to our stock option awards that we expect to recognize over a weighted average period of 0.9 years.

Compensation expense for restricted stock, restricted stock units, long-term performance units and SARs was $8 million for both the nine month periods ended September 30, 2011 and 2010 respectively, and was recorded in selling, general, and administrative expense in the Condensed Consolidated Statements of Income.

Cash received from stock option exercises for the nine months ended September 30, 2011 and 2010 was $4 million, and $2 million, respectively. Stock option exercises in the first nine months of 2011 and 2010 would have generated an excess tax benefit of $3 million and $2 million, respectively. We did not record the excess tax benefit as we have federal and state net operating losses which are not currently being utilized.

Assumptions — We calculated the fair values of stock option awards using the Black-Scholes option pricing model with the weighted average assumptions listed below. The fair value of share-based awards is determined at the time the awards are granted which is generally in January of each year, and requires judgment in estimating employee and market behavior.

	Nine Months
	Ended
	September 30,
	2011			2010
Stock Options Granted
Weighted average grant date fair value, per share	$	26.13		$	11.76
Weighted average assumptions used:
Expected volatility		70.1	%		75.4	%
Expected lives		4.8			4.6
Risk-free interest rates		1.8	%		2.2	%
Dividend yields		0.0	%		0.0	%

Expected volatility is calculated based on current implied volatility and historical realized volatility for the Company.

Expected lives of options are based upon the historical and expected time to post-vesting forfeiture and exercise. We believe this method is the best estimate of the future exercise patterns currently available.

The risk-free interest rates are based upon the Constant Maturity Rates provided by the U.S. Treasury. For our valuations, we used the continuous rate with a term equal to the expected life of the options.

Stock Options — The following table reflects the status and activity for all options to purchase common stock for the period indicated:

	Nine Months Ended September 30, 2011
						Weighted Avg.
	Shares			Weighted Avg.		Remaining		Aggregate
	Under			Exercise		Life in		Intrinsic
	Option			Prices		Years		Value
								(Millions)
Outstanding Stock Options
Outstanding, January 1, 2011		3,129,241		$	14.43		4.3	$	68
Granted		201,133			45.42
Expired		(56,046	)		3.66
Forfeited		(13,184	)		9.36
Exercised		(125,624	)		17.10				3
Outstanding, March 31, 2011		3,135,520		$	16.53		4.4	$	80
Granted		2,711			43.51
Forfeited		(23,841	)		14.26
Exercised		(82,166	)		11.50				3
Outstanding, June 30, 2011		3,032,224		$	16.71		4.2	$	76
Granted		1,649			44.02
Forfeited		(450	)		4.03
Exercised		(115,249	)		8.94				3
Outstanding, September 30, 2011		2,918,174		$	17.03		4.0	$	54

Restricted Stock — The following table reflects the status for all nonvested restricted shares for the period indicated:

	Nine Months Ended
	September 30, 2011
				Weighted Avg.
				Grant Date
	Shares			Fair Value
Nonvested Restricted Shares
Nonvested balance at January 1, 2011		558,198		$	11.58
Granted		141,036			45.42
Vested		(268,891	)		12.00
Forfeited		(4,822	)		13.74
Nonvested balance at March 31, 2011		425,521		$	22.51
Granted		1,381			43.51
Vested		(3,851	)		15.47
Forfeited		(7,190	)		23.82
Nonvested balance at June 30, 2011		415,861		$	22.62
Granted		1,042			44.02
Vested		(3,206	)		15.41
Forfeited		(158	)		1.86
Nonvested balance at September 30, 2011		413,539		$	22.74

The fair value of restricted stock grants is equal to the market price of our stock at the date of grant. As of September 30, 2011, approximately $6 million of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 2.1 years.

Share Repurchase Program — In May 2011, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to 400,000 shares of our outstanding common stock over a 12 month period. Our share repurchase program is intended to offset dilution from shares of restricted stock and stock options that were issued in 2011 to employees. We repurchased all of the 400,000 shares through open market purchases, which were funded through cash from operations, as of August 3, 2011 at a total cost of $16 million through this program. These repurchased shares are held as part of our treasury stock which increased to 1,694,692 shares at September 30, 2011 from 1,294,692 shares at December 31, 2010.

Long-Term Performance Units, Restricted Stock Units and SARs — Long-term performance units, restricted stock units and SARs are paid in cash and recognized as a liability based upon their fair value. As of September 30, 2011, $10 million of unrecognized compensation costs is expected to be recognized over a weighted-average period of approximately 1.6 years.