Stock Compensation Plan

6 Months Ended

Jun. 30, 2011

Stock Compensation Plan

Stock Compensation Plan

Note 8.  Stock Compensation Plan

The Company reserved 3,500,000 shares of $0.01 par value common stock (“Common Stock”) for issuance under the 2004 Omnibus Stock and Incentive Plan (the “Omnibus Plan”).  As of June 30, 2011, approximately 1,140,000 shares of Common Stock were reserved for future issuance under the Omnibus Plan. As of June 30, 2011, the number of shares available for future issuance was not reduced by outstanding SARs because the closing market price for the Company’s common stock was less than the exercise price of all outstanding SARs. The Company accounts for stock-based compensation pursuant to the fair value recognition provisions of ASC Topic 718, Compensation—Stock Compensation (“ASC Topic 718”).

Valuation and Expense Information

Substantially all stock-based compensation expense is recorded in selling, general and administrative expenses on the condensed consolidated statements of operations.  The following table summarizes stock-based compensation expense and related income tax benefits.

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Stock-based compensation expense	$	1.2		$	1.3		$	2.2		$	2.5
Income tax benefit	(0.4		)	(0.5		)	(0.8		)	(1.0		)
Stock-based compensation, net of income tax benefit	$	0.8		$	0.8		$	1.4		$	1.5

The following table summarizes total compensation costs related to the Company’s equity awards and amounts recognized in the six months ended June 30, 2011.

	Stock Options			Restricted Stock
Unrecognized compensation cost — December 31, 2010	$	1.0		$	2.4
Grant date fair value of current year grants	1.2			2.5
Compensation expense recognized	(0.9		)	(1.3		)
Unrecognized compensation cost — June 30, 2011	$	1.3		$	3.6
Expected amortization period (in years)	2.0			2.0

Stock Options

For the six months ended June 30, 2011, the Company awarded nonqualified stock options to Long-Term Incentive Plan (the “LTIP”) participants to purchase approximately 196,600 shares of Common Stock (subject to forfeiture due to termination of employment and other conditions). In addition, the Company awarded to non-employee members of the board of directors nonqualified stock options to purchase 9,190 shares of Common Stock.  For the six months ended June 30, 2011, the weighted-average exercise price of such nonqualified stock option awards was $19.47 per share. The weighted-average grant date fair value for stock options granted during the six months ended June 30, 2011 was $8.46 per share and was estimated using the Black-Scholes option valuation model with the following assumptions:

	Six months Ended June 30, 2011
Expected term in years	5.3
Risk free interest rate	2.3	%
Volatility	57.1	%
Dividend yield	2.3	%

Volatility and the expected term were estimated by reference to the historical stock price performance of the Company and historical data for the Company’s stock option awards, respectively. The risk-free interest rate was based on the yield on U.S. Treasury bonds with a remaining term approximately equivalent to the expected term of the stock option awards. Forfeitures were estimated at the date of grant.

For the three and six months ended June 30, 2011, the aggregate pre-tax intrinsic value of stock options exercised was approximately $1.1 million and $1.4 million, respectively. For the three and six months ended June 30, 2010, the aggregate pre-tax intrinsic value of stock options exercised was approximately $0.4 million. For the six months ended June 30, 2011, the Company recognized excess tax benefits related to the exercise or vesting of stock-based awards of approximately $0.6 million. The aggregate intrinsic value of approximately 1,565,000 stock options that were exercisable at June 30, 2011 was $3.7 million. The aggregate intrinsic value of approximately 1,614,000 stock options that were exercisable at December 31, 2010 was $2.3 million.

The aggregate grant date fair value of approximately 235,000 stock options and SARs that vested during the six months ended June 30, 2011, was $1.0 million. As of June 30, 2011, certain participants met age and service requirements that allowed their stock options to qualify for accelerated vesting upon retirement. As of June 30, 2011, such LTIP participants held options to purchase 210,000 shares of common stock that would have been exercisable if they had retired as of such date. The aggregate grant date fair value of options subject to accelerated vesting was $0.9 million. Stock options subject to accelerated vesting for expense recognition become exercisable according to the contract terms of the stock -based awards.

As of June 30, 2011, the aggregate intrinsic value of 2,185,000 stock options and SARs that were vested or expected to vest was $9.0 million.  The weighted-average grant date fair value of such stock options was $8.63 per share. As of December 31, 2010, the weighted-average grant date fair value and aggregate intrinsic value of 2,320,000 stock options that were vested or expected to vest was $8.34 per share and $8.6 million, respectively.

As of June 30, 2011, the Company had approximately 640,000 unvested stock options with a weighted-average grant date fair value of $4.84 per share. As of December 31, 2010, approximately 725,000 unvested stock options were outstanding with a weighted-average grant date fair value of $3.88 per share.

Performance Units

For the six months ended June 30, 2011, the Company granted target awards of 124,800 Performance Units to LTIP participants. The measurement period for the Performance Units is January 1, 2011 through December 31, 2011. Common Stock equal to between 40 percent and 200 percent of the Performance Unit target will be awarded based on the Company’s return on invested capital, revenue growth for the Technical Products segment, the level of cash flow for the Fine Paper segment and total return to shareholders relative to a peer group of companies and the Russell 2000® Value small cap index. The weighted-average grant date fair value for the Performance Units was $25.73 per share. Compensation cost is recognized pro rata over the vesting period.

RSUs

For the six months ended June 30, 2011, the Company awarded 7,200 RSUs to non-employee members of the Company’s Board of Directors (“Director Awards”).  The weighted average grant date fair value of such awards was $22.44 per share.  Director Awards vest one year from the date of grant. During the vesting period, the holders of Director Awards are entitled to dividends, but the shares do not have voting rights and are forfeited in the event the holder is no longer a member of the Board of Directors. In addition, the Company issued 248 RSUs in lieu of dividends on RSUs held by non-U.S. employees and a member of the Board of Directors.