Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation

7. Stock-Based Compensation

The Company’s incentive compensation plans allow the Company to grant awards to key employees in the form of stock options, stock awards, restricted stock units (“RSUs”), stock appreciation rights, performance stock units (“PSUs”), dividend equivalents and other awards. Compensation related to these awards is determined based on the fair value on the date of grant and is amortized to expense over the vesting period. For restricted stock units and performance stock units, the Company recognizes compensation expense based on the earlier of the vesting date or the date when the employee becomes eligible to retire. If awards can be settled in cash, these awards are recorded as liabilities and marked to market.

The following table discloses the amount of stock based compensation expense for the three and nine-month periods ended September 30, 2011 and 2012:

	Three months ended September 30					Nine months ended September 30
	2011			2012		2011		2012
Stock options	$	665		$	863	$	1,885	$	2,506
Stock awards		—			67		—		67
Restricted stock units		308			286		906		890
Performance stock units		(242	)		1,025		279		2,449
Total stock based compensation	$	731		$	2,241	$	3,070	$	5,912

Stock Options

During 2011, executives participating in the 2011 – 2013 Long-Term Incentive Plan were granted 311,670 stock options which will vest one third each year through 2014. In February 2012, executives participating in the 2012 – 2014 Long-Term Incentive Plan were granted 589,934 stock options which will vest one third each year through February 2015. The fair value of these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

	2011			2012
Risk-free interest rate		2.7	%		1.2	%
Dividend yield		1.8	%		2.7	%
Expected volatility of the Company’s common stock		0.615			0.644
Expected life in years		6.0			6.0

The weighted average fair value of options granted in 2011 and 2012 was $11.57 and $7.33, respectively.

The following table provides details of the stock option activity for the nine months ended September 30, 2012:

	Number of
	Shares
Outstanding at January 1, 2012		1,737,881
Granted		589,934
Exercised		(584,859	)
Expired		(32,800	)
Cancelled		(9,697	)
Outstanding at September 30, 2012		1,700,459
Exercisable		814,251

Restricted Stock Units (RSUs)

The following table provides details of the nonvested RSU activity for the nine months ended September 30, 2012:

	Number of Restricted Units
Nonvested at January 1, 2012		186,805
Granted		6,000
Vested		(44,906	)
Cancelled		(5,067	)
Accrued dividend equivalents		2,980
Nonvested at September 30, 2012		145,812

Performance Stock Units (PSUs)

Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2010 – 2012, earn PSUs and cash. Units and cash earned during 2010 and any units and cash earned during 2012 will vest at December 31, 2012. No units or cash were earned in 2011.

Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2011 – 2013, earn PSUs and cash. Any units and cash earned during 2012 will vest at December 31, 2013. No units or cash were earned in 2011.

Executives participating in the Company’s Long-Term Incentive Plan for the plan year 2012 – 2014, earn PSUs and cash. Any units and cash earned during 2012 will vest at December 31, 2014.

The following table provides details of the nonvested PSUs under the Company’s Long-Term Incentive Plans:

Performance stock units outstanding at January 1, 2012	61,450
Accrued dividend equivalents	1,182
Performance stock units outstanding at September 30, 2012	62,632

The Company’s RSUs and PSUs are not participating securities. These units will be converted into shares of Company common stock in accordance with the distribution date indicated in the agreements. RSUs earn dividend equivalents from the time of the award until distribution is made in common shares. PSUs earn dividend equivalents from the time the units have been earned based upon Company performance metrics, until distribution is made in common shares. Dividend equivalents are only earned subject to vesting of the underlying RSUs or PSUs; accordingly, such units do not represent participating securities.