Stock-based Compensation

6 Months Ended

Jun. 30, 2013

Share-based Compensation [Abstract]

Stock-based Compensation

Stock-based Compensation

Stock-based compensation expense and related tax benefit recognized in the Consolidated Statements of Income are as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Cost of goods sold	$	578		$	917		$	1,231		$	1,621
Research and development	1,206			1,298			2,287			2,474
Selling, general and administrative	5,846			5,650			9,809			9,305
Stock-based compensation expense before income taxes	7,630			7,865			13,327			13,400
Income tax benefit	(2,543		)	(2,389		)	(4,402		)	(4,063		)
Total stock-based compensation expense after income taxes	$	5,087		$	5,476		$	8,925		$	9,337

Stock-based compensation costs capitalized in inventory are as follows (in thousands):

	June 30,
	2013		2012
Capitalized in inventory	$	755	$	697

As of June 30, 2013, the Company had $55.3 million of total unrecognized stock-based compensation costs, net of estimated forfeitures, to be recognized over a weighted average period of 2.2 years.

Note 2. Stock-based Compensation - (Continued)

The fair value of the stock-based awards granted in the three and six months ended June 30,2013 was estimated with the following weighted-average assumptions:

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock option awards:
Risk-free interest rate	0.3	%	0.4	%	0.3	%	0.4	%
Expected dividend yield	1.5	%	1.3	%	1.5	%	1.3	%
Expected term	4.3 years		4.2 years		4.3 years		4.2 years
Expected volatility	33.8	%	39.7	%	33.8	%	39.7	%
Market-based restricted stock awards:
Risk-free interest rate	—		0.4	%	0.3	%	0.4	%
Expected dividend yield	—		—		—		—
Expected term	—		3.0 years		2.2 years		3.0 years
Expected volatility	—		30.7	%	28.8	%	30.7	%
Expected volatility of S&P 500	—		19.6	%	18.1	%	19.6	%
Employee stock purchase plan:
Risk-free interest rate	0.1	%	0.2	%	0.1	%	0.2	%
Expected dividend yield	1.5	%	1.3	%	1.5	%	1.3	%
Expected term	6 months		6 months		6 months		6 months
Expected volatility	25.0	%	27.4	%	25.0	%	27.4	%

The weighted average fair value of stock-based compensation awards granted and vested, and the intrinsic value of options exercised during the period were (in thousands, except per share amounts):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Stock Option Awards:
Weighted average grant date fair value per share	$	5.86	$	6.43	$	5.86	$	6.43
Total fair value of awards granted	$	5,817	$	4,104	$	5,817	$	4,104
Total fair value of awards vested	$	5,013	$	5,970	$	5,026	$	5,985
Total intrinsic value of options exercised	$	652	$	939	$	1,839	$	2,358
Restricted Stock Unit Awards:
Weighted average grant date fair value per share	$	23.43	$	17.21	$	23.38	$	17.22
Total fair value of awards granted	$	25,188	$	30,471	$	25,330	$	30,522
Total fair value of awards vested	$	13,134	$	11,763	$	13,319	$	12,103
Employee Stock Purchase Plan:
Weighted average grant date fair value per share	$	5.25	$	5.02	$	5.25	$	5.02
Total fair value of shares estimated to be issued	$	552	$	1,106	$	552	$	1,106

Note 2.    Stock-based Compensation - (Continued)

The total amount of cash received from the exercise of stock options in the three months ended June 30,2013 and 2012 was $0.6 million and $0.8 million, respectively, and the related tax impact realized from the exercise of the stock options was an expense of $0.3 million and $1.0 million, respectively. The total amount of cash received from the exercise of stock options in the six months ended June 30,2013 and 2012 was $1.7 million and $1.7 million, respectively, and the related tax impact realized from the exercise of the stock options was a benefit of $0.1 million and an expense of $0.7 million, respectively.

 Information with respect to stock option activity is as follows:

	Shares (in  thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2012	6,642		$	21.64	4.7
Granted	993		24.31
Exercised	(141	)	12.42
Forfeited	(8	)	21.40
Outstanding at June 30, 2013	7,486		$	22.17	5.0	$	45,081
Exercisable at June 30, 2013	6,154		$	21.63	4.1	$	41,162
Vested and expected to vest at June 30, 2013	7,420		$	22.15	5.0	$	44,885

Information with respect to restricted stock unit activity is as follows:

	Shares (in  thousands)		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2012	2,372		$	21.30
Granted	1,095		23.38
Vested and distributed	(549	)	26.73
Forfeited	(114	)	25.03
Outstanding at June 30, 2013	2,804		$	20.94

During the six months ended June 30,2013 and 2012, the Company granted approximately 1,088,000 and 978,000 time-vested restricted stock units, respectively. The fair value of time-vested restricted stock units is fixed and determined on the date of grant based upon the Company's stock price on the date of grant. The weighted average fair values of the time-vested restricted stock units granted during the six months ended June 30,2013 and 2012 were $23.43 and $21.68, respectively.

During the six months ended June 30,2013 and 2012, the Company also granted approximately 7,000 and 795,000 market-based restricted stock units, respectively. These units may be earned based upon the Company's total shareholder return compared to the total shareholder return of the S&P 500 Index over a three year period. The fair value of the market-based restricted units was determined and fixed on the date of grant using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation and considered the likelihood of the Company achieving the market-based condition. The fair value of the market-based restricted stock units granted during the six months ended June 30,2013 and 2012 was $15.87 and $11.73, respectively.

There were 125,000 shares issued under the 2011 Employee Stock Purchase Plan ("ESPP") during the six months ended June 30, 2013 and 3,728,000 shares remain available under the ESPP at June 30, 2013 for future issuance. Shares issued for ESPP purchases are newly issued shares.