Note K—Stock Plans

Under various stock plans, officers, employees, and outside directors have received or may receive grants of restricted stock, stock units, stock appreciation rights or options to purchase common stock. Grants have been made at the discretion of the Committees of the Board of Directors. Grants generally vest over four years. Shares offered under the plan are authorized but unissued shares or treasury shares.

Options currently outstanding under the plans have an exercise price equal to the fair market value of the Company’s common stock at the date of grant and consist of non-statutory stock options under the Internal Revenue Code, and generally have a term of 10 years.

Recipients of restricted stock do not pay any cash consideration to the Company for the shares, have the right to vote all shares subject to such grant, and for grants made prior to July 28, 2009, receive all dividends with respect to such shares on the dividend payment dates, whether or not the shares have vested as long as any performance condition has been met. Restricted stock grants made on or after July 28, 2009, contain forfeitable rights to dividends. Dividends for these grants are accrued on the dividend payment dates but are not paid until the shares vest, and dividends accrued for shares that ultimately do not vest are forfeited. Recipients of stock units do not pay any cash consideration for the units, do not have the right to vote, and do not receive dividends with respect to such units. Compensation expense for restricted stock and stock units is generally recognized on either a 3 year cliff basis or 4 year straight line basis, based on the stock’s fair market value on the grant date. For restricted stock grants issued with performance conditions, compensation expense is recognized over each vesting tranche.

FASB authoritative guidance requires that excess tax benefits be recognized as an addition to capital surplus and that unrealized tax benefits be recognized as income tax expense unless there are excess tax benefits from previous equity awards to which it can be offset. The Company calculates the amount of eligible excess tax benefits that are available to offset future tax shortfalls in accordance with the long-form method described in the FASB authoritative guidance.

The Company determines the fair value of options to purchase common stock using the Black-Scholes valuation model. The Company recognizes expense over the service period for options that are expected to vest and records adjustments to compensation expense at the end of the service period if actual forfeitures differ from original estimates. The Company has not granted any options to purchase common stock since 2006.

The Company recognizes compensation expense equal to the grant-date fair value for all stock-based payment awards that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to performance conditions, in which case the Company recognizes compensation expense over the requisite service period of each separate vesting tranche. The Company determines the grant-date fair value of its restricted stock and stock unit awards using the fair market value on the grant date, unless the awards are subject to market conditions, in which case the Company utilizes a binomial-lattice model (i.e., Monte Carlo simulation model). The Monte Carlo simulation model utilizes multiple input variables to determine the stock-based compensation expense.

During the year ended December 31, 2013, the Company granted performance shares to its executives in the form of restricted stock. The shares granted contain (1) a performance condition based on target net income per share, and (2) a market condition based on Total Shareholder Return (“TSR”). The TSR market condition measures the Company’s performance against a peer group. Shares will be delivered at the end of the three year vesting and TSR performance period based on the Company’s actual performance compared to the peer group. Actual shares earned will range from fifty percent (50%) to one hundred fifty percent (150%) of the target award after any adjustment made for the performance condition. The fair value of this award was determined using a Monte Carlo simulation with the following assumptions: an historical volatility of 32.23%, 0% dividend yield and a risk-free interest rate of 0.36%. The historical volatility was based on the most recent 2.61-year period for the Company and the components of the peer group. The stock price projection for the Company and the components of the peer group assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends in the issuing entity over the performance period. The risk-free interest rate is equal to the yield, as of the measurement date, of the zero-coupon U.S. Treasury bill that is commensurate with the remaining performance measurement period.

Stock-based compensation expense consisted of the following (in thousands):


	Years Ended December 31,
	2013		2012		2011
Restricted stock and stock units	$	38,867	$	41,464	$	50,906

Total unrecognized compensation cost, net of estimated forfeitures, consisted of the following (in thousands):


	December 31,
	2013		2012		2011
Restricted stock and stock units	$	53,646	$	51,877	$	54,419

The unrecognized compensation cost is expected to be recognized over the next four years.

The following table reflects activity under all stock plans from December 31, 2010 through December 31, 2013, and the weighted average exercise prices (in thousands, except per share amounts):


	Restricted Stock Plans without Market-Condition					Restricted Stock Plans with Market-Condition					Stock Option Plans
	Number of Shares/ Units			Weighted Average Grant Date Fair Value		Number of Shares/ Units			Weighted Average Grant Date Fair Value		Number of Shares/ Units			Weighted Average Exercise Price Per Share
Outstanding, December 31, 2010		3,996		$	23.44		—			—		5,316		$	22.04
Granted		879		$	31.18		523		$	33.42		—			—
Exercised		—			—		—			—		(806	)	$	22.73
Restrictions lapsed		(2,389	)	$	25.27		—			—		—			—
Forfeited		(94	)	$	23.09		—			—		(60	)	$	26.05

Outstanding, December 31, 2011		2,392		$	24.47		523		$	33.42		4,450		$	21.85
Granted		937		$	27.71		517		$	29.53		—			—
Exercised		—			—		—			—		(2,260	)	$	19.00
Restrictions lapsed		(1,550	)	$	22.20		(240	)	$	33.42		—			—
Forfeited		(42	)	$	24.26		(42	)	$	33.42		(99	)	$	24.74

Outstanding, December 31, 2012		1,737		$	28.25		758		$	30.77		2,091		$	24.80
Granted		688		$	35.34		400		$	43.04		—			—
Exercised		—			—		—			—		(1,397	)	$	23.82
Restrictions lapsed		(1,087	)	$	28.53		(259	)	$	29.53		—			—
Forfeited		(21	)	$	31.29		—			—		(62	)	$	20.48

Outstanding, December 31, 2013		1,317		$	31.68		899		$	36.58		632		$	27.41

The total pre-tax intrinsic value of stock options exercised and the total fair value of shares vested during the years ended December 31, 2013, 2012 and 2011, are reflected in the following table (in thousands):


	Years Ended December 31,
	2013		2012		2011
Total pre-tax intrinsic value of stock options exercised	$	17,092	$	23,678	$	6,429
Total fair value of shares vested	$	53,931	$	55,186	$	67,076

The following table summarizes information about options outstanding and exercisable as of December 31, 2013 (in thousands, except number of years and per share amounts):


	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding and Exercisable as of December 31, 2013		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Aggregate Intrinsic Value
$23.49 to $26.12		163		1.09	$	25.82	$	2,639
$26.13 to $26.13		11		0.30	$	26.13		173
$26.56 to $26.56		239		0.82	$	26.56		3,688
$27.36 to $33.89		219		1.06	$	29.58		2,717

		632		0.97	$	27.41	$	9,217

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $41.99 as of December 31, 2013, which would have been received by the option holders had they exercised their in-the-money options as of that date.

At December 31, 2013, the total number of available shares to grant under the plans (consisting of either restricted stock, stock units, stock appreciation rights or options to purchase common stock) was approximately 2.3 million. All of the 0.6 million options outstanding at December 31, 2013, were exercisable with a weighted average exercise price of $27.41.