Long-Term Equity Compensation

For the year ended December 31, 2012 the compensation cost that has been charged against income under our various stock option and long-term incentive plans ("the Plans") was $28.9 million. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $11.2 million (See Note 2).

Stock options and other equity awards, including but not limited to restricted stock, restricted stock units ("RSUs") and performance share units ("PSUs") have been granted to certain employees, officers and non-employee directors under the Plans. The grant of a single RSU or PSU under our 2006 Long-Term Incentive Plan reduces the number of shares of common stock available for issuance under that plan by 1.75 shares of common stock. RSUs and PSUs granted under that plan prior to May 21, 2009 reduce the number of shares of common stock available for issuance under the 2006 Long-Term Incentive Plan by two shares of common stock for each award. The grant of an option under the 2006 Long-Term Incentive Plan reduces the number of shares of common stock available for issuance under that plan by one share of common stock.

Stock options are granted with an exercise price at or above the fair market value of the Company’s common stock on the date of grant. Effective May 21, 2009, stock option grants carry a maximum term of seven years, and, in general, stock options and other equity awards vest based on one to four years of continuous service. Stock option grants made prior to May 21, 2009 carry a maximum term of ten years. As of December 31, 2012, there were no outstanding options or awards that had market or performance condition accelerated vesting provisions. Certain stock options and other equity awards provide for accelerated vesting upon the occurrence of a change in control (as defined in the Plans) under the circumstances set forth in the Plans and equity award agreements. At the end of the maximum term, unexercised stock options are set to expire.

PSUs were granted in 2012. These PSUs have a one-year performance period and, subject to the recipient's continued employment, provide for cliff vesting at 0% to 100% of the grant three years after the grant date. The number of shares, if any, to be delivered in connection with these PSUs is dependent upon the Company’s satisfaction of certain performance criteria as outlined in each PSU award agreement.

As of December 31, 2012, we have reserved up to an aggregate of 11.9 million shares of our common stock for issuance under the Plans.

The fair value of each option award is estimated on the date of grant using a closed-form option valuation model ("Black-Scholes") based on the assumptions noted in the following table. Expected volatilities are based on implied volatilities from traded options on our stock and historical volatility of our stock. We estimated the expected term of options by using historical data to estimate option exercise and employee termination within a lattice-based valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of options granted is derived from a lattice-based option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury Strip yields in effect at the time of grant with maturity dates approximately equal to the expected life of the option at the grant date.

The following table provides the weighted-average values of assumptions used in the calculation of grant-date fair values, the weighted-average grant-date fair values for options, and the total intrinsic value of options exercised during the years ended December 31:



	2012 (a)		2011			2010
Risk-free interest rate	None		2.36		%	2.65		%
Expected option lives (in years)	None		5.1			5.4
Expected volatility for options	None		35.6		%	43.5		%
Expected dividend yield	None		None			None
Weighted-average grant-date fair value of options	None		$	10.88		$	10.01
Total intrinsic value of options exercised	$	7,418,459	$	7,934,673		$	1,449,985

__________

(a) During the year ended December 31, 2012, we made no grants of stock options.

A summary of option activity under our various plans as of December 31, 2012, and changes during the year then ended is presented below:



	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2012	5,623,818	$29.29
Granted	—	—
Exercised	(659,017)	25.71
Forfeited or expired	(683,068)	27.10
Outstanding at December 31, 2012	4,281,733	$30.19	3.15	$	3,147,027
Vested or expected to vest at December 31, 2012 (reflecting estimated forfeiture rates effective in 2012)	4,127,149	$30.38	3.10	$	3,004,470
Exercisable at December 31, 2012	2,955,047	$32.32	2.56	$	1,999,078



	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price	Number of Options	Weighted Average Exercise Price
$11.19 – 20.00	171,466	3.84	$15.03	167,716	$15.01
20.01 – 25.00	1,795,752	2.60	23.43	893,916	23.81
25.01 – 30.00	599,947	2.53	28.70	583,335	28.75
30.01 – 40.00	924,225	4.15	31.77	519,737	32.53
40.01 – 50.00	630,630	3.37	46.62	630,630	46.62
50.01 – 58.07	159,713	4.26	54.00	159,713	54.00
$11.19 – 58.07	4,281,733	3.15	$30.19	2,955,047	$32.32

We have entered into stock option and RSU agreements with certain employees and non-employee directors and PSU agreements with certain employees. Upon vesting and exercise of each stock option and upon vesting of each RSU and PSU, holders will have the right to receive one share of common stock. Awards of stock options, RSUs and PSUs are subject to restrictions on transfer and forfeiture prior to vesting. The following table presents the number of stock options, RSUs and PSUs granted during the years ended December 31:



	2012	2011	2010
Options granted	—	661,950	1,076,179
RSUs and PSUs granted	1,084,532	895,294	792,597

A summary of RSU and PSU activity under our various plans as of December 31, 2012, and changes during the year then ended is presented below:



	Number of Restricted Stock Units and Performance Share Units	Weighted Average Grant-Date Fair Value		Weighted Average Purchase Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at January 1, 2012	2,210,306	$	26.56		$0.001
Granted	1,084,532	38.22		0.001
Vested	(1,263,567)	26.46		0.001
Forfeited	(93,601)	27.57		0.001
Outstanding at December 31, 2012	1,937,670	$	33.13	0.001		1.70	$	47,084,016
Expected to vest at December 31, 2012 (reflecting estimated forfeiture rates effective in 2012)	1,528,324	$	33.54		$0.001	1.73	$	37,137,207

The fair values of RSUs and PSUs are determined based on the market value of the underlying shares of common stock on the date of grant.

The weighted-average grant-date fair values and aggregate intrinsic values of RSUs and PSUs vested during the years ended December 31, are as follows:



	2012		2011		2010
Weighted-average grant-date fair values of RSUs and PSUs	$	38.22	$	30.65	$	23.10
Aggregate intrinsic value of RSUs and PSUs vested (in millions)	$	49.0	$	14.7	$	18.0

Share-based compensation expense recorded for the years ended December 31, is as follows:



	2012		2011		2010
	(Amounts in millions)
Compensation expense - options	$	5.4	$	6.2	$	6.3
Compensation expense - RSUs and PSUs	$	23.5	$	21.4	$	26.8

As of December 31, 2012, the remaining unrecognized compensation costs and the respective weighted-average recognition periods are as follows:



	Non-vested Options		Non-vested RSUs & PSUs
Remaining unrecognized compensation cost (in millions)	$	2.9	$	33.2
Remaining weighted-average period (in years)	0.51		1.67

Under the Plans, employees and non-employee directors may elect for the Company to withhold shares to satisfy minimum statutory federal, state and local tax withholding and/or exercise price obligations, as applicable, arising from the exercise of stock options. For certain other equity awards, the Company has the right to withhold shares to satisfy any tax obligations that may be required to be withheld or paid in connection with such equity award, including any tax obligation arising on the vesting date. During the year ended December 31, 2012, we withheld 0.5 million shares of common stock to satisfy tax withholding and exercise price obligations arising from stock option exercises and the vesting of RSUs.

We become entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the stock options, restricted shares, RSUs and PSUs when vesting occurs, the restrictions are released and the shares are issued. Stock options, restricted common stock, RSUs and PSUs are forfeited if the employees terminate their employment prior to vesting, other than in certain limited situations.