Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

14.  Stock-Based Compensation

Stock-based compensation expense is calculated by estimating the fair value of incentive and non-qualified stock options at the time of grant and amortized over the stock options’ vesting period.  Stock-based compensation expense was $11.0 million and $6.8 million for the nine-months ended September 30, 2011 and 2010, respectively.  The company granted options to acquire 1.0 million and 1.4 million shares of common stock to officers and employees during the first three quarters of 2011 and 2010, respectively.  Any option grants to directors are exercisable immediately upon granting and expire ten years subsequent to the grant date.  For all outstanding grants made to officers and employees prior to 2011, options become exercisable in 25% increments annually over a four year period beginning on the second anniversary of the grant date and expire ten years subsequent to the grant date.  Starting with 2011 grants to officers and directors, options become exercisable in 25% increments annually over a four year period beginning on the first anniversary of the grant date and expire ten years subsequent to the grant date.  In addition, the company issued 0.8 million and 0.5 million shares of restricted stock and performance shares during the first three quarters of 2011 and 2010, respectively.  The restrictions on all shares of restricted stock expire on the third anniversary of the applicable grant date.

The company granted performance shares to officers and employees during the first quarter of 2011.  The number of shares to be issued will vary depending on the company’s improvement in economic value add (EVA) from December 31, 2010 to December 31, 2012, the cumulative debt reduction in 2011 and 2012 and whether the officer or employee is continuously employed by the company through the end of 2013.  Depending on the foregoing factors, the number of shares awarded could range from zero to 0.9 million.  These shares vest 75% on the second anniversary of the grant date and 25% on the third anniversary of the grant date subject to the achievement of the performance criteria.