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Share-Based Compensation Plans
 3 Months Ended
Mar. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
SHARE-BASED COMPENSATION PLANS
SHARE-BASED COMPENSATION PLANS

Share-based incentive awards are provided to employees under the terms of various share-based compensation plans (collectively, the “Plans”). The Plans are administered by the Compensation Committee of the Board of Directors. Awards under the Plans principally include at-the-money stock options, nonvested stock and cash awards.

The following table provides information on share-based compensation expense and income tax benefits recognized during the periods:
 
Three months ended March 31,
 
2013
 
2012
 
(In thousands)
Stock option and stock purchase plans
$
2,110

 
2,364

Nonvested stock
2,499

 
2,073

Share-based compensation expense
4,609

 
4,437

Income tax benefit
(1,687
)
 
(1,484
)
Share-based compensation expense, net of tax
$
2,922

 
2,953



During the three months ended March 31, 2013 and 2012, approximately 377,000 and 460,000 stock options, respectively, were granted under the Plans. These awards generally vest evenly over a three years period beginning on the date of grant. The stock options granted in 2013 have contractual terms of ten years, and stock options granted in 2012 have contractual terms of seven years. The fair value of each option award at the date of grant was estimated using a Black-Scholes-Merton option-pricing valuation model. The weighted-average fair value per option granted during the three months ended March 31, 2013 and 2012 was $13.99 and $14.07, respectively.

During the three months ended March 31, 2013 and 2012, approximately 22,000 and 93,000 market-based restricted stock rights, respectively, were granted under the Plans. The awards were segmented into three performance periods of one, two and three years. At the end of each performance period, 25%-125% of the award may be earned based on Ryder's total shareholder return (TSR) as compared to the TSR of a peer group over the applicable performance period. For the 2013 awards, Ryder's TSR will be compared to the TSR of a custom peer group. For the 2012 awards, Ryder's TSR will be compared to the TSR of the S&P 500. If earned, employees will receive the grant of stock at the end of the three year performance period from the grant date provided they continue to be employed with Ryder, subject to Compensation Committee approval. The fair value of the market-based restricted stock rights was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation. The fair value of the market-based awards was determined and fixed on the grant date and considers the likelihood of Ryder achieving the market-based condition. The weighted-average fair value per market-based restricted stock right granted during the three months ended March 31, 2013 and 2012 was $53.32 and $43.39, respectively.

During the three months ended March 31, 2013, approximately 15,000 performance-based restricted stock rights were granted under the Plans. For these awards, 25%-125% of the awards may be earned based on Ryder's 2013 return on capital (ROC) measured against a ROC target. If earned, employees will receive the grant of stock at the end of the three year period from the grant date provided they continue to be employed with Ryder, subject to Compensation Committee approval. Share-based compensation expense is recognized on a straight-line basis over the vesting period, based upon the probability that the performance target will be met. The fair value of the performance-based restricted stock rights was determined and fixed on the date of grant based on Ryder’s stock price on the date of grant. The weighted-average fair value per performance-based restricted stock right granted was $58.21. During the three months ended March 31, 2013, approximately 30,000 performance-based restricted stock rights were also awarded under the Plans for which the annual ROC target will be determined in future years. These awards will be considered granted under accounting guidance for stock compensation once the Compensation Committee approves the annual ROC target and communicates the terms of the awards to the recipients.

During the three months ended March 31, 2013 and 2012, approximately 127,000 and 104,000 time-vested restricted stock rights, respectively, were granted under the Plans. The time-vested restricted stock rights entitle the holder to shares of common stock when the awards generally vest at the end of the three-year period after the grant date. The fair value of the time-vested awards is determined and fixed on the date of grant based on Ryder’s stock price on the date of grant. The weighted-average fair value per time-vested restricted stock right granted during the three months ended March 31, 2013 and 2012 was $58.00 and $53.62, respectively.

During the three months ended March 31, 2013 and 2012, employees who received market-based restricted stock rights also received market-based cash awards. In addition, in 2012, the majority of the employees who received time-vested restricted stock also received market-based cash awards. The cash awards have the same vesting provisions as the market-based restricted stock rights. The cash awards are accounted for as liability awards under the share-based compensation accounting guidance as the awards are based upon the performance of our common stock and are settled in cash. As a result, the liability is adjusted to reflect fair value at the end of each reporting period. The fair value of the cash awards was estimated using a lattice-based option-pricing valuation model that incorporates a Monte-Carlo simulation.

The following table is a summary of compensation expense recognized for market-based cash awards in addition to the share-based compensation expense reported in the previous table:
 
Three months ended March 31,
 
2013
 
2012
 
(In thousands)
Cash awards
$1,274
 
597


Total unrecognized pre-tax compensation expense related to all share-based compensation arrangements at March 31, 2013 was $39.3 million and is expected to be recognized over a weighted-average period of 1.6 years.