Stock Compensation Plans

9 Months Ended

Sep. 30, 2012

Stock Compensation Plans [Abstract]

Stock Compensation Plans

14. Stock Compensation Plans

The Company currently has two stock compensation plans. The 1996 Nonemployee Director Stock Option Plan and the 2000 Incentive Stock Compensation Plan provide for the granting of stock options to officers, employees and non-employee directors at an exercise price equal to the fair market value of the stock at the date of grant. Unrestricted options granted to employees vest over two to four years and are exercisable up to ten years from the grant date. Upon retirement, any unvested options become exercisable immediately. Options granted to directors vest at the grant date and are exercisable up to ten years from the grant date.  The 2000 Incentive Stock Compensation Plan also provides for other forms of stock-based compensation such as restricted stock.  As of September 30, 2012, there was $2.7 million of total unrecognized compensation expense related to restricted stock.  The cost is expected to be recognized over a weighted-average period of 1.64 years.

The following table is a summary of the stock-based compensation expense recognized for the three and nine months ended September 30, 2012 and 2011 (in thousands of dollars):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
Stock-based compensation expense	$	1,784		$	115		$	5,200		$	2,987
Tax benefit		(660	)		(43	)		(1,924	)		(1,105	)
Stock-based compensation expense, net of tax	$	1,124		$	72		$	3,276		$	1,882

The fair value of each option grant during the first nine months of 2012 and 2011 was estimated on the date of grant using the Black-Scholes option-pricing model, based on the following assumptions:

	2012	2011
Expected dividend yield	0.64% - 0.67%	0.60% - 0.80%
Expected stock price volatility	45.0% - 56.4%	40.5% - 57.9%
Risk free interest rate	0.27% - 0.82%	0.28% - 2.39%
Expected life options	2 - 4 years	2 - 5 years
Weighted-average fair value per share at grant date	$24.54	$27.41

The expected life of options was determined based on the exercise history of employees and directors since the inception of the plans. The expected stock price volatility is based upon the historical weekly and daily stock price for the prior number of year's equivalent to the expected life of the stock option. The expected dividend yield was based on the dividend yield of the Company's common stock at the date of the grant. The risk free interest rate was based upon the yield of U.S. Treasuries, the terms of which were equivalent to the expected life of the stock option.

A summary of stock option activity under the plans during the nine months ended September 30, 2012, is presented below:

						Weighted-
				Weighted-		Average		Aggregate
				Average		Remaining		Intrinsic
				Exercise		Contractual		Value
Options	Shares			Price		Term		($000's)
Outstanding at January 1, 2012		1,504,311		$	42.26
Granted		13,500			75.75
Exercised		(66,151	)		27.54
Forfeited or expired		(22,724	)		46.00
Outstanding at September 30, 2012		1,428,936		$	43.20		7.2	$	19,307
Exercisable at September 30, 2012		706,738		$	35.99		6.2	$	14,112

As of September 30, 2012, there was $11.2 million of total unrecognized compensation expense related to non-vested stock options. That cost is expected to be recognized over a weighted-average period of 1.75 years. The intrinsic value of stock options exercised in the first nine months of 2012 was $3.2 million.