NOTE 10 – SHARE-BASED EMPLOYEE COMPENSATION PLANS AND OTHER COMPENSATION AND BENEFIT PLANS

The Company recognizes share-based compensation expense based on the fair value of the grants, awards or shares at the time of the grant, award or issuance. Share-based compensation includes stock option awards issued under the Company’s employee incentive plans and director stock plan, restricted stock awarded under the Company’s employee incentive plans, performance incentive plan and director stock plan, stock issued through the Company’s employee stock purchase plan and stock awarded to employees through other benefit programs.

The table below identifies the shares that have been authorized for issuance and the shares available for future issuance under the Company plans, as of December 31, 2012 (in thousands):



Plans	Total Shares Authorized for Issuance under the Plans	Shares Available for Future Issuance under the Plans
Employee Incentive Plans	34,000	6,544
Director Stock Plan	1,000	277
Performance Incentive Plan	650	381
Employee Stock Purchase Plan	4,250	1,002
Profit Sharing and Savings Plan	4,200	349

Stock options:

The Company’s employee incentive plans provide for the granting of stock options for the purchase of the common stock of the Company to certain key employees of the Company. Employee stock options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. Employee stock options granted under the plans expire after ten years and typically vest 25% per year, over four years, or the minimum required service period. The Company records compensation expense for the grant date fair value of the option awards, adjusted for estimated forfeitures, evenly over the vesting period.

The table below identifies the employee stock option activity under these plans during the year ended December 31, 2012:



	Shares (in thousands)	Weighted-Average Exercise Price		Average Remaining Contractual Terms (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011	7,393	$	37.41
Granted	1,834		88.75
Exercised	(1,831)		29.41
Forfeited	(675)		62.97
Outstanding at December 31, 2012	6,721	$	51.03	6.86	$	258,059
Vested or expected to vest at December 31, 2012	6,224	$	49.17	6.70	$	250,536
Exercisable at December 31, 2012	3,527	$	31.36	5.17	$	204,777

The Company’s director stock plan provides for the granting of stock options for the purchase of the common stock of the Company to directors of the Company. Director stock options are granted at an exercise price that is equal to the closing market price of the Company’s common stock on the date of the grant. Director stock options granted under the plans expire after seven years and vest fully after six months. The Company records compensation expense for the grant date fair value of the option awards evenly over the vesting period.

The table below identifies the director stock option activity under this plan during the year ended December 31, 2012:



	Shares (in thousands)	Weighted-Average Exercise Price		Average Remaining Contractual Terms (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2011	97	$	35.00
Granted	-		-
Exercised	(29)		34.92
Forfeited	-		-
Outstanding at December 31, 2012	68	$	35.03	3.31	$	3,698
Vested or expected to vest at December 31, 2012	68	$	35.03	3.31	$	3,698
Exercisable at December 31, 2012	68	$	35.03	3.31	$	3,698

The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-Scholes model requires the use of assumptions, including the risk free rate, expected life, expected volatility and expected dividend yield.

·	Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options’ expected life.

·	Expected life - Represents the period of time that options granted are expected to be outstanding. The Company uses historical experience to estimate the expected life of options granted.

·	Expected volatility – Measure of the amount by which the Company’s stock price has historically fluctuated.

·	Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.

The table below identifies the weighted-average assumptions used for grants awarded during the years ended December 31, 2012, 2011 and 2010:



	December 31,
	2012		2011		2010
Risk free interest rate	0.59	%	1.16	%	1.67	%
Expected life	3.9	Years	3.7	Years	4.3	Years
Expected volatility	33.5	%	33.3	%	33.9	%
Expected dividend yield	-	%	-	%	-	%

The Company’s forfeiture rate is the estimated percentage of options awarded that are expected to be forfeited or cancelled prior to becoming fully vested. The Company’s estimate is evaluated periodically, is based upon historical experience at the time of evaluation and reduces expense ratably over the vesting period or the minimum required service period.

The following table summarizes activity related to stock options awarded by the Company for the years ended December 31, 2012, 2011 and 2010:



	For the Year Ended December 31,
	2012		2011		2010
Compensation expense for stock options awarded (in millions)	$	18.5	$	17.6	$	14.9
Income tax benefit from compensation expense related to stock options (in millions)		7.1		6.8		5.7
Total intrinsic value of stock options exercised (in millions)		113.6		71.5		60.0
Cash received from exercise of stock options (in millions)		54.9		50.3		56.9
Weighted-average grant-date fair value of options awarded	$	23.57	$	16.93	$	14.24
Weighted-average remaining contractual life of exercisable options (in years)		5.13		5.12		5.21

The remaining unrecognized compensation expense related to unvested stock option awards at December 31, 2012, was $53.5 million and the weighted-average period of time over which this cost will be recognized is 3.0 years.

Restricted stock:

The Company’s performance incentive plan provides for the award of shares of restricted stock to its corporate and senior management that vest evenly over a three-year period and are held in escrow until such vesting has occurred. Generally, unvested shares are forfeited when an employee ceases employment. The fair value of shares awarded under this plan is based on the closing market price of the Company’s common stock on the date of award and compensation expense is recorded evenly over the vesting period.

The table below identifies the employee restricted stock activity under this plan during the year ended December 31, 2012:



	Shares (in thousands)	Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2011	40	$	50.72
Granted during the period	18		86.90
Vested during the period ⁽¹⁾	(30)		55.11
Forfeited during the period	(1)		61.08
Non-vested at December 31, 2012	27	$	70.64

⁽¹⁾ Includes 13 thousand shares withheld to cover employees' taxes upon vesting.

The Company’s director stock plan provides for the award of shares of restricted stock that vest evenly over a three-year period and are held in escrow until such vesting has occurred. Generally, unvested shares are forfeited when a director ceases their service on the Company’s Board of Directors. The fair value of shares awarded under this plan is based on the closing market price of the Company’s common stock on the date of award and compensation expense is recorded evenly over the vesting period.

The table below identifies the director restricted stock activity under this plan during the year ended December 31, 2012:



	Shares (in thousands)	Weighted-Average Grant-Date Fair Value
Non-vested at December 31, 2011	8	$	59.65
Granted during the period	5		102.39
Vested during the period	(3)		59.65
Forfeited during the period	-		-
Non-vested at December 31, 2012	10	$	79.58

The following table summarizes activity related to restricted stock awarded by the Company for the years ended December 31, 2012, 2011 and 2010:



	For the Year Ended December 31,
	2012		2011		2010
Compensation expense for restricted shares awarded (in millions)	$	2.0	$	1.7	$	0.9
Income tax benefit from compensation expense related to restricted shares (in millions)	$	0.8	$	0.6	$	0.4
Total fair value of restricted shares at vest date (in millions)	$	2.7	$	2.6	$	1.6
Shares awarded under the plans (in thousands)		23.7		49.9		41.1
Average grant-date fair value of shares awarded under the plans	$	90.10	$	56.18	$	39.57

The remaining unrecognized compensation expense related to unvested restricted share awards at December 31, 2012, was $2.7 million and the weighted-average period of time over which this cost will be recognized is 2.1 years.

Employee stock purchase plan:

The Company’s employee stock purchase plan (the “ESPP”) permits eligible employees to purchase shares of the Company’s common stock at 85% of the fair market value. Employees may authorize the Company to withhold up to 5% of their annual salary to participate in the plan. The fair value of shares issued under the ESPP is based on the average of the high and low market prices of the Company’s common stock during the offering periods. Compensation expense is recognized based on the discount between the grant-date fair value and the employee purchase price for the shares sold to employees.

The following table summarizes activity related to the Company’s ESPP for the years ended December 31, 2012, 2011 and 2010:



	For the Year Ended December 31,
	2012		2011		2010
Compensation expense for shares issued under the ESPP (in millions)	$	1.5	$	1.3	$	1.1
Income tax benefit from compensation expense for shares issued under the ESPP (in millions)	$	0.6	$	0.5	$	0.4
Shares issued under the ESPP (in thousands)		114.6		134.5		152.9
Weighted-average price of shares issued under the ESPP	$	75.42	$	53.93	$	40.86

Profit sharing and savings plan:

The Company sponsors a contributory profit sharing and savings plan that covers substantially all employees who are at least 21 years of age and have at least six months of service. The Company makes matching contributions equal to 100% of the first 2% of each employee’s wages that are contributed and 25% of the next 4% of each employee’s wages that are contributed. The Company may also make additional discretionary profit sharing contributions to the plan on an annual basis as determined by the Board of Directors. The Company did not issue any shares under this plan for the years ended December 31, 2012, 2011 or 2010. The Company does not anticipate funding the plan with the issuance of shares in the future. The Company made monetary matching contributions to the plan in the amounts of $15.6 million, $11.8 million and $11.8 million for the years ended December 31, 2012, 2011 and 2010, respectively.